Asia strips Africa's textile
industry
By Frank Phiri and
Moyiga Nduru
JOHANNESBURG - A few years
ago, the tiny kingdom of Lesotho appeared to have
a lot on offer for investors: cheap labor,
generous tax incentives and proximity to the
regional powerhouse, South Africa. Textile
manufacturers certainly seemed to like what they
saw. Taiwanese entrepreneurs started arriving in
Lesotho in 2000. By investing in the country, they
were also able to take advantage of the African
Growth and Opportunity Act (AGOA). This United
States program was set up to allow duty-free
access to the American market for a wide selection
of exports from countries in sub-Saharan Africa
that met certain conditions, such as respect for
human rights and the rule of law.
After
the Taiwanese came mainland Chinese, Mauritian and
Malaysian textile firms. By 2003, Lesotho had
grown into a major textile manufacturer in Africa,
producing 31% of textiles exported to the US under
AGOA. According to official statistics, some
50,000 people depended on Lesotho's textile
industry for their livelihood in 2004, compared to
20,000 two years before.
During a four-day
visit to Lesotho in December, the then US Trade
Representative, Robert Zoellick, told journalists
that his country had "a great respect for what
Lesotho is accomplishing". But even as Zoellick
was lavishing praise on the country's textile
sector, its prospects looked grim. Toward the end
of the year, six textile factories shut down -
leaving 6,650 employees without work. Enraged
union leader Billy Macaefa blamed the closures on
the expiry of the Multi-Fiber Agreement (MFA),
which was introduced by the World Trade
Organization (WTO) about 30 years ago.
The
initial aim of the MFA was to protect the textile
industries of developed nations facing competition
from low-cost producers in poorer states. Thanks
to the MFA, nations were allowed to impose quotas
on textile imports. This gave countries like
Lesotho the proverbial "foot in the door" in
markets that might otherwise have been dominated
by manufacturing behemoths such as China.
But since the MFA's expiry on January 1,
the budding textile industry of Lesotho and other
countries in the region have been dealt a rude
blow. Textile managers are now lobbying their
governments to improve the business climate in the
13-nation Southern African Development Community
(SADC). But when they say "improve the business
climate", what they actually mean is, impel their
governments to boost the competitiveness of the
region's industry in the global textile market.
The removal of quota restrictions means
that poor African producers are no longer
protected from the stiff competition that the
Asian mass producers pose. Asian countries are
expected to enjoy unlimited access to the
duty-free American market after the lifting of the
quotas. A WTO study released in September showed
that China and India would probably come to
dominate about 80% of the global textile market in
the post-MFA era, while the remaining 20% would be
shared by the rest of the world.
Agrina
Mussa, president of the Association of SADC
Chambers of Commerce and Industry (ASCCI), said
they had produced a "white paper" prescribing
remedies to encourage domestic investment and
production competitiveness. Following the lapse of
the quotas, most Asian firms that had invested in
the region to take advantage of the AGOA, have
pulled out, Mussa said. "We need to look within
(the SADC region) for investments which require
that we have our own mills. For such investments
to come, security, macroeconomic, good governance
and labor issues need to be addressed."
The pullout of Asian investors has created
thousands of job losses in the region. In a new
report, "Rags to Riches to Rags", British-based
charity Christian Aid estimates that 27 million
workers around the world could lose their jobs as
a result of the end of the quota system. Lesotho,
Malawi and South Africa have already reported cuts
in thousands of jobs in the textile industry.
In Malawi 2,511 jobs were cut between
January and March this year when a Taiwanese firm,
Haps Garments, closed shop in the administrative
capital of Lilongwe and relocated to Taipei. A
branch of Haps in Lesotho - where more than 10,000
textile workers have been rendered jobless - also
closed in 2004. Malawi has registered nine textile
companies under AGOA, but not all of them are
exporting to the US. Between them, they employ
more than 11,000 workers, who now face an
uncertain future.
In the tiny kingdom of
Swaziland, where AGOA products constituted 83% of
the country's exports, 30,000 jobs are at stake,
according to a March 2005 survey conducted by the
Zambia-based Common Market for Eastern and
Southern Africa (COMESA). "Any potential
disruption to the local textiles and garments
industry would be understandably resented as this
would present enormous social problems [for] the
country," said the survey.
In 2004, Malawi
earned about US$20 million in textile exports from
the US market, according to a January 2005 country
report on Malawi by London-based think-tank
Economist Intelligence Unit (EIU). The report says
the country's exports under AGOA jumped by 40% and
that it emerged the third-highest African exporter
to the US after South Africa and Cote d'Ivoire.
In regional giant South Africa, some
300,000 textile workers have lost their jobs in
the past two years due to the influx of Chinese
goods. "We need some sort of quota placed on
China. It will be a short-term solution, but it
will give the textile industry a breathing space
to reorganize itself," said Walter Simeoni,
president of the South African Textile Federation.
"Chinese clothing now represents 86% of the total
garments imported into South Africa. Items like
towels, blankets and curtains represent 60%. All
this was achieved within the past three years."
Simeoni rejects the argument that slapping
quotas on Chinese textile imports would violate
WTO rules. "Brazil, Turkey and the US have
introduced some quotas on some of their products.
The European Union is also looking at it. I think
the South African authorities have not been
convinced of the urgency of the problem. And, I
think they are reluctant to upset the Chinese."
This, says Simeoni, stems from the fact that China
supported the struggle to end apartheid in South
Africa.
Currency fluctuations have
worsened the crisis in the textile industry. In
recent months, the South African rand has
strengthened from the historic low it reached in
December 2001, when $1 traded for 13.85 rand. The
dollar is now around six rands. "No textile firm
in the world can compete in an environment where
the currency appreciated against the US dollar and
the Chinese currency by 30% in 2002 and a further
25% between January 2003 and October 2003," said
Simeoni. "In fact, all our competitors in the East
depreciated their currency...against the rand, as
they linked themselves to the US dollar in order
to stay competitive. This is one of the reasons
they create jobs, while we destroy them." An
exchange rate of nine rand to the dollar is
apparently needed for South African textile
exports to regain their competitive edge.
Manufacturers also complain that labor
costs in the country are pricing them out of the
market. Simeoni claimed that monthly salaries for
the industry have increased from an average of
about $215 per month in January 2002 to $500 in
September 2004. South Africa's competitors in the
Far East, he said, pay $40-100 per month.
Concerned that the end of MFA could hurt
poor African producers benefiting from AGOA, the
US government has since October 2004 instituted
safeguard measures to contain specific Chinese
textiles and apparels. According to the US
government's Committee for the Implementation of
Textile Agreements (CITA), the measures aim at
limiting disruptions that Chinese exports may
cause to the US market, if such distortions can be
identified. Under these measures, cotton knit
shirts and blouses, cotton trousers, socks, and
man-made fiber underwear would be reviewed and put
under quotas if they are found to cause market
distortions. The US is permitted, under the
provisions of China's WTO Accession Agreement, to
apply safeguards on textile products from China in
instances where those criteria are met.
(Inter Press
Service)
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