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Technical Report: SADC Rules of Origin in Textiles and Apparel:

Review and Policy Options

(DRAFT FOR COMMENT)

Tomasz Iwanow, Trade Economist

Submitted by: AECOM International Development

Submitted to: USAID/Southern Africa

May 2011

USAID Contract No. 674-C-00-10-00075-00

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Table of Contents Summary and Policy Recommendations: ............................................ 3 1. Introduction ......................................................................................... 7 2. SADC Rules of Origin in the Textiles & Apparel Industry .............. 8 3. The impact of Rules of Origin: Some empirical evidence .............. 8 4. SADC Regional Trade Agreement (RTA) Negotiation Agenda and Rules of Origin ......................................................................................... 9 5. Overview of SADC’s Trade in Textile and Apparel ........................ 10

5.1 Angola ..................................................................................................................... 13 5.2 Democratic Republic of Congo (DRC) ................................................................. 14 5.3 Lesotho.................................................................................................................... 15 5.4 Madagascar ............................................................................................................ 15 5.5 Malawi ..................................................................................................................... 16 5.6 Mauritius .................................................................................................................. 17 5.7 Mozambique ........................................................................................................... 18 5.8 Seychelles ............................................................................................................... 19 5.9 South Africa ............................................................................................................ 20 5.10 Tanzania ............................................................................................................... 21 5.11 Zambia .................................................................................................................. 22 5.12 Zimbabwe ............................................................................................................. 23

6. Rules of Origin and Trade in Textiles and Apparel in SADC ........ 23 7. Industrial policy and reforms of SADC ROO: Effects of Tariffs, Preferences and Other Incentives ....................................................... 25 8. Policy Options for reform of SADC Rules of Origin ...................... 28

8.1 Policy Option 1: “Double transformation” Rule of Origin (Status quo) .............. 28 8.1.1 Distributional Effects ....................................................................................... 29 8.1.2 The impact on SADC’s Trade Negotiation Agenda ..................................... 29 8.1.3 The problem of transshipment ....................................................................... 29

8.2 Policy Option 2: Implement relaxed “single transformation” Rule of Origin ...... 29 8.2.1 Distributional Effect ......................................................................................... 29 8.2.2 Impact on SADC’s Trade Negotiation Agenda ............................................ 31 8.2.3 Preventive and Enhancing Measures ........................................................... 31

8.3 Policy Option 3: Implement a preferential “single transformation” Rule of Origin to SADC LDCs only ...................................................................................................... 31

8.3.1 Distributional Effects ....................................................................................... 31 8.3.2 Impact on SADC’s Trade Negotiation Agenda ............................................ 31 8.3.3 Mitigation, Preventive and Enhancing Measures ......................................... 31

9. Conclusion ......................................................................................... 32 Bibliography........................................................................................... 33 Appendix: ............................................................................................... 33

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Summary and Policy Recommendations: • The Southern African Development Community (SADC) Protocol on Trade, currently

applies a strict ‘double transformation’ Rule of Origin (ROO) that requires fabrics and yarn for garment manufacturing to be produced within SADC in order to qualify for preferential treatment.

• Among the arguments in favor of these rules is a desire to promote SADC-wide integrated value-chains for garments and textiles by encouraging producers at each stage to source from within the region. The rule is also aimed at preventing trans-shipment of garments from outside SADC.

• However, the ‘double transformation’ rule has failed to spur the development of integrated value-chains but has instead stifled intra-SADC trade in textile and garments. Overall, garment producers have struggled to source sufficient amounts and quality of fabrics and yarn from within the region and hence they are often unable to fulfill the SADC ROO. Detailed analysis of trade data indicates that as the result intra-SADC trade in textiles and apparel has been severely restricted to the extent that trade between many Member States is negligible. Intra-SADC trade in textiles and garments as per cent of total SADC imports has fallen from 19% in 2000 to 14% in 2009. SADC economies increasingly import garments from South East Asia whose share of imports increased from 44% to 56% in the last decade.

• Currently, SADC ROO require more integrated domestic and regional sourcing and production linkages than are currently commercially feasible in the region. Given SADC’s limited capacity for manufacturing of fabrics and yarn, regional trade in these products amounted to a mere US$ 26 million and constituted to only 4.5% of intra-SADC trade in textiles and apparel sector.

• This report presents option for the reform of the current structure of SADC’s ROO in textiles and apparel in light of the changing pattern of globalized trade in manufactures. ROO may be able to act as a catalyst for growth of textile and apparel sector in SADC, leading to growth in exports and employment. To do so, ROO need to be designed to be more consistent with international trade in fragmented ‘tasks’ (as opposed to complete products) and need to be open to countries with sufficient levels of complementary inputs.

• Liberalization of ROO to a ‘single transformation’ rule, which does not place any restrictions on the source of materials for garment production, is likely to align SADC textile and garment sector more closely with international production chains.

• The experience of the United States (US) African Growth and Opportunities Act (AGOA) shows that liberalization of ROO can lead to large manufacturing export supply responses in SADC countries. Lesotho and Madagascar, for example, have experienced a boom in the export of textiles and apparel to US which has in turn led creation of thousands of jobs.

• Much like AGOA, liberalization of ROO to the ‘single transformation’ rule within SADC is likely to enhance intra-SADC trade, employment and enhance poverty alleviation in the region but given SADC’s relatively small market size these effects will be smaller than these for AGOA.

• Nevertheless, the garment industry is of key importance for several SADC countries and is a leading employer and revenue and foreign exchange earner. Therefore, even small gains in the sector are significant for local populations where unemployment is high.

• The key challenge in the reform of SADC ROO is divergence in industrial policies toward the sector among Member States. While Southern Africa Customs Union (SACU)

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maintains significant protection for both textiles and apparel, other Member States such as Madagascar, Mauritius and Lesotho have a more export-oriented strategy. These differences lead to asymmetries in the outcome of the ROO reform. Some Member States are likely to obtain a higher margin of preference than others depending on the industrial policies applied. Therefore, some policy harmonization is essential in order to reap full benefits of preferential liberalization.

• This study reviews policy options available to SADC regarding ROO reform. The following options are assessed from the perspective of trade and economic effects as well as in the light of the ongoing SADC trade negotiations with third parties:

Option 1: No reform - ‘Double Transformation Rule’: • Inhibits intra-SADC trade: The current structure of ROO raises the price of garments

production for exports into SADC by requiring firms to source material from within the region. Therefore, policy option 1 is likely to inhibit regional trade, reduce potential production and employment and impact negatively on the global competitiveness of SADC.

• Trans-shipment of goods from outside SADC. The ‘double transformation’ ROO makes it difficult for transshipment of goods originally from outside of SADC through a low MFN duty Member State to a high MFN tariff Member State in order to avoid paying high tariffs. However, control on trans-shipment is inherently a customs issue and is most effectively addressed through the strengthening of controls on trans-shipment rather than through ROO.

• Unsuccessful in the development of regional value-chains. ‘Double transformation’ rule has so far not been instrumental in the development of regional value chains in textiles and garments sector and hence it is unlikely to achieve this in the future.

• Inconsistent in the SADC negotiations with other Regional Economic Communities (RECs). The Economic Partnership Agreements (EPAs) operate under a ‘single transformation’ ROO and this is likely to be a significant point of negotiation for the future Tripartite FTA. Liberalization of ROO is therefore likely to facilitate the conclusion of FTAs with these regions.

Option 2:‘Single Transformation’ Rule of Origin: • Increases intra-SADC trade. Liberalization of ROO will decrease the costs of exporting

to SADC by allowing firms to source inputs from the most competitive suppliers. As a result, SADC Members States that already have production capabilities in garments production will enhance their regional exports. A limited increase in production and exports is foreseen for Madagascar, Malawi, Mauritius, Lesotho, South Africa, Swaziland and Tanzania. As such, the policy is likely to strengthen regional integration and provide employment and alleviate poverty is SADC.

• Some adjustment costs in Member States. In particular South Africa, the biggest SADC economy, is likely to increase its imports of textile and garment from within the region, with associated small but negative impact on production and employment in the sector. These effects will however be minor as imports increases will be small and South African producers themselves are foreseen to increase their exports to SADC. South African consumers are likely to benefit as a result of lower price of imported garments.

• Facilitates negotiations of Free Trade Areas (FTAs) with third parties. The adoption of ‘single transformation’ ROO in textiles will align SADC ROO with these of the EPAs and the rules currently utilized by the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC) and hence facilitate the conclusion of these negotiations.

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• Promotes competitiveness and integration with global value chains. The manufacturing sector is now increasingly globalized and characterized by fragmented production patterns whereby assembly of components and final products can take place in many different locations and countries. Comparative advantage now resides in quite narrowly defined tasks and the effect of tightly restrictive ROO is to prohibit participation in production processes of this type. Therefore relaxation of ROO is likely to lead towards integration of SADC textile and apparel producers in the global value chains and promote their competitiveness.

Option 3: ‘Single Transformation Rule applied for SADC Least Developed Countries (LDCs) only’ • Increases intra-SADC exports of apparel of SADC LDCs. LDCs with productive

capacity in apparel are foreseen to increase their regional exports. A limited increase in exports is likely to occur in Madagascar, Malawi, Lesotho, Swaziland and Tanzania.

• Complicates negotiations of FTAs with third parties: This mixed approach regarding liberalization of ROO is likely to complicate negotiations for the EPAs and the Tripartite FTA as it is inconsistent with the rules currently applied by COMESA and the EAC.

• Promotes competitiveness and integration with global value chains for SADC LDC: Refer to policy option 2 for details.

• Consistent with World Trade Organization (WTO) Rules and Regulations: This policy option is entirely consistent with WTO’s rules as regulations that allow for special preferences to be granted to LDCs.

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List of Abbreviations AGOA African Growth and Opportunity Act BLS Botswana, Lesotho, Swaziland CET Common External Tariff CIF Cost Insurance and Freight COMESA Common Market for Eastern and Southern Africa DRC Democratic Republic of Congo EAC East African Community EPA Economic Partnership Agreement EU European Union IEPA Interim Economic Partnership Agreement FTA Free Trade Agreement HS Harmonized System LDC Least Developed Countries MENA Middle East and North Africa MFA Multi Fibre Agreement MMTZ Malawi, Mozambique, Tanzania, Zambia NIC Newly industrialized Countries PTA Preferential Trade Agreement RTA Regional Trade Agreement REC Regional Economic Community ROO Rules of Origin SACU Southern Africa Customs Union SADC Southern African Development Community SARS South Africa Revenue Service SA South Africa SSA Sub-Saharan Africa TDCA Trade and Development Cooperation Agreement UN United Nations US United States WTO World Trade Organization

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1. Introduction This study is a part of the wider consultative process of Southern African Development Community (SADC) Protocol on Trade which has commenced with 2004 Mid-Term Review of the Protocol. In August 2010, the SADC Ministerial Task Force on Regional Economic Integration meeting noted that the review of Rules of Origin (ROO) for textiles and clothing was still outstanding and that it was important for the matter be resolved expeditiously. The importance of the textiles and clothing industry covering items Harmonized System (HS) Chapters 50 to 63 to the economies of the region was also noted and it was agreed to address the problems arising out of application of existing rules, as they seem to struggle to promote intra-regional trade. The Task Force therefore agreed to establish an Experts Group to review the outstanding ROO. This report aims to facilitate and support the work of the Experts Group. In particular the study will:

(i) Describe and provide analysis of the strengths and weaknesses of the current SADC ROO on textiles and apparel;

(ii) Analyze available data on trade flows and the impact of the current rules on the level of intra-SADC trade in textiles and apparel;

(iii) Compare and contrast SADC ROO with those under the African Growth and Opportunities Act (AGOA) and those utilized by the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC) with whom SADC is currently negotiating the Tripartite Free Trade Area (FTA);

(iv) Provide specific recommendations for the reform of SADC ROO for textiles and clothing.

ROO are an important feature of preferential trade agreements (PTAs). In theory, they are meant to prevent trade deflection through low tariff partners. In practice, ROO can inhibit regional trade by requiring that fabric and yarn used in the production of apparel to be sourced from within the PTA. SADC’s ROO in the textile and apparel sector are currently highly restrictive. The ‘double transformation’ rule requires for fabric, yarn and garments to be produced within SADC to quality for FTA treatment. By analyzing the patterns of trade in textiles and apparel in SADC and beyond this report shows that the current structure of SADC’s ROO have stifled regional trade in textiles and apparel with associated negative effects on employment creation and competitiveness in the region. Garment producers have struggled to source sufficient amounts and quality of fabric from within the region and, as a result, the cost of producing garments in SADC is higher than in other regions. Enhancing intra-SADC trade in textiles and apparel is crucial from the perspective of strengthening regional integration and achieving a more equitable and prosperous SADC. The example of the Newly Industrialized Countries (NIC), mostly in Asia, shows that the textiles and apparel sector is one of the key sectors which act as a catalyst for a development of manufacturing capabilities and targeting higher value-added sectors. This report highlights that relaxing SADC’s ROO can promote regional trade and enhance manufacturing employment. It also provides specific options for ROO reform. The report is structured as follows. Section 2 provides an overview of the current structure of SADC ROO. Section 3 describes some empirical evidence on the impact of ROO for trade and development. Section 4 analyzes ROO from the perspective of negotiations towards the Economic Partnership Agreement (EPA) and the Tripartite FTA. Section 5 is a detailed analysis of SADC trade patterns in the textiles and garments industry. Section 6 analyzes the impact of ROO on SADC’s exports of textiles and apparel. Section 7 examines interaction between tariff and industrial policies in the context of reforming SADC’s ROO.

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Section 8 overviews policy options for a reform of SADC’s ROO and, finally, section 9 concludes.

2. SADC Rules of Origin in the Textiles & Apparel Industry There are essentially two types of sector-specific ROO in the textiles and apparel industry: • ‘Single stage transformation’ allows for the fabric and other intermediate inputs to be

imported from any source for garments manufactured to qualify for preferential treatment.

• ‘Double stage transformation’ requires for intermediate inputs such as fabrics used in garments manufacture to be made in an eligible country. This rule is much more restrictive with regards to sourcing of inputs.

Some RECs, such as for example COMESA, do not have specific ROO for textiles and apparel and apply general rules to all manufacturing sectors.

SADC currently applies a restrictive ‘double transformation’ rule which requires fabrics used in the production of apparel to be sourced from within SADC in order to qualify for preferential treatment. The arguments promoted in favor of the ‘double transformation’ ROO include:

• To promote an integrated fabric-garments value chains by encouraging producers at each stage to source from within the region.

• To prevent trans-shipment of garments from outside of SADC via a low-tariff Member to a high-tariff Member.

3. The impact of Rules of Origin: Some empirical evidence There is only a limited amount of work on the impact of ROO on trade. However, the existing studies overwhelmingly show that restrictive ROO limit trade. Mattoo et al. (2002) suggest that the benefits to Africa from AGOA would have been approximately five times greater without the restrictive ROO. Augier et al. (2004) use a sectoral cross-section model to focus on the impact of rules of origin for textiles and apparel. Their results indicate that lack of cumulation of rules of origin in textiles may reduce trade between non-cumulating countries by up to 73% in 1995 and 81% in 1999. Estevadeordal and Suominen (2004) employ a synthetic ROO restrictiveness index compiled on the basis of the underlying features of ROO across a range of PTAs. This index is then used in an augmented gravity model. Their results suggest that rules of origin do serve to restrict trade, and that measures that allow for a relaxation of their restrictiveness (such as diagonal cumulation) enhance trade. Portugal-Perez (2007) explores the differences between the European Union (EU) and United States (US) trade preferences to African economies. Although similar in the extent of preferences for apparel these agreements differ in the ROO. The main finding is that relaxing ROO by allowing the use of fabric from any origin increased significantly exports of apparel by about 300% for the top seven beneficiaries of AGOA’s third country fabric provision, and broadens the range of apparel exported by these countries. To summarize, this section has highlighted that there is an emerging consensus among quantitative studies that restrictive ROO inhibit trade.

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4. SADC Regional Trade Agreement (RTA) Negotiation Agenda and Rules of Origin SADC currently negotiates RTAs with several regions in the world. The most prominent among these agreements are the Tripartite FTA between COMESA, EAC and SADC and the EPA with the EU. The EPAs as currently negotiated have more relaxed ROO as do COMESA and the EAC with whom SADC is negotiating the Tripartite FTA. The negotiations for these agreements are complicated by SADC’s restrictive ‘double transformation’ ROO as successful conclusion of negotiations requires an alignment ROO throughout and between regions. An Interim EPA (IEPA) with the EU was signed on June 4th, 2009 by some members of the SADC Negotiations Group including Southern Africa Customs Union (SACU) Members Botswana, Lesotho and Swaziland (BLS) and Mozambique. The agreement created a tariff-free quote-free zone among the signatories applicable to ‘substantially all trade’. Different liberalization schedules for imports of goods from the EU have been agreed on with some transitional periods. Crucially, a relaxed ‘single transformation’ ROO in the textile and clothing sector was also agreed. The rule allows SADC apparel exporters to source fabrics and other intermediate inputs from any country in the world and qualify for preferential tariff-free exports to the EU. The IEPA was not signed by all Members of SACU and this has created some legal and technical complications for SACU. Trade relations of South Africa and Namibia – SACU Members that have not signed the IEPA are still governed by the Trade, Development and Cooperation Agreement (TDCA). Currently, there are substantial differences in the trade liberalization schedule and rules of origin between the TDCA and the IEPA which creates a misalignment of SACU’s Common External Tariff (CET) and provide opportunities for trade deflection. Overall, the ROO in the South Africa’s TDCA with the EU are different from those under IEPA. In the textiles and garments sector, the TDCA ROO require that garments have to be made from fabric made in South Africa or in the EU - a highly restrictive two-stage transformation rule – to qualify for preferential treatment. The differences in the ROO between IEPA and TDCA would allow for textiles and garments from EU to enter South African and Namibian market through SACU partner and avoid paying full SACU duties. There are currently extensive consultations between the EU, the SADC EPA Negotiations Group and South Africa to negotiate a solution to this misalignment problem. COMESA and EAC are currently in a process of establishing respective customs unions hence ROO will no longer be required. Under the FTA, COMESA does not have product specific rules and applies general rules to all its manufacturing sectors. The key principles under which goods can be accepted in the importing country as having been produced /manufactured in another COMESA country are:

1. Goods should be produced totally in the exporting member state such that there are no foreign materials added to the manufacturing process. Such goods are live animals, agricultural produce e.g. maize, cotton, etc., this is called, ’Wholly produced rule’; or,

2. When goods are being made and there are some foreign materials added to the manufacturing process, those foreign materials should not be over than 60% of the Cost, Insurance and Freight (C.I.F) value; this is called ‘Material content rule’; or,

3. When good are being made and the raw materials are foreign, then, in the course of the manufacturing process, there should at least be 35% value addition; this is called ‘Value addition rule’; or,

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4. Those goods when the companies make them and the raw material are foreign, during the manufacturing process, the Tariff heading of the final product should be different from the tariff heading of the foreign raw materials; this is called ‘Change in Tariff Heading rule’;

In order to qualify for preferential treatment, COMESA Member States need to satisfy one of these rules. Despite not having sector specific rules COMESA ROO are in essence similar to a ‘single transformation’ rule. The manufacture of apparel from imported fabric necessitates a change of tariff heading and hence satisfies rule 4 above. AGOA is a US unilateral preference program that significantly liberalizes market access to the US for 37 designated Sub-Saharan African (SSA) countries. Qualifying African countries benefit from duty-free access to the US market under the act. In the case of AGOA, an exception was made for a number of the beneficiary countries to allow their garment makers to source fabric from third countries. AGOA trade preferences have increased exports of apparel for some SADC countries, especially for Lesotho and Madagascar and created thousands of jobs in the industry. One of the key factors for successful conclusion of the Tripartite FTA is reaching an agreement on the structure of ROO. The current restrictive ROO might act as a stumbling block in these negotiations as they differ from ROO applied in COMESA, EAC and IEPA.

5. Overview of SADC’s Trade in Textile and Apparel1 Since the creation of the SADC FTA, regional trade in textiles and clothing has expanded significantly. As illustrated in Table 1, in 2000 this trade amounted to almost US$ 400 million. It had risen to well over US$ 600 million in 2008 before decreasing to US$ 475 million in 2009 due to the global economic recession. SADC’s imports of textiles and apparel from the rest of the world have actually risen more sharply and doubled in the same period. In 2000 SADC imported textiles and apparel worth US$ 1.9 billion from outside of the region and in 2008 these imports rose to US $3.8 billion before falling to US$ 3.2 billion in 2009. The share of total SADC imports of textiles and clothing that originates from within the region has dropped from 19% in 2000 to only 14% in 2009.

Table 1: SADC Imports of Textiles and Clothing 2000-09

Source: UN Comtrade Database

Table 2 shows the distribution of SADC imports of textiles and clothing by region/country. It highlights that in the past decade China has captured over 40% of the SADC’s textiles and

1Detailed statistics on intra-SACU trade are not available hence for the most part were not analyzed in this section.

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clothing market, up from 17% a decade earlier. The countries/regions that have decreased their share of SADC market in the last decade were Europe, North America and SADC itself. Table 2: The source of SADC imports of textiles and garments by region

2000 2009

Asia 44.0% 58.2% China 17.0% 40.4% India 10.3% 7.8% Taiwan 6.1% 2.6% Korea 5.4% 1.7% Vietnam 1.0% 1.0% SADC 19.1% 14.7% Europe 17.0% 11.9% North America 4.8% 2.7% MENA 4.6% 5.8% Australia & Oceania 0.8% 0.7% South America 0.3% 0.4%

Source: UN Comtrade Database Table 3 shows SADC Member States’ share in intra-SADC textiles and clothing exports. Mauritius the most competitive textiles and garments exporter has captured 19.4% of intra-SADC trade. The second largest regional exporter is South Africa with 18.4% share. Zimbabwe, a big exporter of cotton, has a roughly 13% share in intra-SADC trade. Malawi, Lesotho and Tanzania all have roughly a 6% share in intra-SADC trade in textiles and apparel. Table 3: SADC Member States’ share in intra-SADC total Textiles and Clothing exports (2009)

Source: Own calculation based on UN Comtrade database. Data for Lesotho are a general estimate based on disaggregated data from the Lesotho’s Bureau of Statistics. Moving on to an analysis of intra-SADC imports, the country that imports most textiles and clothing from the region is South Africa with a 31% share (Table 3). Madagascar is the second largest intra-SADC importer. It imports large quantities of fabric for its clothing

Mauritius, 19.4%South Africa,

18.4%Zimbabwe,

12.8%

Malawi, 6.7%

Lesotho, 6.5%

Tanzania, 6.0%Zambia, 4.8%

Madagascar, 1.8%

Mozambique, 0.4%

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factories from Mauritius. Zimbabwe, Mauritius, Zambia and Malawi all have roughly 6% share in the total intra-SADC imports. Table 3: SADC Member States share in intra SADC total Textiles and Clothing imports (2009)


The importance of the textiles and clothing sector varies significant in SADC (Table 4). For some Member States such as Mauritius, Madagascar or Lesotho it is the main manufacturing sector of the economy. At the other extreme, countries such as Seychelles or Namibia have very limited productive capacity in the sector. The country specific variations in the importance of textiles and apparel sector indicate that each country will be affected differently by a reform of SADC’s ROO. Table 4 shows that the share of the textiles and clothing sector exports in total manufacturing exports. Mauritius, Lesotho and Madagascar are countries for which the textiles and garment industry is the most important. Over 70% of their manufacturing exports come from this industry. In fact, Mauritius is ranked 1st and Lesotho 16th in the world regarding textiles and garments exports per capita.2 Table 4: The Textile and Garments industry in SADC

Exports (in

US$ million) Population

Textile Exports per

Capita

Manufacturing Exports per

Capita

% share of T&C in

Manuf. exp Mauritius 958 1,3 755,1 1072,9 70.4 Lesotho 370 2,0 205,2 217,3 94.4 Swaziland 134 1,2 114,5 395,2 29.0 Madagascar 690 19,1 36,1 40,9 88.3 Botswana 30 1,9 15,6 113,3 13.8 Kenya 270 38,5 7,01 33,6 20.9 South Africa 287 48,7 5,89 766,2 0.8 Malawi 31 14,3 2,14 6,98 30.7 Zimbabwe 14 12,5 1,08 46,8 2.3 Tanzania 6 42,5 0,13 7,00 1.9

Source: Own calculation based on UN Comtrade Data

2 Excluding Macau and Hong Kong which predominantly re-export textiles and clothing originally produced in China.

South Africa, 31.2%

Madagascar, 11.2%Zimbabwe, 6.9%

Mauritius, 6.4%

Zambia, 5.8%

Mozambique, 5.2%

DRC, 4.2%Malawi, 3.8%

Angola , 3.6% Tanzania, 1.5%

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There are also significant differences among SADC Member States in the composition of their exports. The majority of intra-SADC exports are in finished garments but some countries like Malawi, Zambia and Zimbabwe export significant amounts of cotton and other fibers. Table 5 shows the composition of intra-SADC exports by country and for the region overall. It shows that two thirds intra-SADC trade in the sector is in apparel, 28% of this trade is in fibers such as cotton, silk and yarn and only 4.5% is trade in fabrics. There seems to be a clear distinction between countries that predominantly export apparel such as Madagascar, South Africa and Tanzania and those that are the providers of raw materials such as Zimbabwe and Zambia. Only in the case Malawi the share of exports in fibers is roughly equal to that of apparel. Table 5: Composition of intra-SADC exports (2009)

Fibers (e.g Cotton, Yarn) Fabrics Apparel

US$ '000 % share US$ '000 % share US$ '000 % share Madagascar 1703 16.0% 1 0.0% 8927 84.0% Malawi 16764 42.3% 7 0.0% 22771 57.5% Mauritius 28228 24.8% 17183 15.1% 68282 60.0% Mozambique 1076 46.4% 14 0.6% 1224 52.7% SADC 164482 28.0% 26269 4.5% 390172 66.5% South Africa 23159 21.5% 7233 6.7% 73241 67.9% Tanzania 4377 12.4% 11 0.0% 30993 87.6% Zambia 26758 94.9% 110 0.4% 1322 4.7% Zimbabwe 61229 81.5% 194 0.3% 13721 18.3%

Source: UN Comtrade Database In order to assess the distributional effects of any reform of SADC’s ROO it is necessary to provide a detailed analysis of SADC’s trade patterns in the sector. This analysis is provided below for each SADC Member (except for Botswana, Namibia and Swaziland for which data are not available).

5.1 Angola Angola is a large, net importer of textiles and clothing and since the end of the civil war has experienced phenomenal growth in imports amounting to 22.5% a year. In 2009, it imported US$ 340 million worth of textiles and apparel. The vast majority of these imports were from outside of SADC with only US$ 17 million (less than 5% of the total) coming from the SADC region (Table 6). South Africa is the main SADC exporter of textiles and apparel to Angola.

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Table 6: Angola’s imports of Textile and Clothing (2000-09) in US Dollars (‘000)


Statistics show that Angola’s exports of textiles and apparel are negligible and hence these were not analyzed here.

5.2 Democratic Republic of Congo (DRC) Since 200, the DRC has dramatically expanded its imports of textiles and clothing. In 2000, these imports amounted to less than US$ 40 million and rose to over US$ 120 million in 2009 (a more than threefold increase). As in the case of other SADC Member States, the increase in import demand was largely fulfilled by countries from outside the region as only 15% of DRC’s imports was satisfied by SADC. South Africa is a well-established exporter to DRC with exports of roughly US$ 8-10 million a year. Since 2006, Tanzania and Zambia also began exporting clothing and textiles to DRC and have reached export levels of roughly US$ 10 million per year. Table 7: DRC imports of Textile and Clothing (2000-09) in US Dollars (‘000)


DRC, like Angola, is not a significant exporter of textiles and apparel with exports in 2009 amounting to less than US $2 million.

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Imports from Zambia

15

5.3 Lesotho Data for Lesotho’s intra-SACU trade is not available. However, a rough estimate based on disaggregated data from Lesotho’s Bureau of Statistics shows that around 15% of Lesotho’s production in the sector is exported to South Africa. Lesotho exports to SADC are estimated to amount to roughly US$ 35 million worth of clothing which places Lesotho as the 5th largest exporter of apparel in SADC. As mentioned above the Kingdom is one of the biggest per capita exporters of textiles and apparel in the world. This is due to its large exports of clothing to the US. In fact, since 2000, Lesotho – a country of only 1.8 million people - has been Africa’s largest exported of apparel to the US. As indicated in Table 8, after the introduction of AGOA, Lesotho’s exports of textile have experienced staggering growth rates. In fact, in the six year period 1999-2004 these exports grew four-fold from US$ 110 million to over US$ 450 million. The average annual exports growth rate in that period was a staggering 33.5%. Since the expiry of the Multi-Fiber Agreement (MFA), at the end of 2004, which ended quotes and other quantitative restriction on export from Asia, Lesotho’s exports to US have decreased. Nevertheless, Lesotho remains one of Africa’s biggest exporters of apparel. Table 8: Lesotho’s Exports of Textiles and Apparel to the United States 1999-2009 (in US Dollars, ‘000)

Source: Otexa

5.4 Madagascar Madagascar has the third biggest textile and garments industry in SADC (after Mauritius and South Africa). Much like Lesotho, Madagascar is one of the countries that has benefited most from the preferential access to the US under AGOA. The introduction of ‘single transformation’ ROO has been one of the key elements behind Madagascar’s success in exporting apparel. In sharp contrast to Lesotho, Madagascar’s clothing exports are much more diversified. Despite this fact, only 2% of Madagascar’s exports of textiles and apparel are destined to the SADC market. Table 9 shows that, in 2009, Madagascar exported over US$ 460 million worth of textiles and apparel. There was a sharp decline in exports in comparison to 2008 when Madagascar exported over US$ 800 million in the sector. A fall of nearly 50% can clearly be attributed to the political turmoil in the country. As a result, in 2009, the US government suspended AGOA preferences to Madagascar which has further aggravated the fall in exports.

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Export in US Dollars (Millions) 110.8 140.2 214.9 320.7 392.7 455.8 390.7 387.0 383.5 339.7 278.3

% change 26.6% 53.2% 49.2% 22.4% 16.1% -14.3% -0.9% -0.9% -11.4% -18.1%

16

Table 9: Madagascar exports of Textile and Clothing (2000-09)


Madagascar is also a large importer of clothing and textiles. A significant part of Madagascar’s imports are inputs for the garment industry (Table 10). In 2009, Madagascar has imported US$ 320 million in the sector with US$ 53 million coming from SADC (s 16.5% of total). Table 10: Madagascar imports of Textile and Clothing (2000-09) in US Dollars (‘000)


5.5 Malawi Malawi has a small textiles and garment sector. As indicated in Table 4 about 40% of Malawi’s exports to SADC are cotton and the rest are finished garments. Since the introduction of Malawi, Mozambique, Tanzania, Zambia (MMTZ) – SACU Agreement, Malawi experienced a significant rise in exports of garments which were, in particular, destined for the South African market. In 2000, these exports amounted to only US$ 12 million and in 2008 they have nearly tripled to US$ 30 million (Table 11). Since 2009, Malawi’s exports to SADC have started to decline partly due to the global economic recession but mostly due to the expiry of the MMTZ – SACU Agreement. In 2010, when the agreement expired Malawi’s exports to South Africa have nearly disappeared. In the first 9 months of 2010, these exports were worth only US$ 3 million.

0

100000

200000300000

400000500000

600000

700000800000

900000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Exports

Exports to SADC

0

100000

200000

300000

400000

500000

600000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Imports

Imports from SADC

17

It is important to note that Malawi is the only SADC country for which exports of textiles and garments to SADC constitute a significant share of total exports in the sector. As shown in Table 11 in 2007 the share of Malawi’s export to SADC as per cent of total export was 64%. Table 11: Malawi’s export of Textile and Clothing (2000-10) in US Dollars (‘000)

Source: Own calculations based on UN Comtrade and SARS Data. Data for the last quarter of 2010 are a forecast based on first 9 months of South African imports As in the case of several other SADC members, Malawi has significantly increased its imports of textile and clothing in the past decade (Table 12). This increase was not the result of higher imports from SADC but rather increased imports from the rest of the world. South Africa is SADC’s biggest exporter of textile and clothing to Malawi. Table 12: Malawi’s export of Textile and Clothing (2000-09) in US Dollars (‘000)


5.6 Mauritius Mauritius is one of the world’s most competitive producers of textiles and garments and as indicated earlier it is also a country with the largest per capita exports in this sector in the world. Since 2000, Mauritius has exported roughly US$ 1 billion a year worth of textiles and apparel with a decline to around US$ 800 million towards the end of the decade (Table 13). In 2009, only 14% (US$ 113 million) of exports of Mauritius were destined for the SADC’s market with more than half of these exports going to South Africa.

0

10000

20000

30000

40000

50000

60000

70000

80000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

in U

S Do

llars

'000

Total Exports

Exports to SADC

Exports to SACU

0100002000030000400005000060000700008000090000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Imports

Imports from SADC

Imports from SACU

18

Table 13: Textiles and Apparel Exports of Mauritius (2000-09) in US Dollars (‘000)


Mauritius also imports a significant amount of goods in the clothing and textiles category (Table 14). A significant share of these exports are inputs for production of garments. These are usually sourced from Asian economies rather than from SADC. Table 14: Textiles and Clothing Imports of Mauritius (2000-09) in US Dollars (‘000)


5.7 Mozambique In comparison to the size of the country, Mozambique is a fairly small exporter of textiles and apparel. Textiles exports have increased to nearly US$ 50 million in 2007 albeit from a fairly low base (Table 15). Mozambique’s textiles and clothing exporters have been significantly affected by the world’s economic recession. Exports in the sector fell to US$ 30 million in 2009. Despite the proximity of the large South African market, as well as Mozambique’s participation in the MMTZ – SACU Agreement, exports to SACU and South Africa, in particular, are low. Only in 2007 these exports reached a little over US$ 10 million.

0

200000

400000

600000

800000

1000000

1200000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Exports

Exports to SADC

Exports to SA

0

100000

200000

300000

400000

500000

2000 2001 2002 2003 2004 2005 2006 20072008 2009

Total Imports

Imports from SADC

Imports from SA

Imports from Zambia

19

Table 15: Mozambican Exports of Textiles and Clothing (2000-09) in US Dollars (‘000)


Table 16 shows that since the end of Mozambique’s civil war imports in the sector have increase five-fold from US$ 20 million in 2000 to nearly US$ 100 million in 2009. Less than 20% of these imports come from SADC with South Africa being the biggest exporter. Table 16: Mozambican Imports of Textiles and Clothing (2000-09) in US Dollars (‘000)


5.8 Seychelles Seychelles - the smallest economy in SADC – does not have a textile and clothing industry therefore all of the country’s demand is satisfied by imports. Its imports fluctuate between US$ 8-14 million a year with only a fraction of these imports coming from SADC economies (Table 17). South Africa with about 20% share of Seychelles’ total imports does figure prominently on the list of top importers for the country.

0

10000

20000

30000

40000

50000

60000

70000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Total Exports

Export to SA

0

20000

40000

60000

80000

100000

120000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Imports

Imports from SA

Imports from SADC

20

Table 17: Seychelles’ exports of Textiles and Clothing (2000-09) in US Dollars (‘000)


5.9 South Africa

South Africa is, by a large margin, the biggest and most diversified economy in SADC. It is also the second largest exporter of textiles and clothing in SADC with exports amounting to between US$ 600-800 million a year (Table 18). South Africa exports 20% of its total exports to SADC. Also within SADC it is the second largest exporter with US$ 107 million of exports in 2009. South Africa exports textiles and clothing to almost every SADC country with prominent export destinations being Angola, Mauritius, Mozambique, Zimbabwe and Zambia. Table 18: South Africa’s exports of Textiles and Clothing (2000-09) in US Dollars (‘000)


South Africa is a large importer of textiles and clothing even by world’s standards. In the past four years in has imported goods worth a little over US$ 2 billion a year (Table 19). Interestingly, despite the opportunities presented by this large market SADC exporters have captured only a small share of South African market.3 According to the data, South Africa is the second least integrated country in SADC in terms of imports of textiles and garments. The share of South Africa’s imports coming from SADC countries (excluding intra-SACU trade) is only 7.5%. It is also important to note that in the past decade South African imports increased by a factor of two - from less than US$ 1 billion to US$ 2 billion. In the same period imports from SADC have also increased two-fold but given that these imports came from a 3This analysis excludes intra-SACU trade for which trade data are not available.

02000400060008000

1000012000140001600018000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Imports

Imports from SADC

Imports from SA

0100000200000300000400000500000600000700000800000900000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Exports

Exports to SADC

Exports to Angola

Exports to Mauritius

21

much lower base the share of SADC’s imports in South Africa’s total imports has actually decreased. Table 19: South Africa’s imports of Textiles and Clothing (2000-09) in US Dollars (‘000)


5.10 Tanzania Table 20 shows that in the past decade Tanzania has developed a comparatively large textiles and clothing sector with total exports hovering at around US$ 150 million. Tanzania’s exports to SADC have steadily increased since 2005 and, in 2009, reached US$ 35 million (nearly 25% of total exports). In 2009, Tanzania’s top four export destinations within SADC were the DRC, Mozambique, Zimbabwe and Zambia. Interestingly, despite Tanzania’s participation in the MMTZ – SACU Agreement, its exports to SACU are negligible. This shows that preferences provided by the agreement were not fully utilized by Tanzania. Tanzania’s exports to South Africa were also not affected by the expiry of the agreement and in 2010 remained at a little above US$ 2 million. Table 20: Tanzania’s exports of Textiles and Clothing (2000-09) in US Dollars (‘000)


As in the case of other SADC countries, Tanzania’s imports of clothing and textiles have increased significantly in the past decade (Table 21). In 2000, these imports amounted to US$ 80 million whereas in 2009 they were nearly twice as large and stood at US$ 156 million. The analysis above has indicated that Tanzania has one of the largest shares of total exports going to SADC countries. This is in stark contrast to its imports of which just a tiny fraction comes from the SADC Member States. In fact, in 2009 only 4% of imports in the sector came from SADC, of which 90% were from South Africa.

0

500000

1000000

1500000

2000000

2500000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Imports

Imports from SADC

0

50000

100000

150000

200000

250000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Exports

Exports to SADC

Export to DRC

Export to SA

Total Exports

22

Table 21: Tanzania’s imports of Textiles and Clothing (2000-09) in US Dollars (‘000)


5.11 Zambia The SADC market is an important export destination for Zambian exports of textiles and clothing. In 2009, two thirds of Zambian exports in the sector were destined to SADC (Table 22). The vast majority of these exports was cotton with South Africa being a major export destination. Much like other countries in the MMTZ configuration also Zambia has failed to tap on the opportunities provided by the MMTZ–SACU Agreement and has only exported negligible amounts of garments to South Africa. Table 22: Zambia’s exports of Textiles and Clothing (2000 and 2009) in US Dollars (‘000)

2000 2009 value %share value %share World Exports 43649 100% 37290 100% Export to SADC 13983 32% 24654 66% Exports to SA 9478 21% 16439 44%

Source: UN Comtrade Database According to the statistics Zambia imports half of its total imports in textiles and apparel from other SADC countries (Table 23). South Africa is the key SADC exporter of textiles and garments to Zambia. Table 23: Zambia’s imports of Textiles and Clothing (2000-09) in US Dollars (‘000)


020000400006000080000

100000120000140000160000180000

2000200120022003200420052006200720082009

Total Imports

Imports from SADC

Imports from SA

0

10000

20000

30000

40000

50000

60000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total Imports

Imports from SADC

Imports from SA

23

5.12 Zimbabwe Given Zimbabwe’s economic and political turmoil, both exports and imports of textiles and clothing have fallen in the past decade. Total exports of clothing and textiles of which the majority is cotton have fallen from US$ 250 million in 2000 to a little over US$ 130 million in 2009. SADC Member States and South Africa, in particular, are the destination of the vast majority of Zimbabwe’s exports. In 2009, Zimbabwe exported US$ 75 million of textile and apparel of which US$ 60 million to South Africa. The vast majority, or 84%, of these exports were in cotton and other fibers. Table 24: Zimbabwe’s exports of Textiles and Clothing (2000-09) in US Dollars (‘000)


6. Rules of Origin and Trade in Textiles and Apparel in SADC There is considerable evidence, internationally and in the region, that restrictions on the use of imported raw materials, in the form of restrictive rules of origin or more direct local content requirements, are costly to comply with and reduce the competitiveness of the raw material users and generally do little to assist the development of the raw material producing industries (refer to section 3). By imposing a requirement that in order to qualify for preferential treatment exporters have to source their inputs for production of garment within SADC the ROO significantly diminished the value of these preferences. This is essentially for two reasons. Firstly, SADC producers of fabric and other intermediate inputs seem not to have the capacity to fulfill the needs of garment industry. Although a considerable amount of fabric is produced in SADC and is used in the manufacturing of garments, the quantities and qualities available are not always sufficient to meet the garment-makers’ demands. Secondly, the requirement to import fabric from within the region raises the price garments produced in SADC as apparel producers are often unable to source from the most competitive or cheapest source. These two problems increased the cost of production of garments to the extent that in some instances it becomes non-viable commercially to export to SADC. In effect restrictive ROO became the key stumbling block on production of garments in SADC. The most competitive producers of textiles and apparel, in most part based in Asia, have significantly increased their share in SADC imports at the expense of SADC Member States. The share of Asian imports as a per cent of SADC’s total textiles and apparel imports has risen from 44% to 58% in the past decade.

0

50000

100000

150000

200000

250000

300000

350000

2000 2001 2002 2004 2005 2006 2007 2008 2009

Total Exports

Exports to SADC

Exports to SA

24

The contrast of intra-SADC trade flows with those destined for the United States shows that SADC countries have insufficient textile production facilities to supply international markets in large quantities or even to be internationally competitive without some flexibility in ROO, despite trade preferences. The clear link between “single transformation” ROO and export success in the apparel industry is easy to identify as, in several cases, the provision of preferential market access coupled with relaxed ROO has resulted in phenomenal exports increases. The introduction of AGOA by the US Government in 2000 has supported the growth of exports of apparel in Lesotho. Lesotho’s exports to the US rose from over US$ 100 million in 2000 to US$ 450 million in 2004. Without a textile industry of its own, Lesotho’s garment industry was able to source fabric from the most competitive locations in the world, and make it up into garments for large US retailers (such as Wal-Mart and Kmart) and branded-goods merchandisers (such as GAP). A lack of significant fabric manufacturing capacity means that fabric is imported into Lesotho mainly from Asian countries (and to a minor extent from its SACU neighbors) to be made up into garments for export. A similar rise in exports to the US as a result of AGOA has occurred in Madagascar. In the case of Madagascar, we can trace the termination of AGOA preferences in 2010 and the fall in export to the US.4 In 2007, Madagascar exported textiles and apparel worth US$ 287 million to the US. The termination of AGOA decreased these exports dramatically. In the first 11 months of 2010 Madagascar exported only US$ 53 million worth of apparel to the US. It seems that the full impact of the termination of AGOA was only felt in the final months of 2010 when exports have virtually disappeared. In fact, from September to November 2010, Madagascar only exported apparel worth US4.5 million to the US. Much like AGOA, the MMTZ–SACU Agreement provided for relaxed ‘single transformation’ ROO for Malawi, Mozambique, Tanzania, and Zambia in the SACU market. Also this Agreement had a positive but smaller effect on the SADC garments industry. Since the signing of the agreement, Malawi’s export to SACU have increased from a little over US$ 10 million to US$ 35 million in 2007. The majority of these imports were in finished garments. The termination of this agreement at the beginning of 2010 had a dramatic effect on Malawi’s exports to SACU. Already in 2009 these exports had decreased to US$ 25 million. From January to September 2010, Malawi’s exports to SACU have almost fully disappeared and amounted to only around US$ 2.5 million. It is important to note that out of the four countries benefiting from the MMTZ – SACU Agreement only Malawi has managed to penetrate SACU’s market and has to some extent taken advantage of trade preferences. Zambia, for example, exports mostly cotton to SACU. This indicates that although ‘single transformation’ ROO seem to be the key in enhancing exports of garments other important factors like productive capacity, skills availability, preference margins, macroeconomic stability etc. are also important in utilizing trade preferences. Although the development of a regional value chain is one of the arguments put forward to support double transformation rules, there is preciously little evidence that since the establishment of the FTA these production networks have developed. In 2006, Lesotho has opened its first textile mill - Formosa – which produces denim to garments manufacturers domestically as well as to countries as far as Malawi. The key factor in the construction of the mill were concerns over the expiry of AGOA’s “single transformation” ROO provisions rather than the creation of SADC value chains in the textile and garment industry. The discussion of the impact of ROO should be viewed in light of the changing pattern of globalized trade in textiles and apparel. Two factors in particular contribute to these 4The termination of AGOA for Madagascar was related to a successful coup which toppled a democratically elected president.

25

changes: (1) ongoing trend towards tariff reductions and associated preference erosion and; (2) global fragmentation of production. Firstly, at the end 2004 the WTO’s MFA expired. The MFA imposed quotas on exports of textile and apparel from Asia. As a result, several Asian economies, and the People’s Republic of China in particular, have significantly increased their share global textile and garments exports.5 Secondly, global trade in manufacturing is now fragmented. Fragmentation – otherwise known as unbundling or splitting the value chain – refers to the fact that the different stages involved in producing a particular final good are now often performed in many different countries. Particular ‘tasks’ may be outsourced (or off-shored) and can be undertaken in different places. This occurs in response to productivity or factor price differences. Fragmentation means that comparative advantage now resides in quite narrowly defined tasks. The effect of restrictive ROOs is to inhibit participation in production processes of this type. Countries are unable to use preferences to exploit a comparative advantage in a narrowly defined task, instead having to undertake a wide range of tasks domestically to meet ROO requirements. To conclude, the experience of SADC and elsewhere clearly shows that simplifying of ROO can lead to large increases in production and export in the textiles and garment industry. To do so ROO need to be designed to be more consistent with international trade in fragmented ‘tasks’ (as opposed to complete products) and need to be open to countries with sufficient levels of complementary inputs. Therefore, a reassessment of the current structure of SADC ROO in textiles and apparel in light of the changing pattern of globalized trade in manufactures may lead to higher exports, employment and poverty alleviation in the region.

7. Industrial policy and reforms of SADC ROO: Effects of Tariffs, Preferences and Other Incentives A key stumbling block in the reform of SADC ROO in textiles and garments is a wide diversity in SADC Member States’ trade and industrial policies in the sector. Crucially, preferential liberalization in an FTA is likely to provide wide ranging margins of preferences if tariffs and behind the border policies are not synchronized. This diversity is best illustrated with an analysis of textile and garment tariffs in SADC (see Table 28). At first glance SADC’s biggest textiles and garment producers apply fairly uniform tariffs. Madagascar, Malawi, Mozambique and to some extend Tanzania apply tariffs on fibers, denim and textiles that are roughly the same as those for finished garments (between 20%-25%). This however may not represent an accurate picture of the reality as a bulk of apparel production in these countries takes place in Special Economic Zones. Within these zones intermediate inputs are duty exempt provided that the final product is exported. SACU and Mauritius seem to be outliers and apply a significantly different tariff structure. Mauritius – a country that aspires to become a tariff-free island – applies minimal or no tariffs on imports of textiles and apparel. In stark contrast, SACU imposes high to very high tariffs in the sector. The average trade weighted tariff in fibers, denim, and textiles is around 13% with a significant amount of tariff peaks to protect some sub-sectors that are significantly threatened by the global competition. The tariff rates for finished garments are a staggering 45%.6 The tariffs structure reflects a strategy of trying to develop an integrated value chain based on heavily protected market. This strategy is not shared among all Member States, with some of them much more interested in competing in much larger and lucrative global markets.

5 The appendix provides Tables that give evidence regarding the global reshuffling of the Textiles and Garments industry. 6 This is unlikely to change SACU tariff board is still not operational South African tariffs structure is also applied in all members of the SACU Customs Union and has a significant cost-rising effect for producers in BLNS as well as South Africa itself.

26

Furthermore, it is important to note that garments meeting SADC ROO requirements are eligible for duty-free imports when shipped from one SADC Member State to another. The magnitude of the resulting duty preferences depends on the external duty charged on third country imports by the importing Member State. As mentioned above, these rates differ considerably among Member State. An analysis of tariff rates shows that the magnitude of preferences for SADC exporters is highest for exports to SACU as at 45% it has the highest tariff in the region. Hence, non-SACU, SADC garments producers that are able to meet SADC’s ROO requirements also benefit from the protection of the SACU tariff when they sell into the SACU market. At the other extreme, SADC exports of textile and apparel to Mauritius have no margin of preference in comparison to exports from the rest of the world as Mauritius does not implement any tariffs on apparel.7 Table 25a: SADC Tariff Structure in Textiles and Apparel in per cent (2009) (Angola, DRC, Madagascar)

Cat. Product Description Angola Dem. Rep.

Congo Madagascar MFN Min Max MFN Min Max MFN Min Max

50 Silk. 4.81 2 5 8 5 10 19.98 5 20 51 Wool 4.31 2 5 9.47 5 20 5.09 5 20 52 Cotton. 4.46 2 5 12.4 5 20 18.18 5 20

53 Other vegetable textile fibres 2.83 2 5 7.76 5 10 15.85 5 20 54 Man-made filaments. 3.03 2 5 12.88 10 20 13.21 5 20 55 Man-made staple fibres. 3.26 2 5 14.13 10 20 17.99 5 20 56 Wadding, felt & nonwoven; 3.24 2 5 14.24 5 20 18.99 10 20

57 Carpets and other coverings. 20 20 20 20 20 20 20 20 20 58 Special woven fab; tufted tex fab; 15.71 10 20 16.1 10 20 11.97 10 20 59 Impregnated, coated, textile fabr 3.84 2 5 11.25 5 20 15.71 0 20 60 Knitted or crocheted fabrics. 5 5 5 18.64 10 20 20 20 20

61 Art of app & clothing access, knitted 15 15 15 20 20 20 20 20 20 62 Art of app & clothing access, not knit. 15 15 15 19.92 10 20 16.88 10 20 63 Other made up textile articles; sets; 11.67 5 20 19.21 10 20 15.48 0 20

Source: UN Trains Database Table 25b: SADC Tariff Structure in Textiles and Apparel in per cent (2009) (Malawi, Mauritius, Mozambique)

Cat. Product Description Malawi Mauritius Mozambique MFN Min Max MFN Min Max MFN Min Max

50 Silk. 25 5 25 0 0 0 19.98 2.5 20 51 Wool 22.72 5 25 0 0 0 19.89 2.5 20 52 Cotton. 24.1 5 25 0 0 0 6.91 2.5 20 53 Other vegetable textile fibres 4.05 0 5 0 0 0 13.66 2.5 20 54 Man-made filaments. 14.93 5 25 0 0 0 11.88 0 20 55 Man-made staple fibres. 20.33 5 25 0 0 0 17.13 2.5 20 56 Wadding, felt & nonwoven; 11.55 0 25 1.43 0 30 5.68 2.5 20 57 Carpets and other coverings. 25 25 25 0 0 0 20 20 20

7 With very small exceptions.

27

58 Special woven fab; tufted tex fab; 23.31 10 25 0 0 0 20 20 20 59 Impregnated, coated, textile fabr 21.22 10 25 0 0 0 7.6 2.5 20 60 Knitted or crocheted fabrics. 25 25 25 0 0 0 20 20 20

61 Art of app & clothing access, knitted 25 25 25 0 0 0 20 20 20 62 Art of app & clothing access, not knit. 24.98 10 25 0 0 0 20 20 20 63 Other made up textile articles; sets; 22.93 10 25 5.35 0 15 19.62 2.5 20

Source: UN Trains Database Table 25c: SADC Tariff Structure in Textiles and Apparel in per cent (2009) (SACU, Seychelles, Tanzania)

Cat. Product Description SACU Seychelles Tanzania MFN Min Max MFN Min Max MFN Min Max

50 Silk. 0 0 0 0 0 0 25 0 25 51 Wool 5.37 0 22 0 0 0 20.47 0 25 52 Cotton. 15.86 0 22 0 0 0 35.85 0 50 53 Other vegetable textile fibres 6.79 0 22 0 0 100 20.56 0 25

54 Man-made filaments. 12.83 0 22 0 0 0 23.08 10 25 55 Man-made staple fibres. 13.3 0 22 0 0 0 19.09 0 50 56 Wadding, felt & nonwoven; 14.47 0 20 0 0 0 11.56 0 25 57 Carpets and other coverings. 21.34 5 30 24.83 0 25 25 25 25

58 Special woven fab; tufted tex fab; 8.36 0 25 0 0 0 25 25 25 59 Impregnated, coated, textile fabr 9.67 0 22 0 0 0 10.35 0 25 60 Knitted or crocheted fabrics. 18.85 0 22 0 0 0 25 25 25 61 Art of app & clothing access, knitted 43.75 0 45 20.26 0 25 25 25 25

62 Art of app & clothing access, not knit. 43.47 0 45 20.55 0 50 25.05 25 50 63 Other made up textile articles; sets; 27.57 0 60 20.89 0 200 25.78 0 50

Source: UN Trains Database

Table 25d: SADC Tariff Structure in Textiles and Apparel in per cent (2009) (Zambia, Zimbabwe)

Cat. Product Description Zambia Zimbabwe MFN Min Max MFN Min Max

50 Silk. 15 15 15 14.99 5 15

51 Wool 15 15 15 12.32 5 40 52 Cotton. 12.17 0 15 5.96 0 20 53 Other vegetable textile fibres 13.35 0 15 14.7 5 15 54 Man-made filaments. 6.97 0 15 6.57 5 15

55 Man-made staple fibres. 7.55 0 15 12.82 5 20 56 Wadding, felt & nonwoven; 21.2 5 25 19.79 5 40 57 Carpets and other coverings. 25 25 25 40 40 40 58 Special woven fab; tufted tex fab; 24.44 15 25 21.37 10 40

59 Impregnated, coated, textile fabr 9.07 0 25 8.91 5 40 60 Knitted or crocheted fabrics. 25 25 25 13.89 5 20 61 Art of app & clothing access, knitted 25 25 25

62 Art of app & clothing access, not knit. 25 25 25 10 10 10

63 Other made up textile articles; sets; 21.43 0 25 17.77 5 40

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Source: UN Trains Database Other than diversity in tariff levels the other key feature of SADC Member States policy toward the sector is diversity in behind-the-border incentives. Several SADC economies operate an active industrial policy that aims to support the development of the textiles and garment sector. For examples, Lesotho exempts from companies’ tax firms that export outside SACU. South Africa is currently implementing a cash subsidy based on actual production measured by value-added. As previously mentioned Mauritius, Madagascar and to some extend Malawi produce most of their garments in Export Processing Zones (EPZ). Companies operating within these zones pay very little taxes and duties on imports. Diversity in these behind-the-borders incentives for the sector is one of the key obstacles in implementing a reform of SADC ROO. The final degree of SADC’s preferences is determined by these behind-the-border policies. SADC countries that provide high internal subsidies to their textiles and garments producers simultaneously diminish the final preference margin for other SADC members (South Africa is a country with the most sophisticated program of support to it textile and garments sector). Countries that produce textile and garments in Export Processing Zones (such as for example Mauritius, Malawi and Madagascar) enhance the value of SADC preference to their garments exporters by not charging duties on imported intermediate inputs in case garments. The diversity in industrial policies is a result of fundamental differences in SADC Member States’ approach in development of apparel industry. South Africa and to some extend Botswana seek to develop the garment industry through protectionist inward-oriented policies and focus on the domestic market for growth. Smaller Member States such as Madagascar, Mauritius and Lesotho have a more export-oriented strategy. These differences lead to asymmetries in the margin of preference in the context of liberalization of ROO that are dependent on the size of tariffs and other behind-the-border incentives to the sector. Hence, some Member States are likely to obtain a higher margin of preference than others depending on the internal industrial policies in force. Some policy harmonization is therefore required in order to reap full benefits of preferential liberalization and to avoid the so called ‘beggar thy neighbor‘ effect. To summarize, this section argues that given wide differences in SADC Member States’ industrial policy instruments the margin of preference provided via liberalized ROO is likely to diverge depending on the idiosyncratic structure of these preferences. SADC should therefore work towards synchronizing these policies in order to reap full benefits from the FTA as well as to level the playing field for garments producers within SADC.

8. Policy Options for reform of SADC Rules of Origin SADC currently is in a process of reviewing its ROO. This section provides an overview of the available policy options for a reform of ROO. Three main policy options are reviewed: (1) No reform and continued implementation of restrictive “double transformation” ROO option; (2) full liberalization of ROO and implementation of ”single transformation” rule and; (3) application of relaxed ”single transformation” ROO to SADC’s LDCs only.

8.1 Policy Option 1: “Double transformation” Rule of Origin (Status quo) This policy choice entails the continued implementation of restrictive “double transformation” by SADC Member States. In short, the option is likely to continue being a stumbling block to intra-SADC trade in textiles and clothing. It is also likely to be a point of divergence in SADC negotiations for the EPAs and the Tripartite FTA.

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8.1.1 Distributional Effects Inhibits intra-SADC trade. The “no change” policy option, which involves continued implementation of restrictive “double transformation” ROO, means that these rules will remain to impede intra-SADC trade. If the status quo option is implemented it is likely that world’s most competitive producers of textile and garment – China, Bangladesh, Vietnam and India - will continue to increase their share of SADC’s market. The SADC market will remain to be fragmented and hidden behind significant trade barriers. Therefore, continuation of the status quo in ROO has little capacity to generate exports, employment and production in the sector as well as increase its competitiveness. Unsuccessful in the development of regional value chains. The state rational of the restrictive ROO is that they can contribute towards the development of SADC-wide production value-chains in the textiles and clothing industry. Experience from the past decade has shown that the “double transformation” ROO have not created such value chains and therefore continued implementation of these rules is unlikely to create such links in the future.

8.1.2 The impact on SADC’s Trade Negotiation Agenda ‘Double transformation’ ROO are also likely to complicate negotiations for the Tripartite FTA and EPAs. COMESA currently implements more relaxed ROO that are based on local content requirements and a change of tariff heading rules. The ECA is a Customs Union and hence does not require ROO. SADC negotiations position based on a ‘double transformation’ rule for the Tripartite FTA implies that the Tripartite FTA will have to have more stringent ROO than COMESA and EAC and would be therefore difficult to implement. Similarly, the current structure of SADC ROO will make the finalization of EPA negotiations difficult. Botswana, Lesotho, Swaziland and Mozambique have singed the IEPA which includes “single transformation” ROO whereas the current EU – South Africa-RTA operates under the “double transformation” rule. This creates a rift in SACU’s Common External Tariff.

8.1.3 The problem of transshipment Minimizes the risk of trans-shipment of goods from outside SADC. The ‘double transformation’ ROO makes it difficult for transshipment of goods originally from outside of SADC from a low MFN duty Member State to a high MFN Member State in order to avoid paying high tariffs. This is because the exporter needs to prove that both the finished product and the intermediate inputs originate from within SADC. However, trans-shipment is inherently a customs issue and most effectively dealt with in that arena.

8.2 Policy Option 2: Implement relaxed “single transformation” Rule of Origin This policy option entails a significant liberalization of ROO and the application of the ‘single transformation’ rule in all of the SADC Member States. It is likely to enhance intra-SADC trade and facilitate FTA negotiations with EU, COMESA and the EAC.

8.2.1 Distributional Effect Increases intra-SADC trade. This policy option provides for significant liberalization of SADC ROO and entails the application of the relaxed ‘single transformation’ rule in all SADC Members. The option is likely to have a considerable effect on intra-SADC trade in textiles with countries that already have existing capacity in textile and garment production. It is foreseen that Malawi, Mauritius, Mozambique, Madagascar, Lesotho, South Africa, Swaziland and Tanzania have the capacity to increase their intra-SADC exports.

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In the short to medium-term increases in intra-SADC trade will not be large. Several SADC countries are almost entirely dependent on garment production for exports outside of SADC. This dependence has created a structure of production and export that has become embedded to the point that the cost savings and preference utilization simulated by the relaxation of SADC ROO will be limited with respect to intra-SADC trade. Furthermore, previous liberalization of ROO as part of the MMTZ – SACU Agreement had only a limited impact on enhancing intra-SADC exports. It is only in the case of Malawi that these preferences resulted in enhanced exports to the SACU market although in absolute terms these exports were not very large (for details please refer to section 4). Therefore, only in the long-run once productive capacity, skills availability and industrial infrastructure improves, SADC’s Member States will be able to tap on to the opportunities provided by the trade preferences. Some adjustment costs in bigger Member States. The policy option is likely to have some distribution effects in the SADC textiles and garment industry. Region’s largest and most competitive apparel exporter - Mauritius - will receive preferential access to the largest SADC market - South Africa. In medium-term Mauritius is likely to increase its exports to South Africa. This is for two main reasons: (1) the greater the differences in Member States’ tariffs on yarn and fabric the bigger the margin of preference for the country with a lower tariff as the cost importing intermediate inputs would be lower in that country. Mauritius does not impose tariffs on input in garments production hence it would receive the highest margin of preference to SADC and; (2) the margin of preferences is also determined by degree of protection in the import receiving country that grants the preference. Regional exporters that are able to meet the ROO requirements receive the same level of protection as the tariff level in an importing country. SACU’s tariff on garments at 45% is the highest in SADC hence the margin of preferences in that market is also the highest. The increase of exports of apparel from Mauritius to South Africa is foreseen not to be very significant. Mauritius already has a well-established fabric manufacturing industry and already has the capacity to exports to SACU even under the restrictive ROO. Hence liberalization of SADC ROO is less important for Mauritius than for other Member States without such fabrics manufacturing capacities. Promotes competitiveness and integration with the global value-chains. The manufacturing sector is now increasingly globalized and characterized by fragmented production patterns whereby assembly of components and final products can take place in many different locations and countries. Comparative advantage now increasingly resides in quite narrowly defined tasks and the effect of tightly restrictive ROOs is to prohibit participation in production processes of this type. Therefore, relaxation of ROO which will allow to source inputs from any source is likely to lead towards integration of SADC in the global value chains and to promote its overall competitiveness. Divergence in SADC industrial policies leads to asymmetric effects of preferential liberalization. SADC economies apply very different policies and tariff rates in the textile and garment industry. These differences lead to asymmetries in the margin of preference in the context of liberalization of ROO that are dependent on the size of tariffs and other behind-the-border incentives to the sector. The diversity in industrial policies is a result of fundamental differences in SADC Member States’ approach in development of apparel industry. Some policy harmonization is therefore required in order to reap full benefits of this liberalization.

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8.2.2 Impact on SADC’s Trade Negotiation Agenda Facilitates negotiations of FTAs with third parties. The adoption of ‘single transformation’ ROO in textiles and apparel will align SADC ROO with these of the EPAs and will be compatible with prevailing ROO in COMESA and the EAC. Thus the adoption of such a rule is likely to facilitate these negotiations.

8.2.3 Preventive and Enhancing Measures There are some indications that trans-shipment of garments originating from Asia has been a problem within the MMTZ – SACU Agreement. Liberalization of ROO is likely to increase the risk of trans-shipment as exporter will only need to certify that garments are produced in the region. It is therefore proposed to strengthen customs administration and improve regulatory framework to minimize the possibilities of trans-shipment. In order to strengthen customs administration and enforcement SADC can follow the example of AGOA. In order to qualify for AGOA privileges exporters must obtain a special ‘AGOA visa’. AGOA beneficiary countries are therefore required to set up an effective visa system to prevent illegal trans-shipment and use of counterfeit documentation, as well as effective enforcement and verification procedures. Procedures for obtaining the visa entail registration at the relevant Ministries of Trade & Industry and applications to Customs Departments. Given that most SADC Members States are already familiar with the ‘AGOA Visa’ system a simple extension of these procedures to intra-SADC exports could easily be implemented.

8.3 Policy Option 3: Implement a preferential “single transformation” Rule of Origin to SADC LDCs only This policy options 3 provides for preferential ”single transformation” ROO to SADC LDCs only. Crucially, SADC LDCs would also implement relaxed ROO among themselves. Non–LDCs SADC Members States will still be subject to the “double transformation” ROO among themselves and in exports to SADC LDCs. The key feature that differentiates this option from policy option 2 is that it provides a degree of preferences to LDCs within SADC to export to more developed Member States.

8.3.1 Distributional Effects Increases intra-SADC trade. This policy option is likely to enhance exports of SADC LDC to more developed regions as well as among themselves. SADC LDCs that have productive capacity in textiles and garments are likely to benefit. These are Malawi, Mozambique, Madagascar, Lesotho, Tanzania and possible and Zambia. The intra-SADC increases in exports are likely to be limited due to significant productive capacity constraints in LDCs. Consistent with WTO Rules and Regulations: This policy option is entirely consistent with WTO’s rules as regulations that allow for special preferences to be granted to LDCs.

8.3.2 Impact on SADC’s Trade Negotiation Agenda Complicates negotiations of FTAs with third parties. The mixed approach regarding liberalization of ROO is likely to complicate negotiations for the EPAs and the Tripartite FTA as these rules will be inconsistent with the rules currently applied by these PTAs

8.3.3 Mitigation, Preventive and Enhancing Measures In order to minimize the trans-shipment problem the same measures are proposed as in section 7.2.3.

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9. Conclusion Garment manufacturing is currently an important industrial activity in several of the SADC Group countries. The contrast of intra-SADC trade flows with those destined for the United States shows that SADC countries have insufficient textile production facilities to supply international markets in large quantities or even to be internationally competitive without some flexibility in ROO, despite trade preferences. Current SADC ROO have the effect of requiring more integrated domestic and regional sourcing and production linkages than are currently commercially feasible in the region. Trade data indicates that intra-SADC trade in textiles and apparel has been severely restricted by ROO to the extent that trade between some many member states is negligible. This report has argued that a reform of SADC’s ROO is necessary in order to unlock the potential of the apparel industry and enhance exports and employment in SADC. ROO may be able to act as a catalyst for growth of textile and apparel sector in SADC, leading to growth in exports and employment. To do so ROO need to be designed to be more consistent with international trade in fragmented ‘tasks’ (as opposed to complete products) and need to be open to countries with sufficient levels of complementary inputs. Liberalization of ROO to a ‘single transformation’ rule, which does not place any restrictions on the source of materials for garment production, is likely to align SADC textile and garment sector more closely with international production chains. A reform in ROO is particularly important in the light the rapidly changing dynamics in global textile-clothing value chains which has been evident since the expiry of the MFA Agreement in 2005. Less restrictive ROO are likely to have a small but positive effect on production and exports in the industry. Nevertheless, the garments industry is of key importance for several SADC countries and is a leading employer and revenue and foreign exchange earner. Therefore, even small gains in the sector are significant for local populations where unemployment is high, and in an economic context where the industry is under pressure due to impacts associated with the phase-out of the MFA. Trade-induced development has had a positive impact in the past on both economic growth and employment and increasing intra-SADC trade would encourage these trends.

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Bibliography Augier, P., M. Gasiorek and C. Lai-Tong (2004). ‘Rules of origin and the EU-Med partnership: the case of textiles’, World Economy, 27(9), 1449–73. Estevadeordal, A and K Suominen, (2005) “Rules of Origin: A World Map and Trade Effects”, in Estevadeordal, A, O. Cadot, A. Suwa-Eisenmann and T. Verdier (eds) The Origin of Goods: Rules of Origin in Preferential Trade Agreements, IADB and CEPR Erasmus, Hennie and Kirk Robert and Frank Flatters 2004 “Rules of Origin as Tool of Development? Some Lessons from SADC” http://qed.econ.queensu.ca/faculty/flatters/main/writings.html Mattoo, A, D. Roy and A. Subramanian (2002) ‘The Africa Growth and Opportunity Act and its Rules of Origin: Generosity Undermined?’ The World Economy, 26, 829-51 Portugal-Perez, Alberto (2007) ‘The Costs of Rules of Origin in Apparel: African preferential exports to the US and to the EU’ University of Geneva

Appendix: Appendix Table 1: Top 14 Countries that have increased their share of US Garment

Imports (1999-2009)

Country share1999 share2004 share2009 change 1999-09 change 2004-2009 China and HK 11,34% 22,11% 43,11% 26,52% 21,00% Vietnam 0,05% 3,36% 6,58% 6,54% 3,22% India 2,94% 4,49% 5,68% 2,74% 1,19% Indonesia 2,42% 3,23% 4,96% 2,55% 1,73% Bangladesh 2,17% 2,55% 4,35% 2,18% 1,80% Cambodia 0,72% 1,78% 2,33% 1,61% 0,55% Pakistan 1,82% 3,14% 3,40% 1,57% 0,25% Jordan 0,00% 1,18% 0,94% 0,94% -0,24% Nicaragua 0,34% 0,73% 1,10% 0,76% 0,37% Egypt 0,52% 0,70% 1,10% 0,58% 0,40% Sub Saharan Africa 0,75% 2,20% 1,15% 0,41% -1,05% Peru 0,40% 0,85% 0,77% 0,37% -0,09% Haiti 0,31% 0,40% 0,63% 0,33% 0,23% Lesotho 0,14% 0,56% 0,34% 0,21% -0,22% Madagascar 0,06% 0,40% 0,26% 0,21% -0,14%

Appendix Table 2: Top Ten Countries that have decreased their share of US Garment Import (1999-2009)

Country share1999 share2004 share2009 change 1999-09 change 2004-2009 Turkey 1,46% 2,18% 0,79% -0,67% -1,38% Costa Rica 1,03% 0,65% 0,26% -0,77% -0,39% Thailand 2,56% 2,71% 1,79% -0,77% -0,92% Italy 2,47% 2,79% 1,62% -0,85% -1,17% Philippines 2,66% 2,39% 1,31% -1,35% -1,08% Canada 3,77% 3,81% 1,62% -2,15% -2,19%

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Dominican Republic 2,94% 2,55% 0,77% -2,17% -1,78% Taiwan 3,34% 2,60% 1,00% -2,34% -1,60% CAFTA 10,20% 11,83% 7,67% -2,54% -4,16% Korea, South 3,56% 3,18% 0,99% -2,57% -2,19% CBI 11,01% 12,37% 8,31% -2,70% -4,06% Mexico 10,64% 9,62% 5,11% -5,53% -4,51%

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Appendix Table 3: Top 10 Exporter of Textiles and Garments to the US in (US$ Millions)

Country 1999 2004 2005 2007 2008 2009 %∆99-09 %∆99-04 %∆05-09 %∆08-09 Total US Im Exports 63743 83310 89205 96410 93187 81002 %∆ 7,59% 7,08% 3,36% -3,34% -13,08% 27,08% 30,70% -2.77% -15,98% 1. China Exports 6 129 14 558 22 405 32 323 32 678 31 760 %∆ 25,41% 53,90% 19,42% 1,10% -2,81% 418,20% 237,53% 118.16% -1,74% 2. CBI Exports 8 918 10 023 9 661 8 457 8 112 6 731 %∆ 3,58% -3,61% -5,96% -4,08% -17,02% -24,52% 112,39% -32.84% -20,40% 3. CAFTA Exports 8 265 9 579 9 169 7 949 7 673 6 210 %∆ 3,61% -4,28% -6,11% -3,47% -19,07% -24,86% 115,90% -35.17% -21,88% 4. Vietnam Exports 38 2 720 2 881 4 558 5 425 5 332 %∆ 9,47% 5,92% 34,21% 19,03% -1,73% 14007% 7195,88% 96.04% 16,97% 5. India Exports 2384 3633 4617 5 104 5 078 4 600 %∆ 13,13% 27,06% 1,45% -0,51% -9,41% 92,94% 152,38% 26.62% -9,87% 6. Mexico Exports 8 621 7 793 7 246 5 625 4 957 4 142 %∆ -1,86% -7,02% -11,78% -11,88% -16,44% -51,95% 90,40% -46.85% -26,37% 7. Indonesia Exports 1 959 2 620 3 081 4 206 4 241 4 021 %∆ 10,29% 17,60% 7,81% 0,84% -5,20% 105,29% 133,77% 53.46% -4,40% 8. Bangladesh Exports 1 754 2 066 2 457 3 191 3 537 3 521 %∆ 6,51% 18,95% 6,45% 10,85% -0,48% 100,74% 117,77% 70.45% 10,32% 9. Pakistan Exports 1 475 2 546 2 904 3 170 3 078 2 750 %∆ 14,94% 14,07% -2,46% -2,91% -10,65% 86,45% 172,60% 8.02% -13,25% 10 Honduras Exports 2 164 2 678 2 629 2 518 2 612 2 039 %∆ 6,79% -1,81% 2,97% 3,72% -21,91% -5,77% 123,72% -23.83% -19,01% 11. Cambodia Exports 587 1 442 1 727 2 435 2 386 1 888 %∆ 15,23% 19,76% 13,24% -2,04% -20,88% 221,83% 245,79% 30.94% -22,49% SSA Exports 607 1 783 1 486 1 316 1 177 936 %∆ 16,14% -16,63% 0,06% -10,57% -20,52% 54,20% 293,81% -47.52% -28,92% Lesotho Exports 111 456 391 384 340 278 %∆ 16,07% -14,27% -0,91% -11,43% -18,06% 151,31% 411,48% -38.93% -27,42% Madagascar Exports 46 323 277 290 279 212 %∆ 64,79% -14,25% 21,49% -3,62% -24,14% 363,36% 706,88% -34.45% -26,88% Kenya Exports 39 277 271 249 247 195 %∆ 47,55% -2,27% -5,57% -0,86% -20,84% 395,27% 702,78% -29.53% -21,52% Mauritius Exports 232 227 167 115 102 102 %∆ -15,48% -26,67% -3,49% -11,50% 0,27% -56,14% 97,98% -55.24% -11,26% Swaziland Exports 23 179 161 135 125 94 %∆ 27,04% -9,91% 0,01% -7,68% -24,39% 305,52% 767,44% -47.16% -30,20% South Africa Exports 113 164 86 43 41 21 %∆ -35,33% -47,23% -35,00% -5,73% -48,77% -81,45% 145,09% -87.22% -51,70% Malawi Exports 1 27 23 20 13 9 %∆ 15,54% -14,92% 9,01% -36,03% -28,87% 542,73% 1908% -66.31% -54,50%

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