Different experts are debating that even though the US advocates the protection of human rights and not to interfering in countries internal affairs, it utilized its economic power to impose its will on other countries to subdue them. Banning Ethiopia from AGOA protocol can be mentioned in this regard.Its arbitrary measure indicates how it recklessly put pressure on low-income countries.
Recently, the Ethiopian Investment Commission has clearly explained the impact of the US decision on the low-income community. The decision put strain on creating jobs and crumble the urban poor income and livelihoods. Over 80 percent of the 200,000 people who are directly and indirectly engaged in textile factories critically harmed. Asmost workers are young women, and immigrants from the rural to urban areas seeking employment opportunities will face uncertainty.Undoubtedly, Ethiopia’s export led industrialization strategy has contributed to the rapid economic growth registered in the pre-covid and contribute a great deal in poverty reduction, increase life expectancy and improved social wellbeing.
“It is unfortunate that, while Ethiopia is struggling to recover from the covid-19 shock and exerting efforts to meet the sustainable development goals by 2030, the current US administration chooses to threaten Ethiopia with sanctions by denying the tax free supply of Ethiopian products to American markets.The action rather Intensifyeconomic problems andwill not bring peace and stability in the country.
Recently, MamoMihretu a senior policy advisor to Prime Minister Abiy Ahmed (PhD) and Ethiopia’s chief trade negotiator published an article on the Foreign Policy titled “Don’t Remove Ethiopia’s AGOA Trade Privileges”. In his article the adviser emphasized that the Biden administration has threatened to end Addis Ababa’s eligibility under the African Growth and Opportunity Act (AGOA). Doing so would hurt the poor the most, he added.
According to him, although Ethiopia before 2018 would hardly pass the test of human rights or political pluralism, the U.S. government never seriously questioned the country’s AGOA eligibility under the repressive leadership of the Tigray People’s Liberation Front. Indeed, when the AGOA was launched in May 2000, Ethiopia was deep in a state of war against Eritrea. Yet Ethiopia was on the original list of 34 countries declared AGOA-eligible later that year and remained eligible despite years of authoritarian rule.
Ethiopia used its tariff-free access to the U.S. market to successfully entice foreign investors into its manufacturing sector, using a network of industrial parks in over a dozen cities across the country. As a result, foreign direct investment in light manufacturing grew rapidly, attracting several leading global brands to source materials in these sectors.
The impact on Ethiopia’s exports has been equally significant. When the AGOA was introduced in 2000, Ethiopia exported goods worth a minuscule USD 28 million to the United States; in 2020, that figure rose roughly tenfold and stood at close to USD 300 million, nearly half of it under the AGOA.
Today, the two most successful exporting industries under the AGOA, apparel and leather, employ about 200,000 people directly—80 percent of them young women. In Hawassa Industrial Park alone, 95 percent of the employees are women, providing in many cases the first-ever jobs for young families. Small businesses operating within the broader ecosystem of these two sectors—from raw material suppliers to service providers in areas such as catering, transportation, hotels, restaurants, and logistics—are estimated to support in excess of 1 million low-income citizens.
Ethiopia’s removal from the AGOA would deal a serious blow to the welfare of millions of low-income workers at a time when Ethiopia’s manufacturing industry is registering record monthly output levels. Even at the height of the pandemic, the Hawassa Industrial Park proved instrumental, saving lives by quickly repurposing itself to undertake production of personal protective equipment to supply the local and export markets with face masks worth more than USD 114 million.
The effect of Ethiopia’s removal from the AGOA would do lasting damage. Ethiopia’s decades-long and relatively successful efforts to extricate itself from poverty, build a viable manufacturing industry, create jobs for its youth, and progressively wean itself off aid through trade would all be imperiled. Moreover, by injecting uncertainty into the Ethiopian investment environment, such a measure would undo the promising gains registered over the past two decades while escalating the investment risk premium for a long time to come.
Today’s Ethiopia has adopted a decidedly market-oriented economic policy with a plethora of reforms intended to improve the investment environment, open its financial sector, clean up long-mismanaged state-owned enterprises, accelerate its accession negotiations to the World Trade Organization, and launch a privatization program that covers some hitherto untouchable state assets such as state-owned telecommunications, logistics, and sugar companies.
“Ethiopia needs the support of its partners in these efforts, not threats of trade sanctions that would only hurt the very people these partners aspire to protect.
The U.S. government must maintain a sense of balance, context, and perspective in its determination of Ethiopia’s continued AGOA eligibility. Ethiopia’s citizens have never needed AGOA benefits more than now,” he stressed.
Company owners and Employees of Hawassa Industrial Park approached by the media have said that the thought of the United States to ban Ethiopia from market access through the African Growth and Opportunity Act (AGOA) is unacceptable.
Accordingly, if the US puts it into practice it really affects the many lives of factory workers in Ethiopia.
According to different sources,Ethiopia has been among the leading countries in the East African region in its use of the Africa Growth Opportunity Act (AGOA) treaty.
According to the US Trade and Investment with sub-Saharan Africa- Recent Trends and New Developments report, Kenya led the region, scoring 98%.
Ethiopia at 81.9 % and the Democratic Republic of Congo (DRC) at 68.2 % are the other eastern Africa countries that have also taken advantage of the treaty to increase exports to the US mainly of products like textile and apparels, metals, agricultural products and artifacts.
Increase in apparel exports by Madagascar, Ethiopia and Kenya resulted in US imports of apparel from the region under AGOA increasing by 9.9% annually to USD 1.2 billion from 2016 to 2018.
Ethiopia, Guinea, and Mali have been banned from the AGOA list. The decision does not have a simple economic impact in many aspects. The decisions causes unemployment to more than 200,000 workers decreases in foreign exchange likely to have more than USD 200 million,reduction of government revenue etc.
Experts recommended the Ethiopian government to takes various quick measures as a relief to the negative effects that might be occur. Quickly look at other global market options, think of temporary tax relief and subsidy options for sectors (mainly leather and textiles), provide domestic market opportunities, and quickly discuss implications for exporters based on AGOA’s opportunity are expected from the government.
BY TEWODROS KASSA
THE ETHIOPIAN HERALD NOVEMBER 7/2021
