Secondary

Banner: Suitebox – Horizontal

Swaziland – What happens if Swaziland loses its AGOA eligibility?

In a little over three months the US government will put Swaziland under the spotlight and evaluate its eligibility for trade benefits under the African Growth and Opportunity Act (AGOA). The outcome is likely to see Swaziland losing its preferential access to US markets in terms of the act. If the US does pull the plug, Swaziland’s textile industry will go down the drain. During May 2014, the US Departments of Commerce and State will be conducting the annual review of eligibility to determine whether each country eligible for AGOA benefits has met or made progress toward meeting AGOA eligibility criteria. Swaziland was one of the countries earmarked for closer examination by the Obama administration and it is unlikely to withstand the scrutiny.

A December 2013 report by the US Department of Commerce said that as part of the 2014 review of countries, the US government “took special note of its continuing concerns regarding workers’ rights issues in Swaziland.” This was the crux of the report: “The US remains deeply concerned about the government of Swaziland’s lack of measurable progress on workers’ rights issues, particularly protection of freedom of association and the right to organise, its use of security forces and arbitrary arrests to intimidate peaceful demonstrations, and the lack of legal recognition for union federations.” That is not the end of it, either, as AGOA’s eligibility criteria include the establishment of a market-based economy, rule of law, economic policies to reduce poverty, protection of internationally recognised worker rights, and efforts to combat corruption. The scheduled May 2014 review will also examine whether circumstances in ineligible countries have improved sufficiently to warrant making them eligible for AGOA benefits. Mali, for example, was ineligible but has now qualified for AGOA. Swaziland is moving in the opposite direction. The results of the review will be reflected in a recommendation to President Barack Obama on Swaziland’s continued AGOA eligibility.

The manufacturing sector grew by 1.4% p.a. during 2005-12 on the back of a government push to expand factory shells and attract foreign investment into textile and food & beverage manufacturing. Factory production contributed more than 40% of GDP during 2012, which is broadly the level seen over the past decade. Manufacturing production is focussed on textiles, clothing and footwear manufacturing, sugar refining, cotton ginning and wood pulping, and employs some 15,000 people at present. Since 2000, AGOA has attracted much interest from Asian investors into the secondary sector.

WHY DO WE CARE? Swaziland exports a significant amount of its textile and clothing products to the US duty-free under AGOA provisions. These items sent to the US represented 3.5% of Swazi exports during 2011-13 but is much more significant when considering the formal employment implications and overall economic activity. It is the latter that may save Swaziland since, if the AGOA eligibility is withdrawn, it is the workers and their dependents who will suffer. The counterpoint is that the US Congress is losing its appetite for AGOA and similar helping hands while the US economy faces its own crisis. Further, many of the factories that produce for export are owned in full or in part by the government and the monarchy. and that is not going to help Swaziland’s cause. The situation looks bleak for Swaziland’s factory sector.

 

NKC swazi

 

Addendum: AGOA in brief

AGOA became law on the signature of US President Bill Clinton on 18 May 2000 as Title 1 of The Trade and Development Act of 2000. The Act offers tangible duty-free access incentives for African countries to continue their efforts to open their economies and build free markets. President George W. Bush signed amendments to AGOA, also known as AGOA II, into law on 6 August 2002 as Sec. 3108 of the Trade Act of 2002. AGOA II substantially expands preferential access for imports from beneficiary Sub-Saharan African countries. By modifying certain provisions of AGOA, the AGOA Acceleration Act of 2004 (AGOA III), signed by President Bush on 12 July 2004 extended preferential access for imports from beneficiary sub-Saharan African (SSA) countries until September 2015; extended third country fabric provision for three years from September 2004 until September 2007; and provides additional Congressional guidance to the Administration on how to administer the textile provisions of the bill.

The Africa Investment Incentive Act of 2006 further amends portions of AGOA referred to as AGOA IV. AGOA provides “reforming” African countries with the most liberal access to US markets available to any country or region with which the United States does not have a Free Trade Agreement. It supports US business by encouraging reform of Africa’s economic and commercial regimes, which will build stronger markets and more effective partners for US firms. AGOA expands the list of products which eligible Sub-Saharan African countries may export to the United States subject to zero import duty under the Generalized System of Preferences (GSP). While general GSP covers approximately 4,600 items, AGOA GSP applies to more than 6,400 items. AGOA GSP provisions are in effect until 30 September 2015. – Extracted and edited from the International Trade Administration.

Analysts: Gary van Staden & Christie Viljoen

, , ,

Comments are closed.