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by Ismail Akwei, at 08:30 am, August 02, 2018, Money Moves

Rwanda snubs U.S. after Trump suspends its duty-free benefits for clothes imports

Photo: Rwandan President Paul Kagame and U.S. President Donald Trump

Rwanda has snubbed the United States after President Donald Trump suspended the East African country’s duty-free benefits to export clothes to the U.S. following its decision to increase tariffs on used clothes imports and a subsequent ban by 2019.

Trump’s suspension of Rwanda which was confirmed on Monday will not affect other duty-free benefits under the African Growth and Opportunity Act (AGOA).

On Tuesday, The Rwandan government responded to the suspension saying that their garment companies are already being introduced to European buyers.

“We expect some Rwandan companies to be affected. We have a plan for them. We have engaged them and we will be helping with the transition to new markets,” Clare Akamanzi, CEO of the Rwanda Development Board, told reporters.

She added that the government is assisting the companies financially, reports Reuters.

The trade war started over two years ago when countries of the East African Community (EAC) including Rwanda, Tanzania, Kenya and Uganda decided to increase tariffs and then fully ban imported second-hand clothes and shoes by 2019, arguing that it would help member countries boost domestic clothes manufacturing.

The United States was petitioned by the Secondary Materials and Recycled Textiles Association (SMART) which complained that the ban “imposed significant hardship” on the U.S. used-clothing industry and violated AGOA rules.

As signatories to the AGOA trade programme which offers them duty-free access to the United States, their decision violated the programme’s conditions which includes the eliminating barriers to U.S. trade and investment, among others.

Kenya withdrew its decision to ban used clothes after threats by the United States to review trade benefits which Kenya was a major beneficiary. The other countries did not budge.

Uganda and Rwanda had already raised taxes for used clothes and offered incentives to manufacturers to invest in their local textile industry.

Rwandan President Paul Kagame had stated that his country will proceed with the ban on used clothes and will choose to grow its local textile industry at the expense of being a member of the AGOA.

This was met with ultimatums by the acting head of economic and regional affairs at the Africa Bureau of the US State Department, Harry Sullivan. Later, Tanzania and Uganda succumbed to the threats leaving Rwanda which was defiant.

In March, U.S. President Donald Trump notified Congress of the suspension of duty-free treatment for all AGOA-eligible apparel products from Rwanda in 60 days.

This has been effected and the U.S. says it regrets the outcome and calls on Rwanda to reduce the tariffs and cancel plans to ban used clothes imports from the United States.

“We regret this outcome and hope it is temporary,” says the Deputy U.S. Trade Representative C.J. Mahoney in a statement.

U.S. imports from Rwanda, Tanzania, and Uganda totalled $43 million in 2016, up from $33 million in 2015 while exports were $281 million in 2016, up from $257 million in 2015.

Rwanda will lose about $1.5 million in exports to the U.S. or about three percent of its total exports to the United States, Mahoney warns.

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