The Biden Administration has suspended Ethiopia’s duty-free access to the US market in response to civil war in the Tigray region and ongoing reports of human rights abuses. This reflects an emerging trend in the United States’ approach to international trade.
What is the AGOA?
The AGOA affords eligible sub-Saharan African countries duty-free access to the US market for certain products, including agricultural and manufactured goods.
The Act requires the President to annually review which countries are still eligible to receive benefits, based on a strict list of criteria. Notably, it requires each country to make marked progress towards establishing workers’ rights. In 2020 the top five AGOA beneficiaries were: South Africa, Nigeria, Kenya, Lesotho, and Ethiopia. [1]
What does this mean for Ethiopia?
Ethiopia used its duty-free access to the US market to entice foreign investors to its textiles industry, attracting several leading global brands to source materials in this sector, including:
· The Children’s Place
· Gap Inc.
· PVH Corp (which owns brands including Tommy Hilfiger and Calvin Klein)
· H&M
Ethiopia’s suspension from the AGOA may steer existing and potential buyers to other countries. [2]
The Wider Story
Trade agreements increasingly include clauses which require both parties to meet certain provisions on human rights. The US is taking the lead in requiring governance and human rights provisions, in particular those relating to labour rights and corruption.
The US claims its 2021 Trade Policy Agreement will support all workers and increase supply chain resilience. While this move towards mandatory labour rights provisions is encouraging, the effects of sanctions and enforcement on countries such as Ethiopia may only worsen the conditions for low-paid workers.
Action
We strongly encourage companies who source materials from Ethiopia to review their supply chains. Companies should also consider this trend in international trade agreements when investing, or entering long-term relationships with partners, abroad.
References
[1] 2021 Trade Policy Agenda and 2020 Annual Report
[2] Foreign Policy - Global News
