Reevaluating AGOA as a Preferential Scheme and the Path to Follow: From Ethiopia’s Perspective

Author: Meaza Haddis Gebeyehu
Lecturer, Hawassa University, School of Law

One of the positive impacts of economic globalization is the shift of most, although not all, international trade relations into a rule-based, secure and institutionalized system instead of an arbitrary one. WTO and modern-time RTAs are the results of a long-term process since the 1940s which can be taken as a major step for the systematic regulation of international trade as a continuation of the structure from GATT 1947.

Eight rounds of negotiations took place during the GATT 1947 regime[1] during which the economic interests of most developing and least developed countries were underrepresented or totally ignored as the major parties to the negotiations were developed nations. Hence, developing and LDCs are left with the only choice of complying with the already established rules if they wish to be integrated into the multilateral system.

The inclusion of the concept of Special and Differential Treatment (S&D) under the various legal instruments of WTO is a move to accommodate the interests of these countries and prioritize their effective integration into the global system. It is the result of a political compromise. However, developing countries and LDCs have been complaining that the S&D schemes under WTO such as the U.S. implemented Generalized System of Preferences (GSP) system are not working in their favor in reality.[2] In fact, these programs are claimed to be more beneficial to the needs of the developed countries.

AGOA

As an expansion to the product coverage of the already operating GSP System, the U.S. enacted a legislation in May 2000, the African Growth and Opportunity Act (AGOA)[3] specific for SSA countries including Ethiopia. The aim was to promote economic developments of these LDCs through trade instead of aid. These countries were given preferential treatment under AGOA meaning they were allowed to export their products (such as textile and apparel products) duty-free to the U.S. market as an exception to WTO’s MFN principle.

Although AGOA is part of WTO’s S&D which puts responsibility on developed countries to provide special treatment for LDCs,[4] its WTO compatibility is questionable as preference-receiving countries are made specific instead of providing the preference for all developing and LDCs. It also suffers from legal instability as the U.S. adopted it as its federal law and can arbitrarily amend or repeal it anytime it deems right.[5]

Moreover, the preferential scheme has two stages as eligibility criteria: geographical and social and economic criteria.[6]  The geographical criterion is that in order to be eligible for the scheme, a country should be one of the 38 SSA countries.[7] As part of the social and economic criteria, a country must ensure that it has, inter alia, market-based economy and economic policies to reduce poverty, works to achieve rule of law and combat corruption, and ensure respect for internationally recognized worker rights.[8] In addition, beneficiary countries are examined to check whether or not their national policies interfere with US national security or foreign policy, violate internationally-recognized human rights principles and support international terrorism.[9] It is through the use of all these eligibility criteria that the U.S. government regularly revises country-profiles and determines whether a country is still eligible or not to access the preferential scheme.

The aim of preferential schemes such as AGOA is not just fostering U.S.-African commercial relations, they rather carry a far-fetched objective of subjecting the preference-receiving countries into an arrangement that would serve the interests of the other side. The recent suspension of Ethiopia from accessing AGOA following new political developments in the country can be taken as an example to show that trade in the contemporary world is not just an economic issue but a political one as well and eligibility to access S&D schemes like AGOA goes beyond being considered as one of those countries deserving a special treatment owing to their fragile economies.

Path to Follow

The extent to which integration into the global trading system benefits a given country depends on that country’s economic competitiveness. Nevertheless, active engagement within the multilateral (WTO) and regional (RTAs) trade systems is considered as the best alternative available to ensure economic growth in this economically globalized world. Conducting trade based on a legally predictable and transparent system creates smooth trade relations among countries and that’s why an institutionalized trading system is desirable. In a global system where economic interdependence is not an option but a reality, it would be unrealistic to say Ethiopia would be better off isolated. However, it is reasonable to argue that Ethiopia’s international trade relations should be predictable and based on rules to avoid arbitrariness. It needs to strengthen its negotiating capacity to ensure that the outcome of trade negotiations and arrangements are favorable to its national objectives and do not only reflect the interests of the other side.

The decision of the U.S. to suspend Ethiopia from accessing AGOA should be met with immediate economic decisions to counterbalance the probable loss the country would face as a result of the suspension. There are various alternatives to this end including:

• Making the best use of already existing RTAs to which Ethiopia is a party such as AfCFTA and COMESA;
• Actively working towards the creation of new RTAs by entering into either bilateral or multilateral agreements;
• Exploring and using other available  preferential schemes like Everything But Arms (EBA) Initiative;
• Looking for alternative markets which haven’t been explored enough but have potential (African countries, countries in S. America, South East Asia …); and
• Finalizing the country’s WTO accession since that would secure more predictable, certain and rules-based trade relations with other countries and reduce arbitrariness.

Conclusion

AGOA as S&D is supposed to operate based on the non-reciprocity principle being granted unilaterally by the U.S. for specific Countries. However, the whole process of the AGOA scheme is very ambiguous and arbitrary.[10] Although the arrangement is a non-reciprocal one, there still is a high probability for the U.S. to lobby the preference-receiving countries for the promotion of its political interests. The countries on both sides are not in any way on equal economic footing and bargaining power resulting in the manipulation of one by the other for other politically motivated agendas. Ethiopia as one of the latest countries to be given the ultimatum of suspension from accessing AGOA due to political changes taking place in the country can take this as an opportunity to look for other alternatives so that its future trade relations are based on predictable and rules-based system and its economy won’t be affected by such arbitrary decisions in the future. The experience of Ethiopia can serve as a lesson for other SSA countries as well.

[1] Geneva (1947), Annecy (1949), Torquay (1950-51), Geneva (1956), Geneva (1960-61) – also known as the Dillon Round, the Kennedy Round (1964-67), the Tokyo Round (1973-79) and the Uruguay Round (1986-94).

 https://www.wto.org/english/docs_e/gattbilaterals_e/indexbyround_e.htm (Accessed on 11/11/2021)

[2] Dominykas Roga, “Justice and Inequality in the World Trading System: A Critical Assessment”, Inquiries Journal/Student Pulse 4 (11) (2012). http://www.inquiriesjournal.com/a?id=712 (Accessed on 14/11/2021)

[3] UNCTAD, ‘The African Growth and Opportunity Act: A Preliminary Assessment’, A report prepared for the United Nations Conference on Trade and Development ( April 2003)

[4] For example Paragraph 44 of the Doha Delcaration (2001)

[5] Akiko Yanai, “Rethinking Special and Differential Treatment in the WTO”, IDE Discussion Paper No. 435, (2013): 7.

[6] Akiko Yanai, 6-7

[7] As of 2020 as the progress and eligibility of preference-receiving countries is examined annually.

[8] United States Trade Representative, ‘Implementation of the African Growth and Opportunity Act’, USTR Biennial Report to Congress on AGOA (June 2020): 16.

[9] Ibid

[10] Akiko Yanai, 7.

About the Author:

Meaza Haddis Gebeyehu is currently a Lecturer at Hawassa University, School of Law, where she teaches International Trade Law, Public International Law and Law of Contracts. She holds the degrees LL.B. from Hawassa University with Very Great Distinction and Magister Hukum (M.H.) in Legal Science (Cum Laude) from Universitas Indonesia.