Ethiopia and Uganda have pledged to join the Comesa free trade area (FTA) by December, raising hopes of higher trade volumes for Kenya and the region.
Although the two countries are members of the Common Market for Eastern and Southern Africa (Comesa), they have not ratified a special FTA arrangement.
Under FTA a designated group of countries agree to eliminate tariffs, quotas and preferences on most (if not all) goods that they trade among themselves.
However recent research states that Ethiopian electrical and plastic product manufacturing industries will be affected severely if Ethiopia decides to eliminate tax completely on imports from COMESA member states.
The research paper, entitled ‘The Impact of Joining the COMESA FTA on The Ethiopian Economy: The Case of the Manufacturing Industry’ by Yasmin Wohabrebbi, states that Ethiopia will lose almost three percent of the total tariff revenue that would have been collected from trade with COMESA member states if it joins the COMESA Free Trade Area.
Nevertheless, the research further states “this policy measure (if Ethiopia decides to completely eliminate tariffs from COMESA member states) will bring welfare gains to the consumers”.
The research also suggests that the major sources of revenue loss and consumers’ gain will focus on manufacturing products. “This gradual liberalization will also bring a negative effect on textile and leather manufacturing industries but these two industries have the relative potential to withstand their competitors in the COMESA market unlike those of electrical and plastic manufacturing industries,” the report says.
Experts said the plans by Uganda, DRC and Ethiopia to join the Comesa FTA would boost commerce in the region.
“Ethiopia has shown a lot of protectionism in its market which makes it unpopular with traders in many neighbouring countries and the wider Comesa. We hope they change this by adopting the FTA status making it easier for trade,” Joshua Ndegwa, a textile export dealer said.
Ethiopia has found itself at loggerheads with other partner countries over trade controls and restrictions to its markets. Only recently it introduced price curbs to tame runaway inflation, triggering protests among Comesa partners such as Kenya who favour free market policy.
Two years ago, Kenya also raised the red flag on Ethiopia’s restrictive trade practices and urged the Comesa secretariat to arbitrate in a dispute over a list of products eligible under a special cross-border trading scheme.
Kenya took issue with Ethiopia for failing to honour its pledge to reach a deal with Kenya on a list that would be covered under a newly instituted Comesa Simplified Trade Regime (STR).
Other partners of the 19-member bloc also protested against Ethiopia’s adamancy of adopting the STR, prompting a special mission from the Comesa to hold talks with Addis Ababa.
Under the new Comesa STR, traders will be granted simplified certificates of origin to enable them enjoy duty and quota free access as long as their goods appear on a list of agreed products.
The certificates would be filled in by traders at designated border posts and stamped by customs officials upon verification. For purposes of health and safety, those carrying chemicals, foodstuffs, plant and animal products would, however, have to report to offices of the ministries of Health, Environment and Agriculture for clearance.
Kenya’s trade with Uganda has however been relatively smooth thanks to their membership in the East African Community.