## **_Appendix Figure D5. Mauritius exports of apparel to the US by fabric origin_**

# Exports of Apparel to the US by Fabric Origin

<!-- Start of picture text --> 300<br>Using fabric or yarn N/A in<br>250<br>commercial qty (CITA).<br>200<br>Using fabric or yarn N/A in<br>150 commercial qty<br>(401/NAFTA)<br>100<br>Using foreign fabric (LDC<br>50 provision)<br>0<br>Using African fabric made<br>2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 from U.S. or African yarn.<br><!-- End of picture text --> Source: USITC-OTEXA.

Note: Exports are classified by tariff regime eligibility and by fabric origin by product-country-year.

## **D3) Case study on Ethiopian apparel exporting firms: trade preferences or domestic policy reforms?**

The raw country-product-year export data and the yearly impacts of AGOA clearly demonstrate that Ethiopia saw a late success in its apparel export growth to the United States. The effect of AGOA on apparel exports remains statistically significant after controlling for changes in exports to the European Union that occurred after AGOA came into force. To further verify that the boost in export to the US can be largely attributed to AGOA, we visited factories in Ethiopia and interviewed leading firms in the apparel sector. This section relies on information obtained from fieldwork in Ethiopia and testimonies of corporate executives.

Jay Jay Textile PLC was founded in 1971 in the Indian state of Tamil Nadu and operates production plants in Sri Lanka and Bangladesh. The company started its operation in Ethiopia in 2014 and began exporting to the US market in 2015. The main motivation to set up a factory in Ethiopia in 2014 was the establishment of the EPZ that addresses infrastructural challenges by providing land and factory sheds as well as electricity, water, and communication services. The decision was also motivated in part by the need to circumvent the high tariffs on apparel in the US market that were constraining clothing exports from its production plants in Sri Lanka and Bangladesh. “While Ethiopia’s workers have relatively low productivity levels compared to those in Sri Lanka and Bangladesh and inadequate trade logistics greatly affects the company’s cost, quality and lead times, the duty-free market access to the US market under AGOA significantly helped offset cost disadvantages due to the lower productivity of their workers and logistics costs.” While most Sub-Saharan African countries benefit from AGOA trade preferences, the company operation manager noted that the factors that set Ethiopia apart are the government’s pro-active industrial policy targeting the apparel and textile sector combined with the establishment of well-managed industrial parks. Countries like Mauritius have also developed infrastructure that can support a competitive apparel sector but have relatively high cost of labor. Hence, trainable inexpensive labor is another reason why the company was attracted to Ethiopia.

Jay Jay Textile PLC focuses primarily on apparel products for babies (newborns, infants and toddlers). Its production in its Ethiopian plant is entirely CMT (Cut-Make-Trim), sourcing all its materials from India (60 percent) and China (40 percent). The company sources materials from foreign markets for two reasons. First, the U.S. buyers determine where the materials should be produced and sourced from. Second, the quality of fabric and accessories produced in Ethiopia is not adequate for use in apparel exports to the U.S. market. Products produced by the company are mainly sold in the United States and only a small 14