Further blow to clothing and textile exporters

A support measure for Southern Africa’s embattled textile and clothing export industries – selling into a global market utterly dominated by the cut-price giants of the South East and East Asia – looks about set to fade away. This, according to commentators, could be the final financial straw that could break a few more backs in the apparel trades. Lawyer Sean Woolfrey, a researcher for the Trade Law Centre of Southern Africa (tralac), talked to FTW on the issue. He said when officials of the Southern African Customs Union (Sacu) met to determine the fate of the region’s textiles and clothing industrial development programme – commonly referred to as the duty credit certificate scheme (DCCS) – it was widely believed that the outcome of this meeting would be the scrapping of the DCCS. “This, in turn, would represent a further blow to clothing and textiles exporters in the region,” he added, “many of whom are already struggling to cope with intense competition from Asian producers.” To date, no clear indication has been given of the outcome of this meeting. According to Brian Brink, executive director of the Textile Federation, the most recent announcement was that the DCCS would be extended for another year – until March 31, 2010. But, while Brink was told at the meeting with the department of trade and industry (dti) that the DCCS was “in for it”, and that this was its last year, he was wary about accepting this as fact. “The DCCS has been stopgo since 1994,” he said, “with each year the department grudgingly extending the scheme for one more year.” But it will finally have to be phased-out, as it falls foul of the World Trade Organisation (WTO) rulings on export subsidies, and complaint has been made. “This,” said Brink, “because it effectively allows a producer to export goods at cheaper than the domestic price.” Woolfrey agreed. “The DCCS,” he said, “is a Sacuwide export incentive scheme first introduced in 1993. Under the scheme, clothing and textile manufacturers in Sacu member countries can earn duty rebates on imported clothing and textiles based on the value of their exports to non-Sacu destinations.” Used properly, the scheme enhances the international competitiveness of local exporters by providing access to cheaper imported inputs. It also gives them the opportunity to supplement their export production with imported clothing and textile products for their domestic ranges. But the problem, Woolfrey added, is that the DCCs are tradable, and – although the extent of this was curtailed in 2008 following concerns over the abuse of this system – is still the case. “It allows qualifying exporters to sell their certificates to importers who then become the beneficiaries of the duty rebates,” he said. “This aspect of the DCCS has become a source of much consternation, especially in SA.” So, the present story is that the textiles and clothing industrial development programme is set to expire in March next year, Woolfrey added. “And, if no compromise can be reached before then over the extent of the tradability of the duty credit certificates,” he said, “then the likelihood of the scheme being renewed seems bleak. “What is not so clear however is whether this would represent a devastating blow to an already embattled segment of the region’s manufacturing capacity or if it would simply prevent a small group of importers dodging import duties.”