Last week, the East African Community (EAC) proposed to implement a ban on importing used clothes and shoes from outside the region. Leaders meeting in Tanzania encouraged partner states to procure textiles and footwear from within the region and to consider phasing out importation within three years.
Why East Africa’s governments want to ban imports of used clothes
Currently EAC countries import considerable amounts of second-hand textiles and footwear. Despite being a small region, its imports increased from $100 million in 2001 to over $300 million in 2014 – a quarter of what the entire African continent imports ($1.2 billion in total).
The region does have some limited capacity to produce garments and shoes. Uganda for example is a cotton producer, has a few cotton ginning factories for the production of textiles, and the Uganda Manufacturers Associations lists around 30 garment and footwear producers among its members. Kenya’s apparel industry employs around 30,000 people, and Rwanda has made plans to set up a garment factory with the support of foreign investors.
However, this is not enough to satisfy the domestic market, which relies heavily on imports.
The EAC aims to boost this capacity and to develop a vibrant industrial sector. Garment manufacturing is a great starting point – it uses simple technology, requires little capital to start production and can offer employment to many people. For many countries, including the UK, the garment sector was the first step towards industrialisation.
Beyond that, countries can decide to improve their garment sector, or to diversify their production by moving into other sectors.
But banning imports isn’t the right strategy
There are two main reasons why this strategy – called ‘import substitution’ because countries attempt to substitute their imports with goods produced domestically – is misguided.
First, it hasn’t always worked. In the twentieth century, many Latin American countries tried import substitution to shield their nascent industries from external competition. The results, however, were largely disappointing and included slower industrial growth and the presence of over-priced low quality goods on the domestic markets.
Secondly, the ban raises a problem for East Africans. Banning imports of used clothes and shoes means that the population has to choose between buying new imported goods, or buying domestically produced goods. If the latter are costly, or of poor quality, East Africans citizens will have to spend more on these goods. Poorer people, who are more likely to purchase worn shoes and clothes, will bear the burden.
Instead, East African governments should focus on reducing manufacturing costs
There are better ways to promote the garment sector in East Africa and create a vibrant manufacturing sector. They all revolve around the same principle: reducing costs faced by manufacturers to ensure that they can produce at a profit.
This could mean improving infrastructure – providing a good feeder road from the factory to the main road, and a good main road to the border; or ensuring a cheap and reliable supply of power. Or it could mean designing appropriate incentives – tax relief for producers; export incentives for firms targeting international markets; or asking foreign firms to use domestic inputs and labour, while at the same time promoting sectors that are linked to the one to develop.
These types of measures, collectively known as ‘industrial policies’, actually work. Successful examples can be found among the East Asian tigers, where governments took an active role in promoting the development of their manufacturing sectors.
These policies make import substitution redundant. East Africans can produce clothes and footwear for export while at the same time importing second-hand products for domestic consumption. And recent work from ODI’s Supporting Economic Transformation programme highlights how participating in international trade can promote competitiveness in the economy and help countries achieve global competitiveness.
The proposed ban makes little sense under the EAC industrial policy
East African countries understand the importance of developing a competitive industrial sector. In 2011, the EAC adopted an Industrialisation Policy and Strategy (though surprisingly, this strategy does not identify the garment sector as one of its six priority sectors).
These documents provide coordination and promote integration at the regional level, while it is up to the individual countries to design their own policy interventions. So the ban on used garments and footwear imposed at the regional level makes little sense, especially if supporting measures need to be set by the single countries.
In conclusion, the ban proposed by the EAC would be a costly policy with limited long-term benefits. It could also have undesirable effects, like promoting illegal trade.
The effort to promote industrialisation in the East African region is commendable – but it needs to be directed toward coherent industrial policies rather than shutting out potentially beneficial international trade flows.