Trade Policy at Work

The Impact of Second Hand Clothes and Shoes in East Africa

Until the early 1980’s, the clothing and shoes industrial sector in East Africa was thriving, with well-established value chains. Over the years, the sector has collapsed following the emergence of informal dealers of imported second-hand clothes and shoes, which EAC Heads of States recently decided to ban in an effort to revive the sector. This study reviews the state of play of used clothing and shoes imports in East Africa, and proposes practical approaches to implementing the ban.

In the 1960’s to the early 1980’s, the clothing and shoes industrial sector in East Africa was thriving and producing for both the local markets as well as the export market, and employing thousands of people. Value chains in the sector were well established right from the production of raw materials to the finished products. However, over the years, the clothing and shoes manufacturing industries have collapsed with the emergence of an informal sector dealing in second-hand clothes and shoes (SHC). At present, the majority of the population in East Africa source their clothing needs from this informal sector, which has curtailed efforts in revamping the clothing and shoes industrial sectors in the region. The overall objective of this Study is to review the state of play of used clothing and shoes imports within the region, analyze the implications of the EAC Heads of States ban on Second Hand Clothing (SHC) imports in the EAC Community and examine practical approaches to implementing the ban. A dual approach of literature review and gathering first-hand information through interviews of stakeholders in the EAC was utilized. Overall, the importation of SHC has been growing in all the EAC Partner States with the value imported in the EAC in 2015 amounting to $151 million. SHC are deemed to be cheaper and of better quality than the new clothing available on the market, hence the demand for SHC is quite high in all the Partner States. The SHC are cheaper than the new clothing in all the EAC States and the largest importers of SHC into the EAC are from USA, UK, Canada and China. There is generally a negative impact of SHC trade on the textile and leather industry of any country. This was proved by a model created by Garth (2008) that showed that there is a negative relationship between a recipient country’s textile production and textiles imports, with a 1 percent increase in SHC imports resulting in a 0.61 percent reduction in apparel production. The EAC Partner States are not exempted from Garth’s findings. On the environment, research (Farrant, Olsen & Wangel, 2010) shows that the purchase of 100 second-hand garments can save between 60 and 85 new clothing and collecting 100 garments for reuse would lead to between 14 percent decrease of global warming for the cotton T-shirt to 45 percent reduction of human toxicity for the polyester/cotton trousers. However, when this is compared to the cost of SHC in the EAC region, especially regarding the growing decline of the textile, apparel, leather and related sectors, (such as cotton in Uganda and Tanzania and silk in Rwanda), it can be argued that the environmental cost is minimal. A Phased Approach This Study has recommended that a phased approach is used in implementing the ban. SHC are not entirely used clothing. Some of the clothing in the bales are as good as new, but sold as second hand and imported in the same bales with the second hand. So the ban cannot be implemented in a blanket manner without taking note of this fact since the new clothing therein is usually durable good clothing. As such, in the execution of the phased approach, there is need to establish a code of practice and acceptance criteria for different grades of SHC. At present, SHC in the EAC is typically organised into three grades: Grade A – new and as good as new with minor bruises/stains, Grade B – bad odor, dripped strides, some bruises, Grade C – serious bruises, holes, tears and stains. The EAC could decide to first ban grades C and B, while imposing higher tariffs on grade A with the intention of a total ban for all grades over a period of 5 to 8 years.This phased approach would soften the impact of the ban on the domestic consumers, as well as the source countries and would make implementation of the ban easier, by putting in place relevant standards that support only the importation of Grade A clothing. The standards would, in turn, be enforced by the bureaus of standard and the customs officials of the different Partner States. Alternative to the Phased Approach: SHC Purely for Charity There are views that SHC should be totally and immediately banned, save for charitable purposes via licensed importers like churches or foundations, with clear quota allocations. It is argued that as long as there is no commercial drive for SHC, the level of imports will drop significantly and only those truly committed to humanitarian causes will find them worthwhile to import. Further, that since the overarching objective is for the EAC is developing industrialization; the region should not concern itself with processes such as the grading of SHC. This Study however finds otherwise due to the fact that making an exception for only charitable purposes will compromise the ban on SHC substantially, with importers claiming the clothing is a donation. Moreover, originally SHC was admitted as donations, but over time evolved into highly commercial trade and thus putting the EAC in the situation where it is – with SHC importation being so high that the local industries are affected substantially. Tariffs Tariffs for new clothes should be equally addressed. SHC purchasers are both well to do middle class and the have-nots. When the ban is implemented, the middle class will still be able to afford new clothing but the poor may not necessarily. Therefore the ban should put the same tax measures on new imported clothing so that the price of the new imported clothing is as high as that of the SHC ban. That way, the burden of the ban will not only be felt by the poor, but by all clothing consumers, who will, in turn, buy the locally made products. Further, competition against the industrial sector is not only from SHC but also from imported clothes from foreign companies. So the implementation of the ban so as to boost industrial production should also address the increasing establishment of foreign importing clothing businesses in the EAC. Otherwise, the SHC ban will end up promoting the growth of the foreign multinational companies that have the capacity to produce on large scale, and not necessarily support local production.

Addressing challenges facing industrialisation

The factors affecting industrial production in Africa are not mainly SCH, but the unfavourable conditions for industrial growth and development in the Partner States. If these conditions such as high electricity tariffs, the absence of real tax incentives, among others, are not addressed, the ban will not achieve its intended goal of boosting industrialisation in the region.

EAC Vision 2050

The study has noted that the SHC ban may not be popular for some interest groups, but on the whole, it is pushing the EAC in the direction of its Vision 2050. Its implementation can be justified under the international laws, and in the big picture, it will improve the livelihoods of the people in the EAC region through improved industrialisation.