Ethiopia aligns itself with AfCFTA as tariffs reduction begins

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Eshete Asfaw (Photo: Anteneh Aklilu)

Africans join hands for a better Africa

Ethiopia announced that the country is well prepared to go with the African Continental Free Trade Agreement (AfCFTA) that became effective as of Friday January 1, 2021.
Eshete Assefa, State Minister of Trade and Industry (MoTI), said that the country focused on trainings to catch up with the continental free trade scheme.
The training focused on public institutions, House of People Representatives and the business community.
“We have undertaken massive preparation for the new scheme that shall keep the interest of the country and armed the implementers with relevant awareness,” Eshete says. “We have to be armed to win the competition and have equal role on the game,” he added.
The AfCFTA is signed by 54 countries with the exception of Eritrea and 34 of the 54 countries have ratified instrument of ratification in their respective parliament that was first scheduled for July 2020, owing to COVID-19 distortions and rescheduled for January 2021.
AfCFTA targets to create market opportunities, scale economies, improve competition, lower business costs and aims to consolidate Africa into a USD 2.3 trillion market of 1.3 billion people.
From January 2021, tariffs on 90 percent of goods traded between AfCFTA state parties are to be reduced in equal annual installments until they are eliminated within 5 years for non- least developed countries (LDCs) and 10 years for LDCs, which Ethiopia is included.
So, a product facing a tariff of 25 percent being imported into a non-LDC would be tariffed at 20 percent from January 2021, then 15 percent from January 2022, with such reductions each year until it is traded duty-free by January 2026.
For an additional 7 percent of ‘sensitive’ goods, tariffs will fall within 10 years for non-LDCs and 13 years for LDCs. A final 3 percent of ‘excluded’ products are to retain their tariffs to allow flexibilities for state parties with particular sensitivities, but will be subject to a review every five years.
The AfCFTA also contains commitments on customs cooperation and mutual administrative assistance, trade facilitation, technical barriers to trade, sanitary and phytosanitary standards and trade transit.
These work ‘behind the scenes’ to simplify and harmonize trade procedures and logistics, expedite the process of importation, exportation and transit, and to harmonize and mutually recognize standards, and eliminate unnecessary barriers to trade.
State Parties will submit schedules of commitment for the liberalization of trade in services in the five priority sectors of professional and business services, tourism, transport service, communication services and financial services.
According to Jamie MacLeod, Trade Policy Fellow of the Africa Trade Policy Centre (ATPC) at the UN Economic Commission for Africa (ECA),Intra-African exports would increase the most for industrial products; with gains ranging between around 25 per cent (or USD 36.1 billion) and almost 30 per cent (or USd 43.3 billion) under low ambition scenario and high ambition scenario.
In his presentation on December 22, 2020, he said that largest increases in exports of vehicles and transport equipment, energy, metals, machinery, chemical products, sugar, other food products, wood and paper, and textiles.
“These are under-estimates, as they do not include the benefits from services liberalization: priority service sectors for liberalization are: financial services communication, transport, tourism and business services,” he said.
Prime Minister Abiy Ahmed also congratulated the countries on starting to trade within world’s largest free trade area. PM Abiy said “Congratulations to our continent for the beginning of trading under AfCTA. The new frontier for Africa is indeed regional integration, where minds are open to ideas and markets are open to trade. Trade defuses the most fraught relations & integrated markets generate prosperity.”
Secretary-General of the AfCFTA Secretariat Wamkele Mene said at the AfCFTA start of trading ceremony webinar that the day is historic. “Truly today is a historic day, a day in which we start officially trading under the preferences of the African continental free trade area. Today is a day we take Africa a step closer to a vision of an integrated continent, a vision of an integrated market on the African continent,” he said.
“This African continental Free Trade Area should not just be a trade Agreement; it should actually be an instrument for Africa’s development. In this regard, we have seen the World Bank produce a report that projects that by the year 2035, if we implement this Agreement effectively, we have the opportunity to lift out of poverty one hundred million Africans. And the majority of this hundred million Africans that will be lifted out of poverty, are women in trade. It will be the opportunity to close the gender income gap, and the opportunity for SMEs to access new markets,” he added.
“This Agreement does not benefit only the big corporations on the African continent, but it should always be inclusive of young Africans, women and African SMEs. Today, as Africans, we are witnessing the beginning of a new chapter in terms of trade and investment relations of the African continent.”
“I have to say, personally, as an African, I’m truly proud today because 54 countries have signed this Agreement, 34 have ratified it, over 40 have submitted their offers. This is a strong signal that Africa is ready to start trading today on the basis on new rules and preferences that will ensure that the African Market is integrated,” he added.
“Finally, I want you, Africans, to join me as we take this historic step to the vision of an integrated Africa, the Africa we want” he concluded.