US goods trade surplus with Tanzania clocked in at US$203 million in 2019 and the figure is rising. To maintain that upward trajectory, President Samia Suluhu of Tanzania, who is working to restore investor confidence and bridge international relations, held a phone meeting with the US Secretary of State, Antony Blinken early in July.
How well did the meeting go? Well enough that President Samia may very well have managed to secure a visit by US President Joe Biden sometime this year. The details as to whether the US president will actually visit or when if he does, are not known. But what is a fact is that President Samia did in fact seize the opportunity to welcome President Biden to visit Tanzania.
“It is with great pleasure, I receive the best wishes and I pledge to continue accelerating the existing ties between our two countries,” local media quoted President Samia.
In response, Secretary of State Blinken extended his congratulations to Samia for a successful first 100 days since she took office back in March 2021 and reaffirmed US commitment to the country. Specifically, among other things, Blinken applauded Samia’s bold stance in her dealing with Covid- 19.
Notably, she has taken an entirely different approach to handling the pandemic as opposed to her predecessor, the late Dr John Magufuli.
Under Magufuli’s administration, Tanzania received a lot of criticism from international bodies and development partners for not taking steps against the pandemic. Notably, former president Mafgufuli did not institute lockdowns or curfews during the outbreak and urged businesses to continue as usual.
Tanzania also did not release Covid-19 data over the course of the last year, until recently when Samia took office.
On that note, Blinken reassured Tanzania that the US government will continue to support the country’s development efforts through the United States Agency for International Development (USAID).
USAID programmes in Tanzania serve to achieve inclusive, broad-based, and sustainable economic growth. The American programme helps Tanzania to achieve its national development goals as outlined in the USAID Tanzania Country Development Cooperation Strategy.
Further still, through USAID, the US works to advance effective democratic governance in Tanzania, a fact that the Secretary of State was keen to underline.
He specifically congratulated President Samia for what he described as ‘remarkable efforts in strengthening democracy’ and ‘aspiration to interact and collaborate with other opposition parties and as ‘promoting freedom of expression.’
“I am pleased with the reforms made in improving the business environment of the country. The US is pleased with the current state of affairs and encourages its investors to come and invest in Tanzania,” summed up State Secretary Blinken.
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US, Tanzania Trade Relations
Notably, the U.S. Government is Tanzania’s largest bilateral donor and Tanzania is currently the United States’ 121st largest goods trading partner. Trade between the two countries amassed a whopping US$462 million in 2019. That same year, Tanzania was the United States’ 119th largest supplier of goods to the US which totalled US$333 million.
In the same vein, goods exports totalled US$130 million US dollars and overall, the US goods trade surplus with Tanzania was US$203 million in 2019. Topping the import charts were aircraft importation that capped at US$175 million, machinery imports at US$27 million and cereals specifically wheat at US$23 million. There was also plastics that accounted for US$19 million and milling products that reached US$9 million.
US total exports of agricultural products to Tanzania totalled US$47 million in 2019. Leading domestic export categories include: wheat (US$23 million), prepared food (US$3 million), pulses (US$3 million), vegetable oils (ex. soybean) (US$3 million), and poultry meat & products (ex. eggs) (US$2 million).
Then of course there is the African Growth and Opportunity Act (AGOA) free trade pact that Tanzania is a beneficiary of. Enacted in 2000, the act allows 39 eligible sub-Saharan Africa countries to export certain goods to the US market duty-free. However, the Act is nearing its end after it was renewed in 2015 to last through 2025.
However, the AGOA deal came face to face with an opposing development initiative not only in Tanzania but across East Africa as in 2015 the region opted to phase out import of second-hand clothing. The East African Community (EAC) of which Tanzania is a central part of, argued that it wished to develop local industries and in particular the textile sector offered a huge opportunity to industrialize and create employment.
That year, in 2015, Kenya, Rwanda, Uganda, and Tanzania settled for a three-year plan to phase out the importation of used clothes, a major exporter been the United States. To realise the intended ban, taxes were increased on second-hand clothes were increased effectively deterring their importation. The plan was to completely ban the import of second-hand clothes as of 2019.
This ambitious vision was never realized as the Trump administration issued an ultimatum for EAC to rescind the ban on second-hand clothes by 23 February 2018 or, as the DW writer Isaac Mugabi puts it ‘face the consequences.’
He made that comment in an article titled ‘Banning second-hand imports doesn’t solve East Africa’s clothes problem’ that was published in May of 2015 where he says ‘…as much as the struggle for self-dependence and living a dignified life is understandably the way to go, countries in East Africa don’t have enough factories that that can satisfy the demand for stylish clothes.’
True to the fact, the net import of used clothing is estimated at over 540 million pieces per year, a huge number compared to a domestic production capacity of new clothing of 20 million pieces backed by the import of 177 million pieces of new clothing, this leaves a huge demand gap.
There is also the matter of revenue losses for informal traders who deal the second-hand merchandise as well as the fact that new clothes are expensive and so the cost of living would greatly increase for the poorest consumers.
“In the longer term, the phase-out is unlikely to promote the development of the garment sector unless the existing constraints are properly addressed,” writes Linda Calabrese for the Overseas Development Institute in her 2017 paper titled ‘The phase-out of second-hand clothing imports: what impact for Tanzania?’
Of course, there was also the issue of US importers under the US Trade Representative (USTR) who called for cancellation of the AGOA pact should the EAC enforce the ban on second-hand clothes.
In the end, the ban never took effect and AGOA stood strong, the US continues to export second-hand clothing at the value of millions of dollars every year to the EAC, Tanzania being a major recipient.
Understanding AGOA
AGOA is a United States Trade Act, enacted on 18 May 2000 as Public Law 106 of the 200th Congress. The agreement has since been renewed to 2025. The legislation significantly enhances market access to the US for qualifying Sub-Saharan African (SSA) countries.
Qualification for AGOA preferences is based on a set of conditions contained in the AGOA legislation. In order to qualify and remain eligible for AGOA, each country must be working to improve its rule of law, human rights, and respect for core labour standards.
