- African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/'Ethiopia approaches civil war - but Team Biden should avoid harming AGOA'

'Ethiopia approaches civil war - but Team Biden should avoid harming AGOA'

'Ethiopia approaches civil war - but Team Biden should avoid harming AGOA'
Published date:
Wednesday, 17 November 2021

As day turns to night in Ethiopia, International crisis negotiators are feverishly working to avoid an all-out civil war. America’s top diplomat, Secretary of State Antony J. Blinken is in nearby Kenya trying to help resolve the crisis. 

America utilized several pressure tactics to try to bring this outbreak to a resolution but none have worked so far. The latest is to give Ethiopia a 60-day notice of withdrawal from the African Growth and Opportunity Act (AGOA) - but, this proposed “AGOA-EXIT” strategy is meeting some resistance because a significant amount of the Ethiopia’s GDP growth is centered on the success of AGOA, and dislocation from the program could make the situation even worse for Ethiopia and perhaps for all sub-Sahara countries.

On top of that, there are many American retail companies involved with manufacturing in Ethiopia and having only a few months to wind down production - is simply not enough time.

The abrupt “AGOA-EXIT” plan flies in the face of USA retailers and brands who have invested in Africa and this unique action also frames America as a cut-and-run partner in a geographic area that everybody knew (going in) was fraught with risk.

When the conflict finally gets resolved (and it will), losing AGOA means that thousands of Ethiopians will be put out of work, and products destined to the USA retail markets will be transferred back to more stable locations at a great cost to the investors - forcing additional price inflation back home in America.

President Biden is now being cast as the one who is delivering former President Trump’s trade messages to China and to Africa. The Biden team failed to lift Trump’s inflationary retail tariffs on China and, at the same time, inadvertently blocked the China exit doors - as retailers look for other locations to source product with fewer and fewer choices.

Now that Ethiopia is suddenly coming off line, it appears that sourcing options are being eliminated faster than they are being added.

For more than a year, terror has reigned in the northern Tigray region of Ethiopia and the Tigray Peoples Liberation Army (TPLF) is now slowly marching towards the capital city of Addis Ababa. One possibility is all-out civil war, and another is an attempt to cut off the capital city and topple the government led by Prime Minister Abiy Ahmed.

While only 6% of the overall population, the Tigray group dominated Ethiopia politics for more than 25 years until Prime Minister Abiy came to power in 2018 using a coalition government. Since then, with the help of American and Chinese investment, Ethiopian GDP has been growing at a rapid rate and the second most populous country in Africa has been relatively stable.

However, the Tigray group was marginalized from governing, and fighting broke out in the north. Forces from neighboring Eritrea also teamed up with the government against the Tigray, and the conflict accelerated from there. Humanitarian aid to Tigray has been blocked, there are serious reports of atrocities and famine in the region.

Options for U.S. Government to resolve the crisis have been limited, but the steps taken over the last year have also been ineffectual. The Tigray group says they don’t plan to over-run Addis Abba, but they keep inching closer to the capital. Accusations of human rights violations are also pronounced, and there are reports that thousands have been killed and 2 million people have been displaced.

The U.N. Commissioner for Human Rights and the Ethiopian Human Rights Commission released a statement which said: “there are reasonable grounds to believe that all parties to the conflict in Tigray have, to varying degrees, committed violations of international rights, humanitarian and refugee law, some of which may account to war crimes and crimes against humanity.”

On November 1st the United States Trade Representative announced the 60-day “AGOA-EXIT” warning for Ethiopia, but some think it was a poor choice and not helpful for Ethiopia or for Africa. The U.S. State Department then advised that U.S. citizens should quickly leave the country.

While the USA should not extend privileges to any country that performs adversely to any trade agreement, the Ethiopian issue needs to be put in context. Over the years, it has been U.S Government practice to suggest that retailers and sourcing executives work in emerging foreign countries. The idea is that providing entry level jobs and training will create stability for the population, and it is a system that has worked well as the federal government provides a duty-free environment in return.

The problem of late is that the U.S. government is not standing behind their “ask” and not helping to protect the investments that companies have make on their behalf. In this case, it would be more reasonable if they offered a time extension to manufacturers (so they can evaluate their options with regard to losing AGOA), or if they offered exemptions to industries like apparel and footwear that provide significant local employment.

This described loss of “protection” for the investments is fracturing a private-public partnership that has existed for years. Using a trade agreement (like AGOA) as a political negotiating tool, doesn’t jibe with the Ethiopian sewing machine operator who is one year into their first-ever job. The workers shouldn’t be blamed for human rights abuses in their country - when it is someone else who is abusing the power. 

Multiple Industrial parks were built in Ethiopia, and thousands of Ethiopians have been employed. For the apparel sector, exports are generally consigned to the United States under the AGOA umbrella. As Team Biden starts to peel back these AGOA benefits, it punishes the investors, the employees, and adds significant turmoil to a country already in turmoil.

It would be a one-off if this was only happening in Ethiopia, but lonely eyes also turn to Guinea, to Mali, to Myanmar, to Cambodia, and to Nicaragua - where similar threats against U.S. trade benefits exist. 

All of this turmoil brings trade wonks to ask if the U.S. Government is working for or against investors by pulling trade benefits when the going gets tough. It appears that Uncle Sam may not have their back, and with four years left the current AGOA term, it also seems like the Trumpian ideology of individual “bi-lateral” country trade agreements will prevail, even as the AGOA folks are talking about bilateral versus unilateral - to keep the agreement from going away.

Truth be told, AGOA is noble trade policy that has failed to grow and the numbers tell the real story. AGOA was established in 2000 and in their first year did $23.5 billion in exports to the USA. Now, fast forward twenty-one years into the program and the number is roughly about the same.

The problem with understanding AGOA is that African exports are generally based on oil and gas, and the only encouraging part of late is that assembly industries in Ethiopia have been gaining significant ground, and they employ a lot of people. President Biden did express interest in re-invigorating former President Trump’s 2018 “Prosper Africa” initiative and that is a bi-lateral idea - including energy, health, agribusiness, and transportation.

Currently, 39 countries are involved in AGOA (before the newly proposed suspension of Ethiopia, Guinea, and Mali). The reason given for the Ethiopian suspension in their annual country reviews were for “gross violations of internationally recognized human rights.” For Guinea and Mali, it followed Military coups in both countries.

To put all this is some kind on perspective, it should be recalled that in 2019 Ethiopian Prime Minister Abiy won the Nobel Peace Prize for establishing peace with Ethiopia’s northern neighbor Eritrea. Now, the Eritreans and the Ethiopian government forces have been closing in on the Tigrayan population, while the Tigray Peoples Liberation Army has started to gain ground in the conflict and they are headed towards the capital city of Addis Ababa. It seems odd to broker a peace agreement with another country, and then use that country to align against a territory within your own country.

Mr. Abiy declared a six-month state of emergency in Ethiopia and asked all citizens to defend the homeland. The Nobel prize winner also said also said: “We will bury the enemy with our blood and bones and make the glory of Ethiopia high again.”

President Biden, to his credit, is following his “diplomacy first” policy in Ethiopia, but the situation on the ground gets worse by the hour. There is hope is for a peaceful solution, but taking away the AGOA trade benefits doesn’t carry the day. It also harms the bigger picture and the real meaning of America’s AGOA investment in Africa.

Rick Helfenbein:  Former Chairman of the Board of the American Apparel & Footwear Association (AAFA), also serving as their President and CEO.

Read related news articles

** AGOA eligibility review 2023 (for year 2024): Timelines of hearings and request for comments ** [Deadline written submissions 7 July]

The Office of the United States Trade Representative (USTR) is announcing the initiation of the annual review of the eligibility of sub-Saharan African countries to receive the benefits of the African Growth and Opportunity Act (AGOA). The AGOA Implementation Subcommittee of the Trade Policy Staff Committee (AGOA Subcommittee) is requesting written public comments for this review and will conduct a virtual public hearing on this matter. In...

16 May 2023

Cameroon aims to boost export revenues, rejoin AGOA - minister

Cameroon is working to boost export revenues to fend off a potential debt crisis and has relaunched talks with the U.S. to rejoin Washington's flagship trade initiative with Africa, its economy minister said on Monday. The economic fallout from the COVID-19 pandemic and the subsequent global shocks provoked by the war in Ukraine have hit African countries hard, denting economic growth and aggravating their sovereign debt positions. The...

11 April 2023

Somalia pursues AGOA membership to bolster trade

The Somali government officially applied to join the 36 African countries on Thursday, benefiting from the African Growth and Opportunity Act (AGOA). The announcement was made during the Somalia AGOA application ceremony, where outgoing U.S. Ambassador to Somalia, Larry André, highlighted the United States’ commitment to expanding and modernizing partnerships in Africa and Somalia. Ambassador André emphasized that the U.S....

10 April 2023

State Secretary Blinken praises Ethiopia on Tigray peace, no return to trade programme yet

U.S. Secretary of State Antony Blinken praised Ethiopia on Wednesday for its progress in implementing a peace deal to end the Tigray conflict, but stopped short of ushering the country back into a U.S. trade programme. Visiting Ethiopia to repair relations that were strained by the two-year war in the northern region, Blinken met with Prime Minister Abiy Ahmed and discussed ongoing efforts to solidify peace, restore basic services and address...

13 March 2023

Ethiopia asks US to reinstate AGOA trade benefits as US Secretary of State Blinken heads to Addis, Niger

Ethiopia is asking the Joe Biden administration to reinstate its duty-free access to the US market, arguing that “exceptional circumstances” warrant an immediate re-examination of its suspension just as Secretary of State Antony Blinken heads to Addis Ababa to discuss the cessation of hostilities in Tigray. The Office of the US Trade Representative (USTR) terminated Ethiopia’s participation in the African Growth and Opportunity Act...

09 March 2023

US to remove Burkina Faso from AGOA effective 1 January 2023: White House

U.S. President Joe Biden revealed on Wednesday his intent to exclude Burkina Faso from a U.S.-Africa trade pact, citing a lack of progress toward protecting the rule of law and political pluralism. Biden said that Washington will terminate Burkina Faso's designation as a beneficiary sub-Saharan African country under the African Growth and Opportunity Act (AGOA), starting January 2023 as it has not met"eligibility requirements." The decision...

02 November 2022

Kenya 'reaps Sh10 billion after Ethiopia's ban from AGOA deal'

Kenya earned an additional Sh10.2 billion from its exports to the US as Nairobi reaped big from Ethiopia’s suspension from a duty-free trade pact. Last year, Kenya’s exports to the US — mostly apparel were valued at Sh59.6 billion, a jump of more than a fifth from Sh49.4 billion in 2020 as Kenyan traders sold more goods through the African Growth and Opportunity Act (Agoa), a free trade agreement between Washington and select African...

24 May 2022

US Senator requests return of Ethiopia to AGOA

A U.S senator has requested the senate to return Ethiopia to AGOA as it has been progressing in many aspects. U.S. Senator from Virginia Mark Warner said the U.S. should strengthen and improve the trade relationship between Africa specifically Ethiopia. The Ethiopian government has been pending progress in many aspects, especially the ceasefire. The trade relation between Africa specifically with Ethiopia is important. “We do that...

05 April 2022

In Ethiopia, Guinea and Mali, fears rise over losing duty-free access to US market

For Sammy Abdella, the new year has brought bad tidings: the prospect of a steep drop in sales of scarves, rugs, baskets and other textile goods produced by Sammy Handmade in Ethiopia. “The U.S. market is our main destination,” said Abdella, who estimates it accounts for nearly two-thirds of sales for his Addis Ababa-based home decor and fashion company. “So, losing that put us in a very, you know, bad situation.” The source of...

20 January 2022

What does the US decision to delist three African countries from AGOA status imply?

Trade is one highly significant part of Africa’s story. Its pre-colonial, colonial and post-colonial transitions are all marked by trade. But for many years, African trade has struggled with several challenges: poor infrastructure, high transaction costs, opportunism and unfriendly policies. So when President Bill Clinton signed the African Growth and Opportunity Act (AGOA) in 2000, African countries were given a competitive edge by...

11 January 2022

US takes Ethiopia, Mali, Guinea off AGOA program

The United States on Saturday cut Ethiopia, Mali and Guinea from access to a duty-free trade program, following through on President Joe Biden's threat to do so over accusations of human rights violations and recent coups. "The United States today terminated Ethiopia, Mali and Guinea from the AGOA trade preference program due to actions taken by each of their governments in violation of the AGOA Statute," the U.S. Trade Representative's...

01 January 2022

You are here: Home/News/Article/'Ethiopia approaches civil war - but Team Biden should avoid harming AGOA'