BY ABEBE WOLDEGIORGIS
Following of the banning of Ethiopia from AGOA to withstand the challenge it may face, Ethiopia must look other market options for its export products which enjoyed the free of tax privilege in the US market.
Last week, Ethiopia, Guinea and Mali were banned from AGOA privilege due to various reasons.
Simeneh Besi (Ph.D.) works for the African Leadership Higher Skills Academy as Academic Affairs Director and the Ethiopian Economic Association Partnership and Communication Director. As to him, Ethiopia has enjoyed the AGOA privilege for the last two decades. There are countries in Africa who did not enjoy the privilege because they did not fulfill the criteria set to join AGOA. Ethiopia enjoyed the privilege not simply by the USA’s favor rather because of fulfilling the criteria.
One of the criteria is pursuing a market-based economy in which Ethiopia is implemented. The other criteria are ensuring law and order and the USA is using this one as a pretext to ban Ethiopia from the AGOA privilege.
As to him, Ethiopia and the USA had good relations for long years and even if the US government persisted with this decision, thinking that the US would interrupt its strategic partnership with Ethiopia is absolutely wrong.
“In fact, there are various groups which do not have a good attitude towards Ethiopia’s economic growth. There are individuals, countries and interest groups who strives to ban Ethiopia from the US trade privilege.’’ He further said that in fact, the AGOA privilege benefited the law income group of the society, such as women and youths.
The enactment of the executive order signed by the president of the USA indicates the failure of Ethiopia’s diplomatic battle and lack of concerted efforts by the Ethiopian diaspora.
As to Simeneh, the sanction will be enacted in the coming January, therefore, instead of accusing the US, forwarding solutions is essential. Fighting the diplomatic battle again should be continued and counter attacking fake news and misinformation is also vital and appealing to the US to look again at its decision is necessary.
Dakito Alemu is working for Addis Ababa University, Finance and Accounting Department. As to him, Ethiopia enjoyed the AGOA privilege for the last two decades but as compared to other African countries Ethiopia’s income generated by AGOA is less. In 2001 the earned income from AGOA was 200,000 Dollars, while in 2004 it rose to 822 thousand and by 2020 it rose to 100 million Dollars.
Leaving AGOA has its own repercussions and companies which export their products to the US market might face competency challenges. This again might force the companies to lay off their workers and particularly women working in the textile industry may join the unemployed army.
Countries which effectively worked on AGOA benefited a lot but Ethiopia benefited on average; therefore, missing the opportunity does not hurt Ethiopia in a significant way.
From Sub-Saharan African countries South Africa effectively and efficiently benefited from the AGOA opportunity next Nigeria benefited a lot and Ethiopia is beyond many countries in this regard. Other non-Ethiopian Economists also predicted that the impact of the withdrawal from the privilege is not that much painful. However, even if the impact is less there might be circumstances which might create gaps.
According to the IMF 2020 report, Ethiopia earned 3 billion Dollars from export and the share of the USA market is only 7 percent. This indicates that Ethiopia has many options to compensate for the loss which the nation faces due to AGOA banning.
As to Dakito, Ethiopia in 2020 obtained 100 million Dollar through the AGOA opportunity nevertheless, Ethiopia did not utilize the privilege efficiently. He further said that AGOA is governed by “give and take” principle not as free lunch. The US government offered the chance, aiming at protecting its political, economic and social benefits. The withdrawal of Ethiopia from AGOA not only hurts Ethiopia but also the US itself.
As Africa and China’s relations grow from time to time, it seems that the US introduced AGOA to slow down the two continents’ trade relations. Studies conducted from 2015 to 2017 indicated that due to the AGOA privilege, many Sub-Saharan African countries could register 5.8 percent economic growth. This situation indirectly reduced Africa’s trade relation with China. Therefore, we can conclude that the intention of the introduction of AGOA is not simply to create growth opportunities for Africa; it is rather to create havoc on the trade relation between Africa and China.
However, it should be recognized that giving up exporting Ethiopian products to the US market does not mean not harming the US. The American retailer companies which distribute the products and the consumers also will be a loser. Because they purchase the Ethiopian products with the reduced price and sell with the reduced price to the consumers. The tax-free importation is not simply free, it indirectly subsidizes the retailers and consumers.
As for Dakito, it is impossible to run the economy with subsidies. AGOA is not a scheme for ever and it might be interrupted once upon a time. Hence, companies working in Ethiopia and engaged in production should upgrade their competency and must draw lessons from AGOA experience.
But as to Simeneh, it is an undeniable fact that the AGOA enabled to attract foreign investors and to run business here. More than 20 foreign companies came here and created job opportunities for local workers. In addition, it enabled the nation to increase its hard currency earning capacity.
The change created job opportunities to 230 people particularly for women in which indirectly supports more than 1 million their parents. However, withdrawing from AGOA does not put the companies into bankruptcy.
While the US claims that it supports job creation by various means, the president’s Executive Order which bans Ethiopia from AGOA does not go in line with what it claims.
Therefore, it must rethink the matter. Ethiopians should also continue their diplomatic battle by opposing the decision.
As to Simeneh, in the business and trade world one should not depend on one organization or market destiny it rather should broaden other options. It needs to satisfy the domestic and other African countries market demand. In addition, focusing on the Asian market is essential. Raising productivity, reducing waste and providing subsidies to the companies affected by AGOA should be taken as additional options.
Ethiopia’s benefit from AGOA is a recent phenomenon. It was introduced after the expansion of industrial parks. The nation benefited more from AGOA in the last four years particularly in the textile products.
Simeneh added that the US will never abandon Ethiopia and will continue as economic partner but Ethiopian should think of why the USA reached such an unwarranted decision.
The Ethiopian Herald November 10/2021
