Ethiopia’s EU export decline continues

Ethiopia’s exports to the European Union have been declining lately according to a paper presented to the Stakeholder Outreach Workshop on the EU’s Generalized Scheme of Preferences (GSP) in Ethiopia three weeks ago.

The EU has been a major export destination in the quantity and value of goods that Ethiopia exports and despite the decline this is still the case. According to the document from the Ministry of Trade, the EU absorbs an average of 24.5 percent of Ethiopia’s exports, and in the past five years an average of 31.7 percent of Ethiopia’s exports went to the Middle East and China.

Most, 18.9 percent, of Ethiopia’s exports go to China. Based on regional comparison Africa is second after the EU by 20.57 percent.

The US average share is close to 5.5 percent and 17.7 percent goes to unstated destinations.

However the majority of exports still go to the EU but the value significantly shrank in 2016. In 2016 the country exported USD 609 million worth of products, this is a decrease compared with 2011. In 2011 Ethiopia exported about USD 870 million worth of commodities.

Documents indicated that the EU export share in 1997 was 46.8 percent and it declined to 28.6 percent in 2001. During a peak time in 2011 the share went up to nearly 34 percent. But the report indicated that the EU market share bottomed out at 23.28 percent in 2016. However this is much higher than the 2001 performance in terms of value.

The document presented by Yeshak Tekaligne, Director of Bilateral and Regional Trade Relation and Negotiation at the Ministry of Trade indicated that supply side factors including limited productive capacity, limited diversification of the economy and low level of structural change and industrial development were major reasons for the decline.

Efficiency problems in logistical and related areas and a weak value chain are also challenges. The private sectors weak competitiveness in the global system, lack of technology transfer and market linkages were other reasons for the decline.

However not all the changes were due to challenges in some cases the change in exports to the EU is because more exports are going to other emerging trading partners.

Since 2001 the EU has introduced a benefit for Least Developed Countries, a duty free and quota free access to the EU market called Everything But Arms (EBA), for all products–except for arms and ammunition.

Ethiopia is one of the beneficiaries of this policy.

The other reason for the decrease includes the EBA Stringent rules of origin and cost of complying with them.

Competition from Latin America and Asian countries, which generates a market share  for LDCs despite their tariff advantages and high volatility of prices for agriculture products are also other issues.

Ethiopia’s exports to the EU did consistently go up for ten years from 2001 to 2011. Since 2012 they have consistently gone down.

In terms of product type over 90 percent of the commodities that the country exports to EU are agricultural products. Flowers and coffee are the majority and contributed to Ethiopia earning USD 551 million in 2016. Flowers and coffee were 78 percent of the total export share to EU.

Textiles and textile products make up USD 42.8 million with a  7 percent share in the 2016 performance and  non agriculture products brought in USD 14.1 million.

Ethiopia’s exports have remained stagnant lately.

For instance in the first seven months of the budget year the government projected earnings of USD 2.48 billion but the actual achievement stood at USD 1.4 billion. A year ago that figure was USD 1.5 billion.