President Donald Trump has withdrawn Rwanda’s privilege of exporting clothing to the United States duty-free. This was as a result of Rwanda’s decision to raise tariffs on used clothing and footwear imports from the U.S. This was confirmed on Monday, in what many analysts in Washington and Africa see as a foreshadow of Trump’s ‘America First’ trade ideology on the continent.
“We regret this outcome and hope it is temporary,” Deputy United States Trade Representative (USTR), C.J. Mahoney said in a statement, after the announcement by Donald Trump, and also added that the move would affect about $1.5 million in Rwandan exports or about three percent of its total export to the United States.
The African Growth and Opportunity Act
Rwanda’s decision to raise tariffs on the import of used clothing from the U.S. was an invalidation of the AGOA. The African Growth and Opportunity Act (AGOA) is a United States Trade Act that enhances market access to the U.S. for qualifying Sub-Saharan African countries. Only Sub-Saharan African countries are considered for eligibility, and with AGOA beneficiary status having been awarded to approximately 40 countries (this number changes from time to time).
While the eligibility requirements are set out in the legislation, it is the United States which determines, annually, whether countries have met the published eligibility requirements. Beneficiary status may, therefore, be granted, or withdrawn, at the discretion of the US President.
In order to qualify for AGOA trade benefits, partner countries must meet certain statutory eligibility requirements, including making continual progress towards establishing market-based economies, the rule of law, political pluralism, and elimination of barriers to U.S trade and investment, among others.
In March, the Secondary Materials and Recycled Textiles Association (SMART), sent a petition to USTR office affirming that the East African Community (EAC)’s 2016 decision to place a ban on imports of used clothing and footwear placed a significant economic strain on the U.S. used clothing industry, and is inconsistent with AGOA beneficiary criteria for countries to establish a market-based economy and eliminate barriers to U.S. trade and investment. This petition requested an out-of-cycle review to determine whether Rwanda, Kenya, Tanzania, and Uganda, who are members of the EAC, are meeting AGOA eligibility criteria.
The USTR accepted the petition filed by SMART and initiated an out-of-cycle review of Rwanda, Tanzania, and Uganda’s AGOA eligibility on June 20, 2017. A public hearing in which officials from the governments of the countries and from the EAC Secretariat testified was held on July 13, 2017, in Washington. The USTR determined that an out-of-cycle review of Kenya’s AGOA eligibility was not warranted due to the government’s commitment to reverse the tariff back to pre-2016 levels, effective July 1, 2017, and a commitment not to ban imports of used clothing through other policy measures. Tanzania and Uganda also made similar commitments during the course of the out-of-cycle review.
Overreaction from Trump?
Head of East African office of the United Nations Economic Commission for Africa, Andrew Mold, said he was disappointed by the USTR’s announcement. “We know the current U.S. administration has a different position on international trade than previous administrations, particularly with countries with which they sustain large trade deficits, but in this case, the U.S. actually has a trade surplus with Rwanda,” said Mold.
Rwandan clothing exports to the U.S will now attract tariffs as high as 30 percent, Assistant U.S Trade Representative for Africa Connie Hamilton said earlier this month. Despite the suspension, Rwanda will remain eligible to receive non-apparel benefits from AGOA.
To supplement its exporters under AGOA-facilitated contracts, Rwanda is setting up a Rwf1.3 billion ($1.5 million) facility to absorb tax expenses for traders with ongoing contract obligations. The two-year facility which is waiting to be approved by the government is intended to ease the transition as exporters search for markets in Europe and Asia. The government plans to expand the facility into a revolving fund that will cushion local industries against external shocks.
Trump’s tariff war on everybody
Donald Trump’s administration seemingly began a trade war when it imposed sweeping tariffs on $34 billion worth of Chinese goods, ranging from flat screen television sets to aircraft parts, and also including medical devices. China responded by imposing tariffs on $34 billion worth of U.S. goods which included soybeans, automobiles and lobsters.
Trump then extended the trade war it to Canada, Mexico and the European Union (EU) as his administration slapped tariffs on steel and aluminium imports from these countries, citing protection of national interest. These nations also announced tariffs in retaliation on a number of American goods, including American whiskey, toilet paper, U.S. maple syrup for Canada; U.S. pork, cheese, bourbon, apples in the case of Mexico; and bourbon whiskey, motorcycles and orange juice entering the EU.