Ethiopia’s textile industry at risk if US suspends Tigray War trade deal


  • Duty-free status for the US market is a boon for the Ethiopian economy
  • Suspension would harm livelihoods and national prosperity
  • Washington unhappy with abuse and hunger caused by war in the north

ADDIS ABABA, October 28 (Reuters) – At an overcrowded factory in Addis Ababa, Finoteselam Nigussie’s needle plunges into the vaporous white fabric she skillfully guides through a sewing machine.

Like thousands of other Ethiopian women, sewing shawls for export to the United States pays the rent for the 40-year-old textile worker and her daughter’s school fees.

Now, however, Finoteselam’s work is in jeopardy as the United States considers suspending Ethiopia’s duty-free market status, citing abuse and growing famine in the war-ravaged northern Tigray region. .

Suspension of benefits under the Africa Growth and Opportunity Act (AGOA) would threaten Ethiopia’s aspirations to become a light manufacturing hub and erode hard-earned economic gains in a nation once synonymous with hunger. and poverty.

“We have been using AGOA since we started our business,” said Finoteselam boss Sammy Abdella, who founded the company almost two decades ago and employs 250 people.

“People (…) have been working with us since we started. We have created a family,” he added, his voice broken.

Although Ethiopia is not a large global supplier, the suspension of its commercial status in the United States would be another issue on the list of global fashion brands such as The Children’s Place, Tommy Hilfiger and Calvin Klein because COVID- 19 disrupts manufacturing capacity, ports and supply chains. .

HORRORS OF WAR

Washington has repeatedly expressed concern over numerous reports of sexual violence committed by Ethiopian and Eritrean soldiers allied in Tigray, where local forces have been clashing with the army and its allies for a year.

The United Nations says a de facto aid blockade has forced 400,000 people to starve. On Thursday, he said no food convoys had entered Tigray in the past 10 days. There have been numerous reports of massacres of civilians.

The government denied the blocking of aid and said individual soldiers had been tried for abuse, without giving details. Eritrea has denied having committed any abuses.

Washington has already paved the way for sanctions, with its top trade representative promising an upcoming decision on its AGOA status.

The law gives countries in sub-Saharan Africa duty-free access to the United States if they meet criteria, including removing barriers to American trade and moving towards political pluralism.

Prime Minister Abiy Ahmed’s chief trade negotiator Mamo Mihretu told Reuters that AGOA directly created 200,000 jobs and indirectly created millions.

“We should not politicize trade issues,” he told Reuters.

Over the past decade, Ethiopia has spent billions to build a dozen industrial parks and related infrastructure. Some factories produce products for the fashion giant PVH, owner of the Calvin Klein, Speedo and Tommy Hilfiger brands.

Factory workers making hand-crafted garments, hand-woven textiles and basketwork scarves for export to U.S. customers, at the Addis Ababa, Ethiopia, factory on October 14, 2021. REUTERS / Tiksa Negeri

Read more

At Finoteselam, Sammy Ethiopia, around 90% of products are exported to the United States, through retailers like Eileen Fisher and Anthropologie.

Exports to the United States represent three-quarters of the company’s annual sales of more than $ 200,000. If Ethiopia is put on hold, Sammy said his business would shut down.

Ethiopia exported about $ 237 million in duty-free goods to the United States under AGOA in 2020, according to data from the United States Department of Commerce, more than 90% of which are textiles and clothing. clothes.

Duty-free access is a major draw for companies like Gap and Swedish H&M. The full impact of a suspension on foreign investors and Ethiopian companies exporting to the United States is not yet clear, with layoffs and order cancellations possible.

“ADDED HEADACHE”

Mamo has warned that a suspension of AGOA would hurt U.S. companies trying to diversify production from Asia by relocating or expanding into Ethiopia.

Conlumino, a retail research agency and consultancy firm, however noted that Ethiopia’s textile exports to the United States were still tiny compared to those of China, Bangladesh and the United States. ‘India.

Although Ethiopia would suffer from AGOA suspension; Retailers will find alternatives despite the ravages of COVID-19, said Neil Saunders, analyst at Conlumino.

“The suspension of AGOA will not have a huge impact on clothing retail,” he said. “However – as will come at a time when global manufacturing capacity is already shrinking and retailers are struggling to keep up with demand – this is an additional headache.”

A spokesperson for H&M said the company was closely monitoring developments regarding AGOA, but it was too early to comment. In December, H&M said its long-term manufacturing and sourcing strategy involved Ethiopia and that it had no plans to change. But its Ethiopian production is relatively low.

US clothing companies The Children’s Place, Gap and PVH did not respond to requests for comment.

A senior PVH official previously said that the 10-year renewal of AGOA in 2015 “was a critical factor in PVH’s decision to invest,” according to a 2017 case study of PVH in Ethiopia released by the World Bank. and co-written by Mamo.

In 2018, PVH said Ethiopia could become a top supplier as it grows cotton, dyes fabrics and sews clothes. It created a joint venture to operate a factory in the town of Hawassa, the company’s first such venture in 30 years.

Raghavendra Pattar is CEO of Nasa Garment, a manufacturer in the Hawassa Industrial Park. NASA exports around 95% of its clothing to American companies. It employs 1,200 workers, mostly women, and spent $ 7 million to establish the plant two years ago.

But a suspension of AGOA would stop the expansion.

“AGOA… is the reason buyers come to Ethiopia and source their produce here,” he said. “If the benefit of the duty is removed, the buyers will go to another country.”

Reporting by Dawit Endeshaw; Additional reporting by Giulia Paravicini in Addis Ababa and Anna Ringstrom in Stockholm; Additional reporting and writing by Maggie Fick; Editing by Katharine Houreld and Andrew Cawthorne

Our Standards: Thomson Reuters Trust Principles.

Previous Glencore Reaffirms Production Guidelines As Coal Production Recovers - Product Commentary
Next Cryptocurrency – The not so Cryptic Invisible Money!