Rwandan traders say a move by the government to ban imports of used clothing will lead to job losses and will have a negative impact on the country's economy, after the government increased tariffs on imported used clothes with the intention of eventually phasing out importation.
The government argues that the move will boost the local manufacturing sector. The United States has threatened to suspend duty free status for Rwandan apparel products under the African Growth and Opportunity Act (AGOA), America's flagship trade legislation for Africa.
What's your opinion on the fact that east African governments claim domestic demand for locally produced clothes has been stifled by the ubiquity of cheap, second-hand garments imported from Europe and the United States?
Their claim is valid but I see both sides. Of course the priority of East African nations should be to make their domestic production capabilities as strong as possible. However, if the rug gets pulled out too fast, it hurts those whose livelihoods depend on selling second-hand clothes and you create a situation where the domestic industries haven’t yet reached the right level of development and capacity.
That debate isn’t limited to East Africa, but it’s happening around the world, including the United States. When those who make their living and dedicate their lives to a particular industry and believe that the industry could be doing better, the first and easiest place to look is whether or not foreign-produced goods are taking up room on the shelf where domestic (US) goods could be.
What will be the long term impact this move will have on Rwandan Economy?
The best way to understand the impact on Rwanda is to first see where the United States’ focus should be. The Trump Administration should focus on the STRATEGIC “bigger picture.” If our economic partnership with Rwanda is only seen as short-term and transactional then we will miss out on all the potential future benefits to both countries that are possible when both the US AND Rwanda have strong and growing economies.
The US should also keep in mind that President Kagame and his government are factoring in the “bigger picture” as well. Rwanda has set really ambitious long-term goals for trade, investment, and economic growth – that go FAR beyond 2nd hand clothing. Rwanda has set really ambitious long-term goals for trade, investment, and economic growth. These trade disputes with the US may have short-term negative consequences but may be necessary for Rwanda to be a real, independent economic player on the world stage.
Uganda and Tanzania followed Kenya's example and capitulated, agreeing to roll tariffs back to pre-2016 levels, leaving Rwanda the only EAC member country to hold out. What was really at stake here?
First, remember, the United States’ purpose for AGOA is to increase trade and economic growth in sub-Saharan Africa. BUT it is also used as a negotiating tool with countries on other issues, and using this leverage happened under Obama and continues under Trump.
So, what’s was the reasoning and what’s really at stake for Rwanda? I think their official statement in response to Trump’s decision back in April clearly explains it. Rwanda called AGOA “a commendable unilateral gesture to African countries” but you can’t base your economy on what another country may or may not do. While I’m sure Rwanda would love to reap all the benefits from AGOA in perpetuity, the reality is that they have to build their economy their way on what they can control – not based on a gesture from the United States that can unilaterally change.
In March 2017, the Secondary Materials and Recycled Textiles Association (SMART), which represents companies that collect and resell Americans' used clothing, approached the U.S. Trade Representative (USTR) claiming the EAC duty increase violated the African Growth and Opportunity Act (AGOA.) The USTR in turn gave Rwanda an ultimatum - cancel tariffs aimed at supporting the local garment industry within 60 days or lose benefits under AGOA. Does the US really have anything to lose if African nations back out from this deal ?
Here’s the most important thing to keep in mind when you try to understand the Trump Administration’s agenda: Economic partnerships with other countries are centered exclusively around Trump’s notion of “America First.” “Fair” trade with Rwanda or any other country actually means: trade on America’s terms. It may seem like a relatively small group (SMART) is having an outsized impact on US-Rwanda trade, but it makes perfect “America First” sense. SMART believes that Rwanda’s actions threaten its member companies and their tens of thousands of employees and if the Trump Administration has to pick between US companies and workers and Rwanda or any other country, it will be America First.
And yes, America First as pursued by Trump will cause us to lose out in the long run and we’ve already seen that it’s complicated our partnerships with our allies on so many issues from trade to security to climate change.