The Counterproductive Intention of the Biden Administration to Declare Ethiopia AGOA Ineligible
The Historic US-Ethiopia Relationship
In the preface to his book “ABYSSINIA OF TO-DAY”, chief of the first-ever American diplomatic mission to Ethiopia, Robert Skinner, wrote
“… I bring back only pleasant memories of a kind and light-hearted race, whose grave courtesy and sometimes affection I am not likely ever to forget. I rejoice over the fact that I took to these people from a great Governmnet a message of goodwill, unembittered by a single ungenerous thought, and that I had noting to ask which they might not willingly grant.” (p. viii-ix)
A few decades after Skinner’s mission, a visit to the U.S. by Yilma Deressa was followed by the signing of the “point four” agreement, which paved the way for a wide range of American investments in Ethiopian — in the economy, infrastructure, health, agriculture, administrative training, and so on.
It is during this period that Ethiopian Airlines was established with the help of the U.S. It was during this period that close to 50 Ethiopian students left for the U.S. for the first time from Teferi Mekonnen highschool. Some of these students would go on to play key roles in the Ethiopian socioeconomic and political landscape in the subsequent decades.
While there was a period from the late 1960s to the 1990s when the U.S. had a stronger diplomatic relationship with Egypt, the relationship between Ethiopia and the United States has withstood numerous challenges to be one of the oldest diplomatic relationships the U.S. has with an African nation. To this date, Ethiopia remains one of the largest U.S. aid recipients in Africa.
At present, a war in northern Ethiopia, that broke out with the Tigrayan People Liberation Front’s (TPLF) attack on the Ethiopian National Defense Forces (ENDF) on November 3, 2020, has posed a threat to this age-old relationship. Among other things, the Biden administration is considering delisting Ethiopia from African Growth and Opportunity Act (AGOA).
African Growth and Opportunity Act (AGOA)
The African Growth and Opportunity Act (AGOA) is U.S. legislation enacted and signed into law in 2000 by President Bill Clinton and subsequently amended during George W. Bush’s presidency. It was intended to increase “economic policy and commercial engagement with Africa.” As of 2020, thirty-eight eligible countries enjoy duty-free access to the U.S market, with over 1800 products currently listed as AGOA-eligible. The opportunity was initially set to expire by 2015, but it was extended and will now retire in 2025.
AGOA expanded on the Generalized System of Preferences (GSP), a 1974 act, that gave access to U.S markets for over 100 countries and over 5000 products.
To be eligible for AGOA, countries need to meet certain economic, political, legal, and social conditions. These conditions include evolving towards a market economy, political pluralism, ensuring the human rights of citizens, combatting bribery and corruption, and cooperating in the fight against terrorism. While beneficiary countries may not meet these conditions at the time of eligibility designation, progress towards meeting these conditions is assessed on an annual basis, and the President of the U.S. has the legal authority to remove countries that regress or do not make progress to meet these conditions.
Importantly, the conditions also include the removal of barriers to U.S. trade and investment in the beneficiary country. The United States Agency for International Development (USAID) facilitates U.S trade and investment in recipient countries by helping reduce the cost of doing business and bureaucratic red tapes for trade and investment.
Trade with the United States
The U.S is a significant or export destination for many African countries including Ethiopia. In 2019, about 20.7% of Ethiopian exports, close to $572M, ended up in the U.S markets, making it the top export destination for Ethiopia. However, of the total Ethiopian exports to the U.S., only about 42% (or $245M) went through AGOA. The bulk of these exports, $220M of the $245M, were textile, garments, and apparel. [All data are obtained from the Department of Commerce.]
Trade between the two countries benefits the U.S. as well. Ethiopia runs a trade deficit against the U.S. In 2020, Ethiopia’s exports to the US amounted to $525 million (AGOA and non-AGOA) while its imports were worth $907 million. Three-quarters of Ethiopian imports are transportation equipment (worth $736 million). Inevitably, most of these imports are related to Ethiopian airlines.
Several African countries outperform Ethiopia in terms of revenue that comes from AGOA-related exports. These countries, which mainly export primary commodities to the U.S., such as oil, include Nigeria (earned $3.1 billion in2019), South Africa ($2 billion), and Angola ($605 million). Neighboring Kenya earned about $520M from its AGOA exports to the US, more than double the amount Ethiopia earned from AGOA-related exports in 2019.
Lobbying to have Ethiopia Delisted from AGOA
It is now known that Von Batten-Montague-York, a Washington D.C based lobbying and advocacy firm, known for its advocacy work for diaspora Tigrayans, has had communications with senior people in the Biden administration to withdraw Ethiopia from the list of AGOA eligible countries.
Recently, the U.S. trade representative Ambassador Katherine Tai tweeted that she had informed Mamo Mihretu, economic advisor to the Prime Minister of Ethiopia, that Ethiopia’s eligibility to AGOA is threatened due to “ongoing violations of internationally recognized human rights.”
Delisting Countries from AGOA Eligibility
While Amb Tai mentioned the “violations of internationally recognized human rights” as the primary reason for the plan to terminate Ethiopia’s eligibility, research has shown that the U.S. has been less consistent in its invocation of human rights violations as a determining factor for AGOA status. U.S. trade, investment, and national security considerations have been the primary motives for AGOA sanctions. The Trump administration suspended Rwanda’s AGOA eligibility in 2018 as a retaliatory measure to Rwanda’s ban of used clothing imports from the U.S.
On January 1, 2020, the Cameroonian government saw the termination of its AGOA designation by President Donald Trump due to alleged “violation of internationally recognized human rights,” the same concern raised by Amb. Tai about the situation in Ethiopia. Even though the post-2018 election violence and the situation of anglophone Cameroon may have contributed to the Cameroonian AGOA termination, a shift in American strategic interests in the region is argued to be the primary motive for the Washington action.
Ramifications of Terminating Ethiopia’s AGOA Status
Termination of Ethiopia’s designation as AGOA beneficiary will have several ramifications. First, it will be a major obstacle to trade between Ethiopia and the United States. As stated earlier, AGOA exports to the U.S amounted to $245 million in 2020, about 42% of the total Ethiopian exports to the U.S. These exports will face duties and, as a result, will become less competitive in U.S. markets.
Given that textile and apparel represent the overwhelming majority of Ethiopian AGOA exports, the labor-intensive textile sector will be hit hard. Hundreds of thousands of jobs, held predominantly by women, will be threatened. The growth of this sector will be curtailed. U.S apparel producers in Ethiopia, such as Gap and Calvin Klein, as well as European producers which relocated to Ethiopia to take advantage of the low-cost labor, will also face duties on their shipments to the U.S. Trade between the two countries, which created employment opportunities for hundreds of thousands of people, will be jeopardized. Most of these employees being women and low-income households, delisting Ethiopia from AGOA will hit the most vulnerable segment of Ethiopia’s population.
The disruption of trade will not only affect Ethiopia but also U.S. businesses and corporations. In addition to the clothing manufacturers that invested in Ethiopia, manufacturers in the U.S. such as Boeing could suffer if the government of Ethiopia looks alternative aircraft manufacturers like Airbus. Aircraft and other transportation equipment imports from the U.S. will ultimately decrease.
Besides hurting the bilateral flow of goods, services, and financial capital between these two countries, terminating Ethiopia’s AGOA and any quid pro quo by the Ethiopian government will further damage the old and historic relationship between the two countries.
Ways Forward
The U.S should take a different approach in its engagement with the government of Ethiopia. The current approach of intimidation and threats of sanction have not worked to bring an end to the devastating war taking place in northern Ethiopia. Heaping more pressure on a country with a long history of resistance will not bring the desired result.
Instead, the U.S. government will have to engage the Government of Ethiopia with a different, conciliatory approach. The U.S. government will need to condemn the atrocities the TPLF is committing in Amhara and Afar regions, much like it had been busy condemning the purported atrocities in the Tigray region.
Terminating Ethiopia’s AGOA status, as advocated for by TPLF and its advocacy firm, would also mean the Biden administration is taking side with TPLF, and this will rid the U.S. of the credibility to engage the government of Ethiopia as a neutral arbiter. It will also embolden the TPLF which already expanded the war into Amhara and Afar regions and escalate the humanitarian crisis further.
