Trade Liberalisation Under AGOA: A Case Study of Lesotho’s Textile Export Performance and Developmental Outcomes

Anandita Dhaka

Faculty of Social and Historical Sciences, University College London, United Kingdom.

Abstract

The study examined the impact of the African Growth and Opportunity Act AGOA) on Lesotho’s textile and clothing industry, evaluating its role in fostering export growth, structural economic change, and employment. The study employed empirical analysis of trade data, economic indicators, and theoretical frameworks – including the Specific Factor Model (SFM) and gravity model of trade – to assess how AGOA’s preferential market access influenced Lesotho’s sectoral development. The findings revealed that AGOA significantly boosted Lesotho’s textile exports, which grew to constitute nearly 20% of GDP by 2020 and positioned Lesotho as a leading apparel exporter to the USA from Sub-Saharan Africa. The policy facilitated a shift in economic structure, with manufacturing – particularly textiles –driving growth in the secondary sector and contributing to increased female labour participation. However, the benefits were uneven: while employment expanded, real wages stagnated, and foreign-dominated ownership limited local skill development and reinvestment. Theoretical analysis indicates that tariff elimination under AGOA increased the USA demand and reallocated labour within Lesotho’s economy, though the dismantling of the Multi-Fibre Agreement (MFA) in 2005 intensified competitive pressures. The study concludes that while SGOA successfully stimulated export-oriented growth, its broader development impact remains constrained by structural weaknesses. Recommendations include stronger local content rules, wage protections, and incentives for domestic reinvestment to enhance sustainability and equity in trade-led development.

Keywords: African Growth and Opportunity Act (AGOA); Lesotho; Textile industry; Economic development; Export-led growth; Specific Factor Model (SFM); Multi-Fibre Agreement (MFA)

References

1. Collier, P. and Gunning, J.W. (1999) ‘Explaining African economic performance’, Journal of Economic Literature, 37(1), pp. 64–111. https://doi.org/10.1257/jel.37.1.64
2. Didia, D., Nica, M. and Yu, G. (2015) ‘The gravity model, African Growth and Opportunity Act (AGOA) and US trade relations with sub-Saharan Africa’, The Journal of International Trade & Economic Development, 24(8), pp. 1130–1151. https://doi.org/10.1080/09638199.2014.1000942 .
3. Frazer, G. (2010) ‘Trade growth under the African Growth and Opportunity Act’, The Review of Economics and Statistics, 92(1), pp. 128–144.  https://ideas.repec.org/a/tpr/restat/v92y2010i1p128-144.html
4. Grogan, L. (2023) ‘Manufacturing employment and women’s agency: evidence from Lesotho 2004–2014’, Journal of Development Economics, 160, 102951. https://doi.org/10.1016/j.jdeveco.2022.102951
5. IMF (2023) Global trade liberalization and the developing countries -an imf issues brief. International Monetary Fund. Available at: https://www.imf.org/external/np/exr/ib/2001/110801.htm#P38_5409 (Accessed: 5 Dec. 2024).
6. IMF (2023) Lesotho: selected issues and statistical appendix. International Monetary Fund. Available at: https://www.elibrary.imf.org/view/journals/002/2004/023/article-A001-en.xml (Accessed: 6 Dec. 2024).
7. Khamali, R. and Tlelima, T. (n.d.) The evolution of labour market trends in Lesotho’s manufacturing sector: lessons and policy implications. Central Bank of Lesotho. Aailable at: https://centralbank.org.ls/the-evolution-of-labour-market-trends-in-lesothos-manufacturing-sector-lessons-and-policy-implications/ (Accessed: 6 Dec. 2024).
8. Lall, S. (2005) ‘FDI, AGOA and manufactured exports by a landlocked, Least Developed African Economy: Lesotho’, Journal of Development Studies, 41(6), pp. 998–1022. https://doi.org/10.1080/00220380500155254
9. Lautier, M. (2024) ‘Manufacturing still matters for developing countries’, Structural Change and Economic Dynamics, 70, pp. 168-177. https://doi.org/10.1016/j.strueco.2024.02.002 .
10. ODI (2009) Aid for Trade in Lesotho: ComMark’s Lesotho Textile and Apparel Sector Programme. Overseas Development Institute. Available at:https://assets.publishing.service.gov.uk/media/57a08b72ed915d3cfd000d12/lesotho-casestudy.pdf  (Accessed: 6 Dec. 2024).
11. Rodrik, D. (1998) Trade policy and economic Performance in Sub-Saharan Africa. National Bureau of Economic Research. Available at: https://www.nber.org/papers/w6562 (Accessed: 6 Dec. 2024).
12. Rotunno, L., Vézina, P.L. and Wang, Z. (2013) ‘The rise and fall of (Chinese) African apparel exports’, Journal of Development Economics, 105, pp. 152–163. https://doi.org/10.1016/j.jdeveco.2013.08.001
13. Seyoum, B. and Abraham, R. (2022) ‘US trade preference and export performance of Sub-Saharan Africa (SSA): evidence from the African Growth and Opportunity Act (AGOA)’, World Trade Review, 21(5), pp. 1–24. https://doi.org/10.1017/s1474745622000210
14. Simson, R. (2025) Africa’s lost decades, 1974-1994. University of Oxford. Available at: https://www.aehnetwork.org/wp-content/uploads/2025/03/19_Textbook_Lost-decades_RSimson_V5_Final.pdf  (Accessed: 18 Dec. 2025).
15. UNCTAD (2000) Economic growth and social trends in the 1990s. The United Nations Conference on Trade and Development. Available at: https://unctad.org/system/files/official-document/ldc2000p1_en.pdf (Accessed: 8 Dec. 2024).
16. UNIDO (2009) Industrial Development Report 2009 – breaking in and moving up: new industrial challenges for the bottom billion and the middle-income countries. The United Nations Industrial Development Organization. Available at: https://www.unido.org/sites/default/files/2009-02/IDR_2009_print_0.PDF (Accessed: 4 Dec 2024).
17. USTDA (2023) 2023 Annual Report. Available at: https://wits.worldbank.org//CountryProfile/en/Country/LSO/Year/2022/TradeFlow/Export/Partner/ALL/Product/50-63_TextCloth   (Accessed: 3 Dec. 2024).
18. Vlok, S. (2010) ‘AGOA a step forward for development? insights into the textile sectors of Lesotho and Namibia’, University of Witwatersrand, Johannesburg. Available at: https://wiredspace.wits.ac.za/server/api/core/bitstreams/57b5b57a-e9c6-4aa9-860c-12a6966407a7/content (Accessed: 4 Dec 2024).
19. Wang, Z.K. and Winters, L.A. (1998) ‘Africa’s role in multilateral trade negotiations: past and future’, Journal of African Economies, 7(1), pp. 37-69. https://doi.org/10.1093/jafeco/7.suppl_1.37
20. WITS (2022) Lesotho textiles and clothing exports by country and region in 2022. The World Integrated Trade Solution. Available at: https://wits.worldbank.org/CountryProfile/en/Country/LSO/Year/LTST/TradeFlow/Export/Partner/by-country/Product/50-63_TextCloth  [Accessed 6 Dec. 2024].