On April 17, 2023, the US International Trade Commission (USITC) released a new report analyzing the trade and economic impact of the African Growth Opportunity Act (AGOA). The report fulfills the investigation request by the US House of Representatives Committee on Ways and Means in January 2022.
The full report is HERE. Below are the key findings regarding the apparel sector:
The African Growth and Opportunity Act (AGOA) matters significantly to Sub-Saharan African countries (SSA)’s apparel exports to the United States
- AGOA has been the primary competitive advantage for SSA’s apparel exports to the United States. For example, US apparel imports from AGOA beneficiaries have risen from $953 million in 2001 to $1.4 billion in 2021 (note: up to $1.76 billion in 2022). More than 96.4% of these imports claimed AGOA’s duty-free benefits, including 98.8% utilized the “third-country fabric” provision.
- While twenty countries were eligible for AGOA’s apparel provision, over 90% of US apparel imports from AGOA members in 2021 originated in five SSA countries: Kenya (31.5%), Madagascar (19.9%), Lesotho (20.6%), Ethiopia (18.3%), and Mauritius (5.1%).
- AGOA benefits appear essential for SSA countries to maintain their apparel exports to the United States. USITC noted that in every case when a country lost AGOA eligibility between 2000 and 2021, there was a noticeable decrease in US apparel imports from that country, such as Rwanda and Madagascar. (note: according to OTEXA’s latest trade data, US apparel imports from Ethiopia, which lost its AGOA eligibility in 2022, dropped by 42% in the first two months of 2023 from a year ago, far worse than a 5.8% decrease of AGOA members as a whole.)
- SSA garment manufacturers often find supplying the US apparel market a better fit than Europe, primarily because US brands tend to place orders for higher volume bulk basics, which allows workers to focus on a narrower set of skills.
The impact of AGOA on SSA’s apparel production and exports varied at the country level
- Some SSA countries (e.g., Kenya and Lesotho) already had well-established apparel industries when AGOA was implemented in 2000. In contrast, other SSA countries (e.g., Madagascar, Ethiopia, Tanzania, and Ghana) received substantial investments from foreign-owned firms after AGOA was enacted, which helped jumpstart their apparel sectors.
- USITC also identified two “unsuccessful” AGOA cases. For example, Mauritius was the largest AGOA beneficiary apparel supplier to the United States in 2000 but has since fallen to the fifth-largest in 2021, largely due to increased labor costs. Likewise, South Africa’s apparel export to the US was negatively affected by its disqualification from the “third-country fabric” provision under AGOA.
AGOA has had a limited impact on building an integrated regional textile and apparel supply chain in SSA
- Currently, SSA countries primarily participate in the cut-and-sew operations of apparel based on imported textile raw materials from outside the region (mostly from Asia).
- The USITC identified several challenges in building the local textile industry in SSA. For example, building a textile mill typically requires much higher investments (e.g., $200–300 million) than a garment factory (i.e., $25 million). Also, most SSA manufacturers cannot make the various types of yarns and fabrics in demand from U.S. buyers.
- The dilemma is not new: Access to textile inputs from sources outside SSA is essential for garment manufacturers in SSA to meet the specifications of US buyers. However, relying on imported textile inputs reduces the incentives for investing in new textile production capabilities in SSA.
- The USITC report found Mauritius an exception as it has developed a relatively competitive capability in producing cotton fabrics, which are supplied to garment factories in Madagascar. There is also some collaboration between cotton producers in Tanzania and Uganda and Kenya’s textile manufacturers.
US fashion companies generally see SSA as a promising emerging sourcing destination
- Apparel producers in SSA are less established in global apparel value chains than manufacturers in other parts of the world. Therefore, it is not uncommon that fashion brands and retailers “work more directly with SSA apparel manufacturers to ensure product quality, particularly for new or expanding product lines.”
- Most SSA garment factories only have cut, make, and trim (CMT) capability and rely on imported textile materials arranged by fashion brands and retailers.
- USITC found that US companies increasingly import man-made fiber (MMF) apparel from AGOA members to benefit from greater import duty savings. (note: US tariff rates for MMF apparel were typically higher than those made with natural fibers like cotton. On the other hand, however, it’s worth noting that SSA countries generally have more competitive advantages in producing cotton apparel products than in producing MMF apparel).
- SSA countries also have advantages over their Asia competitors. For example, “a shipment takes about 15–18 days to travel from the port in Lomé to the East Coast of the United States. From China or Bangladesh, lead times range from 40–50 days.”
- Many fashion brands “have expressed interest in sourcing from greenfield factories with fewer legacy challenges posed by compliance and environmental impacts.”
- US fashion companies’ sourcing diversification strategy to avoid risk exposure also contributed to the expansion of their apparel imports from AGOA members.
Uncertainty of AGOA renewals hurt US apparel imports from SSA
- Apparel companies typically make sourcing decisions 12–18 months in advance. This practice underscores the importance of renewing AGOA early rather than granting extensions only within two to nine months of expiration, as in the past.
- The USITC report mentioned, “Without the assurance of the “third country fabric” provision, many US apparel companies sourced from AGOA beneficiaries reported holding back orders from the region.”
More can be done to leverage SSA’s cotton production better
- Cotton growing is widespread across about thirty SSA countries. SSA accounts for about 7 percent of the world’s cotton production, the fifth-largest globally.
- However, most SSA cotton is sold to international buyers and exported to Asian mills that process it into yarns and fabrics. In contrast, the consumption of domestic cotton in SSA is limited.
- The SSA cotton industry produces high-quality, “sustainable” cotton that can be used in several high-value end products sold globally. However, because of a lack of mechanization, SSA cotton production struggles to increase supply to meet demand.
- Also, cotton-growing regions in SSA tend to be poorer and less politically stable than other parts of the region.
Discussion questions:
- Based on the blog post and class discussions, how competitive or attractive are AGOA members as apparel-sourcing destinations for US fashion companies, especially compared with suppliers from Asia and the Western Hemisphere?
- Based on the blog post, what improvement can be made to make AGOA or any problems that need to be addressed?
- Any other thoughts related to the patterns of apparel trade and sourcing based on the blog post?
FASH455 Global Apparel & Textile Trade and Sourcing 
It’s interesting how many US brands are apart of AGOA and prefer production in Africa because of its easy shipping as it is closer. Countries in the SSA region do have an abundance of cotton but seeing that they typically ship to Asian countries to be processed into fabrics doesn’t make it seem logical. With the time it takes to send it from Asia to Africa then to the US would be close to the say delivery time as Asia to the US. On the other hand there are still many benefits with tariffs and duty-free with AGOA which outweighs these shipping times. It seems that producing items in SSA working with AGOA is very beneficial for all parties I would just hope to learn more about sustainability efforts or if there are any requirements from any brands or countries regarding production.
I agree when reading about shipping times and the substantial difference in delivery times between the US and Asia versus Asia and the US. Production in SSA is very beneficial for all when it comes to sustainability as well.
I found it interesting how SSA countries have substantial differences over Asian competitors when it comes to shipping in the US. Countries apart of AGOA and SSA’s exports determine the regional supply chain for each country. Fashion brands and retailers must establish plans for imported textile materials from man-made fibers as well. I found this interesting because these fibers import duty savings in the US that benefit AGOA members.
This Blog Post highlights the various pros and cons and developing issues with apparel sourcing from AGOA. The removal of third-party fabric greatly affects the effect apparel sourcing has on these countries. With its removal, fabrics needed to produce garments are unavailable, and the loss of tariff-free sourcing makes AGOA unusable to US apparel brands. Third-party fabric clauses still need to stay in place to support sourcing from these countries. A similar case can be seen in USMCA and CAFTA-DR. If a US brand cannot get the textiles they need in these regions and out-of-the-region textiles do not apply to the short-supply list, the tariff-free pricing does not apply and brands will simply choose to source from China, Bangladesh, Vietnam, or other ASEAN members. I do find it interesting that more US brands do not take advantage of the short freight times from AGOA countries as it is much less than Asian countries.
I found it interesting that 90% of US apparel from AGOA only came from five SSA countries with over 30% coming from just Kenya with Lesotho coming in 2nd as they both had well-established existing apparel industries when AGOA was put in place. It’ll be interesting to see how other AGOA countries can expand their US production as well and if Mauritius is able to expand its apparel industry further again, potentially retaking its spot as the largest AGOA beneficiary supplier. The industries in AGOA countries need to be expanded in order for this program to really work long-term, and just like in CAFTA-DR countries, there need to be textile products made in the region in order to reduce the reliance on Asian textile production. While there is some textile production in Tanzania, Uganda, and Kenya and a fair amount of cotton fabric production in Mauritius, it needs to be further expanded to be successful. This is especially true given that there is an abundance of cotton fiber in the region, but not enough of the production machinery and knowledge to create high quantities of the fabric.
It was interesting to see this balance of pros and cons with sourcing through the AGOA. With the promises that are emerging with sourcing through the AGOA, like the close proximity for fast shipping and the increase of man-made fibers. As well as the contrary of there being a uncertainty of “third country fabrics” in order to make deadlines. From this report I also like that they looked into possible ways to improve the possible setbacks.
An interesting fact from this article is that it demonstrates the profound effects that the COVID-19 pandemic has had on international trade in a variety of goods, including pharmaceuticals, medical devices, and personal protective equipment. In the report, the pandemic’s impact on the U.S. is examined. Industry, market, and trade in these products, along with the difficulties supply chains face in supplying the rising demand for these vital goods. For policymakers, industry stakeholders, and anyone else interested in learning more about how the pandemic has affected international trade, it offers a thorough analysis of the situation as it is today and the prospects for the industry and trade in these goods going forward.
An interesting part of this article is it demonstrates the profound effects that the COVID-19 pandemic has had on international trade in a variety of goods, including pharmaceuticals, medical devices, and personal protective equipment. In the report, the pandemic’s impact on the U.S. is examined. S. Industry, market, and trade in these products, along with the difficulties supply chains face in supplying the rising demand for these vital goods. For policymakers, industry stakeholders, and anyone else interested in learning more about how the pandemic has affected international trade, it offers a thorough analysis of the situation as it is today and the prospects for the industry and trade in these goods going forward.
It is interesting to see that SSA members can be quite attractive as apparel-sourcing destinations for US fashion companies. Since SSA members are not necessarily players in the global supply chain, they can serve as great sourcing outlets for start-ups or brand-new fashion companies. Their quality is high and they can more attentively tend to the needs of US fashion brands. In addition, shipping times when sourcing from SSA members is faster than competitors. Beyond SSA members, AGOA members have also become more attractive sourcing-wise. US fashion brands have been importing man-made fiber apparel from AGOA members in an effort to save via import duties. Overall, the statistics and highlights make it apparent that SSA & AGOA members are becoming increasingly more attractive for US fashion companies to source from.
I found this article to be interesting because I feel I have rarely learned about AGOA members’ involvement in international trade. We have mostly focused on Asian trade, so I find it important to identify what products the U.S. would rather source from Africa than from Asia or other countries, specifically due to the pandemic. AGOA offers faster shipping to the U.S. as well as higher attention to detail, such as man-made fibers.