Dawit Endeshaw

ADDIS ABABA – Finoteselam Nigussie, a crowded Addis Ababa factory worker, uses a needle to cut through gauzy white fabric.

The 40-year-old Ethiopian textile worker stitched shawls in order to send them overseas, paying her rent and school fees.

Finoteselam’s job now is at risk as Finoteselam faces suspension of Ethiopia’s duty free market status. The United States considers citing abuses, and growing hunger in war-ravaged Northern Tigray.

The suspension of benefits from the African Growth and Opportunity Act would jeopardize Ethiopia’s ambitions to be a major light-manufacturing hub and reduce hard-earned economic gains.

Finoteselam boss Sammy Abdella said, “We have used AGOA ever since we started our business.” The company employs 250 people and was established nearly 20 years ago.

“People have worked with me since the beginning. He said, cracking his voice as he spoke of the family he had created.

Although Ethiopia is not an important global supplier of goods, the suspension of U.S. commerce status for it would cause problems to global brands such as The Children’s Place, Tommy Hilfiger and Calvin Klein. COVID-19 also disrupts ports, manufacturing capacities, and supply chains.

WAR HORRORS

Washington has repeatedly expressed concern over widespread reports of sexual violence https://www.reuters.com/article/us-ethiopia-conflict-rape-specialreport-idAFKBN2C20P0 by soldiers in Tigray, where regional forces have battled the military and its allies for a year.

The United Nations says a de facto blockade of aid https://www.reuters.com/world/africa/un-aid-chief-ethiopia-famine-tigray-get-those-trucks-moving-2021-09-28 has forced 400,000 people into famine. There have been many reports of mass killings https://www.reuters.com/investigates/special-report/ethiopia-conflict-expulsions of civilians.

According to the government, aid was not blocked and soldiers were tried without providing details.

Washington has already laid the ground for sanctions https://www.reuters.com/article/ethiopia-conflict-usa-sanctions-idAFW1N2Q1023, with its chief trade representative promising a decision soon https://www.reuters.com/world/africa/us-trade-chief-ethiopias-duty-free-market-status-be-decided-soon-2021-10-14 on its AGOA status.

If they fulfill certain criteria, including the removal of U.S. trade barriers and advancement towards political pluralism, then sub-Saharan African countries are granted duty-free entry to the United States.

Mamo Mihretu was Prime Minister Abiy Ahmed’s chief trade negotiator. He told Reuters AGOA had created 200,000 direct jobs, and indirectly created millions.

He told Reuters that trade matters should not be politicized.

Ethiopia spent over ten billions on the construction of a dozen industrial areas and infrastructure in recent years. Some factories make goods for the fashion giant PVH, NYSE:, owner of Calvin Klein and Speedo labels.

Sammy Ethiopia’s Sammy Ethiopia company exports around 90% of its products to the United States via Eileen Fisher or Anthropologie.

Three quarters of the company’s total annual turnover, which is more than $200,000., are exported to America. Sammy stated that if Ethiopia is banned, his company would close.

According to U.S. Commerce Department data, Ethiopia exports $237 million in goods duty-free, with the exception of apparel and textiles.

Duty-free access is a major draw for companies including Gap and Sweden’s H&M. It is unclear what the full effect of a suspension on Ethiopian investors or companies exporting to America will be. There are layoffs as well as order cancellations.

“ADDED HEADACHE”

Mamo said that an AGOA suspension could hurt American companies looking to diversify from Asia.

Conlumino was a consultancy and retail research agency. It noted however that Ethiopia’s textile exports were not as significant as those from India, Bangladesh, China and China.

Even though Ethiopia could be subject to an AGOA suspension. However, the retailers will look for alternatives, even with all of the COVID-19 chaos, stated Neil Saunders (a Conlumino analyst).

“The suspension by AGOA won’t have an enormous impact on the clothing retail industry,” he stated. This will cause additional headaches for retailers and global manufacturers as it comes at a difficult time.

An H&M spokesperson said the company was following developments regarding AGOA carefully, but it was too early to comment. In December, H&M said its long-term manufacturing and sourcing strategy involves Ethiopia and it did not plan to change. However, its Ethiopian production is quite small.

U.S.-based clothing companies The Children’s Place (USA), Gap (USA) and PVH didn’t respond to our requests for comment.

According to Mamo’s 2017 study on PVH in Ethiopia, a senior PVH official stated that the AGOA renewal in 2015 for 10 years was a crucial factor in PVH investing.

PVH declared that Ethiopia had the potential to become a major supplier of cotton in 2018, citing its capacity to produce, dye and sew clothes. This was the first joint venture formed by PVH in more than 30 years to run a factory in Hawassa.

Raghavendra Pattar, CEO of Nasa Garment is a Hawassa Industrial Park manufacturer. Nasa Exports approximately 95% its garments to U.S. firms. The factory employs approximately 1,200 people, mainly women. It was built two years ago for $7 million.

However, an AGOA suspension might stop expansion.

“AGOA … is the reason buyers are coming to Ethiopia and sourcing manufacturing here,” he said. The duty benefits will be removed and buyers will move to other countries.