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Delay of US Law Hurts Lesotho's Economy, says Trade Minister - 2004-07-01

Lesotho's trade minister, Mpho Malie, says delays by the U.S. Congress in extending the African Growth and Opportunity Act has cost the country tens-of-millions of dollars in lost textile orders.

Tiny, landlocked Lesotho has been one of the major beneficiaries of a U.S. trade law, aimed at encouraging investment in poor African countries by giving them duty-free access to American markets.

Since the African Growth and Opportunity Act (AGOA) took effect in 2000, Lesotho's textile industry has boomed. More than 35,000 jobs have been created, and the small mountain kingdom is now the continent's largest exporter of textiles to the United States. In 2003, Lesotho exported more than $400 million worth of clothing to the United States.

Congress is debating whether to extend the law, and the uncertainty, Lesotho Trade Minister Mpho Malie says, is hurting the country's exports.

One key provision of the act allows Africa's poor countries to qualify for duty-free imports of garments, even if they are made from fabric produced elsewhere. That provision expires at the end of September, and Mr. Malie says, without it, Lesotho's garment industry would suffer.

"It is of great concern, because it says to us, the factories that are sourcing outside of the AGOA-certified in the U.S. are not going to be able to move their garments into the U.S. duty-free and hence it would not be, they would not be competitive in that regard. And it might not be worth their while to stay on and manufacture in Lesotho," he said.

Most of Lesotho's textile factories import fabric from Asia, and would, therefore, not be eligible for the duty-free privileges, if the act is not extended. Mr. Malie says many buyers are already delaying or canceling orders.

"If the provision is not extended beyond September 2004, they would have to pay duties on the orders that come in after 30 September," he said. "So, they are holding on orders that they think will not reach the deadline. As a result of that, what happened is that, in the past two months, we have seen cancellation of orders and holding back of orders to the tune of about $40 million."

The U.S. House of Representatives voted last month to extend the trade privileges until 2015. More urgently for Lesotho, the House voted for a three-year extension of the fabric rule until 2007.

But the Senate has yet to vote on the measure. Until it does, Mr. Malie and Lesotho's textile manufacturers fear business, which is already suffering from the rising value of the local currency, will continue to slump.

Mafako Seokho is one of hundreds of women who stand outside the factory gates each day, hoping to get a job. Three months have passed, and she's still waiting.

"There are some people who are still telling us that there is a job here, so we just come here to look for a job," she said. "But we didn't get it. We just come early in the morning until now, and we didn't get it."

Until AGOA is passed, however, Lesotho's factories are unlikely to be hiring new staff, and Ms. Seokho will keep waiting.