The textile and clothing industry in Lesotho in the wake of the multi-fibre agreement phase-out

This paper examines the textile and clothing (T&C) industry in Lesotho to ascertain the initial effects of the end of quotas and other restrictions on global trade in textile and clothing. Results show a dramatic decline in Lesotho’s T&C exports, both in value terms and export share in major markets in industrialised countries: the U.S. and the EU in the aftermath of the Agreement on Textile and Clothing (ATC). The export decline for Lesotho and for Sub-Saharan African countries as a group has not been accompanied by simultaneous or rapid shift of increasing T&C exports by Asian developing countries, who continue to export post-ATC at about the same levels of textile and clothing that they did before ATC phase out. While T&C exports from Lesotho and other African countries continue to decline, post-ATC, it is unclear if the end of the ATC quotas has been the main cause of that decline. Results do not provide clear evidence that the termination of the ATC has been a major contributing factor to the decline of Lesotho’s and SSA Africa’s T&C exports. Instead, we find evidence of simultaneous and rapid shift of increasing T&C exports from China to Lesotho and other African markets. Compared to competition in export markets, the influx of Chinese products imposes worse threat to the textile and clothing sector in Lesotho and the rest of Africa. Further to these, the utilisation of safeguard mechanisms by the U.S. and the continued option to maintain tariffs and other non-tariff barriers means that the end of ATC did not fully bring about “free trade” for clothing and textiles. These results raise important policy issues that could be considered in the ongoing negotiations on rules: trade remedies, particularly those dealing with safeguard and countervailing measures.