Thursday, May 17, 2012

Apparel's competitive threat

Kenya’s textile  and apparel's industry struggles to remain competitive against its global rivals. This became clear when its sales dropped as a result of the increased opening of the US market to China’s exports in 2005. Since then the Chinese threat has since been held at bay with imposition of restrictions, but should these not be renewed, the results will be very harmful to Kenya’s industry.

However, China is not the sole threat. India, Bangladesh and Cambodia all have strong textile and apparel sectors. While India’s sector may still be restricted in the same way as China’s, it is increasingly difficult for US policy-makers to justify trade advantages offered to African countries over Bangladesh and Cambodia, which are equally poor.

As far back as 2007, The Economist magazine wrote about Africa's AGOA-fueled apparel industry:

… the future is uncertain. American, European and South African quotas on Chinese exports are likely to be abolished within the next couple of years. The World Trade Organisation has also decided that rich countries should extend preferential access to all poor countries, not just African ones

Time is running out on AGOA, not so much in terms of its formal expiry in 2015 (AGOA will likely be extended beyond 2015, as has happened before), but more in terms of whether meaningful advantages can continuously be offered to African states.

Therefore, Kenya’s textile and apparel exporters will need to develop a business advantage over their competition based on firm-level advantages, rather than advantages offered by US trade policy.