Article written

  • on 29.07.2015
  • at 11:11 AM
  • by Naomi Cohen

Great Trade Expectations Behind the US-Ethiopia Trade Relations 0

In 1903, the United States and one of the world’s oldest nations, Ethiopia, established a relationship. Emperor Menelik II described the day as “… beginnings of a relationship which will have some place in history”, as quoted in a paper presented by Professor Negussay Ayele of Cornell University, to mark the 100th anniversary of that occasion. The historic relationship is, in this week, to witness a rare event with the first visit of a sitting president of the United States paying a visit to Ethiopia. President Barack Hussein Obama’s visit to Ethiopia follows what happens to be his first visit as President, to his father’s homeland, Kenya.

Ethio-American relations started at the insistence of Robert P. Skinner, an American diplomat in France, who urged the US State Department to establish an official American presence in Ethiopia. The policy initiative was based on the strategic location of Ethiopia to the Red Sea route and the disadvantaged start-line position of the US compared to the colonial European presence in the region. President Theodore Roosevelt appointed Skinner as the first Commissioner Plenipotentiary for a commercial/diplomatic mission to the court of Emperor Menelik II.

In the following years, the two countries’ trade partnership focused on the military, including arms inflow and the Kagnew military base at the Red sea, leased to the US.

More than a century later, the United States, a major donor and strategic partner in the war against terrorism, is yet to have a major investment relationship in Ethiopia despite the African Growth Opportunity Act (AGOA).

America’s Overseas Private Investment Corporation (OPIC) has been instrumental in helping its citizens, including those of Ethiopian origin, to establish business in Ethiopia through loans.

One early beneficiary is Tamirat Bekele, who opened the International Clinical Laboratories (ICL), the first internationally accredited medical laboratory in the country in 1997, a year before the Ethio-Eritrean border war began.

The process took from 1997 to 2004, as Ethiopian investment law did not allow a private company to get a loan from abroad. It was finally established with 580,000 dollars in 2004, of which 480,000 dollars was a loan from OPIC after the border war ended.

In 2015, the challenges of doing business between the two countries remain and the trade volume between the two countries is low, and significantly in favour of the US.

In the first six months of 2015, the trade volume between the two countries totalled 834 million dollars with the trade balance being 623 million dollars inclined towards US. The 2014 volume of trade was 1.8 billion dollars with the balance being 1.4 billion dollars also inclined to the US. The 2013 data from the US Census Bureau indicates the total trade volume between the two countries was 881 million dollars, with a trade balance of 194 million dollars in favour of the US.

The 2013 figure had a significant fall from the preceding year whose volume was 1.5 billion dollars with the trade balance still 1.1 billion dollars inclined towards US.

By the first six months of the 2014/15 fiscal year, the United States stood at the eighth spot in terms of export destinations of Ethiopian items as data from the Ministry of Trade (MoT) indicates, with a total of 51,718 dollars. Exports showed improvement by 10,815 million dollars from the preceding year when the US ranked ninth place for exports.

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by Brook Abdu

Photo Credit: Addis Fortune

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