By February 4, 2019

Ethiopia Passes Continental Free Trade Deal

By February 4, 2019

An effort which is tailored to create the largest common market in the world has inspired Ethiopia’s Council of Ministers to approve the East African country’s membership to the Africa Continental Free Trade Agreement (AfCFTA).

March 2018, in Kigali, more than 40 African countries signed a historic trade agreement to foster free cross-border trade in the continent. The deal was first considered during the 18th Ordinary Session of the African Union in January 2012, which led to the setting of a tentative 2017 launch date. With a GDP of approximately USD 2.6 Tn, the AfCFTA agreement is expected to create a market for more than a billion people.

“The decision is consistent with PM Abiy’s vision of creating a closer & full regional integration —where minds are open to ideas & markets are open to trade. Ethiopia’s decision & track record of advocating Pan African causes will bring to reality an integrated Africa,” The PM’s office said.

The free trade bill has been referred to the national parliament, awaiting approval expected to suffice in the coming weeks. For the agreement to go fully operational, at least half of the total signatories have to give their respective parliament approval before March 2019. Before then, Ethiopia will have joined the dozen countries that have passed the bill in their national legislative bodies.

While countries such as Kenya, Ghana, and Rwanda among others have passed their bills, the total number of signatories of the protocol has also reached 50. All of this is in an effort to create a single continental market for goods and services, with free movement of business persons and investment. The deal is also expected to clear the channel for accelerating the establishment of the Customs Union.

Of the 65 African countries there are, 16 are landlocked (including Ethiopia), having to rely partially on their coastal neighbors for extra-African trade and development made possible by the use of ports and shipping lines. According to numerous reports, the trade among landlocked countries have not been frequent, and as a result, significantly low.

“Implementation of the AfCFTA creates opportunities for intra-African market access, and can significantly increase trade flows. Tariff removal and cost reduction under the free trade arrangement also reduce production costs and induce economies of scale,”  says Africa Trade Report 2018 by the Africa export-import bank.

Explaining, the report points out that the agreement “Spurs higher domestic production and investment into different sectors of the economy. And that, in turn, enhances growth in exports across sectors and boosts value addition in production and exports, further deepening intra-industry trade across the continent”.

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