African Growth and Opportunity Act Archives

Ethiopia’s Catch-22 make peace and prosper or continue war to bankruptcy

The Brown Political Review expresses a view that Abiy Ahmed’s continued despotism blocks the emergence of peace and prosperity in Ethiopia. Instead real national dialogue is the only way to economic viability

Ethiopia is in a Catch-22 situation. There is no clear foreseeable victory for Abiy Ahmed which involves complete surrender of the OLF or TDF. Come to peace terms with the Tigray National State and the Oromos to salvage the economy or continue a war which has no visible end in sight and will only lead to further economic decay for Ethiopia in order to satisfy Amhara centered nationalists (the main backers of Abiy Ahmed) who want Tigray and Oromo rebellions completely obliterated.

Although Ethiopia’s Central Statistical Agency has been trying to hide failing economic reports since August 2020 the dismal economic outlook can no longer be hidden. Although some economic analysts had predicted a robust economic recovery earlier in the year based upon two factors:

1. That the Ethiopian forces would come to stop significant fighting from Tigray and Oromo factions
2. That cessation of the fighting would improve foreign investors confidence in Ethiopia without sanctions

Currently the Tigray Defense Force is making slow but steady progress into Western Tigray and creating a buffer zone against invasion in the northwestern Afar. Attempts at reinvasion by Eritrean armed forces have been repelled. Meanwhile almost half of the Northern Oromo region has been taken by the Oromo Liberation Front who now openly recruit and train thousands more each week. There is no clear foreseeable victory for Abiy Ahmed which involves complete surrender of the OLF or TDF.

In December 2021 food prices went up 41.6% the highest in decade while the actual value of the birr against the dollar has essentially reached 50 to the dollar and continues to fall. The Ethiopian government has played games with statistics for economic growth using the falling birr to create false gains which are really losses in terms of international currency value in economic growth (-2%), gross domestic product, and per capita income. By the end of 2022 Ethiopian government debt will exceed $60 billion which has an unsustainable debt service unless severe austerity measures occur.

Other analysts have noted that while the previous regime of Meles Zenawi leadership of the Ethiopia Peoples Revolutionary Democratic Front was able to achieve high economic achievement under authoritarian rule this will not be the case for Abiy Ahmed’s prosperity party. Centralizing decision making to Amhara oligarchs, severely suppressing human rights and free press, and not sharing real dialogue with the Tigray and Oromo parties will never bring the “market liberalization” needed to put Ethiopia back on a growth path.

President Biden made clear that there will be no re-instatement of the AGOA (African Growth and Opportunity Act Treaty) until the requirements for human rights guarantees stipulated in the treaty are restored. Professor Jon Abbink is a professor of Politics and Governance at Leiden University, a proclaimed Abiy Ahmed government supporter, and has stated that AGOA termination delisting will cost the loss of “200,000 Ethiopian jobs directly and in the textile and apparel sectors (ca. 80% women) and indirectly in extra 700 to 800,000 additional supportive jobs (in transport, catering, distribution)”. It will dent the emerging young Ethiopian industrialization policy, in which the country showed great promise. Although The (international) firms in the new Ethiopian industrial parks will partly survive by seeking new markets but this will be enough to sustain them.

Ethiopia out of AGOA will benefit West African development

The removal of Ethiopia from the AGOA treaty opens up opportunities for West Africa to develop a textile industry from its high output cotton crops

Claims by Abiy Ahmed supporters of Pan Africanism supporting Ethiopian and Eritrean war efforts forget that Ethiopia’s favored status by the USA may have previously hindered other areas of African development. Now Ethiopia’s loss of participation in the AGOA may bring a new focus and new opportunities for developing West Africa’s large cotton industry which will be included in the AGOA treaty.

West African countries which are greatest producers of cotton on the continent stand to gain greatly from the removal of Ethiopia from the AGOA treaty. The conversion of Ethiopia into an authoritarian state carrying out a genocidal war against the Tigray and Oromo while eliminating free press, civil rights, and right to due process including extrajudicial killing and detention resulted in the appropriate removal of Ethiopia from the African Growth and Opportunity Act Treaty which requires maintaining civil rights and democracy.

Ethiopia produces little cotton requiring high costs of importing from other regions. Meanwhile the West African countries of Benin, Ivory Coast and Burkina Faso respectively rank sixth, seventh, and eighth in the world in terms of cotton production. Currently only 2% of the local output is used to create textiles which have underdeveloped in West Africa. The African Continental Free Trade Area agreement goes into effect January 1st which will further facilitate local trade in West Africa.

Currently West Africa spends more in importing finished textiles $2.8 billion than it exports in raw cotton $992 million. The Oxford Business Group reported that the West Africa Competitiveness Programme, created as a partnership between the EU and ECOWAS, estimates that establishing a garment supply chain in the region could boost the industry’s value by as much as 600% which would be many times larger than that seen in Ethiopia. This would involve building capacity along the entire supply chain: spinning cotton into yarn, weaving yarn into fabric, and dyeing, printing and designing finished clothing. Many analysts see over 250,000 jobs be added to sustain a new textile hub in Africa.

USA will immediately suspend Ethiopian free trade agreement AGOA for human rights violations

USA is expected to immediately suspend AGOA with Ethiopia

There are many reports that tomorrow the United States will announce the removal of Ethiopia from free trade under the African Growth and opportunity Act due to its failure to maintain human rights standards called for in the treaty. Ethiopia was formally warned of this impending action last month if no changes in human rights violations were happening. The USA imported $572 million in 2019 from Ethiopia but sold almost $1 billion to Ethiopia. What action Ethiopia will take in response may include reducing American imports to Ethiopia. It is not known what other Western democracies such as the European Union will also follow the same action at this time.

Summary of USA Ethiopian Trade Status (Latest reports available are 2019)Ethiopia is currently our 84th largest goods trading partner with $1.6 billion in total (two way) goods trade during 2019. Goods exports totaled $1.0 billion; goods imports totaled $572 million. The U.S. goods trade surplus with Ethiopia was $442 million in 2019.

Exports
Ethiopia was the United States’ 77th largest goods export market in 2019.
U.S. goods exports to Ethiopia in 2019 were $1.0 billion, down 22.5% ($295 million) from 2018 but up 279.8% from 2009.
The top export categories (2-digit HS) in 2019 were: aircraft ($736 million), cereals (wheat) ($63 million), machinery ($38 million), electrical machinery ($38 million), and special other (returns) ($26 million).
U.S. total exports of agricultural products to Ethiopia totaled $109 million in 2019. Leading domestic export categories include: wheat ($62 million), pulses ($10 million), vegetable oils (ex. soybean) ($7 million), prepared food ($2 million), and coarse grains (ex. corn) ($1 million).

Imports
Ethiopia was the United States’ 88th largest supplier of goods imports in 2019.
U.S. goods imports from Ethiopia totaled $572 million in 2019, up 28.6% ($127 million) from 2018, and up 406.5% from 2009.
The top import categories (2-digit HS) in 2019 were: coffee, tea & spice (coffee) ($131 million), woven apparel ($112 million), knit apparel ($98 million), special other (returns) ($95 million), and electrical machinery ($45 million).
U.S. total imports of agricultural products from Ethiopia totaled $151 million in 2019. Leading categories include: unroasted coffee ($130 million), nursery products ($6 million), spices ($3 million), planting seeds ($357 thousand), and wine and beer ($271 thousand).

USA officially warns Ethiopia of AGOA violation and pending sanctions of $444 million

Ethiopia is in violation of the African Growth and Opportunity Act by sponsoring atrocities. This could cost Ethiopia $444 million in sales of exports to the USA

A new sanction somewhat anticipated against Ethiopia has just been announced by Von Batten-Montague-York, L.C., a consulting group, the office of the President of the United States today informed the government of Ethiopia that they are in violation of the African Growth and Opportunity treaty signed with the United States under the African Growth and Opportunity Act of 2001. In order to avoid violation the government of Ethiopia must immediately withdrawal from Tigray, open communications, power, transport, and allow aid to Tigray. If they do not then a loss of over $444 million dollars in revenue from sales of tax free exports to the United States will be stopped.

The African Growth and Opportunity Act of 2001 gave Ethiopia a chance to export 1800 different products to the United States duty free. However to participate in AGOA To meet AGOA’s there are strict eligibility requirements including ” countries must establish or make continual progress toward establishing a market-based economy, the rule of law, political pluralism, and the right to due process. Additionally, countries must eliminate barriers to U.S. trade and investment, enact policies to reduce poverty, combat corruption and protect human rights.”

U.S. total imports of agricultural products from Ethiopia totaled $151 million in 2019. Leading categories include: unroasted coffee ($130 million), nursery products ($6 million), spices ($3 million), planting seeds ($357 thousand), and wine and beer ($271 thousand)

Only 9% of total imports to Ethiopia come from the United States. Ethiopia main imports are: foodstuffs, textile, machinery and fuel. Ethiopia main trading partners are: China (18 percent of total imports), Saudi Arabia (13 percent), Russia and India (9 percent)

OLA forces reach Addis outskirts increased trade sanctions against Ethiopia coming

Abiy Ahmed meets with President Recep Tayyip Erdoğan of Turkey

At this moment multiple sources report Oromo Liberation Army elements are fighting in the neighborhood near Entoto Mountain on the edge of Addis Ababa just a short distance from the airport. At the same time Prime Minister Abiy Ahmed made a hasty visit to see the President Erdoğan of Turkey. The Tigray Defense Force continues to advance toward both Bahir Dar and Gondar while also pushing into Western Tigray. The supply of weapons and trained combat soldiers seems to have run out for the Amhara militias trying a last stand near Bahir Dar and Gondar.

Meanwhile Germany and the United States are setting up to increase sanctions on the Ethiopian government. Many are asking will the Prime Minister be able to come back if a take over of Addis is imminent?

Although there are all out call outs for volunteers many of the new fighters have no training and only sticks for weapons

Assuming for the moment his Prosperity Party will stay in power at least for a while recent diplomatic actions or lack there of predict poor relations with the United States. The snubbing of USAID Head Samantha Powers last week and now Jeffrey Feltman, the Special Envoy for the Horn of Africa, by Abiy Ahmed, Prime Minister of Ethiopia, raises the high likelihood that Ethiopia will be declared in violation of the AGOA which allows Ethiopian exports to the USA in hundreds of millions of dollars. Should the Ethiopian government survive which many seem to doubt at this point Ethiopia .

Graph of the trade balance between Ethiopia and the United States in millions of dollars

The United States State Department requests for peace talks with the Tigray Peoples Liberation Front by the Ethiopian government have been soundly rejected as well as requests for military forces invading Tigray to withdrawal, restoration of power, internet, access of aid and investigatory bodies to be allowed to enter Tigray. Growing impatience with the American State Department as well as members of Congress who have passed several resolution condemning the treatment of Tigrayans and the atrocities attributed to the Ethiopia and Eritrean fighting forces have resulted in no response.

Only 9% of total imports to Ethiopia come the United States. Ethiopia main imports are: foodstuffs, textile, machinery and fuel. Ethiopia main trading partners are: China (18 percent of total imports), Saudi Arabia (13 percent), Russia and India (9 percent)