US Sanctions on AGOA: A Political Economy Analysis of Ethiopian Trade Development Challenges and Prospects

Abstract

This study examines the political economy dimensions of US sanctions against Ethiopia and their impact on the textile and apparel industry. To this end, this study uses a case study research design and a mixed research approach that combines primary and secondary data that are analysed descriptively and thematically. The findings show that prior to the US sanctions (2021), Ethiopia benefitted from the African Growth Opportunity Act (AGOA) trade preferences by exporting textile and apparel products that accounted for $525.2 million of its total export earnings. However, Ethiopia’s exit from AGOA has led to significant losses in export earnings, a decline in foreign investment and job losses in key sectors, just as export performance in the textile and apparel industry has fallen to a negative trade balance of $25.9. The study also shows that companies using AGOA were more affected than companies not using AGOA. 63% of the former reported a decline in exports, and 39% of the latter reported laying off employees. Based on these findings, Ethiopia needs to mitigate the impact of the suspension of AGOA by diversifying its trade partnerships and trying to restore Ethiopia’s eligibility for AGOA through diplomatic means.