The
United States is considering suspending Ethiopia’s tax-free trade position to
punish it for violence and food shortages in Tigray. Ethiopia launched a
military campaign in the northern state last year to try to crush a local
force, the Tigray National Liberation Front (TPLF). The conflict has largely
blocked aid transports to the area.
Ethiopia’s
favorable tax position was awarded under the U.S.’s African Growth and
Opportunity Act, also called AGOA.
A
suspension of the tax-free recognition would seriously threaten Ethiopia’s
cloth products, or textiles, industry. That growth industry is part of
Ethiopia’s plan to become a center for manufacturing and improve its economy.
On
workdays in Addis Ababa, the capital city, thousands of women sit at sewing
machines making cloth products for export.
Many
of these workers will lose their jobs if the U.S. suspends the country’s
special tax break.
Finoteselam
Nigussie is a 40-year-old textile worker who pays for her home and her
daughter’s school from her earnings. The company’s owner, Sammy Abdella, set up
his business almost 20 years ago. He has 250 workers.
“People…have
worked with us since we started. We have created a family,” he said.
While
Ethiopia is a comparatively small textile exporter, loss of its trade status
would still cause problems for several worldwide clothing sellers, such as
Tommy Hilfiger and Calvin Klein. They have already been hurt by COVID-19 linked
slowdowns in transportation and other areas.
The
U.S. has repeatedly expressed concern about reports of sexual violence by
Ethiopian and allied Eritrean soldiers in Tigray.
The
United Nations says a refusal to permit aid to enter the Tigray area has forced
400,000 into famine, or severe food shortage. On Thursday, it said no food
trucks had entered Tigray for the past 10 days. There have also been many
reports of mass killings of civilians.
The
government has denied it is preventing aid from entering Tigray and said some
soldiers have been tried for abuses. It did not give additional information.
The
chief trade representative for the U.S. said there will be a decision soon on
Ethiopia’s AGOA standing.
AGOA
gives sub-Saharan African nations special, tax-free access to American markets
if they remove trade barriers to American products and work toward democracy.
Prime
Minister Abiy Ahmed's chief trade negotiator Mamo Mihretu told Reuters that
AGOA had directly created 200,000 jobs and indirectly created millions.
"We
should not politicize trade," he told Reuters.
Over
the past ten years, Ethiopia has spent billions building up its manufacturing.
Some factories produce goods for large clothing companies such as PVH, owner of
Calvin Klein, Speedo and Tommy Hilfiger.
At
Sammy Ethiopia, where Nigussie works, about 90 percent of products are exported
to the United States. If Ethiopia is suspended, Abdella said his company will
close.
Ethiopia
exported about $237 million worth of goods tax-free to the United States under
AGOA in 2020, most of it clothing and textiles, says the U.S. commerce
department.
It
is unclear what will happen to international investors and Ethiopian companies
if the U.S. goes ahead with the suspension.
Mamo
warned an AGOA suspension would hurt U.S. companies trying to move production
from Asia to Ethiopia.
Though
Ethiopia would suffer from an AGOA suspension, large fashion companies would
find other suppliers, said Neil Saunders. He is a retail expert who works for
Conlumino, a retail research company.
Raghavendra
Pattar is head of Nasa Garment, a manufacturer in Hawassa Industrial Park. Nasa
exports about 95 percent of its clothing to U.S. companies. It has 1,200
workers, mostly women, and spent $7 million to set up the factory two years
ago.
An
AGOA suspension would stop its plans to expand.
"AGOA
… is the reason buyers are coming to Ethiopia," he said. He added that if
the tax-free status is removed, “the buyers will go to another country."
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