Ethiopian membership to the African Continental Free Trade Area: Challenges and Prospects

Ethiopian Membership to the African Continental Free Trade Area (AfCFTA):
Challenges and prospects
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Jimma University College of law and governance, School of
law, Post graduate study of commercial and investment laws
Program: Commercial and Investment law

Title: Ethiopian Membership to the African Continental Free
Trade Area (AfCFTA): Challenges and prospects
By Yirgalem Mitiku Gebre ( Id.no: S400034/09)
Advisor: Taddele Geremew (LL.B, LL.M)
A Thesis submitted to College of Law and governance
Research and post graduate studies office in partial fulfillment
of the requirement of LL.M/ Master of laws/ in commercial
and investment laws
Jimma
Feb 8, 2021
Jimma University College of law and governance, School of law, Post
graduate study of commercial and investment laws
Approval Sheet
Title: Ethiopian Membership to the African Continental Free Trade Area
(AfCFTA): Challenges and prospects
By Yirgalem Mitiku Gebre

Approved by Board of Examiners:
__________________ ________________ _________________
Advisor’s name Signature Date
__________________ ________________ _________________
Examiner (External) Signature Date
__________________ ________________ _________________
Examiner (Internal) Signature Date
__________________ ________________ _________________
Chairperson Signature Date
Declaration
I, Yirgalem Mitiku, declare that this thesis is a result of my own original effort and
work, and that to the best of my knowledge, the findings have never been
previously presented elsewhere for the award of any academic qualifications.
Where assistance was sought, it has been dully acknowledged.
Declared by: Yirgalem Mitiku Gebre: ______________
Date: Jan, 2021
Confirmed by:
_______________________________ _______________
Advisor’s Name signature
I
Dedication
I declare this work to my beloved mother GETE LETA and my Father

MITIKU GEBRE who were truly my courage and strength.
II
Acknowledgement
First of all, I would like to thank God, the almighty, for giving me determination, guidance and
courage in writing this thesis. As my regular job is public prosecutor and I have been pursuing
my study in summer program, I would also like to extend my heartfelt gratitude to Oromia
Attorney general for giving me a leave that extends for a period of three months, during which I
was supposed to return back right on job. The leave I was given ultimately enabled me to
successfully complete the work. I would also like to express my special gratitude to my Advisor,
Taddele Geremew, for his encouragement and support from the beginning to the finalization of
the work. His splendid endeavor in shaping the work to be successfully completed is pivotal.
Lastly, but not least, I would like to appreciate those who directly or indirectly supported me all
the way through during the preparation of the work.
III
Abstract
The AfCFTA is established with the aim of establishing a single African market for goods and
services mainly to meet the objective of creating African Economic community there by
facilitating one of the implementation plans of AU agenda 2063. The AfCFTA agreement is set
to be implemented in two phases, namely; phase one and phase two. Ethiopia has already ratified
the AfCFTA. Now a day, AfCFTA has already attained a threshold for the entry into force of the
agreement. A number of studies have been made regarding the prospects and challenges of the
AfCFTA agreement and regional trade liberalization in general. Nonetheless, none of these
studies has considered the prospects and challenges of Ethiopia’s membership to the AfCFTA.
This study, in as far as Ethiopia as a member of AfCFTA is concerned focused only on phase
one and assessed the Ethiopian trade policies regarding trade in goods and services and identified
the possible benefits and challenges.
This study is basically conducted through systematic analysis of primary legal instruments and
literatures written regarding the impacts of AfCFTA on member states. Interview has also been
conducted to verify the validity of those findings arrived at through those systematic analysis.
Accordingly, the results showed that Ethiopia’s membership to the AfCFTA would not be
resulting in an exaggerated positive signal especially in the short term periods for certain sectors.
This is partly due to the fact that Ethiopia’s readiness for the commitment and implementations
of the AfCFTA has not been much commendable despite its early ratification. Yet, the AfCFTA
is expected to benefit Ethiopia as well. It is also found out that, Ethiopia has not, among others,
drawn up national AfCFTA strategies, schedules of specific commitments, schedules of tariff
concessions and regulatory cooperation framework for trade in services and trade in goods and
transitional implementation work programme in line with the adopted modalities. The study has
also revealed that the Ethiopian legal regime regarding trade in services is incompatible with
current regional and global economic moves in favor of liberalization of service sectors. It is
therefore, generally recommended that Ethiopia must revise and amend incompatible economic
policies and legal regimes and take complementary measures, which include designing a national
AfCFTA strategies for its better commitment and implementation readiness. This study has also
highlighted a number of researchable aspects for further study.
Key words: Regional trade liberalization, AfCFTA, Ethiopia, benefits, challenge IV

Table of Contents Page
Declaration ....................................................................................................................................... I
Dedication ....................................................................................................................................... II
Acknowledgement .........................................................................................................................III
Abstract ......................................................................................................................................... IV
Table of Contents ...................................................................................................................... V-VI
Abbreviation and Acronyms ................................................................................................ VII-VIII
Lists of Tables/Figures .................................................................................................................. IX
Chapter One .....................................................................................................................................1
1. Introduction to the Research.....................................................................................................1
1.1.Background of the study...............................................................................................1
1.2.Review of literatures.....................................................................................................4
1.3.Statements of the problem ..........................................................................................12
1.4.Research questions .....................................................................................................14
1.5.The scope of the study ................................................................................................14
1.6.Objectives of the study ...............................................................................................15
1.6.1. General objective ............................................................................................15
1.6.2. Specific objectives ..........................................................................................15
1.7.Methodology of the study ...........................................................................................15
1.8.Significances of the study ...........................................................................................16
1.9. Limitations of the study .............................................................................................16
1.10. The organization of the study ................................................................................17
Chapter Two: An overview of actions for Regional Trade Liberalization: AfCFTA in focus ......19
2.1.Introduction ......................................................................................................................19
2.2.The Meaning and Nature of Regional Trade Liberalization.............................................20
2.3.The Factors required for Regional Trade Liberalization .................................................21
2.4.The AfCFTA’s Institutional framework for trade liberalization ......................................21
2.5. The Current Status of African Continental Free Trade Area ..........................................26
2.6.The Structure of the AfCFTA agreement ........................................................................28
2.7. The operational instruments of the AfCFTA ..................................................................30
V
2.8.Summary ..........................................................................................................................32
Chapter Three: The Potential Benefits and Risks/Challenges of Regional Trade Liberalization:
Theory and Evidence ....................................................................................................................34
3.1. Introduction ........................................................................................................................34
3.2. Potential Benefits of Regional Trade liberalization ............................................................35
3.3. Potential Risks/challenges of Regional Trade Liberalization. ...........................................39
3.4. Summary ..............................................................................................................................41
Chapter Four: The Possible Benefits and Risks/Challenges of AfCFTA for Ethiopia .................43
4.1. Introduction ........................................................................................................................43
4.2. The Ethiopian Trade Policy and Recent Reforms: An overview ........................................44
4.3. The Ethiopian Readiness towards Commitments and implementations of the AfCFTA:
The status quo ................................................................................................................................48
4.3.1. Ethiopian readiness for AfCFTA commitment and implementation: a brief view .......48
4.4. Ethiopian Trade Policies: The Regulatory and Supervisory Policy Environment .............52
4.5. The Impacts of AfCFTA to Ethiopia: General Overview ....................................................56
4.6. The Possible Benefits and Risks of AfCFTA for Ethiopia. ..................................................59
4.6.1. The Possible Benefits of AfCFTA for Ethiopia .............................................................59
4.6.2. The Possible risks/challenges AfCFTA pose to Ethiopia.............................................60
4.7. Maximizing the Benefits and Avoiding Risks/Challenges
Of AfCFTA in Ethiopia: a brief observation. .....................................................................62
4.8. Summary .............................................................................................................................63
Chapter five: Conclusion and Recommendations. .......................................................................65

5.1. Conclusion .......................................................................................................................65
5.2. Recommendations ...........................................................................................................68
5.3. Indications for further research ......................................................................................69
BIBLIOGRAPHY .......................................................................................................... X-XIV
APPENDICE....................................................................................................................... XV
ANNEX : INTERVIEW GUIDE ......................................................................................... XV

VI
Abbreviations and Acronyms
AfCFTA-African Continental Free Trade Area
Art-Article
AU-African Union
AfDB-African Development Bank
AUC-African Union Commission
AMOT- African Ministry of Trade
AEC-African Economic Community-
CFTA-Continental Free Trade Area-
COMESA- Common Market for Eastern and Southern Africa
CGEM-Computable General Equilibrium Model
DSB-Dispute settlement Body
EAC- Eastern African Community
ECOWAS- Economic Community of Western African State
ERCA- Ethiopian Revenue and Customs Authority
FTA- Free Trade Area
GDP- Gross Domestic Products
GTAP- Global Trade Analysis Project
GATT-General agreement on Tariffs and Trade
GATS-General agreement on Trade in Service
GTAP CGEM-Global Trade Analysis Project Computable General Equilibrium model
HPR-House of people’s representative
IMF-International Monitory Fund
LDC-Least Developed Countries
MFN-Most favored Nation VII

MoTI- Ministry of trade and industry
NTM-Non-tariff Trade Measures
NF-National Forum
NTB-Non-tariff barriers
NEPAD-New Partnership for African Development
REC-Regional Economic Community
REI-Regional economic Integration
SADC-Southern African Development Community
SACU-Sothern African Customs Union
SMEs- Small and Medium Enterprises
SPC-Special Product Categorization
SPS- Phytosanitory measures
UNECA-United Nation’s Economic Commission for Africa
UNDP-United Nation’s Development Program
UNCTAD-United Nation’s Conference on Trade and Development
USD-United States Dollar
WTO- World Trade Organization
WB-World Bank
WEF- World Economic Forum
VIII
1
Lists of Tables/ Figures
Number Table/Figure Page
1 Table 1. AfCFTA welfare

gains from a Non-traditional 37
quantitative trade
model(present)
2 Figure 1. Welfare gains from 37
regional integration in
Africa( Billion US$)
3 Table 2 – Increases in 58
exports/imports (%) for
Ethiopia
IX
2
Chapter one: Introduction to the research

1.1. Background of the study
In January 2012, fifty four members of African union gathered to hold the 18th ordinary session
in Addis Ababa and have adopted the key mile stones of AfCFTA and agreed to establish
African continental free trade agreement by 2017. 1 On 15 June 2015, the 25th ordinary summit
of heads of state and government of AU Assembly launched the CFTA negotiation in
Johannesburg, South Africa.2 In July 2016, the AU heads of state and government in its 27th
ordinary summit held in Kigali, Rwanda, reaffirmed its commitment towards establishment of
CFTA by 2017.3 In January 2017, the AU heads of state and government’s summit, in its 28th
ordinary summit held in Addis Ababa, Ethiopia, authorized the president of Niger, H.E
Mahamado Issoufou to lead and monitor the CFTA’s process until the deadline of establishment
of African continental free trade agreement in year 2017.4
This person was also mandated to report on measures that have been taken throughout the
process on the Assembly’s next ordinary session agreed to be held in July 2017. In July 2017, the
AU heads of state and government’s summit in its 29th ordinary session held in Addis Ababa,
Ethiopia, received the report from the then mandated President of Niger.5 It was, however, on
March 21st, 2018 (at the end of 10th extra ordinary session of the AU assembly of heads of state
and governments), that forty- four out of fifty-five member states of the AU signed the AfCFTA
in Kigali, Rwanda.6 On this summit, the three protocols (protocol on trade in goods, protocol on
1
Mr. Prudence (chief Technical advisor on the CFTA and Head of CFTA unit department of trade and industry), ‘
Update on The continental Free trade Area Negotiations’ (presentation at African prosperity conference, 12
September 2017-Accra,Ghana) <https://www.tralac.org/images/docs/12181/african‐prosperity‐conference‐
update‐on‐the‐cfta‐negotiations‐presentation‐by‐mr‐prudence‐sebahizi‐auc‐september‐2017.pdf > last Accessed
7, Dec 2019
2
ibid
3
ibid
4
ibid
5
ibid
6
Cofelice Andrea, ‘African Continental Free Trade Area: Opportunities and Challenges’ (The Federalist Debate 31.3
(2018) ), 32‐35
<file:///C:/Users/its%20me/Downloads/[15918483%20%20The%20Federalist%20Debate]%20African%20Continent
al%20Free%20Trade%20Area‐%20Opportunities%20and%20Challenges.pdf> last accessed 2 Dec, 2019
1
trade in services and protocol on the rules and procedures of disputes settlement) were adopted.
On 1 July 2018 in Nouakchott, Mauritania, Annexes to the protocol on trade in goods, services
and rules and procedure of disputes settlement were adopted.7 Finally, the AfCFTA entered into
force on 30 May 2019, thirty days after the 22nd state (Sierra Leone and Saharawi Republic)
deposited instrument to ratification on 29 April 2019.8 On 10 April 2019, Ethiopia deposited
instrument of ratification of African continental free trade agreement.9 On the 7th July 2019, the
AU and African ministers of trade in its extra ordinary summit involving heads of state and
governments, convened to finalize work on the supporting instruments to facilitate the launch of
the operational phase of the AfCFTA.10 These supporting instruments that have been set were:
Rules of origin, schedules of tariff concessions on trade in goods, online non-tariff barriers
monitoring and elimination mechanism, digital payments and settlement platform and African
trade observatory portal.11
To date, thirty countries have both signed and ratified the AfCFTA leaving Eritrea as the only
African country yet to sign.12 The African continental free trade agreement initiative is in line
with the 3rd June 1991 Abuja treaty, article 6, which is aimed at establishing African Economic
Community. The African continental free trade agreement by itself is one of the key milestones
of the first ten year implementation plan of the AU agenda 2063, and of course the global goal
of ensuring sustainable development. The AfCFTA is mainly aimed at creating a single market
for goods and services via ensuring free movement of business people and investment.
This agreement is expected to be the largest free trade area next to WTO, and it is expected to
cover 1.3 billion people on and usher in the cumulative GDP of 2.5 trillion dollar with new era of
7
Peter Lunenburg, ‘ Phase 1B of the African Continental Free Trade Area( AfCFTA) negotiations’ (POLICY BRIEF
No.63,June 2019), 1-15 < https://www.southcentre.int/wp-content/uploads/2019/06/PB63_Phase-1B-of-the-
AfCFTA-negotiations_EN-1.pdf> last accessed 1 Dec, 2019
8
Au press release, 29 April 2019 < http://au.int/en/pressreleases/20190429/afcfta‐agreement‐secures‐minimum‐
threshold‐22‐ratification‐sierra‐leone > last accessed 13 Aug , 2019
9
Au press release, 10 April 2019 <https://au.int/en/pressreleases/20190410/ethiopia‐deposits‐instruments‐
ratification‐afcfta> last accessed 13 Dec 2019
10
Au press release, 7 July 2019 <https://au.int/en/pressreleases/20190429/afcfta‐agreement‐secures‐minimum‐
threshold‐22‐ratification‐sierra‐leone‐andsaharawirepublic > last accessed 13 Dec, 2019
11
ibid
12
‘Status of AfCFTA Ratification’ ( Towards the AfCFTA) < https://www.tralac.org/resources/by‐region/cfta.html>
last accessed 29, June 2020
2
economic development block.13 As the United Nations economic commissions (UNECA) for
Africa’s estimates, the AfCFTA will boost intra-African trade by 52% by year 2022.14 This
ambition, however, is largely dependent on its actual implementation. The AfCFTA is set to be
operationalized /implemented in two phases; phase one and phase two.15 Phase one covers the
16
trade in goods and services. The protocol on trade in goods, services and on rules and
procedures for the settlement of disputes are the outcome of this phase one negotiation. For its
full and better implementation, however, the agreements are supposed to be made on the rules of
origin, schedules of tariff concessions, and annexes to the protocol on trade in goods and other
specific commitments, annexes to the protocol on trade in services, including schedules of
concessions on trade in services.17
Here the fact that the negotiations on these annexes are categorized as ongoing negotiations is
quite vivid.18 Regarding the AfCFTA, some studies have been made on the general prospects and
challenges of the agreement on phase one, particularly on; the tariff negotiation process, the
expected economic impact of liberalization under the AfCFTA and on some legal issues under
the AfCFTA in general. However, none of these studies have considered and explored Ethiopia’s
potential benefit and challenges and adjustment costs for Ethiopia’s full exploitation of the
AfCFTA and regarding the Ethiopian trade policies as regards Ethiopian membership to the
AfCFTA. The other phase under which AfCFTA is set to be implemented is phase two. Phase
two will cover the areas of intellectual property rights, competition policy and investment.19 As
part of this phase two negotiations, expert meetings began negotiating on the investment protocol
in November 2018 and resumed it in February 2019.20 Previously, January 2020 was set to be a
deadline for concluding negotiations on the investment, competition and intellectual property
13
<https://css.ethz.ch/content/dam/ethz/special‐interest/gess/cis/center‐for‐securities‐
studies/resources/docs/ACCORD‐CT‐2019‐3.pdf> accessed 6 Dec, 2019
14
Witschge Loes ‘African Continental Free Trade Area: What You Need to Know’ (2018)
<https://www.aljazeera.com/news/2018/03/african‐continental‐free‐trade‐areaafcfta‐180317191954318.html>
last Accessed 3 August, 2019
15
Peter Lunenborg , ibid, (n7)
16
17
18
19
20
‘AfCFTA negotiation on phase II’ <https://www.iisd.org/itn/2019/06/27/afcfta‐enters‐into‐force‐phase‐ii‐on‐
investment‐competition‐iprs‐to‐last‐through‐2020‐2021/> accessed 13 Dec, 2019
3
rights protocol.21 The president of Niger, Mahamadou Issoufou, who was empowered with
monitoring the process of AfCFTA’s negotiation, however, recommended to the AU earlier in
the year 2019, that negotiation be post phoned to June 2020.22
The African union assembly subsequently proposed that the draft legal text for those protocols
should be submitted for the Assembly’s adoption by the January 2021’s summit.23 The exact
impacts of these protocols which are likely to be adopted by January 2021 largely depend on the
contents of those protocols, which, of course, remain to be seen up on their adoptions and full
implementations or operationalization. Therefore, given the fact that these protocols are yet to be
adopted, this is study will not have to deal with the potential benefits and challenges pertaining
to this phase of negotiations, instead, the writer of this study will try to make splendid endeavors
to superficially highlight the general liberalization impact of this phase, by considering the
current moves toward liberalization. In a nutshell, this study, in as far as Ethiopia as a member of
AfCFTA is concerned focused on phase one, and examines its prospects and challenges that are
capable of impeding Ethiopia’s full exploitation of African continental free trade agreement.
1.2. Review of Literatures
It will take Ethiopia, Sudan and Zimbabwe about fifteen years to eliminate tariffs on 90% of its
product, as required under AfCFTA.24 Nigeria and South Africa, the continent’s largest
economies, will, however, require five years to eliminate tariffs categories for their product.25
The tripartite free trade areas: the COMESA, SADC and the EAC being a precursor of the
AfCFTA, was signed a couple of years ago but still have not been fully implemented.26 Some
countries employ protectionism despite the existence of trade arrangement due to the fact that
some countries come across a series of national policy reasons that potentially impede them to
abide by the terms of their agreements; even Nigeria, for instance, has once closed its land border
21
ibid
22
ibid
23
ibid
24
Prinesha Naidoo, ‘As World Wavers on Free Trade, Africa Embraces It’
<https://www.bloomberg.com/news/articles/2019‐10‐16/as‐world‐wavers‐on‐free‐trade‐africa‐embraces‐it‐
quicktake‐k1t2ec4l‐accessed > last accessed 5 Dec, 2019
25
ibid
26
ibid
4
to handle the rampant smuggling of foods.27 Obviously, Countries like South Africa and Kenya
that have relatively better manufacturing bases and road networks, railways and ports are more
likely to benefit most from regional integration28, particularly from the AfCFTA, unlike least
developed countries (LDC, according to the lists provided by the study made under the auspice
of the United nations) like Ethiopia that often experience an enormous non-tariff barriers to
trade, due to poor infrastructure, cumbersome government regulations, etc.
This could, indeed, have a tendency to bottleneck Ethiopia’s trade sectors development and its
potential long term growth, despite Ethiopia’s regional integration moves via liberalization
initiatives. Furthermore, according to the United Nations research paper published in Feb 2018,
the AfCFTA will have a tremendous opportunity for ensuring sustainable development and
economic growth of the African continent. This study also admits that all countries will not
benefit alike, and the welfare benefits derived thereof signify relevant costs and commitment.
According to this study, most of the longer term benefits of further trade integration are: welfare
benefit from lower import prices, product efficiencies and increase in output, higher value added
jobs and exports, technological specialization, etc.
In order to derive those long term potential benefits, this aforesaid study has also found out that
the associated costs of adjustment and integration will inevitably effectuate, these are: automatic
loss in trade and tariff revenues, investment required in infrastructure ahead of implementation
and regulatory reforms which could potentially affect the country’s economic policies in the
short run. As pointed out above, despite many benefits AfCFTA is expected to render, countries
are unlikely to be equally beneficial from the agreement establishing the AfCFTA. This study
further admits that some countries will suffer significant tariff revenue losses possibly above
20%. As tariff revenue is one of the major revenue sources for Ethiopia, for stronger reason,
Ethiopia could thus be one of those countries that would suffer significant tariff revenue losses.
The study, hence, suggests that integrating and harmonizing regulatory measures, eliminating
non-tariff barriers to trade and investment aside, and facilitating the entry into formal economy
would help Africa exploit the benefits of continental free trade agreement. However, taking
Ethiopia as a least developed country into account, the possible opportunities and challenges
27
ibid
28
ibid
5
ensuing from all perspectives so that Ethiopia would exploit the potential benefit to its fullest
potential and make better adjustment costs for the possible challenges has not been specifically
dealt under those studies. On the other hand, according to the United Nations Economic
Commission for Africa’s (UNECA) estimates, the implementation of the AfCFTA could increase
intra-African trade by 52% compared to 2010 by 2022 reducing intra-regional trade gap
characterizing Asia (51%), North America (54%) and Europe (67%).29
According to the UNECA’s estimates, the main benefits of the AfCFTA will accrue to small and
medium sized enterprises in the short run; this medium and small enterprises today account for
80 % of the continent’s companies.30 UNECA further suggests that the benefit will extend to all
citizens of Africa in the long run, achieving 16.1 billion dollar estimate of welfare gains. Such
intra-African economic and commercial growth demonstrates AfCFTA’s potential role in
harnessing and guiding African countries structural transformation, thereby strengthening
Africa’s position in global trade.31
This being so, following the failure of DOHA Round of trade negotiation and the crisis that have
been occurring under multi-lateral trade negotiation (WTO’s ruling authority), preferential trade
arrangement at bilateral, regional or trans-regional levels have been undertaken. However, Africa
has almost been out rightly excluded from such arrangement.32 It is, thus, with the objective of
boosting intra-African trade and consolidating African regionalism that AfCFTA was established
with the ultimate desire of competing on international markets having agenda 2063 in mind.
Nonetheless, the realization of AfCFTA’s potential benefits is made conditional on identifying
and overcoming political, legal, economic and functional challenges.33 The followings are among
the key challenges that could potentially encumber its full operationalization.
The expected overall economic impact of AfCFTA on Africa
Even though AfCFTA has been ratified by many African countries, the parties are yet to submit
their respective schedules of tariff concession and schedules of specific commitment on trade in
29
Cofelice Andrea , ibid, (n 6)
30
31
32
33
6
goods as well as trade in services, as is required for operationalizing of AfCFTA on its phase
one.34 So, unless these schedules of tariff concessions in particular and AfCFTA in general are
changed to a concrete deal rather than merely being rhetorical, the economic impact that was
estimated via computable general equilibrium (CGE) model that GDP, employment and increase
in intra-African trade for the continent would be increased remain futile. 35
Therefore, the potential economic benefit could hardly be harvested unless schedules of tariff
concessions are carefully calibrated.36 Obviously, there are numerous losses, particularly tariff
revenue losses in the short run. According to the findings of some studies, Africa-wide tariff
revenue losses would be ‘7.2% ((free trade area (FTA) with special product categorization) to 9.1
% of current revenue (a full FTA)’.37 The assumption of these studies, however, is that the long
term benefits outweighs the short term losses. Therefore, tariff liberalization in terms of tariff
elimination can have a negative impact, such as unemployment, lower wages in certain sectors
that may involve increased health care costs and costs of retraining.
In a nutshell, unless otherwise compensatory/ flanking measures in the form of adjustment costs
are, thus, carefully put in place social tensions and problems becomes in evitable, and hence,
such measures need to be taken in the short run because, many types of long term adjustment
costs are difficult to model due to lack of data.38 This is why short term measures are so
preferred. This assumption indeed goes with the articulation of the famous British economists,
J.M.Keynes, who once wrote as follows:
‘‘(The)…long run is a misleading guide to current affairs. In the long run we are all
dead. Economists set themselves too easy, too useless a task, and if in tempestuous seasons they
can only tell us, that when the storm is long past, the ocean is flat again.”39
34
35
36
37
38
39
Peter Lunenborg , ibid, (n7) ; see also at: http://en.wikiquote.org/John Maynard Keynes
7
Economic obstacles to expanding intra-African trade
The study made on this title examines the possibility of expanding intra-African trade whilst
assessing the impact of three categories of obstacles to such trade, these are: insufficient
infrastructures, mismanagement of economic policies, and internal political tensions.40 The result
of this study shows that these obstacles have a significant impact on intra-African trade,
especially for countries with developing economies within Africa. Infrastructures availability,
inter alia, is a crucial determinant of intra-African trade. According to the study based on field
surveys where exporters refer to, the lack of infrastructure is, however, one of the significant
bottlenecks to the expansion of African trade flows. Besides, according to this study, sound
economic policies also appear to promote higher intra-African trade. This is in fact based on the
correspondent literatures in this field, which shows that economic policies play an important role
in fostering exports. The study made on this title have also identified, correspondent to what
various other studies have so far documented, the negative impacts of political tensions on
economic activity.41 Numerous other literatures have recently shown that poverty and bad
economic performances are significantly contributing to political tensions in the region. Hence,
fostering intra-African trade could play a fair share role in calming down the political stalemates.
Some key legal issues regarding the AfCFTA

1. Conflict and inconsistency between the AfCFTA and preferential trade arrangements42
Given the existences of other regional economic blocks before the establishment of AfCFTA and
perhaps its proliferation in the years to come, conflict and inconsistencies may occur between
AfCFTA and other regional economic agreements. In order to reduce legal inconsistencies in this
regard, article 19 of the AfCFTA regulates the relationship of AfCFTA with Regional economic
communities (RECs). According to the 1st paragraph of this provision, in case of inconsistencies,
the provision of AfCFTA shall apply. Nonetheless, in case of higher levels of regional
integration than under the AfCFTA or incase a tariff is eliminated for a product under the
existing agreement, that agreement shall apply regardless of AfCFTA negotiations.
40
41
42
8
2. Most favored nation treatment (MFN)43
Article 37 of the Abuja treaty44 establishing African economic community provides that:
i. The best treatment provided to African country should be accorded to all African
countries alike.
ii. If African countries provide a tariff preference to non-African country, such tariff
preference must be provided to all member states.
This legal commitment, most favored nation treatment, is also incorporated as one of the basic
principles for the AfCFTA negotiations. Unlike the case in the Abuja treaty, where tariff
preferences given to a non- African country is similarly ought to be provided to member states,
the agreement establishing AfCFTA envisages the article entitled ‘ continental preferences’
which in effect reduced the obligation under MFN treatment provided in article 37 of the Abuja
treaty. In spite of article 37 of the Abuja treaty, Article 18 of AfCFTA signify that there is no
obligation to accord the MFN treatment given to other non-member country, because it extends
certain qualification. Although Article 18 of AfCFTA applies to preferences given to third
parties, the extension of such preferences is subject to reciprocity, and it can only be claimed on
the basis of quid pro quo. These scenarios, however, have the impact of inhibiting African
countries to benefit from preferences given by one African country to its non-African
counterpart. It is, thus, due to the likely occurrences of these scenarios that the 32nd ordinary
summit of January 201945 decided that: ‘member states are indebted to inform the AU assembly
before entering into a partnership with third parties because, it was suggested that such could
potentially leverage the AU vision of creating a single African market.
3. Schedules of concessions as an integral part of the AfCFTA46
Despite the implication of the treaty text 47 that the adoption of schedules of tariff concession is a
one-time event, in which tariff concessions becomes effective immediately up on adoption by the
43
44
The text of the Abuja Treaty can be retrieved at https://www.wipo.int/edocs/lexdocs/treaties/en/aec/trt_aec.
pdf.
45
AU Press release, 12 February 2019 ‘Key Decisions of the 32nd Ordinary Session of the Assembly of the African
Union’ <https://au.int/en/pressreleases/20190212/key ‐decisions‐32ndordinary‐session‐assembly‐african‐union‐
january‐2019>last accessed 13 Dec 2019
46
Peter Lunenburg , ibid, (n7)
9
assembly and up on entry into force of the agreement in accordance with article 23 of the
agreement establishing African continental free trade area, in practice the parliaments in several
African countries would perhaps scrutinize the agreed tariff concessions before ratification by
their respective parliament.
Obviously, this is because tariff concession is considered as the meat of the agreement as far as
trade in goods is considered. The delays in setting up of schedules of concessions by member
states would pose a serious challenge for the assembly to bring all tariff concession under a
single big package thereby slowing the implementation of the AfCFTA. Similarly, Ethiopia is on
its part supposed to seriously analyze the relevant AfCFTA provision, related protocols and
annexes attached thereto in line with its own relevant laws before submitting the proposals of its
own tariff concession and schedules specific commitment. Under this study, though, the
readiness of Ethiopia to submit schedules of its tariff concessions and schedules of specific
commitment have been analyzed.
4. Rules of origin48
Regarding rules of origin, those issues on which negotiations are to be concluded are listed under
art. 42.1 Of annex 2 on rules of origin. These includes: substantive and procedural rules of
origin. If there is no agreed substantive rules of origin under the AfCFTA, art.42.3 provides that;
‘‘pending the adoption of the outstanding provisions, state parties agree that the rules of origin in
existing trade regimes shall be applicable.’’ This provision, thus, seems to balance the threshold.
Since the AfCFTA has agreed rules of origin procedures, state parties are legally required to
submit documents, such as AfCFTA certificate of origin (Appendix I), AfCFTA origin
declaration (Appendix II) and AfCFTA supplier or producer’s declaration (Appendix III) once
the country has ratified AfCFTA and the AfCFTA is entered into force.49 Since the study made
by Peter Lunenburg on the rules of origin in particular does not discuss Ethiopia’s current status
regarding its obligation under rules of origin, this study have tried to specifically address the
matter in the Ethiopian context.
47
The treaty establishing African continental free trade area (adopted 21 march 2018, entered into force 30 may
2019), art 23. See also this treaty’s protocol on trade in goods, art 8
48
49
10
On the other hand, the delay in the submission of documents on the rules of origin by state
parties that is yet to submit would encumber the implementation proceedings of AfCFTA on one
hand and bottlenecks the potential benefits that could be accruing from negotiating on rules of
origin, on the other hand. Therefore, negotiation on rules of origin could help countries to be
beneficiary of preferential tariffs resulting from the value added to the product deserving rules of
origin negotiation. Failing such negotiation, however, countries like Ethiopia, whose important
source of government revenue is tariff would face certain revenue losses from those limited
products deserving preferential tariff. At present, given the ongoing negotiation on rules of origin
and schedules of tariff concession, the challenges that it poses, particularly to Ethiopia, is quite
contemplable.
5. Tariff negotiations50
The African Union ministers responsible for trade were requested to submit the schedules of
tariff concession in line with the agreed modalities until July 2019.51 This is of course requested
during the January 2019 AU summit.52 Despite the optimistic ambition of this summit, since the
implementation of negotiation modalities require a series of bilateral tariff negotiations, bringing
the finalized tariff schedule in due time under a single big package could hardly be possible,
because such bilateral negotiation is yet to be made on the matter.53 As per annex IV of the
modalities to continental free trade area on tariff negotiation, version 21 September 201754
negotiating parties negotiate tariff modalities on an individual bases if member states
participating in RECs are not customs union.
However, if member states belong to a customs union, negotiation shall be collectively done.55
The more the number of customs union the less number of negotiations and the more convenient
the negotiation would be. If all African countries would opt to negotiate individually, the
maximum number of negotiations would reach one thousand four hundred eighty five
50
51
African Union press release, ibid, (n 45)
52
ibid
53
ibid
54
‘Modalities for Continental Free Trade Area on Tariff Negotiations’,(TI/CFTA/AMOT/3/TIG/MOD/FINAL, Annex
IV‐ version 21 September 2017)
55
Peter Lunenburg , ibid , (n7)
11
(55x54/2=1485)56, provided that fifty five countries have ratified the AfCFTA and hence
requested to submit their schedules of tariff concession. Nonetheless, such tariff concessions
could be difficult to be administered by custom authorities; especially it would become very
difficult for countries like Ethiopia where there is no robust cluster of custom authorities to
administer such tariff concessions of continental free trade area and Ethiopia is supposed to
negotiate individually because it is not a member of any of the customs union.
1.3. Statements of the problem
As Ethiopia is a member of AfCFTA, its laws and relevant policies need to conform to the
AfCFTA text and its subsidiary laws and rules. In order for Ethiopia to conform to the
requirements under the AfCFTA, economic policy and legal reforms including tariff reforms is
inevitable. However, tariffs are an important and perhaps irreplaceable revenue source for
Ethiopia and are seldom used to protect domestic infant industry. Elimination of tariffs on 90 %
of its product for Ethiopia, as required under the AfCFTA inevitably takes a relatively longer
period of time. Ethiopia’s commitment and implementation readiness is also quite cumbersome.
On the other hand, tariff reduction requires some adjustment as it could be implied from the
economic impact assessment studies discussed above. Hence, generally, how these tariff barriers
challenge Ethiopia’s commitment to AfCFTA , and the manner as to how the costs of
adjustment (from the legal point of view as well) may be put in place to enable Ethiopia exploit
the benefits of CFTA to its fullest potential will be the subject of this study.
With respect to trade in services, since the giant service sectors of Ethiopia are not yet fully
liberalized, the creation of a single liberalized market for trade in services under AfCFTA would
become a potential hurdle for the government that used to fully or partially monopolize the
sectors. Thus, what the service sectors liberalization moves advocated by AfCFTA implicates to
the existing relevant national laws of Ethiopia and the possible challenges to the domestic service
suppliers and the manner as to how Ethiopia is supposed to respond to the service sector
liberalization to conform to the AfCFTA’s obligations is also an identified problem, as well.
56
The total number of links is equal to 55 x 54 (2,970), but a bilateral negotiation has 2 parties. So if all African
Countries would negotiate individually; the maximum number of negotiations would be 55 x 54 / 2 = 1,485. see
also Peter Lunenburg , ibid, (n7)
12
Therefore, the adjustment costs that need to be taken to respond to these problems by Ethiopia in
general are not clear and subject to critical scrutiny. On the other hand, as it has been revealed
from literatures, Ethiopia, like many other least developed countries are experiencing crucial
non-tariff barriers to trade, such as57: lack of trade facilitation measures, poor infrastructures and
lack of regulatory transparency, etc. In this regard, how such non-tariff barriers to trade
challenge Ethiopia’s commitment, slow implementation of the existing commitment and how
such challenges could be averted to enable Ethiopia exploit the benefits of CFTA to its fullest
potential will be suggested by this study. As Ethiopia, being landlocked country, has poor quality
of transport infrastructure and other infrastructures, it is assumed that policy makers did not
focus on reducing uncertainties that prevent firms from accessing new markets.
This study also examined the assumption that, in Ethiopia, there is no AfCFTA national
implementation strategy which is complementary to the broader national trade policy and
dedicated to carry out implementation and fully utilize the prospects of AfCFTA. The key
strategies that Ethiopia should adopt but short of making includes:
 Export review strategy that covers the existing intra-African and global trade
performance within the context of its own trade policy framework.
 Prioritizing target sectors by identifying AfCFTA’s export potentials
 Identifying the bottlenecks to its target sectors
 Taking strategic actions for boosting identified target sectors
As far trade in goods is concerned, Ethiopia did not submit schedules of concessions and a
related complement to the schedules of concessions for trade in goods. Regarding trade in
services, too, since scheduling of specific commitments call for a deep review of the regulatory
framework of the identified sector, this is yet to be made as well. Local policy makers should do
more to support and subsidize local firms in improving their proprietary, industrial and
commercial performance so that producers and service providers provide high quality products
and services. Ethiopia’s performance in this regard is almost negligible.
Given the fact that a number of key phase one issues remain to be negotiated; including:
schedules of tariff concessions, schedules of service commitments and rules of origin, this study
57
13
examined the assumption that Ethiopia did not have a clear insights into setting this schedules
pending these negotiations, because it is yet unclear as to which products and services will be
subject to tariff cuts and which service sectors will be liberalized without categorization of a
product into sensitive, non-sensitive and excluded lists.
1.4. Research questions
The study has tried to address the research problems by answering the following
questions:
1. What are the impediments for Ethiopia to utilize the AfCFTA for its own
developmental goal to the fullest extent possible?
2. What are those crucial bottlenecks to Ethiopia to implement its commitment toward
AfCFTA?
3. What are the possible opportunities ensuing from Ethiopia’s membership to ACFTA?
4. How can Ethiopia avert and withstand the possible challenges ensuing from its
membership to ACFTA?
1.5. The scope of the study
As the AfCFTA is yet to be implemented and some tariff concessions are still ongoing, this study
will not be empirically assessing the compliance of Ethiopia to its commitment under AfCFTA.
This study will not also be dealing with the potential benefits and challenges of Ethiopia in
regard to the phase II negotiations underway. This is merely due to the fact that the AU assembly
has already proposed the due date for submission of the draft legal text for those protocols under
phase II, according to which the date for its adoption is fixed to be by January 2021. Hence,
since the exact impacts of these protocols which are likely to be adopted by January 2021 largely
depend on the contents of those protocols (the scope of substantive protections and procedural
remedies), which, of course, remain to be seen up on their adoption, this study will only be
limited to superficially highlighting the liberalization impact of this phase by considering the
current liberalization moves in general.
Despite, as far as phase I is concerned, this study is limited to identifying the possible prospects
of AfCFTA and challenges to Ethiopia that are capable of impeding Ethiopia’s full exploitation
14
of AfCFTA. This study is also limited to those periods that start from the pan-African vision of
creating African single market to the inception of AfCFTA to its establishment and its start of
trading which is scheduled to be by Jan 1, 2021. This is to show that the study is made before the
scheduled date for AfCFTA’s start of trading i.e. Jan 2021.
1.6. Objective of the study
This study has been made in order to achieve the following general and specific objectives.
1.6.1. General objective
Examining Ethiopia’s possible benefits and challenges of becoming a member to AfCFTA
1.6.2. Specific objectives
 To examine the possible challenges to Ethiopia to abide by the commitments under

AfCFTA.
 To examine whether any policy instruments are adopted by Ethiopia in order to harness
the prospects of AfCFTA and handle the potential hurdles.
 To identify and suggest the best possible mechanisms available to avert and withstand the
possible challenges ensuing from Ethiopia’s membership to ACFTA.
 In order to appraise some policy and legal framework differences Ethiopia has had and
recommend the possible way forward towards their harmonization with the AfCFTA.
1.7. Methodology of the study
This study is a library based study. A doctrinal and qualitative type of research method is
employed. The primary sources of information for my study have been relevant international,
regional and national instruments such as: treaties, protocols, and annexes to the protocols.
The secondary sources include; textbooks, journals, journal articles (including those
unpublished) ,articles written by experts and organizations in the field and empirical study in
the existing literatures, research papers and materials on AfCFTA by the
AU,UNECA,UNCTAD, IMF,WB, AEC and other relevant information available from electronic
resources. Interview has also been conducted at the Ethiopian ministry of trade and industry with
the regional integration trade relations and negotiations directorate’s acting director.
15
Therefore, the writer of this paper has systematically analyzed the existing primary and
secondary sources of information for this study. Although the writer of this study did not conduct
an empirical study, because AfCFTA is yet to be implemented and some relevant and crucial
data’s aren’t in the public domain as well, the empirical studies that had been conducted using
the Generalized Trade Analysis Projects Computable General Equilibrium Model to assess the
potential long term effects of AfCFTA have been systematically analyzed. As such, other studies
on the economic obstacles to expanding intra-African trade and some other books that reveal
economic implications of AfCFTA on the member states have been systematically analyzed to
ensure the certainty and predictability of AfCFTA provisions in the context of Ethiopia’s
scenario.
1.8. Significances of the study
Since this study had never been researched before, it will contribute as an input or precursor for
those researchers who want to conduct further study on this area and enable them to have
acquaintance to this area of study as well. The study will also help traders; local producers and
service providers who engage in such continental free trade area to know and identify their
respective contemplable economic prospects and challenges under the AfCFTA. The study will
also enable local traders to identify those challenges to their business and learn how to overcome
these challenges in advance and exploit the benefits accruing from the continental free trade area
to its fullest potentials. Identification of the main challenges under this study would also help
local policy and law making organs to consider the depth of the problems and revise the already
existing policies and laws, in such way that it appears compatible with the provisions under the
continental free trade area, and use them in crafting national trade policies and laws that should
be incorporated to meet the objectives of AfCFTA.
1.9. Limitations of the study
This study is not genuinely comprehensive, because; first, Phase II negotiations are not the
subjects of this study as the protocols on the phase II negotiation are set to be adopted by January
2021, secondly, interviews and questionnaires have not been conducted and distributed to/with
AU ministers responsible for trade, committees of higher trade officials and relevant institutions
residing at head quarter of AU and perhaps at different African countries due to time and budget
16
constraint. Besides, since the writer of this paper is self-sponsored and busy by his regular work
and due to the imposition of partial lockdown measures due to the Corona virus outbreak the
study has been a bit cumbersome.
Thirdly, since the AfCFTA is yet to be implemented, making an empirical assessment in regard
to Ethiopia’s membership is hardly possible, and even if the implementation process has already
been begun, time and budget etc. would be a major constraint to conduct an empirical
assessment. On the other hand, African continental free trade area is a new phenomenon and
adopted very recently, hence lack of sufficient study literatures in this study area, especially
regarding Ethiopia’s membership, forces the researcher to heavily rely on internet sources.
Nevertheless, the researcher firmly believes that the methods chosen are enough to overcome
those limitations and conclusions are drawn confidently.
1.10. The Organization of the study
In brief, this study attempts to explore the prospective benefits and challenges of African
continental free trade area with special emphases to Ethiopia as a member to the AfCFTA. In so
doing, the writer has opted to organize the study into five chapters. Chapter one, which is
generally captioned as introduction to the research, comprises of: Background of the study,
Review of literatures, Statements of the problem, Research questions, Objectives of the study,
Scope of the study, methodology of the study, significances of the study, Limitations of the study
and the organization of the study. Chapter two of this thesis deals with an overview of actions for
regional trade liberalization: AfCFTA in focus. This chapter generally deals with the meaning,
nature of and factors required for regional trade liberalization, and the AfCFTA institutional
framework for trade liberalization, AfCFTA status, AfCFTA structure and operational
instruments under AfCFTA.
Chapter three deals with the Potential Benefits and Risks/Challenges of Regional Trade
Liberalization: Theory and Evidence. This chapter generally provides a conceptual and
theoretical framework of the benefits and challenges of regional trade liberalization. Chapter four
is entitled as the Possible Benefits and Risks/Challenges of AfCFTA for Ethiopia. In this chapter,
an overview of the Ethiopian Trade Policy and Recent Reforms, the Regulatory and Supervisory
Policy Environment pertaining to the Ethiopian Trade Policies, an general overview of the
17
impacts of AfCFTA to Ethiopia, the possible benefits accruing from Ethiopian membership to the
AfCFTA and the possible risks/challenges that impede Ethiopia’s full exploitation of AfCFTA,
and Maximizing the Benefits amid Avoiding multiple Risks/Challenges of AfCFTA in Ethiopia have
been explored. The final chapter, chapter five, concludes the research and embodies
recommendations and indications for further research that the researcher considers appropriate.
18
Chapter Two: An overview of Actions for Regional Trade
Liberalization: AfCFTA in focus
2. 1. Introduction
The trade relations among/between countries of the world have been made through varieties of
trade arrangement ranging from preferences made to countries under same colonial rule
(empires) to bilateral trade agreement to broader regional trade liberalization.58 The long-term
trend of these trade arrangements have been that the global trade platform have been defined by
their complex interplay and even rival, among the numerous trade regimes, than being portrayed
as a choice between multilateralism and regionalism.59 Despite the complexities and messy
evolution of these trade arrangements, the following trends have consequently been discerned
there from. These are60:
o Firstly, International trade cooperation has become consolidated involving more countries
under the globally binding framework of WTO.
o Secondly, trade arrangements have deepened to a global integration of the economy
beyond domestic policies.
o Thirdly and finally, the global trade has become progressively open and less
discriminatory with the ironical result of diminishing preferential trade arrangement of
bilateral trade agreements and regional trade liberalization that indeed have already been
in place, due to the motives of countries that go beyond mere market access.
Although the historical trends have been towards more openness and market access, the countries
of the world that have once been advocating the global commercial trade by getting away from
protectionist blocks, had made a series of set-backs and reversals all along the way due to
geopolitical insecurity, financial instability and so on.61 A very good example of this scenario are
58
‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐,B. ‘Historical background and current trends’ (world trade report, 2011)
<https://www.wto.org/english/res_e/booksp_e/anrep_e/wtr11‐2b_e.pdf> last accessed 15 Feb, 2020.This section
specifically deals with the historical background of preferential trade agreements which have been in place even
before the formation of GATT in 1947.
59
ibid
60
ibid
61
ibid
19
the economic depression of the early 1870s and the Great Depression of 1930s that pressured
states to slip back and focus on protectionism via defensive trade arrangements.62
In spite of these defensive and discriminatory trade blocks of the 1930s which indeed fueled the
economic slump and paved the way for the outbreak of the Second World War, the most striking
phenomenon came into picture with the creation of the ‘‘multilateral’’ GATT system in the
aftermath of the Second World War.63 With this, the debates on pros and cons of the bilateral and
regional trade liberalization have once again exploded, the then arguments being on whether
their proliferations could potentially weaken multilateralism or even spur subsequent progress in
the multilateralism. 64 Regardless of these divergent views on the debates, however, the bilateral
and regional trade liberalization has surged and proliferated proving that the creation of the
multilateralism did not actually reduce bilateral and regional trade arrangements. Under this
study, the discussion of the meaning and the actions for regional trade liberalization, factors
required for regional trade liberalization and AfCFTA’s framework for trade liberalizations are
of paramount importance. Accordingly, these sub-titles are respectively discussed like as
follows;
2.2. The Meaning and Nature of Regional trade liberalization
The meaning of Regional trade liberalization can be briefly explained as an agreement whereby
countries under the same geographical locations, level of development, etc. come together and
conclude an agreement that binds them, mainly to foster an economic collaboration through an
agreed rules, standard and institutions by focusing on barriers to free trade, free movement of
people and capital within that specific region.65 The economic purpose of this arrangement is, of
course, to create larger and more attractive open market and link countries to international
market while promoting that there are no barriers to trade.66 The regional trade liberalization
arrangements that had been embraced in Africa exist in the East, West and South and sub-
62
ibid
63
ibid
64
ibid
65
Osabuohien and others, ‘Bilateral Trade Performance in West Africa: Gravity Model Estimation’ (African
Development Review, 2019), 1‐14.
66
ibid
20
Saharan Africa having membership overlap.67 Despite the splendid efforts of Southern Africa
Development Community (SADC), Common Market for Eastern and Southern Africa
(COMESA), East African Community (EAC) and the ECOWAS, they have confronted
numerous challenges along their way.68 The regional trade liberalization arrangements have also
been created in specific regions within Asia, Europe, Latin America and North America mainly
to speed up the rate of development within their respective region. A point worth noting here,
however, is that the political theories of regional trade liberalization stemmed with a view mainly
to explain the European integration that has later spilt over to the other continents as well.69 The
concept, theories and historical development of regional integration is thus traced back to the
Europeans moves towards creation of regional integration.
2.3. Factors required for Regional Trade Liberalization
According to the findings of the UNDP (2011), regional trade liberalization is much broader than
merely liberalizing trade in a sense that it requires, among others, the following factors for
liberalizations, these are; investments in regional infrastructure, standards and regulations
harmonization, adopting common approaches to macro-economic policy, management of shared
natural resources and greater labour mobility.70 The major rational behind regional trade
liberalization moves is the assertion that is premised on strength in numbers and unity of
countries under the same geographic locations which is believed eventually to fasten the rate of
development whilst ensuring security.71
2.4. The AfCFTA’s Institutional framework for trade liberalization
Although there are various other regional trade liberalization move across the world, the writer
of this paper has focused on the AfCFTA framework for trade liberalization, because the work
tries to deal with Ethiopia’s membership to the AfCFTA with its possible benefits and
67
Hartzenberg, ‘Regional Integration in Africa’ (World Trade Organization, Staff
Working Paper ERSD,2014) , 14
68
ibid
69
Thanawat Pimoljinda, ‘Theoretical Discussion on Regional Integration: EU‐ASEAN Perspective’
< https://www.wto.org/english/res_e/booksp_e/anrep_e/wtr11‐2b_e.pdf > last accessed 20 January, 2020.
70
Opeyemi Akinyemi and Others, ‘Regional Integration and Energy Sustainability in Africa: Exploring the Challenges
and Prospects for ECOWAS’ (African Governance and Development Institute ,WP/19/081, Research Department,
January 2019), 6-8
71
Chingono, M. & Nakana, ‘The Challenges of Regional Integration in Southern
Africa’ (African Journal of Political Science and International Relations, 3(10) S , 2009)), 396‐408
21
challenges. With regard to one of the regional trade liberalization moves in Africa that is the
AfCFTA agreement, institutional structures or framework and dispute settlement body (DSB) to
govern various aspects of the AfCFTA including its operationalization has been created, despite
fears of no implementation.
The fear of no implementation of AfCFTA’s trade liberalization moves by some is partly due to
the fact that, Pan-African initiatives, in many instances, remain to have been unimplemented and
fail to achieve its matching ambitions. Conclusion of AfCFTA negotiations is nothing without
having them implemented with matching ambition, which is, indeed, a challenge to AfCFTA.72
No matter what, articles 9-13 of the AfCFTA institutional agreements, the protocols sub-
structures, appendices and annexes charged with implementing the AfCFTA are central to the
implementation of the AfCFTA.
The AfCFTA agreement created the institutional structures or framework and dispute settlement
body (DSB) to govern various aspects of the AfCFTA including its operationalization.73 These
institutional structures resulting from AfCFTA’s phase 1 negotiation were expected to facilitate
the overall activities and implementations of the AfCFTA. The AfCFTA is required to undergo a
series of negotiations through different phases for convenience purpose. The AfCFTA, on its
phase two, is also expected to establish committees via protocols.74 Those institutions created
during phase I, are like as follows;75
1. The Assembly of the African Union Heads of State and Government: It is the highest
Decision-making body and likely to meet during the AU summit. The AU assembly will
provide oversight of and provide strategic and political guidance to the AfCFTA. The
Assembly has been in existence even before the establishment of AfCFTA. The Assembly’s
membership may, thus, extend beyond the AfCFTA’s membership. So, the Assembly may
include African Union members that are yet to become party to the AfCFTA agreement. This
72
Mahamadou Issoufou and V. Songwe, ‘Africa’s Continental FTA, Boost to Growth, Development’( Fortune,
2018).
73
ibid
74
Herbert Smith Free hills LLP, ‘The African continental Free Trade Agreement: a new pathway for Africa?’
<https://www.lexology.com/library/detail.aspx?g=f491ed6f‐352d‐4ef0‐8b68‐f2f907e53ed8> last
accessed 6 Dec, 2019
75
ibid; See also <https://en.m.wikipedia.org/wiki/African_Continental_Free_Trade_Agreement> last accessed
Aug 3, 2019
22
manifests that the AfCFTA is central to the African Union’s integration agenda, ensuring that
non-members are likely to eventually join the pact affecting the continental integration. This
can also reflect that AfCFTA institutions for the implementation of the AfCFTA are deeply
rooted within the African Union’s institutions, ensuring that it maintains the political
commitment of all African Union members towards the ratification and implementations of
the AfCFTA agreement.76
2. The Council of Ministers responsible for trade: The Council provides strategic trade
policy oversight and ensures effective implementation and enforcement of the
AfCFTA Agreement. The Council of minister can make binding decisions in accordance
with the AfCFTA Agreement. It is the main decision making institution for the AfCFTA. Its
mandate goes further to establishing and supervising the secretariat and the committees under
the AfCFTA ; issue directives and regulations that are related to the agreement; consider
structural, financial and legal decisions for adoption by the Assembly of the African Union,
which is also one of those institutions for the implementation of the AfCFTA agreement.77 It
comprises only of the member states to the AfCFTA, unlike the Assembly which includes all
African states, ensuring that AfCFTA is administered only by member states to the AfCFTA.
This institution also has the impact of pressuring non-member state to join and ratify the pact
so they aren’t left out of significant technical decisions.78 The Council of ministers is also
required to foster trade policy harmonization beyond the AfCFTA, such as Africa’s positions
in the WTO negotiations.79
3. The Committee of Senior Trade Officials: The Committee of Senior Trade Officials
implements the Council of minister’s decisions. Such committee reports its undertakings to
the Council of ministers.80 The committee has two main functions; acting as a clearing house
for technical decisions submitted to the council and supervising relevant sub-committees and
ensuring the implementation of the Council’s decisions.81 The sub-committees established
under the protocols on trade in goods, trade in services and the sub- committees that are
76
Assessing Regional Integration in Africa IX ( Next Steps For The African Continental Free Trade Area, United
Nations Economic Commission for Africa, July 2019) , 40
77
Ibid, 45
78
B Sodipo, ‘Governance for an effective AfCFTA’ In D. Luke and J. MacLeod (eds) , Inclusive Trade in Africa: The
African Continental Free Trade Area in Comparative Perspective ( London: Rout ledge, 2019)
79
Assessing Regional Integration in Africa IX ( n 76), 46
80
ibid
81
ibid
23
going to be established under the protocols expected to be adopted by the Jan 2021, in turn,
report their undertakings to the Committee of senior trade officials.82 These sub-committees
will assist the committee in their functions pertinent to the various relevant annexes to each
protocol. The Committee of senior trade officials is responsible for the development of
programs and action plans for the implementation of the AfCFTA Agreement. In addition to
the committee comprising of senior trade officials to be established under AfCFTA,
several committees will be established through protocols to assist with the implementation
of specific matters. It is already agreed to establish Committees for; trade in goods, trade in
services, on rules of origin, trade remedies, non-tariff Barriers, technical barriers to trade, and
on sanitary and phytosanitary measures.
4. The AfCFTA’s secretariat: The secretariat is established by the Assembly with a view to
service the aforementioned institutions. The African Union Commission was directed to
serve as an interim secretarial ship.83 The Secretariat serves an administrative function. The
responsibility of the secretariat is coordinating the Implementation of the agreement. The
secretariat is the autonomous body within the AU system, and being functionally
autonomous it will have the power to make administrative and operational decisions,
including the recruitment of its members of human resource without even getting approval
from the Assembly of the African Union, but it follows the African Union’s financial and
procurement rules because it is financed from the African Union Budget.84 The secretariat
could also exercise the power of delegation on some perfunctory matters given from the
committees, in case prompt decisions are thought by the committees to be given.
The Committees could indeed delegate for the same reason decision making authority to the
REC representatives absent state representation or accredit the permanent representatives to the
committee of senior trade officials, as is done in the WTO.85 The secretariat shall work closely
with the AU commission and receive its budget from the AU. It has an independent legal
personality equivalent to other African Union organs, such as: the Pan African parliament,
NEPAD and the African Court. This being said, the details of the roles and responsibility, the
decision as to where the head quarter should be and its structure there of shall be decided
82
ibid
83
ibid
84
ibid
85
ibid
24
by the council of ministers responsible for trade. It was then decided that Ghana shall be the head
quarter of the AfCFTA secretariat.
Under certain occasions, it may be required by the AfCFTA agreement itself, to implement
AfCFTA agreement through regional or national committees, which may include: national
committees on trade facilitation and non-tariff barriers.86 Nonetheless, if national trade ministries
create national AfCFTA committees or institutions that mainly focus on harmonization of
member states’ approach or employ national implementation mechanisms to implementation
within the structure of the AfCFTA national strategy, effective implementation of the AfCFTA
and effective national domestication of the AfCFTA could become more likely.87
With regard to the settlement of trade disputes between member states, the dispute settlement
body (‘DSB’) as well as the Appellate Body, on the appeal stage, are entrusted with the power of
dispute settlement.88 The settlements of the disputes are set to be undergone based on the model
akin to that of the WTO’s dispute settlement mechanisms. Its rules and procedures are laid down
in the Protocol on dispute settlement.89 According to this protocol, parties are required to settle
their disputes amicably, failing which they may refer the matter to the DSB or, indeed, to
arbitration.
Similar to its WTO’s correspondent, under AfCFTA’s DSB, there is so called ‘the rule of
reverse consensus’, which provides certain decisions by the DSB (such as the decision to adopt a
Panel or Appellate Body report) must be approved unless there is consensus by the DSB not to
do so. For example, Article 19(4) of the Protocol on Rules and Procedures on the Settlement of
Disputes provides that, within sixty days following the date on which the final Panel report is
circulated, the report shall be adopted at a meeting of the DSB unless a Party to the dispute
notifies the DSB of its decision to appeal or the DSB decides by consensus not to adopt the
report. The motivation for including such a mechanism is to prevent paralysis of the decision-
86
ibid
87
ibid
88
The treaty establishing African continental free trade area (adopted 21 march 2018, entered into force 30 may
2019) , definition part 1(pt1), art 1(l) ; see also protocol on rules and procedures on the settlement of disputes, art
3
89
ibid
25
making process. The adoption of reports becomes almost automatic given the high threshold of
consensus required to block it.90
In spite of the establishment of these institutional arrangements, however, AfCFTA is only an

‘‘agreement to agree’’ in many ways. An agreement for concrete commitments are still need to
be made under the framework of six protocols, three of which are of course pending to be
completed under phase two negotiation.91 Yet, the extent to which AfCFTA’s member states are
supposed to cede their economic sovereignty and legal sovereignty remain to be determined by
member states.92
2.5. The Current status of African Continental free trade area
The African continental free trade area’s contribution to the vision of African Continental
integration accounts over 50 years old.93 According to Kwame Nkrumah94, the former president
of Ghana, the political independence that had been achieved with decolonization wouldn’t have a
potential impact in bringing economic growth for the peoples of Africa until it is complemented
with economic independence. Economic decolonization was by then thought to have been
achieved through a regional integration approach. Such vision of an economic integration has
persisted giving rise to the establishment of the continental free trade agreement and the adoption
of an instruments of economic prosperity for Africa. And regarding its status on the ongoing
negotiations, AfCFTA negotiators, as it has been tried to mention hereunder, surpassed the
expected stage of development with the pace of the negotiations.
The text of the AfCFTA agreement and its protocols on trade in goods, trade in services and on
the rules and procedures on dispute settlement were concluded in less than three years after its
official launch on 15 June 2015 at the 25th ordinary summit of the African Union Heads of state
and government. Most of the annexes to the agreement had been negotiated and added by the
June 2018 summit of the African Union Assembly. The AfCFTA has indeed shown a remarkable
90
Herbert Smith Free hills LLP, ibid, (n 74)
91
ibid
92
ibid
93
Assessing Regional Integration in Africa IX (n 76), 37‐39
94
Thomas Nelson, ‘Kwame Nkrumah, The Autobiography of Kwame Nkrumah’ ( Ghana, 1957)
26
Progress and member states have, thus, shown commitment towards an area of negotiations that
had been dwindled, consume much time and grew feeble without the agreement ever entering
into force.95
The free trade area negotiation between European Union and Canada took 8 years; those
negotiations between Asian Countries in the regional and comprehensive Economic partnership
have been ongoing for more than six years.96 Negotiations between the United States and Europe
on the Transatlantic Trade and Investment partnership, however, became weaker after 4 years,
and the free trade area of the America between 34 countries became weaker after 12 years.97
The DOHA round of the multilateral trade negotiations at the WTO have dwindled without
conclusion for over 17 years.98 In Africa, too, several Economic partnership Agreement
negotiations between regional groupings of African Countries and the European Union have not
shown tangible outcome more than 14 years after their launch. With regard to the AfCFTA,
however, the threshold of 22 countries required for the entry into force of the agreement has been
met by 1 April 2019, which is only one year and ten days after signature. Such speed for the
ratification process is unprecedented in AU history.99
Moreover, the operational phase of the AfCFTA has already been launched in Niger in July 2019
at the African Union summit. The later last signatories to the agreement were Nigeria and Benin,
bringing the number of membership to 54 out of 55, with the lone country, Eritrea, yet to join.100
African Union is indeed putting AfCFTA into operation. This AfCFTA is in force across more
than 30 countries of Africa that have already ratified the agreement.101 More ratification are,
however, expected which of course remain to be seen meanwhile.
Has trading under the agreement begun?
Although the AfCFTA has already met the minimum threshold with 22 nations ratified it, the
trading under the agreement has not yet begun. Member states still haven’t yet set out the
95
Assessing Regional Integration in Africa IX ( n 76) , 37‐39
96
ibid
97
ibid
98
ibid
99
ibid
100
Shannon Manders, ‘EXPERT ANALYSIS: AFRICA’S FREE TRADE AREA – WHERE ARE WE NOW?’
<https://www.tralac.org/resources/infographic/13795‐status‐of‐afcfta‐ratification.html>last accessed 6 Dec, 2019
101
‘Status of AfCFTA Ratification’ <https://www.tralac.org/resources/infographic/13795‐status‐of‐afcfta‐
ratification.html> last accessed 03 Sept, 2020. While this study is being conducted, 30 countries of Africa have
already ratified the agreement, and it is expected that the remaining signatories will ratify the agreement.
27
operational instruments of the AfCFTA such as: the ‘‘rules of origin’’, which determine the
nationality of goods and schedules of tariff concessions. Indeed, member states want trading
under the agreement to commence by July 2020 and optimistic of its full operation by 2030.102
However, the agreement under the AfCFTA is unlikely to commence by July 2020 partly
because of the pending development of operational instruments by member states of the
AfCFTA and partly due to the outbreak of the Corona virus (Covid-19) pandemic, which indeed
becomes a potential hurdle for the implementation of the agreement as well. This prediction is
further strengthened by what the director of regional integration and trade, Stephen Karigi, told
an online group of journalists at the Economic Commission for Africa on 11 may 2020 that the
1st July 2020 start date for trade under AfCFTA has been postponed at least to 1 Jan 2021. This is
due to the fact that the global communities have diverted their major focus efforts on protecting
lives from Covid-19.
2.6. The structure of the AfCFTA agreement

The AfCFTA agreement has three layers.103 The first layer deals with a framework of the
agreement that defines, in general terms, the purposes and intentions of the agreement and
outlines the scope of application of the agreement. The institutional frame work for the
implementation and administration of the AfCFTA is also dealt under the first layer of the
AfCFTA agreement. This layer embraces the guidelines on the principles of transparency and the
relationships between the AfCFTA agreement and relevant other regional and international
instruments.
The second layer of the agreement encompasses the protocols to the agreement which includes;
protocols on trade in goods, trade in services, rules and procedures of dispute settlement,
investment, competition policy and intellectual property rights. These protocols cover the main
substantive and operative parts of the agreement, which include; the intentions, objectives,
obligations, exceptions and institutional provisions. The third layer of the AfCFTA contains the
annexes, guidelines, lists and schedules to the protocols, which articulate the provisions within
the protocols in detail. For example, pursuant to articles 7 and 8 of the protocol on trade in
goods, State parties are obliged to progressively eliminate import duties, whereas annex 1 details
102
Prinesha Naidoo, ibid, (n 24)
103
Assessing Regional Integration in Africa IX, ibid, (n 76), 43‐44 ; see also The treaty establishing African
continental free trade area, ibid, (n 88)
28
the exact tariff schedules to be used for such liberalization.104 In certain occasions, too, this third
layer does include appending additional documents, such as: appendices to the annexes on rules
of origin, or guidelines to the annex on trade remedies.
The followings are the integral parts of the agreement establishing the AfCFTA:
 Phase I Negotiations:
1. Protocol on Trade in goods
 Annex 1 Schedules of Tariff Concessions
 Annex 2 Rules of Origin
 Annex 3 Customs Cooperation and Mutual
 Administrative Assistance
 Annex 4 Trade Facilitation
 Annex 5 Non-Tariff Barriers
 Annex 6 Technical Barriers to Trade
 Annex 7 Sanitary and Phytosanitary Measures
 Annex 8 Transit
 Annex 9 Trade Remedies
2. Protocol on Trade in Services
 Schedules of Specific Commitments
 MFN Exemption
 Air Transport Services
 List of Priority Sectors: Transport, communication, Finance, Tourism and
Business services for the first phase of liberalization of all service sectors
 Framework document on Regulatory Cooperation

3. Protocol on Rules and procedures on the settlement of disputes
 Working Procedures of the Panel
 Expert Review
 Code of Conduct for Arbitrators and Panelists
 Phase II Negotiations:
104
ibid
29
4. Protocol on investment
5. Protocol on competition policy
6. Protocol on Intellectual property rights
The aforementioned annexes could further establish institutional arrangements, including sub-
committees dedicated to effective administration of the negotiations and implementation of the
agreement. In a nutshell, the three layers of the AfCFTA agreement create a rules-based legal
system for administering the practices of preferential trade between the member states of the
AfCFTA, thereby creating common grounds for addressing trade related issues.105
2.7. The operational Instruments of the AfCFTA
During the AU summit of July 2019 held in Niamey, Niger five supporting operational
instruments106 of the AfCFTA were officially launched after the minimum threshold for the entry
into force was attained. This occasion has also marked the country to host the AfCFTA
secretariat to be the Republic of Ghana. The operational instruments play a pivotal role in
supporting the launch of the operational phase of the AfCFTA and the beginning of trading
under AfCFTA. The followings are the operational instruments of the AfCFTA;
1. The Rules of Origin: It is a specific legal regime that governs the conditions under which a
product or service can be given nationality for want of some preferences.
2. The Tariff concessions: It has been agreed that tariffs should be liberalized for 90% of
goods and services and the deadline of which is set to be 1st July 2020. Yet, state parties do
not seem to be committed enough to liberalize tariffs for 90% of goods and services as early
as possible. Member states are given an opportunity to upload their tariff offers covering
90% of the tariff lines by using the AfCFTA trade in goods online portal. The AfCFTA on
line negotiation tool will, in turn, have the following roles:
-Facilitating negotiation on tariff liberalization between state parties, customs Unions or
regional groupings under the AfCFTA;
- provide tools to ensure the technical quality of the offers that has been made;
105
ibid
106
African Union, ‘The African Continental Free Trade Area (AfCFTA) enters into force’
<https://www.theeastafrican.co.ke/Sponsored/African‐continental‐free‐trade‐area‐afcfta‐enters‐into‐
force/4358802‐5325418‐cchsjcz/index.html> last accessed 6 Dec, 2019
30
- increase transparency and safeguard confidentiality;
- Provide negotiating tools for negotiating groups to enable them interact. Here, these
tools will help them define their respective product lists, exchange shared lists with
selected parties for discussions and suggest their respective counter proposals. The tools
will also help state parties to exchange the lists of their product with their respective tariff
line level and create a collaborative platform to define the tariff that is due to be applied.
In doing so, factors such as: fiscal revenues, the level of productions, sectorial
employment, the potential trade, the preexisting tariffs, the commitment of the state party
and the infant industries. It is, thus, based on this methodology that the lists of the
product are identified as a potential starting point for negotiation by considering the tariff
reduction schedules that has already been set as a bench mark.
3. The Continental Online Tool as a Mechanism for monitoring, reporting and elimination
of Non-tariff Barriers (NTBs):
Non-tariff barriers are conceived as the potential bottleneck in the intra-African trade than the
tariff barriers. The progressive elimination of the preexisting NTBs and abstaining from
introducing another NTBs are one of the major objectives of the AfCFTA. This is in fact mainly
aimed at promoting intra-African trade. It is, thus, with this view that the Continental tool as one
of the operational instruments of the AfCFTA agreement was officially launched to ensure NTB
is properly and effectively monitored and is eliminated.
4. The Pan-African Payments and Settlement System (PAPSS):
It is regarded as the major infrastructure of payment and settlement system for the commercial
payments and intra-African trade. This proposal is actually being developed in collaboration with
the African Export import Bank (Afreximbank) whose major objective is to facilitate the ease of
payment system in Africa. It can even potentially divert and formalize the prevalently conducted
informal cross-border trade in Africa. This project will also become an alternative to the current
high cost and time consuming banking relationships by facilitating a simple, low- cost and risk-
controlled payment clearing and settlement system. The remaining benefits of PAPSS are
decreasing liquidity requirements of commercial banks and central banks for settlement as well
31
as its own payments; and strengthening Central Banks’ oversight of cross border payment
systems.
5. The African Trade Observatory:
It is a body that acts as Africa’s trade information portal empowered to eliminate information
asymmetries and other hindrances about intra-Africa trade, such as; lack of information about
trade opportunities, trade statistics, lack of up-to-date and reliable trade data and information
about Africa’s Exporters and importers. In a nutshell, such trade observatory will act as a central
repository where exhaustive qualitative and quantitative trade data and information are placed at
the continental level. This will ultimately enable national policy makers and private sectors to
make genuine policies and business decisions.
2.8. Summary
The Regional trade liberalization can be defined as an agreement whereby countries under the
same geographical locations, level of development, etc., come together and conclude an
agreement that binds them, mainly to foster an economic collaboration through an agreed rules,
standard and institutions by focusing on barriers to free trade, free movement of people and
capital within that specific region, mainly to create larger and more attractive open market and
link countries to international market while promoting that there are no barriers to trade.
According to the findings of the UNDP (2011), regional trade liberalization is much broader than
merely liberalizing trade in a sense that it requires, among others, the following factors for
liberalizations, these are; investments in regional infrastructure, standards and regulations
harmonization, adopting common approaches to macro-economic policy, management of shared
natural resources and greater labour mobility.
Although there are various other regional trade liberalization moves across the world, the writer
of this paper has focused on the AfCFTA framework for trade liberalization because the work
tries to deal with Ethiopia’s membership to the AfCFTA with its possible benefits and
challenges. With regard to one of the regional trade liberalization moves in Africa that is the
AfCFTA agreement, institutional structures or framework and dispute settlement body (DSB) to
govern various aspects of the AfCFTA including its operationalization has been created. Those
institutional frameworks created during phase I are; The Assembly of the African Union Heads
32
of State and Government, The Council of Ministers responsible for trade, The Committee of
Senior Trade Officials and The AfCFTA’s secretariat. The operational phase of the AfCFTA has
already been launched in Niger in July 2019 at the African Union summit. Although the
AfCFTA has already met the minimum threshold with 22 nations ratified it, the trading under the
agreement is postponed for Jan 1, 2021. The AfCFTA agreement has three layers. The first layer
deals with a framework of the agreement. The second layer of the agreement encompasses the
protocols to the agreement which includes; protocols on trade in goods, trade in services, rules
and procedures of dispute settlement, investment, competition policy and intellectual property
rights. The third layer of the AfCFTA contains the annexes, guidelines, lists and schedules to the
protocols, which articulate the provisions within the protocols in detail.
33
Chapter three: The Potential Benefits and Risks/Challenges
of Regional Trade Liberalization: Theory and Evidence
3.1. Introduction
The theoretical foundations of the conventional approaches to regional integrations are, in

essence, traced back to the schools of political and economic thoughts, such as: neo‐classical,
Marxist and development economics.107 The theory of economic integration which assumes
perfect competition and whose major focus is the production of different kinds of goods was
originally believed to have been developed from traditional trade theories.108 Biswaro (2003)
also, on his part, has a belief that the earliest theoretical work on regional trade liberalization,
and the liberal economists’ interests in promoting tariff reduction and removal of non-tariff
barriers to trade emanated from the theory of comparative advantage in international trade.109
As indicated by theory, the main elements of regional trade liberalization include: removal of
tariff and non‐tariff barriers amongst state parties, ‘‘having a common external trade policy
which initiates common external trade restrictions against non‐members, initiating free
movement of goods and services, as well as free movement of factors of production
across national borders, harmonization of policies, unification of national monetary policies,
and acceptance of a common currency. These happen in stages which include free trade area,
customs union, common market, economic union and complete regional integration.’’110
The crucial motives behind regional trade liberalization have been the prospects of enhancement
of economic development and growth.111 Regarding the welfare impact of regional trade
liberalization, the theories demarcate it from two angles, i.e. ‘‘static effects of economic
107
Manone Regina Madyo, ‘THE IMPORTANCE OF REGIONAL ECONOMIC INTEGRATION IN AFRICA’ ( A thesis
Submitted in fulfillment of the requirements for the degree of MASTER OF COMMERCE in the subject
ECONOMICS at the UNIVERSITY OF SOUTH AFRICA, July 2008) ; it can also be retrieved from
<http://uir.unisa.ac.za/bitstream/handle/10500/2075/dissertation.pdf> last accessed 13 Jan, 2021
108
C Imbriani & F Reganati, ‘International production and economic integration: Toward economic convergence’
(Economia Internazionale, 47 (4), 1994), 333‐349
109
J.M. Biswaro, ‘Perspectives on Africa’s integration and cooperation from OAU to AU:
an old wine in a new bottle’( WIU. Washington, 2003); see also Manone Regina Madyo, ibid, (n 107), 14
110
Manone Regina Madyo, ibid, (n 107), 14‐15
111
ibid
34
integration, which are in terms of productive efficiency and consumer welfare, and dynamic
effects of economic integration, which relates to member states’ long‐term rates of growth.’’112
The theoretical benefits and challenges of regional trade liberalization can, thus, be seen from
two perspectives, namely static effects (measured in terms of consumer welfare and production
efficiency) and dynamic effects ( measured in terms of member states’ long-term growth rates)
of economic integration.113
These effects determine the overall welfare gains pertaining to economic integration. Obviously,
in order to gain benefits from economic integration, particularly regional trade liberalization,
member states are supposed to change and harmonize their economic policies. For example,
member states will have to remove tariff barriers to trade in which case prices will ultimately
reduce. This is, thus, one case in which case static effects can occur.114 On the other hand, it is
also predicted by Economic theory that, free trade in general will potentially improve welfare
gains of member states.115 Likewise, the dynamic effects of trade policy changes in Regional
trade liberalization can most often than not improves welfare gains of member states, certain
challenges are indeed available.116 Hence, this chapter is devoted to identifying the potential
benefits and challenges of regional trade liberalization in general.
3.2. The Potential Benefits of Regional Trade liberalization
The static effects of regional trade liberalization are mainly found in terms of production
efficiency and welfare of the consumer.117 First of all, static effects can occur with the removal
of tariff barriers to trade. Then, the general regional trade liberalization in terms of static effects
of regional economic integration will impact the welfare gains of member states in two opposing
ways, i.e. a welfare increasing trade creation effect, and a welfare reducing trade diversion effect.
These welfare effects, indeed, have to do more with allocation of resources.118 Generally
speaking, the impacts of economic integration in general and of REI in particular largely depend
112
ibid
113
R.J. Carbaugh, ‘International Economics’ (Australia Thomson, South‐Western., 9th edition, 2004)
114
Manone Regina Madyo, ibid, (n 107), 39‐40
115
ibid
116
ibid
117
ibid
118
ibid
35
on the relative strength of these two opposing forces.119 Accordingly, the followings could thus
deem to be, inter alia, the potential benefits of Regional trade liberalization:
 Lower import prices stemming from regional trade liberalization yield Welfare
benefits; Production efficiency and increase in consumer goods, higher value
added jobs and exports, and technological specialization will materialize in the
long run. Hence, regional trade liberalization ensures sustainable development
and economic growth.
 Creates bigger and integrated regional market for products.
 Permits producers to benefit from economies of scale and to access cheaper
raw materials and intermediate inputs.
 Improves conditions for forming regional value chains and integrating to global
value chains.
 Allows consumers to have access to cheaper imported products from other
member states.
 Leads to better allocation of resources and faster economic and trade growth.
 Catalyzes the structural transformation of the countries from resource and
low technology based economies to more diversified knowledge based
economies.
 Encourages both intra-trade and external direct capital flows to the regions
The IMF has also estimated the AfCFTA’s potential welfare effects by using newer and
quantitative trade models. Accordingly, it is found out that very small welfare gains are derived
out of import tariff elimination and welfare gains are dependent largely on moderate reduction of
non-tariff barriers to trade (see Table 1 below).120
119
ibid
120
Lisandro Abrego and others , ‘The African Continental Free Trade Area: Potential Economic Impact and
Challenges’ (I M F STAFF DISCUSSION NOTE, SDN/20/04, may 2020)<https://www.tralac.org/resources/by‐
region/cfta.html > accessed 3 July, 2020
36
Table 1. AfCFTA Welfare Gains from a Non-traditional Quantitative Trade Model
(Percent)
Tariff Elimination NTB Reduction Tariff Elimination and
(35 percent) NTB Reduction
Welfare increase in SSA 0.07 2.1 2.6

Welfare increase in Africa 0.05 1.7 2.1
Welfare increase in the
rest of the world 0.00 0.00 0.00
Welfare increase world 0.00 0.03 0.04
Source: Lisandro Abrego and others (2019).
Note: NTB = non-tariff barrier; SSA = sub-Saharan Africa.
On the other hand, the fact that trade liberalization particularly the regional integration result in
economic development in the long run and at the aggregate level is backed by the economic
theory and indeed by the quantitative evidence (Example: see figure 1 below). The policy
maker’s assertions in this regard as well prove same.
In terms of the static effects of an economic integration, the sources of imports and the quantity
of imports and trade in general under regional trade liberalization are, fortiori, expected to
37
increase as well. Besides, Imports from member states under regional trade liberalization are
treated favorably than those from outside the trading blocs resulting in an increase in an intra-
trade. Thus, the static effects analysis based on the theory of comparative advantage in
international trade illustrates that the formation of customs union will increase welfare gains of
member states and of the rest of the world as well, provided that trade creation effects are found
to outweigh trade diversion effects.121
On the other hand, despite the fact that regional trade liberalization’s genuine impact on growth
has been difficult to assess, the theory of endogenous growth suggested that the economic growth
rate is greatly affected by economic policies followed by countries, the technological progress
rates, the accumulation of knowledge and the institutional and governance quality.122 The United
Nations Economic Commission for Africa123 has also supported this endogenous growth theory
by showing regional trade liberalization’s contribution to economic growth due to the impact of
three factors. The first one is technological and knowledge transfer which stimulates trade and
increase technological progress.124
Therefore, regional trade liberalization promotes foreign direct investment which in turn
increases technological spillovers. Secondly, economic growth is resulted from the regional trade
liberalization’s criteria to force member states to create a macroeconomic environment that copes
up with the international competition.125 The third factor that induces an economic growth
according to the UNECA is attributable to the fact that member states are required to improve
and update the legislative and regulatory framework in line with the requirements under their
respective regional trade liberalization’s agreement.126 Another potential benefit of regional trade
liberalization efforts is poverty alleviation. According to the evidence by the UNECA, the rate of
growth for those having average income exactly matches those of the poor.127 Nonetheless, one
real problem is that the gains of international economic integration may not be easily understood
121
Manone Regina Madyo, ibid, (n 107), 43
122
123
African Trade Policy Centre (ATPC), ‘Trade Liberalization under the Doha Development Agenda: Options
and Consequences for Africa, Work in Progress’ ( United Nations Economic Commission for Africa (ECA), Addis
Ababa, August 2004)
124
Ibid
125
ibid
126
ibid
127
ibid
38
by non‐economists. Yet, non-economists could stick to analyzing the suggestions by different
theories regarding the benefits of regional trade liberalization.
3.3. The Potential Risks/challenges of Regional Trade Liberalization
Obviously and as has been superficially discussed above, reaping the prospective benefits
accruing from the regional integration, would largely depend on the overcoming of certain
political, economic and legal challenges. This is merely due to the fact that the commitment of
the state party towards ratification and implementation of the regional trade liberalization need a
political commitment of member state at the initial point, and indeed followed by economic
policy and legal reforms that need to be made to ensure harmonization within the regional trade
liberalization agreements. For instance, Africa’s heterogeneity could be one challenge. Africa’s
heterogeneity can be manifested in terms of country population size, level of income, stages of
economic development, trade openness, divergent trading regimes and trade policies, diversified
patterns of intra-regional trade and the lack of continent wide trading hub.128
Unlike Asia, Europe and North America, Africa lacks a continent wide trading hub acting as
systemic global exporter that also imports value added from the rest of the continent.129 In
Africa, NTBs remain to have been high for most African countries as well. These NTBs are
broadly classified into three, these are: non-tariff trade measures (NTMs), Infrastructure gaps and
other trade-related transaction costs. In Africa, the two most prevalent NTMs are technical and
sanitary/phyto sanitary barriers.130 Large infrastructure gaps (the quality of ports, air
transportation, and other measures of infrastructure efficiency are low in Africa compared with
other regions) and given the geography of the continent ,trade related transaction costs, including
128
Lisandro Abrego and others ,ibid, (n 120)
129
South Africa being the only country operating as a hub for southern Africa, for which it is also a key supplier of
intermediate goods. It is a top‐five trading partner for 14 African countries. At the same time, it is integrated,
mostly upstream (forward integration), in global value chains (GVC) with China, the United States, Germany, and
India. As international trade is currently shifting from goods to tasks, Africa need to spur the development of a
nascent supply chain in the continent and provide abridge for African countries to generate more downstream
integration into global value chains and thereby harvest welfare gains from their participation under AfCFTA and in
international trade arrangement.
130
This calculation is made based on Economic and Social Commission for Asia and the Pacific (ESCAP) – taken from
World Bank database.
39
ground transportation costs are also barriers to intra-African trade.131 With regard to addressing
infrastructure gaps, although The Presidential Infrastructure Champion Initiative was launched in
2011 and the Program for Infrastructure Development in Africa was adopted in 2012, they will
still take time to bring significant changes.
Moreover, in Africa, although trading under AfCFTA agreement was originally scheduled to
begin on 1st July 2020, it will not begin as scheduled due partly to the effects of Covid-19.132 The
African economy that was set to grow at about 3.4% and 3.9% in 2019 and 2020 consecutively is
becoming a mere projection due to the negative impact of the covid-19.133 By and large, the fact
that many African countries do not have a monetary policy space and fiscal policy space to be
provided in trillions of dollars for economic resilience due to the pandemic, climate change and
perhaps other catastrophes could potentially curtail African economies and implementation of
the AfCFTA itself.134 Vast economic disparities as regards Africa among African countries can
also potentially create difficulty to market access and openness to market.
On the other hand, as Regional trade liberalization could potentially induce trade creation and
trade diversion, trade creation and diversion often focuses and concentrates on trade flows.135
This trade flows have two significant effects, the first being changes in world prices that would
improve member states terms of trade that ultimately increase welfare gains at the expense of
131
It is taken and analyzed from the world trade organization’s data base. See also World Bank, ‘ESCAP‐World Bank
Trade Cost Database’ (2009).It can also be Accessed at www. Unescap.org/resources/escap‐world‐bank‐trade‐cost‐
databank.
132
Wamkele Mene, Secretary General, African Continental Free Trade Area (AfCFTA) Secretariat has recommended
to the AU Assembly of heads of state , the body empowered with delaying the trading date. The recommendation
is inspired by the current public health crisis and the need for some technical work to be concluded. The secretary
further noted by saying that, ‘‘we are exploring other ways of continuing our technical work if the pandemic
continues. Trade negotiations are very technical. We negotiate in four languages (English, French, Arabic and
Portuguese). We must make provision for the different time zones in Africa. And there are requirements for
confidentiality. All these have to be taken into account before we can continue the negotiations, if at all we are
able to continue the negotiations on virtual platforms. We would like to resume our work as soon as the pandemic
is contained. But if for whatever reason, the pandemic continues, which we hope it will not, we are exploring
other ways of advancing our negotiations.’’ See also Kingsley Ighobor, ‘AfCFTA: Implementing Africa’s free trade
pact the best stimulus for post‐COVID‐19 economies’
<https://www.un.org/africarenewal/magazine/may‐2020/coronavirus/implementing‐africa%E2%80%99s‐free‐
trade‐pact‐best‐stimulus‐post‐covid‐19‐economies> last accessed 10 Aug 2020.
133
ibid
134
ibid
135
40
non-member to economic integration agreements.136 The second effect of trade flows is changes
in tariffs and trade volumes leading to loss of government tariff revenues as a consequence of
trade diversion and regional trade liberalization.137 This will ultimately become one of the
potential risks/ challenges to many countries whose significant source of government revenue is
tariff.
Moreover, it has been widely agreed that not all welfare effects of regional trade liberalization is
static in nature.138 Regional trade liberalizations in general have also dynamic effects in the long
term growth rates of member states. According to the theory of optimum currency, the potential
risks could relate to gains (that includes more uniform prices, lower transaction costs, certainty
for investors, economies of scale, factor productivity and enhanced competition) which are to be
had from sharing a currency across the borders of member states.139
3.4. Summary
As indicated by the theories discussed above, the crucial motives behind regional trade
liberalization have been the prospects of enhancement of economic development and growth.
These theories of regional trade liberalization demarcate the welfare impact of regional trade
liberalization from two angles, i.e. ‘‘static effects of economic integration, which are in terms of
productive efficiency and consumer welfare, and dynamic effects of economic integration, which
relates to member states’ long‐term rates of growth.
Accordingly, the general regional trade liberalization in terms of static effects of regional
economic integration will impact the welfare gains of member states in two opposing ways, i.e. a
welfare increasing trade creation effect, and a welfare reducing trade diversion effect. These
welfare effects, indeed, have to do more with allocation of resources. Generally speaking, the
impacts of economic integration in general and of REI in particular largely depend on the
relative strength of these two opposing forces. Nonetheless, as has been discussed above, reaping
the prospective benefits accruing from the regional integration would largely depend on the
overcoming of certain political, economic and legal challenges. This is merely due to the fact
136
ibid
137
ibid
138
ibid
139
R.J. Carbaugh, ibid, (n 113), 40 ff
41
that the commitment of the state party towards ratification and implementation of the regional
trade liberalization need a political commitment of member state at the initial point, and indeed
followed by economic policy and legal reforms that need to be made to ensure harmonization
within the regional trade liberalization agreements. Hence, the followings are, among others, the
potential risks/ challenges to many countries;
 Loss of government revenues for many regional trade liberalization agreements

 Non-tariff barriers to trade, such as: non-tariff trade measures (NTMs), Infrastructure
gaps and other trade-related transaction costs.
 In Africa, the two most prevalent NTMs are technical and sanitary/phyto sanitary
barriers. Large infrastructure gaps (the quality of ports, air transportation, and other
measures of infrastructure efficiency are low in Africa compared with other regions) and
given the geography of the continent ,trade related transaction costs, including ground
transportation costs are also barriers to intra-African trade.
 Vast economic disparities as regards Africa among African countries can also potentially
create difficulty to market access and openness to market.
 Africa’s heterogeneity could be one potential challenge. Africa’s heterogeneity can be
manifested in terms of country population size, level of income, stages of economic
development, trade openness, divergent trading regimes and trade policies, diversified
patterns of intra-regional trade and the lack of continent wide trading hub.
42
Chapter Four: The Possible Benefits and Risks/Challenges
of AfCFTA for Ethiopia
4.1. Introduction
On March 21, 2019 Ethiopia ratified its first ever free trade agreement, the African continental
free trade agreement.140 On April 11, 2019, Ethiopia became 19th country to have deposited
instrument of ratification to the African Union commission.141 Having deposited instrument of
ratification with Moussa Faki Mahamat, the chairperson of the AUC, Mamo Mhretu142 told
journalists that Ethiopia’s ratification of the AfCFTA as a founding member is of a paramount
importance as it makes Ethiopia a decision maker rather than being agenda receiver.143 He
further added that ‘‘the agreement is above all essential to create huge market, increase investment
flow between Ethiopia and other member countries, among others.’’144
According to the Ethiopian ministry of foreign affairs, Ethiopia has agreed to liberalize 90 % of its
tariff to the AfCFTA member states within the next 15 years.145 According to the then state minister
of foreign affairs, Hirut Zemene, Ethiopia reached on this decision after two years negotiation.146 As
Ethiopia is not a member to any of the FTA147, particularly in Africa, the creation of the AfCFTA and
its ratification will enable Ethiopia, inter alia, not to lag behind and runoff in the African wide moves
140
It was on Thursday, march 21, 2019 at around 3:35 that Ethiopian parliament, HPR, ratified the AfCFTA
st nd
becoming the 21 country to ratify the CFTA. Gambia then follows and became the 22 country to ratify same
fulfilling the threshold for the CFTA to enter into force. Visit the ministry of foreign affair’s face book page. It can
be retrieved at <http://www.facebook.com/MFAEthiopia/posts/ethiopian‐parliament‐ratifies‐agreement‐to‐
establish‐afcftathe‐house‐of‐peoples‐/2702247579802468/> last accessed Sept 02, 2020.
See also ‘Parliament ratifies Ethiopia’s membership to AfCFTA ’Ethiopian Herald newspaper (Ethiopia, March
22/2019) <https://www.press.et/english/?p=3794> last accessed Sept 02, 2020.
141
Xinhua, ‘Ethiopia deposits Africa free trade pact ratification to AU’ <http://www.xinhuanet.com/english/2019‐
04/11/c_137969375.htm> last accessed Sept 02, 2020.
142
A Senior Advisor to the Prime Minister Abiy Ahmed and Chief Trade Negotiator at a time.
143
‘Ethiopia Deposits Instruments of AfCFTA Ratification with AUC Chairperson’ <
https://www.ena.et/en/?p=7279> last accessed Sept 02, 2020.
144
ibid
145
‘Nation to Apply 90 Percent Tariff Liberalization for Members of AfCFTA’, <https://www.ena.et/en/?p=8646>
last accessed 17 Aug, 2020
146
ibid
147
____________, ‘AfCFTA Phase 1 Negotiations: Issues and Challenges for Eastern Africa’ (A THIRD WORLD
NETWORK‐ AFRICAPUBLICATION, 2019) < Nation to Apply 90 Percent Tariff Liberalization for Members of AfCFTA>
last accessed Nov 11, 2020.
43
toward realizing the Abuja treaty of establishing African Economic Community.148 Moreover,
Ethiopia’s membership to the AfCFTA creates an important milestone to coordinate with African
countries by harmonizing its national economic policies in line with the AfCFTA’s framework and
the Abuja treaty, eventually deriving the potential benefits accruing thereof. Among those countries
in the Eastern Africa, Ethiopia’s total export to African countries with which it does not have a FTA
is the highest, 684,198149(values in the USD thousands). And, As Ethiopia is not a member of any of
the FTAs in Africa, Ethiopia’s share of exports going to countries with which it has FTA is
negligible (0%).150 The same is true for Ethiopia on the import side as per this same UNCTAD’s
trade data stat. In a nutshell, given that Ethiopia’s all trade (exports and imports) with other African
countries are not preferential; AfCFTA is expected to pose the largest impact on Ethiopia’s intra-
African trade.
In this chapter, an overview of the Ethiopian Trade policy and recent reforms, The Regulatory
and Supervisory Policy Environment pertaining to the Ethiopian trade policy, the progress
Ethiopia has gone through since its ratification of the agreement and its readiness to implement
the agreement amid multiple challenges will be briefly discussed. Furthermore, the general
overview of the impacts of AfCFTA to Ethiopia, the possible benefits and challenges Ethiopia’s
ratification and implementation of the agreement could pose, Maximizing the Benefits and
Avoiding Risk/Challenges of AfCFTA and the adjustment costs for Ethiopia to fully exploit the
AfCFTA have systematically been analyzed.
4.2. The Ethiopian Trade Policy and Recent Reforms: An overview
Trade policy is all about a plan of action adopted by government to determine the size of one’s
market for the firms’ or multinational enterprises’ product and hence strongly influence foreign
148
Obviously, nonetheless, the Abuja treaty itself is unable to realize its ambition of establishing AEC in 34 years
reckoned from the date of its entry into force in 1991. The adoption of the continental customs union that
chronologically precedes establishment of AfCFTA should have been finalized by 2018. Sadly, AfCFTA, which
should have also been adopted earlier before 2018, the time line set for the implementation of continental
customs union, is adopted in March 2018 with no implementation of the agreement to date. This is simply to
demonstrate the fact that, the time frame for the chronological implementation of action plans to realize the
Abuja treaty is not being strictly followed. This could, among others, be attributable to the cumbersome
bureaucratic limbos that have long been in place since and before its inception.
149
‘AfCFTA Phase 1 Negotiations: Issues and Challenges for Eastern Africa’, (n 147), 12. The calculation is made
based on trade data from UNCTAD stat (for the year 2016).
150
ibid
44
direct investment and domestic investment.151 Liberalization of host countries’ trade policies and
investment contributes a lot for overall economic growth.152 Moreover, trade policies play a
pivotal role in changing trade and investment environment of one’s country. In order to
modernize the economy and ensure sustainable development of the country, countries need to
undertake trade reform and adopt trade policy mainly to transform an inward oriented economy
to an outward oriented economy. It is, however, up to countries (economic sovereignty) to decide
to reform its economy in line with its own developmental goals to transform its economy.
Coming to the Ethiopian scenarios, Ethiopia has had little market power for trade.153 Hence,
Ethiopia tried to pursue an open trade policy to transform to a modern economy since the early
1990s.154 Consequently, the then new government of Ethiopia, since August 1993, has passed
through a series of trade reform program mainly to dismantle quantitative restriction and reduce
tariff level and hence tariff levels have significantly been reduced.155 Ethiopia has also
undertaken ‘‘important policy measures, such as; reduction of non-tariff barriers, harmonization
and simplification of tariffs, including tariff lines and dispersions, removal or tariffication of
quotas, reduction and gradual elimination of all controls including on domestic prices,
deregulation and realignment of foreign exchange rates and liberalization of investment
policies.’’156 Despite, Ethiopia has not fully realized liberalized trade regime. Yet, the liberalized
trade regime is indeed relatively better than the highly restrictive trade regime during the period
of Derg regime.
Recently, too, under the Prime Minister Abiy Ahmad’s administration, Ethiopia has pledged to
make structural reforms designed to strengthen the private sector, boost competition, and
increase investment thereby ending Ethiopia’s long reliance on state –led economic growth.
151
_______ ‘POLICY FRAMEWORK FOR INVESTMENT USER’S TOOLKIT’ (A publication of the Investment Division of
the OECD Directorate for Financial and Enterprise Affairs, OECD, 2012)
<http://www.oecd.org/investment/toolkit/policyareas/trade/PFItoolkitTRADE.pdf> last accessed 17 Jan, 2021
152
ibid
153
‘The Ethiopia: Trade and Transformation Challenges: Diagnostic Trade and Integration Study’, (Summary and
Recommendations, DIAGNOSTIC TRADE INTEGRATION STUDY, July 2004 Final Version), 20‐28
<https://enhancedif.org/en/system/files/uploads/ethiopiadtisfinal_volume1.pdf> last accessed 12 Jan, 2021
154
ibid
155
ibid
156
‘Accession to the World Trade Organization: Challenges and Prospects for the Least‐developed Countries (LDCs):
Ethiopian Accession Case Study’ (Technical Annex, The Estey Centre Journal of International Law and Trade Policy,
Volume 6, Number 2, 2005/p. 201‐209) <https://ideas.repec.org/a/ags/ecjilt/23891.html> last accessed 12 Jan,
2021
45
Despite, Ethiopian MoTI is still unable to draw up a comprehensive Ethiopian trade policy157
that is considerate of the premier’s ambition. Moreover, although Ethiopia has ratified the
AfCFTA the liberalization moves so far in line with the AfCFTA’s requirement is not
commendable. During the annual meeting of the World Economic Forum held in Davos on 23
January, 2019, too, Prime Minister Abiy Ahmed met WTO director-General Roberto Azevedo
and expressed his government’s commitment to regional and global integration through the
WTO accession and its participation in the AfCFTA.158 He further noted in his addresses to the
WEF that, Ethiopia sought to open its economy to international markets and plans to reform
state-owned enterprises and to open key sectors of the economy to domestic and foreign private
investors in areas such as; Telecoms, logistics, energy, aviation, railways and industrial parks.159
As part the premier’s ambition, the new Ethiopian investment regulation no. 474/2020 has lifted
restrictions previously imposed on the provisions of transport services, including; air, ground and
marine and railway transport to allow to foreign investment in the following areas: rail way
transport, cable car transport, cold-chain transport and freight transport. The new Ethiopian
investment regulation no.474/2020 enacted for the implementation of the investment
proclamation no.1180/2020 has also made various other reforms with respect to allowing foreign
investment. Nonetheless, Ethiopia does still have sectors dominated by state-owned enterprises,
such as financial markets, telecommunications, logistics, and transportation, etc. As far
Ethiopian membership to the AfCFTA is concerned, the comprehensive Ethiopian trade policy
that is quite considerate of Ethiopian membership to the AfCFTA is also yet to be developed.160
With the specific aim of further fulfilling and realizing the general objectives161 of the agreement
establishing AfCFTA, state parties to the AfCFTA, among others, are obliged to progressively
eliminate tariffs, non-tariff barriers to trade in goods, liberalize trade in services and support and
strengthen institutional frame work for the implementation and administration of the AfCFTA.162
157
Interview with Tages Mulugeta, acting director at Regional integration trade relations and negotiation
directorate, The FDRE ministry of trade and industry ( Addis Ababa, Dec 28,2020)
158
WTO ACCESSION NEWS LETTER, WTO accession developments, Secretariat report to members, (N° 91 —
January/February 2019) <https://www.wto.org/english/thewto_e/acc_e/nl_e/2019_01_acc_newsletter_e.pdf>
Last accessed 12 Dec, 2020
159
ibid
160
Interview with Tages Mulugeta, ibid, (n 157)
161
The treaty establishing African continental free trade area, ibid, ( n 88), pt II, art.3
162
The treaty establishing African continental free trade area, ibid, ( n 88), pt II, art.4(a) ,(b) and (g)
46
Despite, the progress Ethiopia has passed through to achieve those very purpose are not
commendable. Ethiopia is lagging behind like majority of state parties to the AfCFTA, regarding
its commitment on implementing operational instruments to the AfCFTA, that include tariff
concessions in regard to protocol on trade in goods (submission of schedule of tariff concession),
submission of schedule of specific commitment with regard to the protocol on trade in services
in line with the adopted modalities, submission of documents pertaining to rules of origin in line
with its relevant annex and with regard to supporting institutional framework for the
implementation and administration of the AfCFTA under its own national AfCFTA
implementation strategy.163
Schedules of tariff concessions were to be submitted to the AU assembly for adoption in July
2019. But, Ethiopia did not live up to this expectation. These scenarios will, thus, potentially
become a potential hurdle for Ethiopia to exploit AfCFTA to its fullest potential. Therefore,
relevant government think-tanks shall create conducive environment in which those matters
could be discussed with relevant government organs including at the parliamentary levels with
members of Ethiopian parliament. This in turn will create possibilities for the new enactment and
modifications of relevant rules and regulations for the effective implementation of Ethiopia’s
commitment under AfCFTA. Moreover, since liberalization of trade is actually measured based
on a tariff lines in to be agreed tariff books and on the actual implementation of the protocols and
its subsidiary rules, Ethiopian commitments and liberalization deal could be left ambitious.
Therefore, the ERCA needs to convert its tariff books into ICHCDCS/the Harmonized system,
be it HS 2017 or the earlier version having regard to the timing of tariff cuts or transition periods
set in favor of least developed countries like Ethiopia. On the other hand, article 26-28 of the
protocol on trade in goods leave policy space for state parties to deviate from certain AfCFTA
provisions under certain circumstances, which include; general exceptions, security exceptions
and during critical balance of payment difficulties. So, countries like Ethiopia must make use of
this provision and make relevant policies in ways compatible with these specific provisions of
the protocol on trade in goods. With regard to schedules of specific commitments related to the
protocol on trade in services, article 22 of the protocol on trade in services provide that state
parties shall set out those specific commitments in their respective schedules.
163
47
In this regard, too, Ethiopia is lagging behind from its obligation imposed by this protocol to
develop schedules of specific commitments and develop regulatory cooperation framework for
trade in services and develop transitional implementation work programme in line with the
adopted modalities. Besides, Ethiopia and all state parties were indeed required to designate the
liberalization of the priority service sectors before January 2020. The specific commitments for
trade in services for five (5) priority service sectors included in phase I were supposed to have
been submitted to the AU assembly for adoption in Feb, 2020. Ethiopia, however, did not live up
to this expectation.164
4.3.The Ethiopian readiness towards commitments and implementations of the AfCFTA:

The Status quo
Preface
Obviously, All member states to the AfCFTA are required to abide by the commitments under
the AfCFTA which includes; reduction of applied tariff in the trading of goods, the opening of
service sectors, and/or changes in the administrative practices and relevant regulations pursuant
to the negotiated transition periods for implementation of their commitments under the AfCFTA.
This sub topic is dealt specifically with Ethiopia’s readiness towards commitments to the
AfCFTA and also systematically analyzed the above discussions and the assessment made by the
African champion’s initiatives on African governments’ commitment and readiness for the start
of trading under AfCFTA.
4.3.1. Ethiopian readiness for AfCFTA commitment and implementation: a brief view
According to the African champions initiatives’ assessment165 of African governments’

commitment and readiness for AfCFTA’s start of trading, in spite of the intense happiness for the
establishment of AfCFTA by governments, the AfCFTA commitment and implementation
164
165
‘‘Afro Champions is a regional private‐public partnership designed to galvanize African resources and
institutions to help drive Africa’s integration. The Initiative supports the emergence and success of African business
champions, which have a critical role in integrating African markets and accelerating the transformation of the
continent. Afro Champions is a leading private sector partner of the AU.’’ See also, THE AFROCHAMPIONS
INITIATIVES, ‘AFCFTA YEAR ZERO REPORT’, (An Assessment of African Governments’ Commitment and Readiness
for AfCFTA Start of Trading in light of COVID19) [part one], may 2020),
8 <https://www.tralac.org/documents/resources/cfta/3519‐afcfta‐year‐zero‐report‐april‐2020afro> last accessed
Nov 11,2020
48
readiness of African governments was below 50% even before COVID -19 struck.166 The
commitments and implementation readiness of African governments would, for stronger reason,
be likely to remain below 50 % after COVID-19 struck as well. This is simply because; COVID-
19 pandemic has negatively affected the world economy as a whole. Despite, there is no best
weapon, of course, to beat COVID-19 than keeping the AfCFTA itself on track mainly to speed
up post-Covid-19 economic recovery. The point worth noting here as well is that, Ethiopia is not
the exception of this scenario. The Afro champions initiatives on its AfCFTA year Zero report
ranked African countries by their level of commitment, according to which Rwanda (with
83.93% score) ranked 1st as the most committed country and Eritrea (0.85%) being the least
committed country in the continent. 167
On the other hand, this study has also found out that, South Africa has the highest score (68%)
and South Sudan has the lowest score (1.7%) in terms of implementation readiness .168 Ethiopia’s
implementation readiness is suggested to be below 50%.169However, in the combined ranking of
commitment and implementation readiness, Rwanda (74.26%) leads followed by Kenya
(67.89%); South Sudan (55th state) being the last (with 11.75%).170 Ethiopia ranks 34th state in
the continent with 45.20% over performance in terms of both commitment and implementation
readiness of the AfCFTA.171 Even though more than 30 states have ratified AfCFTA almost all
state parties are yet to complete a national AfCFTA implementation strategy as well.172 This
shows that there is still a lot to be done by Ethiopia as well to improve its overall performance in
terms of both commitment and implementation readiness to exploit AfCFTA to its fullest
potential. According to an interview conducted at the Ethiopian ministry of trade and industry,
too, although Ethiopia is trying its best endeavor to liberalize its home grown economy and
making a various consultative meetings regarding the challenges and prospects AfCFTA may
166
Ibid; the overall average commitment level of the continent to AfCFTA is at 44.48%; and its overall
implementation readiness level is at 49.15%.’
167
THE AFROCHAMPIONS INITIATIVES, ‘AFCFTA YEAR ZERO REPORT’, (An Assessment of African Governments’
Commitment and Readiness for AfCFTA Start of Trading in light of COVID 19) [part one], may2020),14‐15
<https://www.tralac.org/documents/resources/cfta/3519‐afcfta‐year‐zero‐report‐april‐2020afro> last accessed
Nov 11,2020
168
ibid, 16‐17
169
THE AFROCHAMPIONS INITIATIVES, ‘AFCFTA YEAR ZERO REPORT’, ibid, (n 167), 29; see also Annex 3 showing
the Overall state of Implementation Readiness by Country
170
THE AFROCHAMPIONS INITIATIVES, ibid, (n 167), 17‐19
171
ibid, 26‐30
172
ibid, 20‐21
49
pose to Ethiopia, but Ethiopia is yet to adopt a national AfCFTA implementation strategy which
is crucial for strategic implementation of the agreement.173
Despite, the interviewee noted that Ethiopia is working a commendable job with regard to
creating awareness to relevant stakeholders and creating a road map for Ethiopia to exploit
AfCFTA to the extent possible, though this does not replace a national AfCFTA implementation
strategy.174 Ethiopia did not submit its schedules of tariff concessions and schedules of specific
commitment, despite efforts being made towards their development.175
In general, the failure to develop a national AfCFTA implementation strategy, failure to submit
schedules tariff concessions and schedules of specific commitment could potentially keep on
hampering the performance of commitments and implementation readiness of member states in
general and of Ethiopia in particular. The absence of the national AfCFTA implementation
strategy could possibly pose critical question towards the long-term viability of the AfCFTA
itself. So, the completion of a national AfCFTA implementation strategy that is publicly
available and accessible on line by member states to the AfCFTA shall not be taken for granted.
Moreover, although the protocol on the free movement of people176 is believed to play a pivotal
role in fast tracking trading under the AfCFTA framework, only four countries (Rwanda, Mali,
Niger and Sao Tome and Principe) have ratified it. The failure by Ethiopia to sign and ratify
same is so very likely to impede the movement of labor thereby discouraging an economic
integration ensuing thereof and above all; it creates a potential hurdle to Ethiopia to exploit the
benefits of AfCFTA to the extent possible.
Besides, according to the assessment by the Afro champions’ initiatives177, the average
percentage score of trade facilitation readiness for all member states, in terms of implementation
173
174
ibid
175
ibid
176
The protocol to the treaty establishing the African Economic Community relating to the free movement
th
peoples, the right of residence and the right of establishment (Adopted by the 13 ordinary session of the
Assembly, held in Addis Ababa, Ethiopia on 29 January 2018). Trading and letting peoples move freely across the
continent shall be coinciding in order to actualize the aspirations of AfCFTA, as the saying goes ‘‘trade starts with
people moving’’. Hence, for AfCFTA to be more efficient and effective, member states to the AfCFTA are expected
to ratify the protocol on the free movement of peoples and facilitate visa openness; See also THE
AFROCHAMPIONS INITIATIVES, ibid, (n 167), 22‐23
177
THE AFROCHAMPIONS INITIATIVES, ibid, (n 167), 23
50
readiness (customs efficiency and trade infrastructure) performance is 41.7%. The average score
for trade-infrastructure is 41.3%, whereas that of customs efficiency is 42.1%.’’178 It can, thus,
be inferred from this finding that Ethiopia has also lesser trade-infrastructure and in efficient
customs operations as its main bottlenecks to its intra-African trade, and so Africa is supposed
garner lessons from successful trading blocks of Asia, Europe and other continents to improve its
trade facilitation readiness so that AfCFTA be more meaningful and become a success story.
Ethiopia, on its part and of course as a member of the AfCFTA, shall make its splendid endeavor
towards modifying its trade facilitation capability- as measured by customs efficiency and trade-
related infrastructure, to meet the requirements under the AfCFTA and indeed its relevant
annexes attached thereto.
Lastly but not least, the ease of getting credit is of paramount importance for the successful
implementation of AfCFTA. According to the findings of the World Bank regarding ease of
doing business, the average percentage score for ease of getting credit across Africa, for all
countries combined is 43.3%.179 Rwanda is on the top of getting credit with 95%.180 From this, it
can be deduced for stronger reason that Ethiopia’s SMEs are also grouped under those countries
with lower score of getting credit and trade finance. The limited access to credit and trade
finance181 for SME of Ethiopia in particular are, thus, likely to potentially suppress the SME’s
growth and competitiveness under the AfCFTA framework.
Generally, however, given the fact that trading under AfCFTA is about to kick off as of this
January 1, 2021 and Ethiopia still lags behind to make significant offers182 and accomplish
numerous tasks bestowed up on, especially with regard to the operational instruments of the
AfCFTA. Hence, Ethiopia’s current state of affairs makes the writer of this paper hardly to hold
the opinion that Ethiopia is ready enough, especially for the January’s start of trading on crucial
trading sectors.
178
ibid
179
THE AFROCHAMPIONS INITIATIVES, ibid, (n 167), 24
180
ibid
181
The problem is in fact almost common across the continent.
182
51
4.4.The Ethiopian Trade Policies: The Regulatory and Supervisory Policy Environment
I have specifically wanted to deal with the legal regime of trade in services due to the fact that
liberalization of trade in services requires the amendment of domestic statutory provisions far
greater than trading in goods do. Ethiopia, once adopted a developmental state policy, has had
legislations authorizing its government to predominantly take part in those strategic streams of
business which include: Telecom, power plant, air transport, etc.183 Moreover, its relevant laws
such as investment laws, banking laws, insurance laws, etc. have also restricted foreign investors
from participating in business areas such as; Transport, finance, broadcasting, packaging,
forwarding, education, health care and legal services, etc.184 Despite, quite recently, during the
annual meeting of the World Economic Forum in Davos on 23 january,2019, prime minister
Abiy Ahmed noted in his address that Ethiopia is committed to regional and global integration
through the WTO accession and its participation in the AfCFTA.185
He further noted to the WEF that, Ethiopia sought to open its economy to international markets
and plans to reform state-owned enterprises and to open key sectors of the economy to domestic
and foreign private investors in areas such as; Telecoms, logistics, energy, aviation, railways and
industrial parks.186 On 30 January 2020, with its 4th working party meeting, Ethiopia’s accession
negotiation process, which is currently in its 18th year, has officially resumed after an 8-year
break.187 Ethiopian premier, Abiy Ahmad, reiterated that, his government is committed to using
Ethiopia’s accession to the WTO as a driving force for the reform of its home grown economy,
and set date of Ethiopia’s accession to the WTO to be, ideally, by the end of 2021.188 During this
working party meeting, which is on January 29, 2020, the delegation of Ethiopia was led by the
senior advisor to the prime minister and chief trade negotiators, Mamo Mihretu and 15 members
183
ERMIAS ABEBE ADDIS, ‘THE ACCESSION OF ETHIOPIA TO THE WTO IN THE CONTEXT OF ITS POLICY ON
“DEVELOPMENTAL STATE”’,( a thesis Submitted in partial fulfillment of the requirements for the degree of masters
of law with specialization in international economic law at the university of south Africa, Sept 2014), 36
184
ibid
185
WTO ACCESSION NEWS LETTER, ‘WTO accession developments, Secretariat report to members’, (N° 91 —
January/February 2019) <https://www.wto.org/english/thewto_e/acc_e/nl_e/2019_01_acc_newsletter_e.pdf>
Last accessed 12 Dec, 2020
186
ibid
187
WTO ACCESSION NEWS LETTER, ‘WTO accession developments, Secretariat report to members’ ( N° 98 —
January/February 2020)
<https://www.wto.org/english/thewto_e/acc_e/nl_e/2020_01_acc_newsletter_e.pdf=12>last accessed 12 Dec,
2020
188
ibid
52
that include; Ambassador Misganu Arga Moach, State Minister of Trade and Industry; Dr
Eyob Tekalign Tolina, State Minister of Finance; and other senior representatives from a
range of Ministries and governmental agencies.189 The meeting mainly focused on the Ethiopia’s
economic priorities to promote a private sector growth.
This main focus of Ethiopia will also benefit Ethiopia’s commitment and implementation
readiness of the protocol on trade in services envisaged under the AfCFTA framework as well.
As far as Ethiopia’s WTO accession is concerned, the technical working groups for service
commitments of Ethiopia is also being developed , although schedules of specific commitment
under AfCFTA is yet to be submitted for adoption by the assembly.190 Nonetheless, as it can be
inferred from the assessment made by the African champion’s initiatives discussed under this
chapter and the investment policies and the legal reforms so far made by Ethiopia, the progress
so far made with regard to the reforms of economic priorities and making specific commitments
especially in service sectors of the economies do not seem to be commendable as has been
pledged by the Ethiopian government, especially in as far as liberalizing priority service sectors
as part of the AfCFTA’s phase I liberalization of service sectors is concerned. So, Ethiopia needs
to liberalize its trade policies in those areas. Hereunder, I will examine two selected service
sectors to appraise their readiness and compatibilities with the requirements under the AfCFTA
and that of WTO as well, given that Ethiopia has planned to accelerate it WTO accession,
perhaps to finalize its accession by the end of 2021. These are;
 Financial sectors
Although the new Ethiopian investment regulation no.474/2020 and the investment proclamation
no.1180/2020 consistent with amendments made to sector specific laws such as the Banking
Business Proclamation and the Insurance Business Proclamation, is enacted to abolish the
distinction between Ethiopian nationals and foreign nationals of Ethiopian origin removing
sectors that were exclusively reserved for Ethiopian nationals, it still excludes foreign nationals
of non-Ethiopian origin from participating in the financial sectors, like banking, insurance and
microfinance businesses. These businesses are currently being transacted by local businessmen
(domestic investors) and government itself.
189
ibid
190
53
Ethiopia’s current exclusion of those foreigners is likely to be scrutinized by relevant institutions
under the AfCFTA. Generally, with regard to the four modes of service supply, the stand point of
Ethiopia is almost the same.191 Cross border supply of financial service (mode 1) is almost
restricted except for reinsurance, in which case Ethiopian insurance companies are allowed to
buy reinsurance from abroad. Consumption abroad of financial service (mode 2) is also
practically prohibited by requiring companies to surrender their foreign currency to the national
bank. Commercial presence of foreign financial institutions (mode 3) is statutorily barred. Since
commercial presence is already barred the concept of the presence of natural persons (mode 4) is
irrelevant. Foreigners are, however, exceptionally allowed to work in the country in rare cases
provided that they are given a work permit from relevant governmental authorities in advance.
Given that AfCFTA also uses the WTO GATS scope of spheres regarding the commitment in
trade in services and Ethiopia has ideally pledged to accede to the WTO by the end of 2021, and
in fact its obligation under AfCFTA to progressively liberalize its service sectors, Ethiopia need
to assess its legal frame work regarding financial sectors and make significant reforms without
indeed compromising Ethiopia’s infant industries’ inability to withstand competition which is
likely to be hit hard and subsumed by giant foreign firms.
Having this in mind, it is crystal clear from the arguments of many scholars in the field that,
countries with small economies will face problems in withstanding giant firms pressures,
however, until when are these small economy countries supposed to wait in fear of foreign giant
firms and while of course, the trading under AfCFTA is also about to kick-off as of next January
2021 also poses another question. Hence, in my view, countries, while reforming their critical
service sectors need to take subsidizing measures and other flanking measures under the
AfCFTA framework and that of the WTO up on its accession, and put in place complementary
policies towards their commitment under the AfCFTA. Or else categorizing those products under
sensitive lists for the time being and prioritizing those critical service sectors a sap. So, I’m of
the opinion that it is through this way that the paradox in this regard may be reconciled. Above
all, they also need to put in place an action plan for the liberalization of those sectors and identify
those products and services that need to be categorized under sensitive and exclusion list until
full liberalization of AfCFTA is implemented.
191
Daniel Roseman, ‘The WTO and telecommunications services in China: three years on’ (Emerald Group
Publishing Limited Volume NO 22005), 28; see also ERMIAS ABEBE ADDIS, ibid , ( n 183), 37‐38
54
 Telecom
Telecommunication sector is traditionally divided into value added and basic services.192 Basic
service i.e. voice data transmission, telex, telegram are most of the time restricted.193 The
investment proclamation provides that domestic and foreign investors are only allowed to invest
in Telecom business jointly with the government. Council of ministers regulation enacted for the
effective implementation of investment proclamation, and determination of investment areas
reserved to domestic investors, is silent on whether foreigners are allowed to form joint venture
with the government. The regulations rather have been referring the issue for further
determination by the ministry of information technology.194 The government, however, promised
to liberalize the sector once telecom service in rural areas turns out to be profitable.195 This
policy option emanate from the assumption that telecom service in rural areas is not profitable.196
In my view, this is illogical given the fact that the telecom service like mobile service has now a
day become available throughout the country including remotest rural areas. Yet, the
government does show no sign of fully liberalizing the sector. Moreover, although the Ethiopia’s
legal regime allows joint venture in Telecom, the practices show the monopolistic power of the
government.197 Therefore, for Ethiopia to exploit the benefit of AfCFTA with regard
liberalization of critical service sectors, it may need to apply conditional liberalization moves
like geographic limitation, equity capital or transition period that indeed needs to be incorporated
under its schedule under the specific sector, just like other countries did to find a common
ground with the members.198
Generally speaking, despite the fact that Ethiopia has been appreciating the benefits emanating
from the WTO membership since 2003, the government have once adopted the developmental
state ideology and exhibited developmental policies in its business laws as a regulator and actor
of the economy.199 This policies and developmental state laws has become a potential hurdle
against its quick WTO accession ambition. In a nutshell, the legal regime as regards the service
192
ERMIAS ABEBE ADDIS, ibid , ( n 183), 41‐42
193
ibid
194
ibid
195
ibid
196
ibid
197
ibid
198
ibid
199
ERMIAS ABEBE ADDIS, ibid , ( n 183), 45
55
sector manifested in the investment proclamation is incompatible with the ambition of Ethiopia’s
WTO membership, ideally pledged to be by the end of 2021, as reiterated by Prime Minister
Abiy Ahmed. Hence, the legal regimes as regards the service sector, manifested mainly in the
new investment proclamation, need to be revised in a manner that is compatible with Ethiopia’s
commitment under the AfCFTA framework and in fact to exploit the potential benefits ensuing
from this sector.
4.5. The Impacts of AfCFTA to Ethiopia: General overview
Although, AfCFTA has retained the threshold required for its entry into force and trading under
AfCFTA is about to begin by Jan 1, 2021, member states were not in a position to setup
schedules of tariff concessions and rules of origin has not also been made ready by members
within the timeframe set by the AU assembly for their adoption. Based on Computable General
Equilibrium Model (CGEM), the most often used type of model indeed used in the Global Trade
Analysis Project (GTAP) to forecast the long term possible impact of FTAs and assess impact
studies, certain anonymous study entitled ‘AfCFTA Phase 1 Negotiations: Issues and Challenges
for Eastern Africa’200 have examined the available results specific to East African countries
regarding the real income/GDP, employees’ wages, tariff revenue losses, impacts on exports and
imports, etc.
According to this study, thus, the CGE models have shown positive signal in employment
opportunity and positive changes in skilled real wages across east African countries with the
exception of unskilled labour in agriculture. This study, however, has also found out that, with
the AfCFTA, Ethiopia’s skilled real wages would be decreasing (-0.45) unless otherwise trade
liberalization in Ethiopia are accompanied by trade facilitation measures (+1.83% for Ethiopia,
+0.40% for ‘rest of Eastern Africa’201). Yet, Ethiopia’s wage growth would be lower compared
to the African average (1.18% unskilled real wages in agriculture, 0.25% in unskilled real wages
in non-agricultural sectors).202 The result of this study indeed generate some discomfort, given
200
‘AfCFTA Phase 1 Negotiations: Issues and Challenges for Eastern Africa’, ibid, (n 147), 29‐37.
201
Ibid, (n 147), 29 ; See also Simon Mevel and Stephen Karingi, ‘Deepening regional integration in Africa: A
computable general equilibrium assessment of the establishment of a Continental Free Trade Area followed by a
th
Continental Customs Union’( a Paper for the 7 African Economic Conference, Kigali, Rwanda, 30 October, 2012‐ 2
November 2012).
202
ibid
56
the fact that many East African countries including Ethiopia have unskilled workers in
agriculture and as agriculture is indeed specifically the backbone of Ethiopian economy.
Mevel and Karingi (2012)203 also projected that AfCFTA would have a negative impact on real
income /GDP/ in the rest of East Africa including Ethiopia (0.3%) , the results indeed partly
mirroring what is already projected for wages decrement. On the other hand, Jensen and Sandrey
(2015)204 expect positive impact for all countries, still projecting small changes happening to
Ethiopia (0.36%). Having seen those projections, the writer of this paper believes that Ethiopia’s
membership to the AfCFTA would not be resulting in an exaggerated positive signal especially
in the short term periods for certain sectors. This is partly due to the fact that Ethiopia’s readiness
for the commitment and implementations of the AfCFTA has not been much commendable
despite its early ratification. According to the studies discussed above, however, Among East
African countries, the most positive impact in terms of real income growth goes to Uganda
(0.4% according to Mevel &Karingi, 2012) and (2.15% according to (Jensen & Sandrey,
2015).205Moreover, According to some studies, ‘‘the share of revenue tariff in the Ethiopia
government’s total revenue is significant, and any change in tariff policy can have influential
impact on the government’s revenue budget. ’’206 Given this fact, Ethiopia is very likely to be hit
hard through this tariff liberalization measures under the AfCFTA. This is indeed proved by the
estimates of tariff revenue losses for East Africa207, according to which Ethiopia’s tariff revenue
losses is estimated to be (USD 165 million according to (Sandrey and Jensen(2016)208,and USD
171 million according to Mureverwi (2016))209. More valid research is of course needed to
estimate tariff revenue losses under the AfCFTA for each individual AfCFTA member states.
Yet, tariff revenue losses obviously materialize given the fact that Ethiopia’s main source of
government revenue is Tariff Revenue.
203
Simon Mevel and Stephen Karingi, ibid, (n 201)
204
Hans Grinsted Jensen and Ron Sandrey, ‘The Continental Free Trade Area – A GTAP assessment’ (TRALAC,
2015).
205
‘AfCFTA Phase 1 Negotiations: Issues and Challenges for Eastern Africa’, ibid, (n 147), 30
206
Professor D.K.Mishra and Lemma Gudissa (Corresponding Author), ‘The Contribution and Trends of Tariff
Revenue in the Ethiopian Tax Structure’ (Journal of Economics and Sustainable Development, ISSN 2222‐1700
(Paper) ISSN 2222‐2855 (Online), Vol. 5, No.13, 2014), 108 < http://www.ecsu.edu.et/content/contribution‐and‐
trends‐tariff‐revenue‐ethiopian‐tax‐structure > last accessed 14 Nov, 2020.
207
208
Hans Grinsted Jensen and Ron Sandrey, ibid, (n 204)
209
Brian Mureverwi ,‘Welfare Decomposition of the Continental Free trade Area’ ( Selected Paper for Presentation
th
at the 19 Conference on Global Economic Analysis ,Washington DC,15‐17 ,June,2016).
57
Despite, a study by Chauvin et al. (2016)210 has specific figure for Ethiopia showing an increase
in its exports and imports as a result of implementation of AfCFTA in the long run, with exports
relatively growing faster than imports. This result is also affirmed by Jensen and Sandrey
(2015)211. The studies, however, does not guarantee an overall trade surplus of Ethiopia with
other African countries; it rather requires deep scrutiny and revision of an overall macro
economy and economic policy of Ethiopia.
Table 2 – Increases in exports/imports (%) for Ethiopia -- Source: Chauvin et al. (2016)
Country in East Increase in Scenario

Africa exports/imports
(%) Elimination of all Elimination of Elimination of
tariffs in All tariffs tariffs and non‐
agriculture tariff measures
Ethiopia Exports 4.58 6.64 10.92

Imports 4.16 6.04 9.95
Moreover, according to one recent World Bank study made based on the partial equilibrium
Tariff Reform Impact simulation Tool (TRIST), the short term impact on import for Ethiopia on
account of AfCFTA is very small, which accounts 0.2% in case 90% tariff lines are removed and
0.3% in case of full liberalization.212
With regard to the distributional impact of AfCFTA in terms of income groups (poor/rich) and
gender mainstream, in Ethiopia, the gains from AfCFTA for the richest households and urban
households are larger than it is for poor and rural house hold.213 Hence, CFTA is a pro-rich in
Ethiopia. Both Male headed households and Female headed households benefit from AfCFTA
with slight bias in favor of male household.214 Regarding the AfCFTA’s contribution to
Ethiopia’s welfare gains, AfCFTA will contribute welfare gains to Ethiopia, the major sources of
210
‘AfCFTA Phase 1 Negotiations: Issues and Challenges for Eastern Africa’, ibid, (n 147), 32; Chauvin, N.D.,
Ramos,M.P.,&Porto,GTrade, ‘Growth and Welfare Impacts of the CFTA in Africa’(2016).
211
Hans Grinsted Jensen and Ron Sandrey, ibid, (n 204)
212
Hans Grinsted Jensen and Ron Sandrey, Ibid, (n 204), 33
213
Ibid, (n 204), 34
214
ibid
58
its welfare gains in monetary terms will be Kenya and Egypt, though.215 According to Chauvin et
al. (2016)216 Ethiopia’s share of meat and livestock export will increase, while that of cereals
would fall; Ethiopia’s import of energy and textiles will also increase.217 Although the
agricultural sectors would benefit from AfCFTA, the value added in manufactures (including
vegetable oil and fats value added sector) would be negatively affected.218
Such projections under those studies will, thus, help Ethiopia to prioritize tariff negotiations and
of course specific services sectors and categorize products into sensitive, non- sensitive and
exclusion lists.
4.6. The possible benefits and Risks/challenges of AfCFTA for Ethiopia: a brief overview
4.6.1. The possible benefits of AfCFTA for Ethiopia
 AfCFTA will provide Ethiopia with its huge market that would enable its agricultural
products, such as: Seeds and pulses, skins and hides, textiles and apparel and food items like
wheat, animal products, and vegetables and so on to be exported. The AfCFTA will also help
increase the quality of local industries and export commodities of Ethiopia, due to
competitive market environment.
 The geographical location of Ethiopia, its potential of diverse energy sources and diversity of
its commodity for export are expected to help Ethiopia to best exploit comparative advantage
and eventually take advantage of the AfCFTA.
 Ethiopia being of course a founding member (agenda giver than agenda receiver) [emphases
added] of the AfCFTA has a better diplomatic standing and modern foreign policy
objectives, this in turn is, thus, expected to enable Ethiopia to entrench its role in the
AfCFTA and better benefit from AfCFTA.219
 AfCFTA is expected to uplift Ethiopia’s experience of peace keeping and mediation role to
promote peaceful economic development.220
215
Hans Grinsted Jensen and Ron Sandrey, (n 204), table 2 at p. 71; Brian Mureverwi , ( n 209). See also see
<https://www.press.et/english/?p=8575#> last accessed 16 Aug 2020.This is as projected by the GTAP‘s CGEM.
216
217
ibid
218
Ibid, (n 147), 36‐37.
219
Solomon Dibaba, ‘Ethiopia’s benefits, challenges in joining AfCFTA’ Ethiopian Herald (Ethiopia, July 23, 2019) <
https://www.press.et/english/?p=8575# > last accessed 16 Aug, 2020.
220
ibid
59
 The available studies on the prospects of AfCFTA suggests good fortune for countries that
are not currently undertaking trade under existing preferential agreements, namely Djibouti,
Eritrea, Ethiopia, Somalia and Sudan.221
4.6.2. The Possible risks/ Challenges AfCFTA pose to Ethiopia
 As implementation of tariff modalities which, among others, include setting up of schedules
of tariff concessions require member states to the AfCFTA to make multiple tariff
negotiation either individually (in case of member states participating in REC that are not
customs union) or collectively ( in case member states belong to customs union)222, such is
thus likely to bewilder complexity for countries like Ethiopia , as Ethiopia is going to
negotiate tariff concessions individually, because Ethiopia doesn’t belong to any customs
union to negotiate collectively. This episode will consequently take more time and drain a lot
of resources for such high number of negotiation for Ethiopia to finalize schedule of tariff
concession unless Ethiopia reconsiders making common offers with certain countries of
common categories’. However, still, while making common offers, safeguarding national
interests, for example safeguarding local industries, could become more difficult under the
regional arrangements or settings.
 Among the major preconditions for the implementations of the AfCFTA is agreement on the
rules of origin and, given that the rules of origin and the associated procedures under the
AfCFTA are yet to be established and are even likely to be costly for Ethiopian firms to
implement relative to the expected benefits ensuing thereof, they would not utilize the
preferences under the AfCFTA eventually resulting in null and void gains from such trade
liberalization. Therefore, this would appear to be one of the bottlenecks for Ethiopia to
exploit AfCFTA in this regard to its fullest potential.
 In its efforts to synchronize the basic and fundamental tenets of economic and legal reform
agenda with the requirements under the AfCFTA, Ethiopia is likely to face a number of
practical challenges that of course need to be addressed swiftly. These are: the need to
streamline the nation’s fiscal, monetary and banking policy with the requirements under the
AfCFTA’s relevant rules.223
221
222
‘Modalities for Continental Free Trade Area on Tariff Negotiations’, ibid, ( n 54)
223
Solomon Dibaba ,ibid, (n 219)
60
 The quality of goods and value added product with the required volume and logistic service
is a weak link that needs to be urgently addressed in Ethiopia.224
 The Ethiopia’s private sectors are not strengthened in such a way that they play active role in
a relatively competitive regional economy.225
 Ethiopian Exporters are practically believed to handle their businesses far below the
international standards.226 Moreover, ‘they face challenges in organizing modern logistics,
packing and forwarding, handling modern financial systems.’227
 According to the AU summit 2019 held in January, schedules of specific commitments are
supposed to have been submitted to the January 2020 sessions of the Assembly, in line with
the agreed modalities.228 Submission of these schedules of specific commitment would be
quite challenging for non-WTO members like Ethiopia where services negotiations are
relatively difficult. As service negotiations are gargantuan by its nature, Ethiopia would get
the service negotiation challenging, because the negotiations presuppose a lot of prior
analysis, economic policy reform, legal reform and stake holder consultation, which is time
consuming as well.
 Regarding tariff revenues, although there is no consensus across studies on the magnitude of
tariff revenue losses, tariff revenue losses will take place across all East African countries.
Such area of course calls for further research on the estimates of tariff revenue losses across
African countries, Ethiopia is thus also one of those countries facing a significant tariff
revenue losses.
 Ethiopia, being landlocked country, has poor quality of transport infrastructure and other
infrastructures, so it is assumed that policy makers did not seem to focus on reducing
uncertainties that prevent firms from accessing new markets.
 According to the assessment made by the African champions’ initiatives discussed under this
chapter, Ethiopia, just like many African countries, is lagging behind to draw up national
AfCFTA strategies that are supposed to include ; setting up of the export review strategy that
covers the existing intra-African and global trade performance within the context of its own
224
ibid
225
ibid
226
ibid
227
ibid
228
https://au.int/en/pressreleases/20190211/key‐decisions‐32nd‐ordinary‐session‐assembly‐african‐union. last
accessed 12 January, 2019
61
trade policy framework, prioritizing target sectors by identifying AfCFTA’s export
potentials, identifying the bottlenecks to its target sectors and taking strategic actions for
boosting identified target sectors.
4.7. Maximizing the Benefits and Avoiding Risks/Challenges of AfCFTA in Ethiopia: a
brief observation
As discussed above, countries like Ethiopia which have infrastructure gaps and indeed other non-
tariff barriers to trade, must progressively and to the extent possible, eliminate, among others,
non-tariff barriers to trade in order to take advantage of the AfCFTA. Furthermore, Ethiopia
must also need to integrate and harmonize regulatory measures. Ethiopia as a least developed
country and among those countries with at risk economies is supposed to be backed by sound
policy making and preferential treatment that would enable them to potentially exploit AfCFTA.
Generally speaking, as it has been projected by the GTAP CGEM, AfCFTA is likely to bring
welfare gains to member states of the AfCFTA as a whole; however, this is made conditional on
the reduction of tariff and mainly non-tariff barriers. The commitments and implementations of
the AfCFTA by member states, particularly Ethiopia, in turn, potentially results in incurring of
costs; for instance, significant tariff revenue losses, transitional unemployment, etc. This
necessitates the taking of complementary measures that is considerate of Ethiopia’s level of
development, trade and financial needs, trade practices, rules and regulations. Such measures
might call for the abroad based reform agenda that may involve legal frame work and economic
policies. Regarding the NTBs to trade like infrastructural deficit, land locked countries like
Ethiopia shall work very seriously in reducing trade related costs as well and shall consolidate its
coordinated efforts with other member states towards African transportation strategy mainly to
reduce costs and time at customs and ensure efficient use of resources. Moreover, in order to
ease costs of doing business under the AfCFTA framework, Ethiopia must construct and improve
infrastructures and enable its SME’s to access credit to facilitate the ease of doing business under
the AfCFTA framework.
62
As part of AfCFTA national strategy229 supposed indeed to be devised by member states,
Ethiopia shall as far as possible work towards drawing up export review strategy that covers the
existing intra-African and global trade performance within the context of its own trade policy
framework, prioritize target sectors by identifying AfCFTA’s export potentials, identify the
bottle necks to its target sectors and taking strategic actions for boosting identified target sectors,
and solve the country’s current political stalemates is of paramount importance for its effective
implementation of the commitments under the AfCFTA.
Furthermore, as domestic infant industries of Ethiopia are in fact likely to be hit hard by trade
liberalization, enhancing social safety net programs and the gradual and selective liberalization
of critical sectors by categorizing products and services into sensitive, no-sensitive and exclusion
lists, is of paramount importance to ensure a well-functioning AfCFTA for Ethiopia. Besides, as
tariff is the most important government revenue of countries like Ethiopia, those countries should
focus on devising a revenue mobilization strategy specific to their country context. The political
commitment of Ethiopia towards making the relevant tax policy reforms is also of paramount
importance.
4.8. Summary
The new Ethiopian investment regulation no. 474/2020 has lifted restrictions previously imposed
on the provisions of transport services, including; air, ground and marine and railway transport to
allow to foreign investment in the following areas: rail way transport, cable car transport, cold-
chain transport and freight transport. The new Ethiopian investment proclamation no.1180/2020
and the new Ethiopian investment regulation no.474/2020 enacted for the implementation of this
proclamation has also made various other reforms with respect to allowing foreign investment.
Nevertheless, these investment proclamation and regulation still exclude foreign nationals of
non-Ethiopian origin from participating in the financial sectors, like banking, insurance and
microfinance businesses. These businesses are currently being transacted by local businessmen
(domestic investors) and government itself. Ethiopia, under Prime Minister Abiy Ahmad and his
administration sought to open its economy to international markets and plans to reform state-
owned enterprises.
229
A national AfCFTA strategy that identifies comparative advantages and target complementary measures toward
those sectors is required by member states to the AfCFTA.
63
Ethiopia’s MoTI is still, however, unable to draw up a comprehensive Ethiopian trade policy that
is considerate of the premier’s ambition. Moreover, although Ethiopia ratified the AfCFTA, the
liberalization moves in line with the AfCFTA’s requirement is not commendable as well. The
commitments and implementations of the AfCFTA by member states, particularly Ethiopia, in
turn, potentially results in incurring of costs; for instance, significant tariff revenue losses,
transitional unemployment, etc. This necessitates the taking of complementary measures that is
considerate of Ethiopia’s level of development, trade and financial needs, trade practices, rules
and regulations. Such measures might call for the abroad based reform agenda that may still
involve legal frame work and economic policies.
64
Chapter Five: Conclusion and Recommendations
5.1. Conclusion
The AfCFTA agreement has been signed and attained threshold for its entry into force. Ethiopia
has also deposited its instrument of ratification230. Trading under the agreement which were set
to begin as of July 2020 was rescheduled to get off the ground by January 2021. The African
continental free trade agreement initiative is in line with 1991’s Abuja treaty, which is aimed at
establishing African Economic Community. The African continental free trade agreement by
itself is one of the key milestones of the first ten year implementation plan of the AU agenda
2063, and of course the global goal of ensuring sustainable development.
The AfCFTA is mainly aimed at creating a single market for goods and services via ensuring
free movement of business people and investment. This agreement is expected to be the largest
free trade area next to WTO, and it is expected to cover 1.3 billion people on and usher in the
cumulative GDP of 2.5 trillion dollar with new era of economic development block.231 This
ambition, however, is largely dependent on its actual implementation. The AfCFTA is set to be
operationalized /implemented in two phases; phase one and phase two.232 Phase one covers the
233
trade in goods and services. The protocol on trade in goods, services and on rules and
procedures for the settlement of disputes are the outcome of this phase one negotiation. For its
full and better implementation, however, the agreements are supposed to be made on the rules of
origin, schedules of tariff concessions, and annexes to the protocol on trade in goods and other
specific commitments, annexes to the protocol on trade in services, including schedules of
concessions on trade in services.234
The other phase under which AfCFTA is set to be implemented is phase two. Phase two will
cover the areas of intellectual property rights, competition policy and investment.235 The
negotiations on this phase two have not been concluded. The African union assembly has
230
Xinhua, ibid, (n 141)
231
Witschge Loes ibid, ( n 14)
232
233
234
235
65
subsequently proposed that the draft legal text for those protocols should be submitted for the
Assembly’s adoption by the January 2021’s summit.236 Consequently, this study focuses on
phase one and tried to identify the possible benefits and challenges of Ethiopian membership in
regard to this phase. In this regard, some studies have indeed been made on the general prospects
and challenges of the regional trade liberalization and AfCFTA, particularly on; the tariff
negotiation process, the expected economic impact of liberalization under the AfCFTA and on
some legal issues under the AfCFTA in general. However, none of these studies has considered
the possible benefits and challenges of Ethiopian membership and assessed the Ethiopian trade
policies in regard to the AfCFTA. In order for Ethiopia to conform to the requirements under the
AfCFTA, economic policy and legal reforms including tariff reforms is inevitable and is indeed
necessary.
With regard to tariff reduction measures taken by Ethiopia and many other trade liberalization
agreements, however, it is likely that it becomes a significant loss to the government revenue,
because tariff is a major source of government revenue in Ethiopia. Regarding trade in services,
what the service sectors liberalization moves under AfCFTA implicates to the existing trade
policies of Ethiopia and the possible challenges to the domestic service suppliers and the manner
as to how Ethiopia is supposed to respond to the service sector liberalization to conform to the
AfCFTA’s obligations need to be studied, as well. There are also problems with regard to non-
tariff barriers to trade in Ethiopia. Therefore, the adjustment costs that need to be taken to
respond to these problems by Ethiopia in general are clear, but still Ethiopia is required to
progressively reduce NTBs to trade, such as infrastructure gaps. Generally, in order to meet the
objectives of this study; the writer has analyzed the existing primary and secondary sources of
information. Consequently, the findings of the study revealed that; given that Ethiopia’s all trade
(exports and imports) with other African countries are not preferential; AfCFTA is expected to pose
the largest impact on Ethiopia’s intra-African trade. Nonetheless, according to a certain study,
Ethiopian membership to the AfCFTA would not be resulting in exaggerated positive signals
especially in the short term periods for certain sectors. This is partly due to the fact that
236
‘AfCFTA negotiation on phase II’ , ibid, ( n20)
66
Ethiopia’s readiness for the commitment and implementations of the AfCFTA has not been
much commendable despite its early ratification. 237
Yet, the long term benefits are expected to outweigh the short term costs. In this regard, the
writer has recommended that there has to be complementary measures that need to be put in
place to maximize the benefits amid multiple challenges ahead. On the other hand, as it can be
inferred from the discussions so far, member states were not in a position to setup schedules of
tariff concessions and rules of origin has not also been made ready by members including
Ethiopia, in accordance with the agreed modalities of tariff negotiation and within the timeframe
set by the AU assembly for their adoption.
Moreover, according to the assessment made by the African champions’ initiatives, Ethiopia, just
like many African countries, is lagging behind to draw up national AfCFTA strategies. The study
has also revealed that the limited access to credit and trade finance238 for SME of Ethiopia in
particular are, thus, likely to potentially suppress the SME’s growth and competitiveness under
the AfCFTA framework. Furthermore, Ethiopia is lagging behind in developing schedules of
specific commitments and regulatory cooperation framework for trade in services and trade in
goods and in deed to develop transitional implementation work programme. The study has also
revealed that the Ethiopian legal regime regarding trade in services is incompatible with current
regional and global economic moves in favor of liberalization of service sectors. The writer has
indeed selected two sectors (financial sectors and Telecom services) for a brief discussion and
tried to appraise their readiness and compatibilities with the requirements under the AfCFTA and
that of WTO as well, given that Ethiopia has planned to accelerate its WTO accession, perhaps to
finalize its accession by the end of 2021 as claimed by Prime minister Abiy Ahmed during WEF.
237
‘AfCFTA Phase 1 Negotiations: Issues and Challenges for Eastern Africa’, ibid, (n 147), 29‐37.
238
The problem is in fact almost common across the continent.
67
5.2. Recommendations
The following recommendations are suggested by looking into the regulatory environment of the
Ethiopian trade policies and the general overview of the status quo of the Ethiopian membership
to the African continental free trade area.
1. Ethiopian ministry of trade and industry must design a national AfCFTA implementation
strategy that include; identifying opportunistic export sectors (supply market) and value
chains for its better commitment and implementation readiness. Ethiopian MoTI shall also
harness the finalization of key phase one issues under AfCFTA, that includes; drawing up
schedule of concessions, schedule of specific commitment and accord originating status to
products in line with the annex for rules of origin. Moreover, Ethiopian MoTI need to
carefully categorize products and services into sensitive, non-sensitive and exclusion lists so
that the country exploits AfCFTA to its fullest potential on one hand and withstand AfCFTA
pressures on the other hand. Besides, as Ethiopia doesn’t belong to any customs union to
date, it will be difficult for Ethiopia to individually negotiate with all member states to the
AfCFTA. Therefore, the writer of this paper is of opinion that, Ethiopia need to carefully
make common offers with certain countries of common categories.
2. Ethiopian parliament/HPR/ must ratify the protocol to the treaty of AEC relating to the free
movement of peoples, rights of residence and establishment to realize the moves towards
creation of an African single market.
3. Ethiopian MoTI must draw up a trade policy that is considerate of Ethiopian membership to
the AfCFTA. Meanwhile, trade Policy makers must also think critically about the long term
distributional consequences of the AfCFTA while navigating the long road to
implementation so as not to fall in the inequality traps leaving Ethiopian economy worse off
and blocked of regional value chains.
4. In order to exploit AfCFTA to its fullest potential, Ethiopia parliament /HPR/ must also need
to amend its relevant legal regimes like customs, tax, investment and the likes in line with the
requirement under the AfCFTA.
5. With regard to progressive liberalization of tariffs obligation under the AfCFTA, the
Ethiopian Revenue and customs authority in collaboration with relevant government organs,
must make its utmost endeavor to prepare a tariff book that is compatible with the
68
requirement under AfCFTA agreement, and that of the WTO and the World customs
organization. Moreover, in order to administer tariff concessions, the ERCA must also need
to establish a robust cluster of customs authorities.
5.3. Indications for further research
Since the AfCFTA is yet to be implemented, making an empirical assessment in regard to

Ethiopian membership is hardly possible, this is indeed partly due to the fact that at the time the
writer of this paper had been conducting this research, AfCFTA hasn’t got off the ground. This
study has, however, highlighted a number of researchable aspects that could be pursued further
by those who want to conduct an empirical assessment even on the title of this study once trading
under AfCFTA is began and specifically on phase two negotiations, once the protocols are
adopted.
69
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XII
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 Carbaugh R.J. , ‘International Economics’ (Australia Thomson, South‐Western., 9th edition,
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 Chauvin, N.D., Ramos, M.P., & Porto,G Trade, ‘Growth and Welfare Impacts of the CFTA
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AFRICA, July 2008)
Articles
 ‘Accession to the World Trade Organization: Challenges and Prospects for the Least-
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(TRALAC, 2015)
XIII
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5. Newspaper articles
 Issoufou M. and Songwe V., ‘Africa’s Continental FTA, Boost to Growth, Development’
Fortune (2018)
 ‘Parliament ratifies Ethiopia’s membership to AfCFTA ’Ethiopian Herald newspaper
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6. Conference Papers
 Mevel S. and Karingi S., ‘Deepening regional integration in Africa: A computable general
equilibrium assessment of the establishment of a Continental Free Trade Area followed by a
Continental Customs Union’( a Paper for the 7th African Economic Conference, Kigali,
Rwanda, 30 October, 2012- 2 November 2012)
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17 ,June,2016)
 Prudence (chief Technical advisor on the CFTA and Head of CFTA unit department of trade
and industry), ‘ Update on The continental Free trade Area Negotiations’ (presentation at
African prosperity conference, 12 September 2017-Accra,Ghana)
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cfta-negotiations-presentation-by-mr-prudence-sebahizi-auc-september-2017.pdf > last
Accessed 7, Dec 2019
Interview
 Interview with Tages Mulugeta, acting director at Regional integration trade relations and
negotiation directorate, The FDRE ministry of trade and industry ( Addis Ababa, Dec
28,2020)
XIV
V
APPENDICE
ANNEX: INTERVIEW GUIDE
My name is Yirgalem Mitiku, I’m conducting a research to complete my LL.M study at Jimma
University, College of law and governance, School of law on the topic entitled: Ethiopian
membership to the African Continental Free Trade Area ( AfCFTA): Challenges and Prospects.
I firmly believe that your responses are of paramount importance to reach at genuine findings.
Hence, I kindly request you to give me genuine responses for the questions I pose to you.
Moreover, I want to assure you that the information gathered are only used for academic
purpose. In case you need it, I can anonymously report your name and other personal
information you may provide.
In advance, the researcher is grateful for your concern, cooperation and time.
Part one: Background information about the respondent

Name___________________________________________ (optional)
Position______________________________________
Year/s of experience____________________________
Part two: Main questions
1. What is your observation regarding Ethiopia’s readiness towards its commitment and
implementation of AfCFTA?
 Did Ethiopian ministry of trade and industry set-out and submit schedules of tariff
concessions and schedules of specific commitments for their subsequent adoption by
the Assembly?
2. Did Ethiopian ministry of trade and industry draw up a national AfCFTA implementation
strategies?
3. Did Ethiopian ministry of trade and industry prepare regulatory cooperation framework?
4. Did Ethiopian ministry of trade and industry in collaboration with other relevant bodies set –
out transitional implementation work programme for certain goods and services in line with
the adopted modalities?
5. Is Ethiopia ready for trading under AfCFTA that is expected to kick off as of Jan 1, 2021?
6. What did the Ethiopian ministry of trade and industry so far do regarding the according of
originating status for Ethiopian goods and services, and regarding submission of documents
relating to rules of origin?
XV
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Ethiopian Membership to the African Continental Free Trade Area (AfCFTA):

Challenges and prospects

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Program: Commercial and Investment law

By Yirgalem Mitiku Gebre

Declared by: Yirgalem Mitiku Gebre: ______________

Date: Jan, 2021

Advisor’s Name signature

I declare this work to my beloved mother GETE LETA and my Father

Key words: Regional trade liberalization, AfCFTA, Ethiopia, benefits, challenge IV

4.6.2. The Possible risks/challenges AfCFTA pose to Ethiopia.............................................60

4.7. Maximizing the Benefits and Avoiding Risks/Challenges

Of AfCFTA in Ethiopia: a brief observation. .....................................................................62

4.8. Summary .............................................................................................................................63

Chapter five: Conclusion and Recommendations. .......................................................................65

ANNEX : INTERVIEW GUIDE ......................................................................................... XV

AfDB-African Development Bank

AUC-African Union Commission

AMOT- African Ministry of Trade

AEC-African Economic Community-

CFTA-Continental Free Trade Area-

COMESA- Common Market for Eastern and Southern Africa

CGEM-Computable General Equilibrium Model

DSB-Dispute settlement Body

EAC- Eastern African Community

ECOWAS- Economic Community of Western African State

ERCA- Ethiopian Revenue and Customs Authority

FTA- Free Trade Area

GDP- Gross Domestic Products

GTAP- Global Trade Analysis Project

GATT-General agreement on Tariffs and Trade

GATS-General agreement on Trade in Service

GTAP CGEM-Global Trade Analysis Project Computable General Equilibrium model

HPR-House of people’s representative

IMF-International Monitory Fund

LDC-Least Developed Countries

MFN-Most favored Nation VII

NTM-Non-tariff Trade Measures

NEPAD-New Partnership for African Development

REC-Regional Economic Community

REI-Regional economic Integration

SADC-Southern African Development Community

SACU-Sothern African Customs Union

SMEs- Small and Medium Enterprises

SPC-Special Product Categorization

SPS- Phytosanitory measures

UNECA-United Nation’s Economic Commission for Africa

UNDP-United Nation’s Development Program

UNCTAD-United Nation’s Conference on Trade and Development

USD-United States Dollar

WTO- World Trade Organization

WEF- World Economic Forum

Number Table/Figure Page

1 Table 1. AfCFTA welfare

Chapter one: Introduction to the research

1.2. Review of Literatures

The expected overall economic impact of AfCFTA on Africa

Some key legal issues regarding the AfCFTA

3. Schedules of concessions as an integral part of the AfCFTA46

1.3. Statements of the problem

1.4. Research questions

1.5. The scope of the study

1.6. Objective of the study

1.6.1. General objective