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America’s harmful threats  

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THE LAST WORD: By Andrew M. Mwenda

Why U.S. resistance to the proposed ban on second hand clothes is a danger to our future prosperity

On August 17, Daily Monitor published an article titled “US envoy warns on ban of second hand clothes.”  The U.S. Ambassador to Uganda, Deborah Malac, made the warning during a “courtesy call” on our Speaker of Parliament, Rebecca Kadaga. Malac warned that a ban on second hand clothes would jeopardise Uganda’s benefits from AGOA. Never mind that this decision was adopted by regional heads of state as part of the East African Industrialisation Policy.

Kadaga assured Malac that Uganda’s parliament had “thwarted” the proposed policies on second hand clothes. She also said second hand clothes are a major source of jobs for many Ugandans and also offer cheap alternatives to our poor citizens who cannot afford new clothes. I will return to this shortsighted view of “cheap” alternatives and jobs later.

Having been assured, Malac was “quick to say she had simply paid a courtesy call” on Kadaga and the meeting ended. But not before she had flattered her host saying: “It was interesting to see that parliament was vocal on the issue of police brutality.” This was strange given that the biggest culprit on such brutality is the USA where police officers are videoed almost daily shooting and killing civilians, especially black people – or may be in Malac’s world, black lives don’t matter.

The U.S. envoy’s warning was one of those stories our media consider unimportant, perhaps tacked away on page seven (I read it online). Yet this “courtesy call”, the threats from Malac, and the assurances of Kadaga form the core of what has kept our country in perpetual poverty. If this had been about democracy and human rights, it would have made front-page news and a topic of discussion by our pundits on radio and television, stirred animated debates on social media and maybe a demonstration.

This disregard for international trade as a foundation of growth in favour of democracy and human rights shows how development discourse has diverted African elites from the core challenges of development in their countries to peripheral issues that have little or nothing to do with development. Trade; especially international trade, is the corner stone of prosperity. It has a division of labour, a hierarchy: some countries produce cotton; others weave cloth while others market high fashion. What a country earns depends on its place in this value chain.

For instance, those who sell cotton, as Uganda has done 1903, earn less than 2% of the final value when Louis Vuitton, Giorgio Armani or Dolce and Gabana sell their designer clothes. Those who make cloth, like Sri Lanka, earn about 15%. What we call “development” is the process of upgrading from selling these low-skills and therefore low-value commodities (goods and services) to high-skills and therefore high-value commodities.

Uganda’s parliament should resist U.S. Ambassador Deborah Malac’s warning that a ban on second hand clothes will jeopardise Uganda’s benefits from trading with America. In opposing the ban with threats and bribes, the U.S. is asking Ugandans to continue specialising in being poor.

For countries to upgrade themselves along such a value chain, they need active state policies to encourage investment in industry, skills acquisition, mobilisation of long-term capital, tax incentives, etc. The aim of such policies is not just to attract investment but also to shield local infant industry from the cold winds of international competition. The state in Japan subsidised Toyota, a private company, for 20 years before it broke even. The same happened with Sam Sung and Hyundai in South Korea. We have been taught that public money should not be used to prop private companies and our elite would resist any such efforts.

Yet there is no way Uganda can develop a textile industry when USA and China are dumping cheap second hand clothes and subsidized textiles respectively on our market. Every country that has sought to upgrade its products along the aforementioned global value chain has made a serious tradeoff – as the example of Japan and South Korea above attests. Without exception, industrialising countries have to consume expensive poor quality domestic goods in the short term as they build economies of scale, improve skills and other competences to upgrade their quality of output and reduce the price of such goods in the long term.

Developed countries always lecture on the importance of comparative advantage in international trade. They ask poor nations to specialise in production and export of raw materials (where poor nations have comparative advantage) and import finished industrial products (where rich nations have comparative advantage). This is because, except for goods like gold, diamonds and oil, the price of unprocessed products suffers a long-term tendency towards declining terms of trade.

Therefore in proposing an industrial strategy to facilitate our nations to upgrade from selling raw cotton to selling finished garment, our leaders were actually proposing a strategy of making the first baby steps to future prosperity. They are proposing that our citizens should upgrade their skills from being peasant-farmers tilling land with a hoe to industrial workers working on machines that make clothes. In opposing this strategy with threats and bribes, the U.S. is asking us to continue to specialise in being poor.

This brings me to the shortsightedness of Ugandan legislators, a shortsightedness that is understandable but tragic. Uganda’s MPs represent many traders who earn a living selling second hand clothes. They also represent millions of poor consumers who use second hand clothes because brand new ones are too expensive. East Africa’s industrialisation strategy of banning second hand clothes, therefore, inflicts immediate harm on these two groups. However, in the long term, this industrial strategy promises to create more jobs and bring the region more value.

Development – like its precondition; capital accumulation – requires foregoing today’s consumption in order to enhance it tomorrow. You postpone buying a fancy car today and invest in an apartment or financial portfolio from which you can draw future streams of income. For a country to upgrade from being cotton-farming to an industrial nation requires short-term trade-offs. A country develops or stagnates if and when it is willing to pay the short to medium term costs of such a transition.

Our countries will remain poor if our politicians do not allow these short-term tradeoffs. To export value added products tomorrow, we must sacrifice today. It may be in the interest of the US to promote use of second hand clothes in Africa. Perhaps this benefits American traders in these clothes, American charities, and shipping companies etc. These may be lobbying their government to put pressure on us to accept their demands. That is understandable; America has a right to promote her interests. The danger is for our MPs to take a short-term view of this problem and join hands with America to the detriment of our future prosperity.

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6 comments

  1. Andrew Mwenda wrote: “This was strange given that the biggest culprit on such brutality is the USA where police officers are videoed almost daily shooting and killing civilians, especially black people – or may be in Malac’s world, black lives don’t matter.”

    This is a really cheap shot on the part of Andrew Mwenda. The facility to publicise whatever happens in the US should not be misconstrued as the greater occurrence of police brutality in the US than Uganda. I have lived in the US for a considerable period, and given what Mwenda is choosing to present as greater police brutality in the US than Uganda, if it was a matter of choice, I would rather take the situation in the US any day. Not only is even a minor case of police brutality in the US exposed, but those of Uganda never see the light of day, with the exception like the one which was video taped recently. Moreover in the US you can sue the police and win damages which is not the case in Uganda.

  2. If there were a place to report Mwenda, I would. And I would do it in a hurry. (emotions???) I would wish to see him laid down and smitten with ten strokes of the cane without him touching there. Unfortunately, I do agree with him on principle but disagree with his method of activism and radicalism. Mwenda is predicting saturnalia, the moment Africa is left alone.
    At this rate, he needs to be at a sanatorium because of his obduracy. His fixation on a droop idea that Africa can stand on its own has enabled him recreate “Africa” on a completely new earth. But he knows far too well, that his accusations towards the United States are wrongly premised.

    As an international figure, Mwenda should know that international relations is built on the doctrine of reciprocity. If the United States provided a platform for Sub Saharan African countries to market their products under the African Growth and Opportunities Act (AGOA), it would only be befitting that Africa returned the favour. However, AGOA was formed on a
    nonreciprocal basis. That is, Africa is free to enjoy the American market without paying in return. There are two key provisions under the AGOA which are of interest. Under the provision of ‘Technical assistance and Capacity Building’, the intention was to encourage
    African governments liberalise trade. In this effort , for the FY 2013, the United Sates provided approximately $209 million up from $109 million in 2012. It should be noted that out of the total exports of the 39 member countries of AGOA, only $ 4 billion was realised in 2015. Under the ‘African Competitiveness and Trade Expansion’, the United States Administration took on two initiatives- first, it applied a tariff of 3.5% on AGOA products compared to the average 11.4% charged on products from developed economies. Secondly, the U.S Administration appropriated up to $30 million annually to help potential
    exporters become globally competitive. Other than lamenting that the U.S wants to hold Africa in perpetual poverty, how far have the African governments gone in alleviating this poverty? Through corruption? (which Mwenda fervently defends.)

    The African leaders do not only abuse and misuse public funds/grants, they also lack the appreciation of the basic concepts regarding development. I will stick to AGOA to illustrate my frustrations. In 2007, President Museveni introduced a gentleman called Villupilai Kanananthan. Kanananthan was running a joint venture between the government of Uganda and Tri-star Apparels Sri-Lanka to advance AGOA objectives. The government
    renovated the Coffee Marketing Board (CMB) headquarters at Bugolobi. It also advanced
    $ 11 million in form of subsidies, loan guarantees and incentives. After one year in operation, President Museveni ordered for the arrest of Kananathan. After two years, the plant had come to a halt. A Libyan company bought majority shares and a force of 2,000 factory workers was reduced to just below 300. Of the 300 workers that were retained, they continued to draw their meals and allowances from State House. (What is the investment return on such a business? or, am I yet again making a moral argument?)

    The case you make here for Africa was done for India in what Barrington Moore pointed out as the “revolutions from above”, in which the bureaucracies of the agrarian ruling class made alliances with weak commercial classes. We cannot just start talking about industrialisation, we have to start from somewhere. The problem with India was that, although the construction of a rail network was an important moment in the modernisation of
    the society, it was never a result of an indigenous industrial revolution. Just like it happened in India and Brazil, the displaced workers (dealers in second hand clothes)will become beggars on the fringes of great cities. The point is, the Europeans had the time to “evolve” their steel industry out of blacksmith shops, iron production, small-scale steel and then, after a century of development and job generation, came to a huge steel factory. When Mwenda talks of “short-term” he’s ignoring such facts and in turn, because
    of the “borrowed” technology, we shall only be building enclaves of modernity in a largely backward society. Mwenda seems to be in a hurry but sometimes life restricts us to a small strip of survival- where we have to juggle between prudence and pragmatism. The life of dealers in second hand clothes matters too.

  3. 1.In the past, most international companies were more comfortable with signing trade deals with illiterate leaders (backdoor deals) they could still be having such thoughts that’s why during the oil negotiations, some companies fled coz they thought Africans were still naive.
    2.In the Business world,both the rich & poor countries need each other.
    3.Despite Africa’s rich natural resources, we face the challenge of being despised how do you tell a white man that the shirt he is wearing was made in Africa??
    4.Its better for African countries to have big industries like H&M,Starbucks,Nestle,American Garden establish processing plants here.e.g In South Africa there is a BMW manufacturing plant .
    5. Rich nations adhere to high standards that’s why at times our agricultural products are banned from Europe at times we Africans lack concentration we rush a lot in the end we make silly mistakes.
    6.I have read some of the AGOA rules e.g (i)A country has up to 10 years to trade under AGOA partnership provided you (Behave well in the American context)(ii)A country can be suspended from AGOA for a period determined by USA(So countries are under pressure to behave well least you r suspened.(iii) I dont know how the duty free arrangement works is it meant to geniely exempt poor countries from taxes or its a cover up to export our goods at a low fee?

  4. The key question is why is m7 willing to take these MPs to Kyankwanzi/Rwakitura/State House on matters of his personal politics but will not put up any fight on a matter of national survival. It is a question that disturbs me of a leader of thirty years and still counting. What if he fought for us, for Uganda instead of himself,so we fought for him instead in return?? You see slums upgrade, Kigali Convention, now airbus in Rwanda while on this side, its only confusion. We don’t deserve this.

  5. China is flooding the global market (especially here) with new affordable clothes; US and Europe will soon not find market for second-hand clothes. They will get out of business in the same way vendors of used computers have got out because from China we’ve found affordable new computers. The same is soon happening to vehicles… with China-made new cars coming at competitive prices, we’ll say bye to reconditioned Japanese cars.

    There’s no place for “expensive poor quality” goods. In this day and age! Look at China and her Asian neighbors… whereas you could question the quality of Tecno or Huawei phones in the makers’ early years in the business, they were not priced in the range of Nokia or Siemens! Besides quality is subjective. Function is what matters most times in countries like ours where we’re still striving to meet basic needs. Electrical appliances made in Indonesia or raincoats made in Vietnam become competitive because they compete in suitability for use and affordability with imported (used or new) stuff.

    The Asian entrepreneurial class set out to produce goods and sell at prices affordable by Asians, especially the low-income segment first. If there’s anybody setting up a fabrics industry in Uganda, they should find simple methods to produce good quality and sell to us cheaply. If government finds such an entrepreneur and invests a portion of public money in a way that results in affordable products and a growing enterprise, which legislator will oppose the move?

    Where was America when Baidu was rising to displace google in China? The problem with us here, is that we all talk and there’s nobody doing. So, policy talk here and there, ban imported second-hand clothes and then what? Policy pronouncements should be mere dressing… not the beginning. Chinese didn’t miss google when it folded; YouTube fans had already been introduced to YouKu, developed and run by Chinese, in Chinese and primarily for Chinese.

    When facebook was banned in China, complaints from Chinese users lasted only a few weeks because there were other networking platforms – for Chinese, and by Chinese! That made a difference. In most of Africa we can’t afford to ban anything foreign… we can only talk of banning, but we can’t take a step. Why? We are vulnerable.

    Unlike the China examples above, we in Uganda and Africa sometimes think it’s the obligation of the West to help us get politically and economically independent of the West. So we’ll be calling upon American and European companies to come and make clothes here so that we stop importing from Europe and America!

    And a Turkish company will come, financially cushioned by own government… set up here, do a few things and produce new clothes that we won’t afford. Our entrepreneur will export to Europe and we will keep importing from China. Will there be still justification for government’s investing in such? Yes of course. Jobs and contribution to GDP through export of clothes. The original intent (affordable new clothes made here by us for us) gets lost. And somehow the legislators who oppose such are shortsighted!

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