The US is fighting one of the world’s poorest countries over trade

12 JUL 18 10:33 ET

    (CNN Money) — Second-hand clothes donated by Americans have sparked a bitter trade dispute between the United States and one of the world’s poorest countries.

The obscure conflict is playing out in the apparel markets of Rwanda, where the government has increased import duties on used clothing from the United States from $0.25 to $2.50 per kilogram.

The tax hikes, which were imposed in 2016, are designed to encourage domestic clothing production in a country that still bears the scars of a horrific genocide 24 years ago. But they have provoked a backlash from the Trump administration.

Used clothes, many of which start as US charity donations, have long been a staple of wardrobes in Rwanda. Yet their abundance and popularity have stalled development in the local clothing industry.

Rwandan President Paul Kagame has said the duties are needed to boost local producers and prevent his country from being used as a “dumping ground” for used American clothes. He has proposed banning imports by 2019.

The restrictions have upset traders in the United States.

The Secondary Materials and Recycled Textiles Association, which represents companies that sell used and recycled clothing, filed a complaint with the US government in 2017 arguing that the trade barriers put thousands of American jobs at risk.

Following a review, the Office of the United States Trade Representative warned in March that it would suspend some benefits that Rwanda had under the African Growth and Opportunity Act (AGOA), which allows sub-Saharan African countries to export to the United States without facing tariffs. Rwanda would, for example, lose the right to export duty-free apparel to the United States.

“The President’s determinations underscore his commitment to enforcing our trade laws and ensuring fairness in our trade relationships,” Deputy U.S. Trade Representative C.J. Mahoney said in March.

Rwanda, which was given 60 days to roll back the restrictions, refused to budge.

Critics of the US decision say the government has overreacted to the tariffs on used clothing, which affect just $17 million in US exports a year and target a country where average annual income is around $700.

Rosa Whitaker, a former US trade official who worked on African issues under Presidents Bill Clinton and George W. Bush, said the Trump administration was acting out of a “warped sense of America-first.”

“The Trump administration is making a symbolic statement rather than a substantive statement,” she said. “I see America picking trade battles, but I was surprised we would have time to pick one with Rwanda. We are talking about such a small amount of trade.”

Whitaker, who helped design AGOA, said the move goes against the original intent of the legislation.

“One of the whole points of the agreement was to help African countries to develop an apparel manufacturing base, because we understood that apparel is the first entry point into manufacturing,” she said.

The Office of the United States Trade Representative did not respond to requests for comment.

Related: The making of a global trade war

In Rwanda, the government has pledged to help exporters affected by the trade spat by compensating them for new US taxes.

“We are put in a situation where we have to choose; you choose to be a recipient of used clothes … or choose to grow our textile industries,” Kagame told reporters in June. “As far as I am concerned, making the choice is simple.”

Reaction to the dispute has been mixed in the markets of Kigali, the capital of Rwanda.

Elie Mazimpaka, who has been selling used clothing in Kigali for over a decade, said that at least half of the vendors at his market have left. Customers are buying less used clothing, with many opting for Chinese products that are less expensive.

While Chinese products are new, some Rwandans said they prefer the unique style that secondhand clothes from the United States had offered.

Mazimpaka, 35, said that government plans to boost domestic production haven’t yet been felt.

“Factories are part of a good plan but it’s not yet delivering the products for poor communities,” he told CNN as he sifted through a pile of dresses.

Related: Europe says trade fight with US will hurt economic growth

Despite the risk to his own job, Mazimpaka believes that government efforts to reduce used clothing imports are warranted.

Across a crowded table of denim jackets, high school football tops and push-up bras, Media Kamirwa, 25, agreed.

“America shouldn’t use clothes to try to patronize Rwanda. We’d rather just stick to our plan, which is to get developed,” she said.

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