Economy

Kenya to gain as US restricts Ethiopia goods on Tigray war

Joe Biden

US President Joe Biden speaks during climate change virtual summit from the East Room of the White House campus April 22, 2021, in Washington, DC. PHOTO | AFP

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Summary

  • Kenya looks set to benefit after the US suspended duty-free access to Ethiopian exports following ongoing unrest in the country’s Tigray region.
  • The US move to ban Ethiopia opens a window for Kenyan textile and apparel firms to increase their exports to the US market of more than 6,000 product lines as US restrictions hit their Ethiopian rivals.

Kenya looks set to benefit after the US suspended duty-free access to Ethiopian exports following ongoing unrest in the country’s Tigray region.

The US move to ban Ethiopia opens a window for Kenyan textile and apparel firms to increase their exports to the US market of more than 6,000 product lines as US restrictions hit their Ethiopian rivals.

US authorities said Ethiopia had breached the eligibility requirements of the African Growth and Opportunity Act (Agoa) because of “gross violations of internationally recognized human rights” a US official was quoted by reports saying.

Kenya’s total exports to the US under the Agoa plan peaked at Sh46 billion in 2019, before declining eight percent to Sh42.2 billion in 2020, according to the Economic Survey data.

On the other hand, Ethiopia exported about Sh26.3 billion worth of goods duty-free to the US under Agoa last year, US commerce department data shows.

More than 90 percent of the Ethiopian exports were textiles and apparel signaling the huge opportunity for Kenyan textile exporters. Kenyan officials yesterday remained mum on the implications of the US ban when sought for comment by Business Daily.

Agoa grants 40 African states including Ethiopia and Kenya quota and duty-free access to the US market of more than 6,000 product lines.

Over the past decade, Ethiopia and Kenya have spent billions constructing a dozen industrial parks and related infrastructure in race for the US export market.

Some Ethiopian factories produce goods for fashion giant PVH, owner of the Calvin Klein, Speedo and Tommy Hilfiger labels.

Kenya and the US formally launched negotiations for a bilateral trade agreement last year that the two economies hope could serve as a model for additional agreements across the African continent.

The deal would replace the Agoa, which expires in 2025.

The Tigrayan war is threatening the stability of Ethiopia, Africa’s second-most populous country seen by Kenyan major companies, as a promising frontier for investment. The conflict has kept investors on edge, even as it triggered a hunger crisis, leaving millions of people in need of humanitarian aid.

It intensified Tuesday after Ethiopia’s council of ministers declared a nationwide state of emergency effective immediately, according to state media.

Earlier in the day, authorities in Addis Ababa told residents to register their weapons in the next two days and prepare to defend the city.

An executive order signed last month by US President Joe Biden seeks to slap harsh sanctions on all sides involved in the war in the Tigray region — including the governments of Ethiopia and Eritrea.

The previous US attempts to pressure the warring factions, including visa restrictions against Ethiopian and Eritrean officials, have not been successful. The Biden order allows the US Treasury Department to impose sanctions if steps are not taken soon to end 10 months of fighting.