Lesotho does not have a formal trade policy. Trade policy is guided by various statutes on trade and the SACU trade policy. Because of this, the external environment plays a major role in mapping short-term trade policy, although most often with long-term implications. Lesotho's exports to the world increased significantly from 1999 to 2002. This increase in exports is mainly related to the introduction of the AGOA, which gives Lesotho preferential market access to the US. Imports from the RoW have also been increasing, signifying increased production levels boosted by preferential market access accorded to Lesotho by the AGOA and other arrangements. The increase in imports is probably due to greater imports of textiles, used as inputs into the production of clothing for the US market.
However, one should take a closer look at developments in the country's textile and clothing cluster recently. A small drop in exports in 2003 is probably due to the Multi-Fibre Agreement (MFA) coming to an end on 31 December 2004, which would have reduced Lesotho's preferences in the US market and resulted in a drop in clothing exports. Lesotho has generally experienced a negative trade balance with SA, the RoSADC and the RoW. Trade between Lesotho and SA remains significant, although over the period under review, the volume of trade declined two-fold compared to the period before 1999, probably due to the effect of the AGOA and the favourable macroeconomic environment that prevailed in SA. Exports to SA, having increased substantially from 1999 to 2002, fell quite dramatically from 2002 to 2003.The drop was mainly due to declining exports of textiles, footwear and electronic goods.
Lesotho does not have sizeable exports destined for the RoSADC, and the country's trade with the RoW is increasing faster than trade with its SADC partners. Indications are, however, that the country's regional and global trade relations might improve because of better integration through multi-lateral agreements that are already in place and those under way. Lesothos' exports to the RoSADC have decreased markedly from 2000 to 2003, probably due to its focus on exports to the US. Imports from SADC have also declined over the period, although they exhibit quite volatile up- and downswings. This probably reflects problems with the quality of the data rather than an economic trend.