Loss of textile market costs African jobs

African textile producers and exporters are reeling from the impact of new World Trade Organization rules opening up to free market forces a sector previously protected for more than 30 years. January 2005 marked the expiration of a quota system in industrial nations which, as a side effect, had provided a ready market for textiles and apparel from poor African and other developing countries.

The result is that more than 250,000 jobs have been lost in Africa, affecting more than another million family members, reports the International Textile, Garment and Leather Workers’ Federation (ITGLWF). Most jobs have been lost in Lesotho, South Africa, Swaziland, Nigeria, Ghana, Mauritius, Zambia, Madagascar, Tanzania, Malawi, Namibia and Kenya.

The ITGLWF is calling on African governments to convene an urgent continental conference on the future of the clothing, textile and footwear industries so that governments, trade unions and producers can develop plans to respond to the current crisis, increase efficiency, attract investment and improve workers’ welfare.

The Multi-Fibre Arrangement (MFA), set up in 1974, was designed to protect producers in the world’s biggest markets – the US, Canada and the European Union (EU) from the more efficient ones emerging in Asia at the time. For decades, there was a limit to the amount of textiles other countries could export to the largest markets. This limit mainly affected the world’s major producers, such as China, India, Hong Kong, the Taiwan province of China and the Republic of Korea. But these restrictions brought advantages to the many smaller textile-exporting countries that stepped in to fill the gap.

During the MFA, textile companies from the major Asian producers set up subsidiaries in less developed countries such as Lesotho, a country that enjoys duty-free access to the US under the African Growth and Opportunity Act of 2000. As a result, textiles and clothing became Lesotho’s economic mainstay, and at one point the industry employed 56,000 workers, accounting for virtually every manufacturing job in the country.

Today, Lesotho provides a telling example of the grave impact of the expiration of the MFA. “Most if not all our foreign investors come from Asia, mainly Taiwan and China,” notes Mr. Daniel Maraisane, head of the main clothing workers’ union. With the end of the quota system, those investors “say it’s now easier and cheaper to manufacture in China and India. So they are starting to go back home.… There’s simply no way little Lesotho can compete with such giants.”

By the end of 2004, six of the country’s 50 clothing factories had already closed in anticipation of the deadline, leaving 6,600 workers without jobs or termination benefits. The surviving companies, faced with shortfalls in export orders, placed 10,000 workers on short-term work, using them only when needed. “If things go on like this,” says Mr. Maraisane, “we are afraid that unemployment, which already stands at 40 per cent, will end up reaching 70 per cent.”

The National Council of Textile Organizations, grouping the main US producers, reports that within the first three months of 2005 — immediately after the lifting of the quotas — imports of cotton trousers from China shot up by 1,500 per cent and of cotton shirts by 1,350 per cent. In Europe, “the increases in the import of certain categories of clothes exceeded 2,000 per cent during the first quarter of 2005,” notes ITGLWF General Secretary Neil Kearney.

Alarmed by the influx, in May 2005 the US government imposed temporary restrictions on textiles and clothes imported from China, affecting about $2 bn worth of goods. The restrictions are permitted under “safeguard” clauses that China signed when it joined the WTO in 2001. Any WTO member can use the clauses to limit sudden rises in imports from China until 2008.

Like the US, African countries could invoke these “anti-dumping” measures to temporarily restrict Chinese exports, notes Mr. Mills Soko, a researcher at the South African Institute of International Affairs in Johannesburg. This narrow window of opportunity could provide a little more time for African textile producers to improve efficiency and competitiveness and add more value to their exports.

To encourage imports of more modern equipment and to enhance competitiveness, Kenya’s government removed taxes on all cotton ginning and textile manufacturing machinery in 2002. The government also dropped taxes on goods and services to cotton ginning factories and improved incentives to lure textile companies into its export processing zones (EPZs). These are specially created industrial areas that offer investors incentives such as tax exemptions and the ability to move funds freely into and out of Kenya.

By December 2004, clothing enterprises in Kenya’s EPZ employed 34,614 workers “in 30 world-class factories,” says Ms. Margaret Waithaka of the EPZ Authority. Thanks to the improvements in the sector and to growing demand in the US, apparel exports from Kenya to the US increased from $44 mn in 2000 to $226 mn in 2004, she says, making Kenya the second-largest exporter of clothing to the US from sub-Saharan Africa. But to withstand the heavy competition of the post-MFA era, further adjustments are needed.

One option would be for African countries to move away from overdependence on textiles and clothing, and into other goods that are in demand. The UN Economic Commission for Africa (ECA), based in Addis Ababa, Ethiopia, recommends that African states provide cheap credit and other incentives to enterprises that manufacture a wide range of goods for export.

As a strategic starting point, they should begin processing local raw materials into finished products for export, the ECA says. Instead of exporting raw cotton or cloth, for example, countries could develop industries that produce high-end clothing products. This effort could include trying to supply niche markets for garments with African designs.

To diversify their exports, African countries will need significantly improved access to international markets, says Mr. Gobind Nankani, the World Bank’s regional vice-president for Africa. That would require reducing “protectionist practices, such as subsidies, in foreign markets,” which is under negotiation in the current round of WTO global trade talks scheduled for completion by the end of this year.