US Removes Ethiopia, Mali, and Guinea from Africa Growth and Opportunity Act

Aljazeera published on 2 January 2022 an article titled "US Removes Ethiopia, Mali and Guinea from AGOA Trade Programme." 

The United States removed Ethiopia on 1 January 2022 from AGOA eligibility due to "gross violations of internationally recognized human rights being perpetrated by the government of Ethiopia and other parties amid the widening conflict in northern Ethiopia."  It removed Mali and Guinea because of coups d'etat in both countries.  Each country has benchmarks for reinstatement of AGOA eligibility.  

A factsheet on "AGOA and Ethiopia" explains that in 2020 Ethiopia exported to the United States $238 million of goods (mostly apparel and footwear) under the terms of the Africa Growth and Opportunity Act.  Coffee exports of $131 million did not fall under AGOA.  

Will Chinese Light Manufacturing Move to Africa?

Peking University's Center for New Structural Economics and the UK-based Overseas Development Institute published in December 2017 a landmark study titled "Adjusting to Rising Costs in Chinese Light Manufacturing: What Opportunities for Developing Countries?" by Jiajun Xu, Stephen Gelb, Jiewei Li and Zuoxiang Zhao.

Accelerating real wage growth in China from the mid-2000s has raised the possibility of relocation of jobs from export-oriented labor-intensive light manufacturing industries on China's east coast to low-income countries in Africa, other parts of Asia, and even within China. The study surveyed 640 privately-owned Chinese firms in four sectors--home appliances, garments, footwear, and toys--that collectively employ about 16 million workers in China. Only 10 percent of the firms had invested abroad in the past or intended to do so in the next three years. Southeast Asia (Vietnam and Cambodia) was the most frequent destination. So far, only three firms had invested in Africa, all in footwear in Ethiopia. Only two firms indicated Africa was a preferred destination for planned foreign direct investment.

While the sample surveyed in China is relatively small, this report suggests that all of the recent hype concerning the potential movement of Chinese light industry to Africa should be treated with a great deal of caution. The study concluded that Southeast Asia remains a much more likely destination for China's outward investment in light industry than does Africa.

Chinese Manufacturing Not Likely to Relocate in Africa

The Center for New Structural Economics at Peking University published in December 2017 a report titled "Adjusting to Rising Costs in Chinese Light Manufacturing: What Opportunities for Developing Countries?" by Jiajun Xu, Stephen Gelb, Jiewei Li and Zuoxiang Zhao.

The authors interviewed 640 private companies (42 percent owned by domestic Chinese owners and 52 percent wholly owned foreign subsidiaries) in four Chinese cities concerning their plans for moving to lower cost production areas. The main challenge they faced in China was rising wage costs.

The implications for Africa are important. Of the 62 firms that had invested abroad or planned to do so, southeast Asia was a much more likely destination than Africa, where only three of the firms had invested to date, all in footwear in Ethiopia. Only two firms indicated Africa was a preferred destination for planned foreign direct investment (FDI). The survey suggested there is a need for realism on the potential for jobs transfer from China to low income host countries.

Ethiopian Footwear Entrepreneur

Good Governance Africa published a story on 1 June 2014 titled "Heart and Sole" by Matthew Newsome about an Ethiopian entrepreneur who has developed a footwear export business that already has sales of $2 million annually and employs more than 200 people.