GENEVA — Granting poor African countries preferential market access without tariffs or quotas to rich markets such as the U.S. and European Union could increase their annual income by $3 billion to $5 billion and boost exports by 5 percent to 10 percent, surmised a report by a United Nations Conference on Trade and Development.
The study estimates that an elimination of trade subsidies, demanded by West African cotton countries in the stalled global trade talks aimed at reducing tariff barriers, would increase the price of cotton by 10 percent to 20 percent.
The U.S. African Growth and Opportunity Act provides favorable market-access terms for apparel exports of sub-Saharan countries that qualify through 2015. This includes items made from U.S.-made yarns and fabrics or from regionally produced materials. The qualifying African countries are also allowed to use fabric purchased from any third country, which lets them compete with Asian exporters.
However, the third-country provision is slated to expire at the end of September 2007, and U.S. legislation that called for extending the third-country benefits for another year has been blocked in Congress.
Vincent Karega, Rwanda’s minister of industry and investment promotion, said AGOA continues to offer “big opportunities” for his and other African nations. But he noted the focus should not just be on preferential treatment but for investment in capacities, boosting the economy and opening the market.
“It’s the only way to enhance real trade,” he said.
A joint study by UNCTAD and the International Chamber of Commerce on promoting investment in Rwanda notes the country’s biggest apparel manufacturer, UTEXRWA, which employs 700 people, has already established contacts with potential U.S. buyers like Wal-Mart.
However, the company is constrained, the study points out, “by low production capacity, high transport costs, the cost of imported inputs and the cost and availability of energy.”
To overcome some of the constraints, UTEXRWA has entered into a cooperation agreement with the Canadian Center for Textile Technology to upgrade its workforce, production quality and capacity, the study said.