During the Durg regime, Ethiopians heard a song that praised coffee every weekday mornings for being the backbone of the Ethiopian economy. Coffee was also called the “green gold.” While the songs are no longer broadcasted, coffee is still the number one Ethiopia’s export, accounting for about 47 percent of Ethiopia’s total exports, in 2005.
After relaying on raw materials such as coffee for more than 30 years, Ethiopia still faces the challenge to diversifying and increasing Ethiopian exports. Exports are important to a country for earning foreign currency, which could be used to buy products not manufactured in the country or pay debts.
Because it is difficult to find a trade data from Ethiopia, most of the numbers used in this article are from the United Nations and the Department of Commerce. The trade data does not include arms and ammunitions because those statistics are not readily available.
In 2005, Ethiopia’s total trade was $2.4 billion: exports - 656 million, imports - $1.8 billion. Ethiopia bought $1.9 million more than it sold in 2005.
Ethiopia’s Exports
Most of Ethiopia’s exports were coffee, spices, and tea worth $314 million (48 percent of the total exports); grain and seed, $133 million (20 percent); hides and skins, $75 million (11 percent), vegetables, $22 million (3 percent).
The profit Ethiopia earns from exports was negatively affected by the following three phenomena.
Firstly, while the demand is still high and growing for organic raw materials, prices for Ethiopia’s exports, in the past decades have consistently declined. Meaning even if more coffee is being exported out of Ethiopia the money coffee earns is lower than decades ago.
Secondly, reports indicate level of efficiency in production, management, and distribution in Ethiopia are still underdeveloped. Coffee alone provides income for approximately 25 percent of the population.
Thirdly, Ethiopia’s exports were negatively affected by the recent Ethio-Eritrea war. As shown in the graph, after seven years, Ethiopian exports to the United States have not yet reached the level in 1998, which was $70 million. In 2005, Ethiopia’s export to the U.S. was $62 million.
While most of the Ethiopian exports are extractive, one of the most damaging is the exports of trees, which was the sixth largest export in 2003. Ethiopia is currently facing a very high rate of deforestation.
The European Union bought $337 million (51 percent) of Ethiopian exports; China $86 million (13 percent); Japan $74 million (11 percent); and the United States $62 million (11 percent) in 2005.
Ethiopia’s Imports
The top three Ethiopian imports in 2005 were machineries and aircrafts $664 million (34 percent of total imports), vehicles and electronic equipments $398 million (20 percent); food and medicine $212 million (10%).
In the long run, the reliance on imported machineries, medicine, and food might suffocate domestic industries in Ethiopia.
Ethiopia imported $713 million worth items (36 percent of total imports in 2005) from the European Union; $515 million (26 percent) from the United States; and 285 million (15 percent) from China.
Ethiopia’s Regional Trade
The top Ethiopian export and import partners are the wealthiest countries in the world. Ethiopian trade with the rest of Africa and other developing regions are limited. Several trade experts’ advice African countries to increase regional and continental trade for economic growth.
Many regional organizations in Africa are attempting to negotiate the lowering of trade barriers among neighbor countries.
Ethiopia is member of several enter-regional trade organizations such as Common Market for Eastern and Southern Africa (COMESA). Under COMESA, 20 east African countries has agreed “to co-operate in developing their natural and human resources for the good of all their people'” and promote “peace and security in the region
On October 31, 2000, eleven out of the 20 COMESA member countries[1] created a Free Trade Agreement and “eliminated their tariffs on COMESA originating products, in accordance with the tariff reduction schedule adopted in 1992.”[2] Ethiopia has not yet other neighboring counties in creating a free trade area.
Joining the other African countries would provide Ethiopia with an economic opportunity. Several studies indicate if people are given the opportunity to trade, no ethnic differences or boarders will prevent them from improving their economy.
Ethiopia’s Trade with the United States
Ethiopia ranks number 78 in buying U.S. products and number 136 in selling to the United States.
To improve the trade relationship between the United States and some African countries, President Clinton signed the Africa Growth and Opportunity Act (AGOA) became a law in May 18, 2000. President Bush expanded and extended AGOA by amending the law twice. The latest amendment became a law on July 13, 2004.
AGOA received bipartisan support in Congress. Many individuals, lawmakers, and nongovernmental organization worked to create, expand and improve AGOA. Those individuals include Whitaker, the founder and CEO of Whitaker Group and Congressman Jim McDermott, a democrat from Seattle.
AGOA grants quota and duty free access to certain African exports to the United States from eligible African countries.
Counties must meet annual eligibility requirements in order to export some of their product to the United States duty free. The eligibility requirements include progress toward a market-based economy, free trade, the rule of law, political pluralism and support in fighting terrorism.
AGOA also provides an opportunity for African trade ministers and business people to meet with high U.S. government officials, annually. As of March 2006, four AGOA forums have taken place in Senegal, Washington D.C., and Mauritius.
Ethiopia has been AGOA eligible since AGOA become a law. Through AGOA, Ethiopia’s exports to the United States have somewhat increased and diversified. While it is a good start for diversification of Ethiopia’s export, relaying solely on apparel export is not good for Ethiopia because China and India are expected to dominate world’s textile and clothing market, especially after quotas for their exports of clothing was eliminated early in 2005.
Organizations such as the Ethio-American Trade & Investment Council have been attempting to improve trade by organizing events with the United States Trade and Development Agency for Ethiopian exporters to visit Washington DC to find buyers in the United States.
Many Ethiopian business owners need the help of the Ethiopian Diaspora to distribute Ethiopian products worldwide. The African Diaspora could take advantage of these programs to export and import goods and services that benefit Ethiopia.
United States also have export assistance programs for people who would like to ship goods and services to Ethiopia. Government agencies, such us the U.S. Import Export Bank and Export Administration under the Department of Commerce, offer such assistance.
In conclusion, while a well developed transportation system and high tariffs are barriers to Ethiopian trade, opportunities for prosperity through trade are immense.
Ethiopia must stop relaying on one backbone - coffee – and start building strong pillars of trade. Optimistically, Ethiopia will soon offer the world her blessings for a profitable return.
Stay tuned for an article on Ethiopian potential exports.
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