The conundrum: why the talks of expelling Ethiopia from AGOA

The Biden administration is threatening to delist Ethiopia from AGOA by the end of October 2021, supposedly to avert an escalating civil war between the Government of Ethiopia and the Tigray People’s Liberation Front (TPLF), a rebel group which led Ethiopia for nearly three decades with an iron fist policy until 2018.

Many experts close to this issue expressed concern and pointed out a glaring paradox: although Ethiopia under TPLF governance would hardly pass the test of human rights or political pluralism, the US government never seriously questioned the country’s AGOA eligibility.

So one might ask, why now when the Ethiopian government is undergoing democratic reforms and allowing, for the first time in history, free and fair elections? Why is the Biden Administration’s understanding of the conflict in Ethiopia so wildly different from that of the people of Ethiopia who are fighting against the return of a repressive regime?

Summary of African Growth & Opportunity Act (AGOA) as a foreign policy tool

The African Growth and Opportunity Act, signed into law on May 18, 2000 as Title 1 of the Trade and Development Act of 2000, offers a trade program that is meant to establish stronger commercial ties between the US and Sub-Saharan Africa.

AGOA grants eligible participants duty-free access to the US market for thousands of products. Although it is not a free trade agreement, the act establishes a preferential trade agreement between the US and select countries in the Sub-Saharan region.

Ethiopia is among the countries included in the AGOA at the time of the program’s initial establishment. AGOA is sometimes looked at as a form of aid, which is not entirely accurate. It has provided the US with preferential access to valuable commodities such as oil and other lucrative non-agricultural products.

Sub-Saharan Africa as a whole has critical problems with intra-state trade, which increases dependency on large foreign trade partners – such as the US and European countries. This regional trade gap provides leverage for the US when participating in trade negotiations.

As a result, AGOA has been used as a bargaining chip as countries can be delisted from participation. For example, the Trump administration suspended Rwanda’s duty-free access to the United States. Rwanda’s suspension was not in response to human rights violations, but rather it was in retaliation to the Rwandan government which had stopped the import of used clothing from US firms.

What happens if Ethiopia is banned from AGOA

Delisting Ethiopia from AGOA will likely have a devastating effect on the Ethiopian economy, which is already struggling to recover from the COVID-19 pandemic and 11 months of war.

In the short term, US companies will face increased tariffs, which will lead to loss of appetite for manufacturing goods in Ethiopia. In the long-term, Ethiopia might not maintain its track record as a top foregin direct investment destination in Africa.

For the US, stopping AGOA would simply contradict its own stated values of lifting Sub-Saharan countries out of poverty. Most importantly, the damage will be faced by the ordinary Ethiopian citizens. Chief Trade Negotiator of Ethiopia, Mamo Meheretu, predicts that a withdrawal from preferential access would directly put as many as 85,000 jobs at risk and about 1 million more across the entire supply chain. The biggest victims will be low-income women who have been working at the Industrial Parks. These women and their families will be abruptly destabilized and put at risk of poverty if the AGOA program is discontinued.

The Ethiopian government is engaged in a bilateral and existential war with the TPLF - a war through which the TPLF is explicitly attempting to overtake the capital of Addis Ababa and overthrow the government. If the US choses to attack the Ethiopian economy through the cancellation of the AGOA or the imposition of sanctions, it would not only be emboldening insurrectionist rebels, it would be aiding them in the subversion of the entire Ethiopian government.

What is the government of Ethiopia doing or should be doing?

Up until June, 2021, the Ethiopian government provided 70 percent of the humanitarian aid, including lifesaving food, medicine and fuel to rehabilitate the Tigray region. After declaring a unilateral ceasefire and withdrawing armed forces from Tigray altogether, the Ethiopian government continued to facilitate ground and air humanitarian access to Tigray. Ethiopia's efforts to stop the war have been overlooked by the US.

Thus, the US threats to delist Ethiopia from AGOA might not be about the actual humanitarian crisis in northern Ethiopia, but rather about advancing the TPLF’s agenda, which is in line with US interests.

Looking ahead, Ethiopia should take alternate steps to diversify its trade partnerships. To paraphrase IPDC Investment Promotion Advisor Dawit Feleke, “the country should shift its economic policy from garment, textile and leather manufacturing to other sectors like pharmaceuticals and import substitution items.”

If Ethiopia is indeed delisted from the AGOA, it does not mean the IPs and the country’s manufacturing economy will shut down immediately. Ethiopia should explore alternatives and exploit the comparative advantages in the international market. The nation needs to look into underutilized strategies such as allowing factories to sell their products in the domestic and regional markets.

(The Reporter, Oct.16, 2021) The ending of the long-lasting, mutually beneficial trade relationship between Ethiopia and the US will damage the Ethiopian economy in the short-term, and may lead to temporary economic upheaval in Ethiopia, but in the long term, the loss of Ethiopia as a chief trade partner will be a big loss for the US as well.

The Hope

The hope is the US will make the decision based on its long-term interest to the region as a whole and not based upon the demands of questionable lobbyists representing the TPLF agenda. The US has a long history with Ethiopia dating back more than a century, and it can continue to use Ethiopia as a gateway to cement economic ties with the continent at large, especially in today’s highly competitive, decentralised global market.

Ethiopia is not just another country in Africa, but rather a political and economic powerhouse in the HOA and the continent at large. Engaging the legitimate Ethiopian government and attempting to consider the wants and needs of the Ethiopian people will have a greater impact in the long-term than cutting economic ties for whatever short-term geopolitical gains.