Changing this requires carefully analysing where and how Kenya can develop business-based advantages, assuming a level international playing field, and then beginning to implement the changes required to compete.
Tuesday, June 5, 2012
Competitiveness concerns
Currently, Kenya’s apparel firms compete
internationally based on the largess of US trade policy makers and not on firm
and country-level advantages.
Changing this requires carefully analysing where and how Kenya can develop business-based advantages, assuming a level international playing field, and then beginning to implement the changes required to compete.
Changing this requires carefully analysing where and how Kenya can develop business-based advantages, assuming a level international playing field, and then beginning to implement the changes required to compete.
Growing opportunities in cut flowers
Time is everything in cut flowers.
Therefore, predictably, what the US does not grow itself, it imports from from its back yard, with just 2 countries, Colombia and Ecuador, accounting for about 80%
of its imports. As Andean Pact countries, they enjoy duty-free access.
However, in third place lies the Netherlands, whose exports doubtless include a large share of Kenyan flowers (industry experts estimate between 30-40%). Kenya’s growth opportunities lie in increasing this share of product going to the US as well as direct supply. However, Kenya should be wary that it does not cannibalize its ‘via-the-Netherlands’ market as it grows its direct market, leaving it with more value chain hassles but no more of the market than it began with.
However, in third place lies the Netherlands, whose exports doubtless include a large share of Kenyan flowers (industry experts estimate between 30-40%). Kenya’s growth opportunities lie in increasing this share of product going to the US as well as direct supply. However, Kenya should be wary that it does not cannibalize its ‘via-the-Netherlands’ market as it grows its direct market, leaving it with more value chain hassles but no more of the market than it began with.
Tuesday, May 29, 2012
Strategy presentation
To view the strategy presentation given to the AGOA National Committee on May 29th click here: http://db.tt/ZuKJdtRl
Wednesday, May 23, 2012
Going nuts
Nut exporters to the US were not
immediately responsive to the passage of AGOA, remaining at historic export
levels until 2002/3. 2003 saw an increase, with a 3-4 year surge in exports.
However this pales in comparison to a recent surge, where the value of nut
exports to the US overtook tea in 2010 and rivaled coffee in 2011.
This increase has been in part fueled by lower harvests in Australia, a major macadamia nut exporter, which led to both more demand from Kenya and higher overall prices (pushing up value).
However, a major factor behind the spectacular increase has been a ban by the Government of Kenya on the export of raw, in-shell nuts. This has diverted exports from processing buyers, namely Hong Kong, China and India, to local processors.
Like textiles and apparel, though to a lesser extent, the success of the sector is based on policy-level and not firm-level advantages over competitors. Minus the government ban, local supply may dramatically revert to other countries for processing and re-export to the US and other countries.
This increase has been in part fueled by lower harvests in Australia, a major macadamia nut exporter, which led to both more demand from Kenya and higher overall prices (pushing up value).
However, a major factor behind the spectacular increase has been a ban by the Government of Kenya on the export of raw, in-shell nuts. This has diverted exports from processing buyers, namely Hong Kong, China and India, to local processors.
Like textiles and apparel, though to a lesser extent, the success of the sector is based on policy-level and not firm-level advantages over competitors. Minus the government ban, local supply may dramatically revert to other countries for processing and re-export to the US and other countries.
Monday, May 21, 2012
Carson: AGOA boosts trade, supports shared growth with Africa
The African Growth and Opportunity Act (AGOA) has boosted
exponentially the United States’ trade with sub-Saharan Africa and remains the
“centerpiece” of U.S. economic engagement with the region, according to
Assistant Secretary of State for African Affairs Johnnie Carson.
Speaking ahead of the annual AGOA forum, scheduled to take place in Washington June 14–15, Carson said the pivotal economic development program “remains very relevant today not only for the trade preferences it provides eligible African countries, but also for the platform it gives the U.S. government to engage in an economic dialogue with our African partners.”
The assistant secretary told the House Foreign Affairs Subcommittee on Africa during testimony April 17 that U.S. trade with sub-Saharan Africa has grown significantly during the past 10 years.
U.S. exports to the region have tripled from less than $7 billion in 2001 to more than $21 billion in 2011, while U.S. imports hit $74.2 billion last year, according to the U.S. Department of Commerce.
The department reported the top destinations for U.S. exports in 2011 were South Africa, Nigeria, Angola, Ghana and Ethiopia. U.S. exports in machinery, vehicles, mineral fuels, cereals and aircraft drove the export growth.
U.S. imports from sub-Saharan Africa grew by 14 percent from 2010, driven by an increase in African exports of mineral fuels, precious metals and stones, vehicles and cocoa products. Major exporters to the United States were Nigeria, Angola, South Africa, Gabon and Chad.
Carson commended these strengthening economic ties and said that “increasing two-way trade and enhancing investment helps to grow economies on both sides of the Atlantic.”
While Africa's growth is impressive, he said, it still only accounts for less than 2 percent of global trade.
“It is my firm belief that Africa represents the next global economic frontier, and I am not alone in that assessment,” Carson said, noting that the World Bank projects growth rates of between 5 percent and 6 percent during the next two years for Africa.
Carson said AGOA, which is part of the Trade and Development Act of 2000, will continue to be critical in supporting this growth. AGOA allows participating countries in sub-Saharan Africa to export nearly all of their goods to the United States duty-free. By removing taxes and other trade and customs barriers, AGOA has helped African countries to increase and diversify their exports.
Signed into law by then-President Bill Clinton in May 2000, AGOA was designed to expand U.S. trade and investment with sub-Saharan Africa, stimulate economic growth, promote trade and investment talks, encourage economic integration and help bring sub-Saharan Africa into the global economy. Currently, 40 countries participate in AGOA.
The 2012 forum will focus on how to improve Africa’s infrastructure to facilitate and increase trade and development. It will bring together more than 600 participants, including senior U.S. and African government officials, members of the private sector and civil society representatives.
Source: www.agoa.info
Speaking ahead of the annual AGOA forum, scheduled to take place in Washington June 14–15, Carson said the pivotal economic development program “remains very relevant today not only for the trade preferences it provides eligible African countries, but also for the platform it gives the U.S. government to engage in an economic dialogue with our African partners.”
The assistant secretary told the House Foreign Affairs Subcommittee on Africa during testimony April 17 that U.S. trade with sub-Saharan Africa has grown significantly during the past 10 years.
U.S. exports to the region have tripled from less than $7 billion in 2001 to more than $21 billion in 2011, while U.S. imports hit $74.2 billion last year, according to the U.S. Department of Commerce.
The department reported the top destinations for U.S. exports in 2011 were South Africa, Nigeria, Angola, Ghana and Ethiopia. U.S. exports in machinery, vehicles, mineral fuels, cereals and aircraft drove the export growth.
U.S. imports from sub-Saharan Africa grew by 14 percent from 2010, driven by an increase in African exports of mineral fuels, precious metals and stones, vehicles and cocoa products. Major exporters to the United States were Nigeria, Angola, South Africa, Gabon and Chad.
Carson commended these strengthening economic ties and said that “increasing two-way trade and enhancing investment helps to grow economies on both sides of the Atlantic.”
While Africa's growth is impressive, he said, it still only accounts for less than 2 percent of global trade.
“It is my firm belief that Africa represents the next global economic frontier, and I am not alone in that assessment,” Carson said, noting that the World Bank projects growth rates of between 5 percent and 6 percent during the next two years for Africa.
Carson said AGOA, which is part of the Trade and Development Act of 2000, will continue to be critical in supporting this growth. AGOA allows participating countries in sub-Saharan Africa to export nearly all of their goods to the United States duty-free. By removing taxes and other trade and customs barriers, AGOA has helped African countries to increase and diversify their exports.
Signed into law by then-President Bill Clinton in May 2000, AGOA was designed to expand U.S. trade and investment with sub-Saharan Africa, stimulate economic growth, promote trade and investment talks, encourage economic integration and help bring sub-Saharan Africa into the global economy. Currently, 40 countries participate in AGOA.
The 2012 forum will focus on how to improve Africa’s infrastructure to facilitate and increase trade and development. It will bring together more than 600 participants, including senior U.S. and African government officials, members of the private sector and civil society representatives.
Source: www.agoa.info
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:
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.
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.
Sunday, May 13, 2012
The uncertain future of apparel
Depsite great growth and product divsersification, the textile and apparel sector’s growth spurt was just that, a spurt. Within
3-4 years it had leveled off, remaining largely flat since 2005 when the MFA
expired (with a substantial dip as a result of the 2009 US recession).
A leveling off of Kenya’s exports at this much higher level would still amount to a substantial AGOA accomplishment. However, it is not certain that exports will level. The three products that dominated Kenya’s pre-AGOA exports – namely woven women’s clothes, knitted jerseys and woven men’s shirts – have all been in decline since their 2004/05 peak (most dramatically so in the case of men’s shirts) and though other products have come on line and grown well, this has not stemmed the sector’s flattening out.
A leveling off of Kenya’s exports at this much higher level would still amount to a substantial AGOA accomplishment. However, it is not certain that exports will level. The three products that dominated Kenya’s pre-AGOA exports – namely woven women’s clothes, knitted jerseys and woven men’s shirts – have all been in decline since their 2004/05 peak (most dramatically so in the case of men’s shirts) and though other products have come on line and grown well, this has not stemmed the sector’s flattening out.
Friday, May 11, 2012
Brookings weighs in
A
good article on AGOA
and the 3rd party fabric provision by the Brookings
Institution at: http://www.brookings.edu/opinions/2012/0504_us_africa_commercial_relations_kimenyi.aspx
Excerpts:
“The emerging consensus from this forum is that future of U.S.-African relations are dependent on Congress extending the third country fabric provision of the African Growth and Opportunity Act (AGOA) within the next several weeks.”
“Already, African manufacturers have lost more than 35 percent of their orders from U.S. customers due to the uncertainty surrounding the extension of the provision, according to the Washington-based African Coalition on Trade which represents exporters in nine AGOA countries. Reportedly there is no opposition in the Senate or House to extending the provision.”
“Apparently, it is just the political paralysis that is affecting all aspects of U.S. lawmaking these days.”
Excerpts:
“The emerging consensus from this forum is that future of U.S.-African relations are dependent on Congress extending the third country fabric provision of the African Growth and Opportunity Act (AGOA) within the next several weeks.”
“Already, African manufacturers have lost more than 35 percent of their orders from U.S. customers due to the uncertainty surrounding the extension of the provision, according to the Washington-based African Coalition on Trade which represents exporters in nine AGOA countries. Reportedly there is no opposition in the Senate or House to extending the provision.”
“Apparently, it is just the political paralysis that is affecting all aspects of U.S. lawmaking these days.”
Thursday, May 10, 2012
AGOA in a global context
AGOA
has led to impressive gains in Kenya’s trade with the US, particularly in the
first few years after its launch. However, this growth needs to be put in
context of general increases in Kenya’s exports across the board.
The major impact of AGOA to Kenya’s overall exports has been to increase the general relevance of US exports, making it Kenya’s 5th largest export partner with between 5-6% of total exports.
Kenya’s exports to the US are important, but they are not of critical importance. Therefore, though exports to the US were almost flat since 2005, Kenya’s total exports still grew at a healthy 11% a year between then and 2011.
The major impact of AGOA to Kenya’s overall exports has been to increase the general relevance of US exports, making it Kenya’s 5th largest export partner with between 5-6% of total exports.
Kenya’s exports to the US are important, but they are not of critical importance. Therefore, though exports to the US were almost flat since 2005, Kenya’s total exports still grew at a healthy 11% a year between then and 2011.
Saturday, May 5, 2012
Kenya's response to AGOA
AGOA’s
impact on Kenya’s exports has been nothing short of impressive. Growing at an
average of 2% a year before AGOA’s passage, Kenya’s exports to the US exploded
to a growth level of 28% a year until 2005.
Most of this growth was fueled by the textiles and apparel sector, which grew at as much as 44% between 2001-05. However, this was from a respectable pre-AGOA 16% annual growth rate.
The end of the multi-fiber arrangement in 2005 led to a collapse in growth, culminating in a full-on decline in textile/apparel exports with the on set of the US’s recession in 2009.
However, leading non-textile/apparel exports softened the decline in total exports by steadily growing at between 7-10% over the same 2006-11 period.
Most of this growth was fueled by the textiles and apparel sector, which grew at as much as 44% between 2001-05. However, this was from a respectable pre-AGOA 16% annual growth rate.
The end of the multi-fiber arrangement in 2005 led to a collapse in growth, culminating in a full-on decline in textile/apparel exports with the on set of the US’s recession in 2009.
However, leading non-textile/apparel exports softened the decline in total exports by steadily growing at between 7-10% over the same 2006-11 period.
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