Ethiopian textile industry at risk if U.S. suspends trade deal over
Tigray war
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[October 28, 2021] By
Dawit Endeshaw
ADDIS ABABA (Reuters) - In a crowded Addis
Ababa factory, Finoteselam Nigussie's needle plunges in-and-out of the
gauzy white cloth she deftly guides through a sewing machine.
Like thousands of other Ethiopian women, stitching shawls for export to
the United States pays the 40-year-old textile worker's rent and her
daughter's school fees.
Now though, Finoteselam's job is in danger as the United States ponders
suspending Ethiopia's duty-free market status, citing abuses and a
growing famine in the war-ravaged northern Tigray region.
Suspension of benefits under the African Growth and Opportunity Act (AGOA)
would threaten Ethiopia's aspirations to become a light manufacturing
hub and dent hard-won economic gains in a nation once a byword for
hunger and poverty.
"We have used AGOA since we started business," said Finoteselam's boss
Sammy Abdella, who set up the company nearly two decades ago and employs
250 people.
"People ... have worked with us since we have started. We have created a
family," he added, his voice cracking.
Although Ethiopia is not a large global supplier, suspension of its U.S.
trade status would be yet another problem on the list for global fashion
brands such as The Children's Place, Tommy Hilfiger and Calvin Klein as
COVID-19 disrupts manufacturing capacity, ports 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.
The government has denied blocking aid and said individual soldiers have
been tried for any abuses, without giving 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.
The act gives sub-Saharan African nations duty-free access to the United
States if they meet criteria including removing barriers to U.S. trade
and progress towards political pluralism.
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 issues," he told Reuters.
Over the past decade, Ethiopia has spent billions constructing a dozen
industrial parks and related infrastructure. Some factories produce
goods for fashion giant PVH, owner of the Calvin Klein, Speedo and Tommy
Hilfiger labels.
At Finoteselam's company, Sammy Ethiopia, around 90% of products are
exported to the United States, via retailers such as Eileen Fisher and
Anthropologie.
[to top of second column] |
Tadele Abate, 37, weaves
a fabric at the Sammy Ethiopia hand made garments, hand-woven
textiles and basketry factory in Addis Ababa, Ethiopia, October 14,
2021. REUTERS/Tiksa Negeri
Exports to the United States account for three quarters of the firm's
annual turnover of over $200,000. If Ethiopia is suspended, Sammy said
his company will close.
Ethiopia exported about $237 million worth of goods duty-free to the
United States under AGOA in 2020, U.S. commerce department data shows,
more than 90% of it textiles and apparel.
Duty-free access is a major draw for companies including Gap and
Sweden's H&M. The full impact 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 warned an AGOA suspension would hurt U.S. companies trying to
diversify production from Asia by relocating or expanding to Ethiopia.
Conlumino, a retail research agency and consulting firm, noted, however,
that Ethiopia's textile exports to the United States were still
minuscule compared to the likes of China, Bangladesh and India.
Though Ethiopia would suffer from a AGOA suspension; retailers will find
alternatives despite the havoc from COVID-19, said Neil Saunders, a
Conlumino analyst.
"The suspension of AGOA will not have a huge impact on clothing retail,"
he said. "However - as this will come at a time when global
manufacturing capacity is already reduced and retailers are struggling
to keep up with demand - it is an added headache."
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. But its Ethiopia production is
comparatively small.
U.S.-based apparel companies The Children's Place, Gap and PVH did not
respond to requests for comment.
A senior PVH official previously said 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 published by the World Bank and
co-authored by Mamo.
In 2018, PVH said Ethiopia could become a top supplier because it grows
cotton, dyes fabrics and sews garments. It established a joint venture
to operate a factory in Hawassa city, the company's first such venture
in 30 years.
Raghavendra Pattar is CEO of Nasa Garment, a manufacturer in Hawassa
Industrial Park. Nasa exports about 95% of its garments to U.S.
companies. It employs 1,200 workers, mostly women, and spent $7 million
to set up the factory two years ago.
But an AGOA suspension would halt expansion.
"AGOA … is the reason buyers are coming to Ethiopia and sourcing
manufacturing here," he said. "If the duty benefit is taken away, 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)
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