On December 22, 2002, Ugandan President Yoweri Museveni paid a ceremonial visit to a textile plant in Kampala, his country’s capital city. That day, shoppers in faraway America were streaming down the aisles of malls and department stores in crazed search of last-minute Christmas gifts. But Museveni’s mind was on supply, not demand. As dignitaries, including the US ambassador, looked on, the president loaded a cardboard box containing twelve pairs of seaweed- and stone-colored shorts onto a truck, dispatching them on a journey that was to end on the shelves of an American retail chain.

The clothes were part of the first shipment to roll off the assembly line of a new textile factory, which was set up to take advantage of the African Growth and Opportunity Act, an American free-trade initiative. Few Americans have ever heard of the four-year-old law. But in Uganda, AGOA, as the initiative is commonly called, is a magic word, invoked by politicians and businessmen, diplomats and foreign-aid donors–and most of all by President Museveni. To hear Museveni tell it, AGOA is the first step toward breaking Africa’s dependence on foreign aid and the beginning of an economic revival.

To America and other wealthy nations, which have grown tired of pumping billions in aid into Africa with little evident effect, Museveni is a godsend: an African leader who will tell them what they want to hear. Museveni’s view that free trade promises a painless way to raise the continent from penury has won him admirers across the ideological spectrum and entree into rarefied circles. Most recently, he extolled the virtues of trade at the G-8 summit in Sea Island, Georgia. When President Bush signed a bill reauthorizing AGOA through 2015 in July, he praised Uganda’s president. “This African leader,” Bush said, “understands that…when nations respect their people, open their markets, expand freedom and opportunity to all their citizens, entire societies can be lifted out of poverty and despair.”

A closer look at Uganda, however, reveals a reality more complicated than such blithe rhetoric. Two years after that first heady Christmas season, Museveni’s countrymen are suffering from a serious case of buyers’ remorse. The government-subsidized textile factory, built to be an exemplar for the rest of the nation, has instead suffered worker unrest, as politicians allege exploitation and government corruption. Museveni may still believe, as he once said, that AGOA is “the greatest act of fraternity towards Africa by the USA.” But to many Ugandans, their country’s experience has become an object lesson in the bruising realities of life in the global marketplace.

President Clinton first proposed the African Growth and Opportunity Act in his 1998 State of the Union address, arguing later that “trade and investment are the keys to African development.” The bill was modest in what it promised–outside of textiles, many of the goods covered under it were already subject only to very small tariffs, or none at all–but there was still a tough fight to get it passed. Textile-state representatives and unions were bitterly opposed. Some predicted the law would only benefit sweatshop owners. Illinois Representative Jesse Jackson Jr. invoked a comparison to the slave trade in opposing the bill.

African leaders like Museveni, however, saw the law as empowering, not enslaving. Museveni thought AGOA would act as a catalyst to rebuild Uganda’s once-thriving textile industry, which had withered away during decades of dictatorship and civil war.

There was a problem, though. Textile entrepreneurs weren’t beating down the doors. Uganda is a landlocked country with a reputation for political instability. Its eastern neighbor, Kenya, had ports, and it already possessed a decent-sized textile industry. So did the island nation of Mauritius. Southern Africa had better infrastructure.

Museveni was desperate to find someone, anyone, willing to invest in his vision of a textile-exporting Uganda. Enter a Sri Lankan businessman named Veluppillai Kananathan, a longtime Kampala resident with a reputation as a wheeler-dealer. (He was once tried and acquitted of fraud charges, and associates say he used to pass himself off to potential business partners as the Sri Lankan ambassador, allegations Kananathan calls “totally wrong.”) Kananathan partnered with a Sri Lankan textile magnate and met with Museveni in 2002 to hammer out a deal. The government would renovate an old coffee market, turning it into a textile plant, which the investors would run. If all went well with the pilot project, the Sri Lankans said, they would open many such plants across the country. They predicted the deal would create 300,000 jobs within two years.

The way Museveni saw it, the factory would be a great piece of public relations. Potential foreign investors could see Ugandans churning out shirts and shorts. So could foreign journalists. (Indeed, the Washington Post and the New York Times would both run front-page features about the plant.) Seeing young people happily at work, the public would realize that free trade promised tangible benefits.

To underscore the latter point, Museveni came up with the idea of recruiting 1,000 young women to work at the plant. Recruiters fanned out across the country, traveling from village to village to woo the women with promises of high-paying jobs “in trade” in the capital.

One of the perversities of Uganda’s poverty is that it is felt most keenly by educated people. There are many more diplomas than jobs. So ambitious young women clamored for spots in the program. “We wanted to rise up from the levels where we were, and become somebody, do something,” said Doreen Abalo, 21, one of the recruits. The newspapers played the story of the “AGOA Girls” as a heartwarming rags-to-riches tale: Pygmalion in a textile factory.

When clothes started rolling off the assembly line in late 2002, Museveni’s vision seemed fulfilled. Later, a BBC radio reporter asked the president what his thoughts were as he saw off the clothes shipment. “This is the biggest event after independence,” the president replied. “That’s how I felt.”

By Ugandan standards, workers at Kananathan’s plant, Tri-Star Apparel, were well-off. They lived rent-free in a dormitory. They had free meals, too. But almost from the beginning, there was grumbling. When the plant opened, workers were told their salaries would be around $40 a month–not atrocious by Ugandan standards, but certainly not what the celebrity AGOA Girls expected. After all, Museveni himself had summoned them, had even called them his “daughters.” The workers staged a sick-out to protest their pay. That spurred a visit by a presidential adviser, who gave them a tongue-lashing, pointing out that $40 a month was about the same as a housekeeper’s salary. The young women, some of whom held university degrees, were not amused by the comparison. Even more insulting, Museveni had made it clear that he didn’t want any of his “daughters” to be distracted by boyfriends. So the workers were not allowed off the factory grounds, which were surrounded by a high concrete wall topped by barbed wire.

According to the employees, as business picked up at the factory, working conditions deteriorated. When there was a big order to fill, they were forced to work eighteen hours or more a day. Sri Lankan matrons ruled the factory floor like homeroom teachers. If a worker had to go to the bathroom, she had to get a pass. If she was sick, she had to get the overseer’s permission to leave. The workers claimed that the managers locked the factory’s fire escapes to keep them from slipping out. Some of the managers were abusive.

After a series of covert meetings, a delegation went to the factory’s managers, saying the workers wanted to form a union. Ugandan law recognizes the right of workers to organize, at least in theory, so Kananathan said he would negotiate.

But last October there was an incident. Accounts of what happened are fuzzy, but it seems that one of the Sri Lankan managers badly beat one of the workers. The next day, the AGOA Girls went on strike, barricading themselves in their dormitory. Riot police showed up. The police promised that management would negotiate, so the strikers opened the doors. Instead, Kananathan fired the union organizers. The police moved in again to make sure there was no more trouble.

Later, Museveni would say that he himself ordered the firings. “I sacked those girls because of indiscipline,” a local newspaper quoted him as saying. “Their action would have scared off investors who had plans of setting up businesses here.”

But if the strike started off as a garden-variety labor dispute, it quickly evolved into something more. Afterward the newspapers dug into the plant’s finances and discovered that the government had invested millions of dollars in the plant. That set off a parliamentary investigation.

“Over and over again we see companies singled out and favored,” Bright Rwamirama, the chairman of Parliament’s finance committee, told me. In mid-April, when we met, Rwamirama was finishing a report on his investigation. It promised to be scathing. Subsequent investigation by The Monitor, an independent daily newspaper, found that the government put more than $11 million into the project, in the form of subsidies, loan guarantees and other goodies. Under questioning, Kananathan admitted he wasn’t making the payments on his government-backed loans–suggesting that business was not booming at the factory. And he disclosed that his investment had amounted only to “technical expertise.” “We didn’t bring [in] cash at all,” he told the committee.

Ugandan government officials say that, whatever public relations damage the strike did, AGOA has been good to Uganda. Exports to America amounted to almost $35 million last year, more than double the amount in 2002. Textiles alone accounted for more than $1.5 million of the increase.

“Before the AGOA dispensation, social and economic transformation was a remote possibility: if we struck oil,” said Geoffrey Onegi-Obel, a senior presidential adviser on AGOA and trade. “What the AGOA dispensation has done is basically tell us, ‘Look guys, you’ve been complaining and whining all these years. Now we dare you to transform your economy. We dare you to produce world-class products, and we will buy them.’ What was a remote possibility [AGOA] has made [into] a distinct possibility.”

The key word, of course, is “possibility.” For Uganda, the benefits about AGOA have never been strictly about realities, but also about perceptions–intangibles like self-confidence and entrepreneurial spirit. The Tri-Star factory was supposed to be a symbol of Uganda’s free-trading future. The irony is that Museveni’s pet project ended up becoming something else: a parable of the hazards of high expectations.

There is no way to hide the fact that AGOA is unlikely to deliver the benefits Museveni preaches. In 2003 sub-Saharan African countries exported $14 billion worth of goods to America under AGOA. But one product accounted for 80 percent of that total: oil. Only a handful of West African countries possess oil. For the rest of the continent, the benefits are much less immediate. A UN report published last year suggests that for most products, AGOA offers “only a slight improvement over the status quo.” Textiles are the exception. But in 2005, American quotas and tariffs on textiles are due to be totally eliminated under World Trade Organization rules. After that, African textile imports will lose any comparative advantage over those from China or anywhere else.

Nevertheless, at the Tri-Star Apparel factory, workers continue to churn out clothes, to be sold by American chains like Target and J.C. Penney. Since the strike, the union organizing effort has foundered. Recently, an official from the American Center for International Labor Solidarity, which is funded by the AFL-CIO, visited to offer pointers and support to the local textile workers’ union. But Museveni’s vehement opposition–the president recently said those who encouraged strikers were “worse than [Joseph] Kony,” a sadistic rebel leader–means skepticism is warranted.

One thing is certain: Plenty of Ugandans are willing to stitch shirts for less than $2 a day. After the strike, hundreds thronged outside the gates of the Tri-Star factory, hoping to take the place of the 300 fired union agitators. Job seekers continued to gather there for months afterward. One afternoon when I visited the factory, I passed a group of young men and women sitting on sheets of cardboard in the hot sun just outside the plant’s high concrete wall.

A shabbily dressed man named Ofwono Silver introduced himself. Silver, 23, said he was desperate for work. He had been waiting since morning, vainly hoping that someone from the factory would let them inside.

“I want to sew,” he said.