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TRADE-RUSSIA: Ethiopia Seeks Preferential Treatment for Coffee

Kester Kenn Klomegah

MOSCOW, Apr 30 2008 (IPS) - After several months of trade negotiations in the joint Russian-Ethiopian economic commission, Russia is considering allowing Ethiopia to bring in its different brands of aromatic coffees on a preferential basis.

If the first consignment is delivered this year, it means Ethiopia will be diversifying its coffee export market from its traditional markets in the United States, Britain and other parts of Europe.

‘‘We know that Russia has a fast growing and big market for these products.

‘‘From our side we’ll do everything possible to explore the existing economic potential for cooperation in this sphere and tap it to the maximum,’’ Dr Teketel Forssido, a professor in agriculture who was appointed last year as the new Ethiopian ambassador to Moscow, told IPS in an interview.

He said that Ethiopia and Russia have just concluded a range of new trade agreements.

Ethiopia’s foreign trade policy is primarily aimed at identifying international markets for the country’s agricultural products that will generate foreign revenues for the country.

Russia’s liberalised market, which emerged after the collapse of the Soviet economic system, is one of those being targeted.

The Ethiopian government has adopted flexible policies that allow Russian business to invest in the coffee industry of Ethiopia. Land is basically free and can be cultivated using cheap local labour and local raw materials which can be processed without difficulty.

What is required is to process all necessary documents with the help of the appropriate ministries.

Forssido explained that Russian companies can buy Ethiopian products directly by negotiating with Ethiopian exporters. His government’s agencies will provide support to facilitate coffee trade transactions for Russian importers.

Senior trade official at the Ethiopian embassy in Moscow, Amha Hailegeorgis, told IPS that ‘‘Ethiopia has been exporting coffee to Russia for a long time now. There are already private Russian companies which import Ethiopian coffee that are marketed in Moscow and St Petersburg.

‘‘However, the amount of coffee coming into Russia is still too little. Most Ethiopian coffee reaches Russia via a third country.

‘‘Therefore, during the last joint commission meeting, the Ethiopian delegation asked for preferential treatment for Ethiopian coffee. That is, for coffee to enter the Russian market without any tax. The Russian side has agreed to consider the proposal. It will boost the trade relations between the two countries,’’ he explained.

A document released by the Russian ministry of foreign affairs last year says that goods exported from African countries are eligible for preferential customs and tariff treatment. Legislation stipulates that traditional export goods from least developed countries in regions including Africa should be exempted from import taxes.

Researchers at Moscow’s Institute for African Studies say coffee remains one of the most important sources of export income for East African countries, notably Uganda, Ethiopia, Kenya and Tanzania.

Ethiopia is the Africa’s largest coffee exporter and has been hard hit by the recent price slump. Coffee accounts for more than 60 percent of Ethiopia’s exports, generating vital income for its population of 65 million, more than half of whom live on less than a dollar a day.

Income from Ethiopia’s coffee has dropped by 110 million dollars, severely affecting the one million families who depend on coffee for their income.

While still selling to consumers in western countries for around 10 dollars per kilogram, the world market price for coffee is less than 50 dollar cents per kilogram, of which farmers only receive half.

Just five years ago, farmers received at least five times that amount. As a result of this massive slump in the coffee price, Ethiopian coffee farmers are facing poverty and hunger.

Coffee exporters praised the government for its marketing efforts.

‘‘Ethiopia’s economy is agrarian. It has many agricultural products, including coffee and flowers, to offer the Russian market. The authorities are really pushing to promote Ethiopian coffee, get new markets and expand our business in Russia,’’ Tewodros Yilma, managing director of Addis Ababa-based Alpha Trading Partners, told IPS.

‘‘The business competition is always there but because of the uniqueness of Ethiopian coffee, consumers’ response is increasingly positive and encouraging. If the Russian coffee market opened up for Ethiopian coffee, it would definitely help our economy in a big way.

‘‘We hope to see a tremendous increase in the export volume and earnings,’’ he added.

Tewodros further said that Russia has been an ally of Ethiopia’s since the time of the USSR. After the collapse of the Soviet Union, Ethiopian and Russian relations between the two counties have shown significant improvement, although not as fast as Ethiopia had expected.

Katelo Shonora Geta, a director at Bulehora Trading Enterprise, told IPS from Addis Ababa that if Russian authorities allowed Ethiopian coffee imports on more favourable terms, it would boost revenue and domestic production in the long term.

‘‘It will be easy for Ethiopia to penetrate a market such as Russia with its genuine quality. Russia is a big potential market for the coffee trade. Demand exists for Ethiopian Arabica coffee,’’ Geta said.

Eustace Davie, director at the Free Market Foundation, an organisation that tracks African trade policies in South Africa, told IPS, ‘‘there will without doubt be keen competition in the Russian market and it is up to Ethiopian coffee growers to produce a type of coffee that is in demand in Russia and to supply it at a competitive price’’.

Davie explained that Rwanda has provided a good example of how special coffee can be produced to appeal to specific markets.

‘‘In the long run all imports must be paid for out of funds generated by exports. Exports are not good for their own sake but for the capability it gives to exporters to import goods for sale in their home country. Of course, the exporter may prefer to sell the foreign currency that is earned to someone else who wishes to import,’’ Davie said.

Many African states are, for instance, using foreign currency to purchase goods from China, which has the capability to produce goods at lower prices than other countries.

So if Ethiopians sell coffee to Russia they would be able to shop around for the best quality goods at the lowest prices from other countries and so make low-cost goods available to Ethiopian consumers, and in the process improve the quality of lives of the people.