The Ethiopian government is finalising instruments and expediting internal consultations for the accession of the Common Market for Eastern & Southern Africa (COMESA) Free Trade Area (FTA).
Industry areas in which the country is going to join the free trade area have been identified by the Ministry of Finance and Economic Development (MoFED) at the end of 2014. MoFED’s study conducted at the end of 2014 recommended a phase by phase approach to accede into the COMESA FTA and accordingly, categorised three trade areas based on their responsiveness to the FTA competition after accession. These are extremely competitive, upon capacity building and uncompetitive.
Trade areas categorised under ‘extremely competitive’ and ‘competitive upon capacity building’ will join the free trade area with a complete elimination of tariffs in the future. The remaining uncompetitive industries will join FTA gradually with 30pc reduction of tariffs every year.
The change of the tariff system has been accomplished based on the industries selected to join COMESA FTA and ready to submit to the Council of Ministers for final endorsement. MoFED is given an authorisation by the Inter-Ministerial Coordinative Committee to conduct internal consultations with different stakeholders such as the Ethiopian Revenue & Customs Authority (ERCA) and commercial associations, Semere Tesfaye, senior expert of United Nations Agencies of Regional Economic Cooperation at MoFED told Fortune. He added that following the consultation, the instruments for the selected trade areas to FTA will be made public and then deposited with the COMESA Secretariat, which will then distribute them to the member countries.
Ethiopia failed to join the COMESA FTA in 2000 because of reduced competitiveness of the local industries compared with the industries of other COMESA Member States. However, with the growing economy of the country, some industries are potentially recorded to be able to contend in the FTA area, Semere said, declining to name the trade areas selected for the COMESA FTA.
Having a disadvantage of keeping back the revenues the government would have obtained from tariffs in the short run, the accession of Ethiopia into the COMESA FTA results in more market opportunities for domestic industries, increased efficiency of local industries, access to less expensive and high quality products for the consumers, and prevention of domestic monopolies charging high prices, the study showed.
COMESA is the largest regional economic organisation in Africa having 19 Member States and a population of about 390 million. It is an organisation of states focusing on the formation of a large economic and trading unit capable of overcoming trade barriers. COMESA’s 18th summit was held in Addis Abeba between March 22 and March 31, 2015 with the theme of “Inclusive and Sustainable Industrialisation”. Prime Minister Hailemariam Dessalegn was elected as Chairperson of the COMESA authority by Heads of State and Government Summit.
The FTA was realised in October 2000 when nine Member States, namely, Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, Zambia and Zimbabwe eliminated their tariffs for the goods coming from COMESA Member States.