Tough Love Restored Friendship Brings New Hope

In the 120 years of diplomatic relations between Washington and Addis Ababa, it has not been just love that solely dominated the relation between the two. The Ethio-Somali War and the 17 years of the Dergue Regime set records for all time low in their diplomatic history.

With the demise of the Dergue regime in Ethiopia in 1991, the US had become a key development partner of Ethiopia providing billions of dollars each year in the form of humanitarian and development assistance. Ethiopia was also a key ally of the US in the fight against terrorism in the Horn of Africa. However, following the outbreak of a war between the new Government of Ethiopia (GoE) and the Tigray People’s Liberation Front (TPLF) in November 2020, relations between the two got strained after more than 27 years of heyday. Words of war at State Department press conferences, loggerheads over the repetitive agenda at the UN Security Council, a signed executive order for sanctions, withdrawals of promised loans and development assistances, and the banning of Ethiopia from the Africa Growth Opportunity Act (AGOA)— all show how the their relations has gone through tough twists and turns in the last two years.

However, as the central government concluded a peace deal with the TPLF fighters last month in Pretoria, the Ethiopian government has found favorable response in its quest for the restoration of the friendship with the US. The just concluded US-Africa Leaders Summit was an opportune moment to catch. The visit of Prime Minister Abiy Ahmed to Washington to attend the Summit on December 13–15, 2022, was in that case a fruitful mission in easing of tensions between the two longtime friends. It was very instrumental in soliciting profound support for Ethiopia’s dollar-starved economy. In this article, EBR’s Addisu Deresse analyzes their relationship and the element of an ever rising China.

On the afternoon of December 13, 2022, leaders from civil society organizations and the African private sector were heading to the Martin Luther King Memorial Library, in Washington DC. These leaders were invited to attend a roundtable discussion on the future of AGOA, which was organized by the AGOA Civil Society (CSO) Network.

The AGOA CSO Network is an alliance of non-governmental organizations (NGOs), small-to-medium-sized business representatives, chambers of commerce, and other organizations from the US and Africa that are interested in the successful application of the American Growth Opportunity Act for the benefit of the populations of the US and Africa. The Network was founded on January 17, 2003, at the AGOA Civil Society Forum in Phoenix, Mauritius, by 102 member organizations from the United States, Mauritius, South Africa, Nigeria, Kenya, Namibia, Mali, Lesotho, and Democratic Republic of the Congo.

Led by David Vandy, an international multimedia journalist at the Voice of America as its Master of Ceremony, the discussion on December 13 revised its recommendation from a minimum five-year extension of AGOA benefits to a ten-year extension to align with the African Union’s Agenda 2063. The Secretariat also emphasized the creation of a USD 5 billion Special Purpose Investment Fund (SPIF) with tax incentives to support the creation of thorough strategic plans for AGOA-eligible countries to transition from AGOA, a preference trade agreement, to bilateral trade agreements and/or free trade agreements between 2025 and 2035.

The discussion also suggests encouraging US corporations to invest in the targeted industries in collaboration with organizations and companies in the relevant AGOA-eligible nations, namely the African Union and the African Development Bank. In order to prepare for the full implementation of the African Continental Free Trade Area Customs Union, it is hoped that this will catalyze US investment, technology, innovation, values, and best practices throughout Africa; assist in creating the necessary high-paying jobs for youth on both sides of the Atlantic Ocean; and fill existing market gaps throughout Africa.

“We launched the advocacy campaign for the 10-year extension of AGOA and invited members of the Network and other stakeholders to join the working group for the advocacy campaign,” reads the summary sheet released by the Network by the end of the discussion.

Through a mix of AGOA and GSP preferences, Ethiopia has been one of 39 Sub-Saharan African nations that had enjoyed duty-free export status to the United States for about 6,500 products. The privilege had lasted from 2000 until it was revoked in December, 2021. The harsh decision by Biden’s administration came following the war between the federal Government of Ethiopia (GoE) and the Tigray People’s Liberation Front (TPLF).

Despite being a net importer of commodities from the US, Ethiopia’s exports to the Western giant have dramatically expanded and rose by about 20 times between 2000 and 2020 (USD28 million to USD 525 million). Under AGOA, about half of Ethiopia’s exports to the US are passed duty-free; these include largely clothing, leather footwear, and other leather products. Flowers and vegetable crops are also major commodities in the list.

With Ethiopia, the US has a huge trade surplus. In 2020, US exports to Ethiopia were worth USD 868 million, while USD 525 million in Ethiopian imports came from the US. For products to be eligible for preferential market access, they must be categorized as AGOA / GSP eligible and show proof of Ethiopian origin by satisfying the origin requirements. In 2020, US imports from Ethiopia were subject to USD0.9 in import charges, which were mostly imposed on a selection of footwear, headgear, and clothing.

The visit of Prime Minister Abiy Ahmed (PhD) to Washington to participate in the US-African Leaders Summit on December 13 – 15 was intended to rekindle the difficult conversations that had strained relations between the two countries. Since his arrival in the east coast of America, the PM has been sharing stories of fruitful conversations with the members of the American business community, Katherine Tai (Amba.), the US Trade Representative who is a member of the President’s Cabinet and principal trade advisor, negotiator, and spokesperson on US trade policy. The Premiere also met Secretary of State Antonio Blinken.

The visit came after a peace deal was signed in Pretoria, South Africa, between the GoE and TPLF in November 2022. Even though it is too early to gauge the productivity of these talks, the World Bank has issued USD 745 million in grants for improved access to health services and flood management projects.

However successful the visit might be, it didn’t result in the US backtracking from its decision to lift the ban on AGOA—at least for now. That may also be too soon to ask, given that US officials continue to be tough on matters regarding the presence of Eritrean soldiers in Tigray. Issues regarding and the need to ensure accountability for atrocities committed during the war is still on the table for American diplomats whenever they meet their Ethiopian counterparts.

“We have not seen clear statements on the reconsideration of the decision to lift the ban,” says Fitsum Hailu, an international market consultant. “However, from the tone, I hope that they will reconsider their decision to invite Ethiopia back in.”

One Ethiopian businesswoman who has her fingers crossed waiting for the reconsideration of the American government’s decision is Gizeshwork Tessema, CEO of Gize PLC, one of the veteran logistics companies in Ethiopia. As the World Bank’s Business Doing Index contributor and UN Global Compact Member, Gizeshwork was also one of the business people who went to Washington to participate in the AGOA CSO Network roundtable discussion.

“I have always been in close contact with them for years as I am personally interested in the matter,” Gizeshwork told EBR.

Gizeshwork hopes that obstacles in US-Ethiopia relations will gradually fade, as she prefers doing business with companies from the West over those companies from the Eastern bloc. She says, companies from North America and Western Europe demonstrate a high degree of professional and ethical standards.  “This has always benefitted my company very well.” Even the practice of workplace gender equality and protection of labor rights, is a good lesson she claims to have acquired by working with Western companies.

“Gize PLC is the only member of the UN Global Compact,” Gizehswork argues. “They have tough standards for gender and labor rights, but those have only made us a better company through the years.”

In the few times Gizeshwork tried to do business with the East, it has only left a bad taste in her mouth. Even though the East offers plenty of business opportunities, business people there have issues to improve on ethical and professional standards. “They sometimes want to look down on you in your own country,” Gizeshwork says.

No matter what, China is here, and they are making the world know about it. Following Washington’s decision to revoke Ethiopia’s accession to the benefits of the AGOA privileges, China announced that it would waive tariffs on 98 Pct of taxable imports from nine African countries beginning in December 2022. Now, that decision is in the implementation stage.

Despite a snag because of incomplete documentation, Ethiopia seems to be well on its way to enjoying a new privilege package from the second biggest economy. According to the Ethiopian Ministry of Trade and Regional Integration (MoTRI), the Chinese government has approved the duty-free entry of 1,644 Ethiopian goods into the Chinese market. China is providing Ethiopia with this market opportunity on an individual basis without imposing any obligations on Ethiopia.

Followed by Saudi Arabia and Turkey, China continues to be the largest source of foreign direct investment (FDI) in Ethiopia. When it comes to manufacturing investment, the private sector in China dominates the scene. This holds true regardless of the quantity or value of projects. ETB 29.17 billion (about USD 570 million) worth of investments were made in the manufacturing industry from 2010 to 2018. This made up 78.69 Pct of all Chinese investment in Ethiopia in terms of value. In Ethiopia’s statistics on foreign direct investment, the construction industry is not particularly noteworthy. Contrastingly, Chinese construction companies are commonplace, particularly in infrastructure projects. This is due to the fact that these companies largely provided construction services without necessarily having foreign subsidiaries.

The Chinese also have their eyes only on the prize, no matter how bad politics gets in a nation. That also seems to have gained them more trust during the GoE’s military engagement with the TPLF. From stopping the US and its allies from using the UN Security Council to pass resolutions on Ethiopia repeatedly, Beijing sits in comfort in the heart of the incumbent in Addis Ababa. Not to mention the uncertainty surrounding the viability of Ethiopia’s estimated USD 13.7 billion in Chinese debt, which is the second-largest in Africa behind Angola’s. China’s interest in Ethiopia is further increased by this debt liability.

Even though relations between Addis Ababa and Washington have deteriorated since the start of the war with the TPLF two years ago, the United States remains an important source of humanitarian assistance for the East African country. The United States first established diplomatic ties with Ethiopia in 1903, and they have persisted ever since, having their own good and bad days.

The United States government is the biggest donor to Ethiopia. Over the past 20 years, more than USD 13 billion development assistance was solicited from the US, with around four billion dollars going directly to health sector financing. Even with the marred relations, USAID has contributed more than USD 668 million in humanitarian aid to Ethiopia’s emergency drought response in 2022, by far the largest portion of all donors financing for this catastrophe to date. The US contributes more than USD 500 million annually on average to humanitarian aid, making it the largest bilateral donor.

With the latest US-African Leaders Summit, Washington hopes to ease tensions, not just with Addis Ababa but the whole Africa.

“Africa’s importance to global trade and investment will increase as its young population is set to double by 2050 to 2.5 billion people, representing more than a quarter of the world’s population, with a business and consumer market of 16 trillion dollars,” Fitsum told EBR. “No doubt, Africa will be the frontier of the next economic battle ground.”

The harsh military intervention in Libya, Syria, Iraq, among other countries, have been happening with Africans watching. Not to mention the factor of an alternative power playing into all this. How Africa has been feeling about the US was on full display when Washington expected Africa to condemn Russia for the invasion of Ukraine. That vote went down only to the disappointment of Linda Thomas Greenfield, US ambassador at the UN. The disappointment went to the point of introducing a bill at the Capitol Hill to punish African countries who did not vote the way Washington expected.

Talking to global media on December 15, 2022, Arikana Chihombori-Quao, former ambassador of AU to the US explained how the US needs to call for a timeout and rethink the whole game. The time to develop policies in Washington and attempt to shove it down the throats of African leaders is over.

“The conversation [Summit] is a desperately needed one,” Arikana told the media.

Arikana is not the only one to hold that view. The Ichikowitz Family Foundation published its latest African Youth Survey in June, 2022. According to the survey, 77 Pct of young Africans think that China is a better partner to Africa’s future and not the United States. That sits well in the figures, too. According to the United States Institute of Peace, Bilateral trade between China and Africa rose 35 Pct in 2021 from the year earlier to USD 254 billion, with African exports hitting a record USD 106 billion. China’s trade volume with Africa exceeds by a factor of four US-Africa trade volumes in the year which stood at USD 64 billion. EBR

EBR 11th Year • Dec 2022 • No. 113