Tuesday, May 28, 2024
CommentaryThe private sector needs to robustly engage in the AfCFTA

The private sector needs to robustly engage in the AfCFTA

The Ethiopian economy has been largely guarded from international and regional competition due to the country’s very limited engagement in global and regional agreements to promote economic integration. Ethiopia has been recognized for its active role in international, regional, and sub-regional cooperation issues, such as peacekeeping under the United Nations and the African Union.

Especially in the Horn of Africa, it noticeably takes part in efforts to strengthen government-to-government economic cooperation, including through selling electricity to its neighbors. Yet, interestingly, it does not have a matching level of participation in the arena of economic integration, particularly trade liberalization.

Prior to joining the African Continental Free Trade Area (AfCFTA) in 2019, the notable effort the Ethiopian government made to enhance its economic integration with other countries was its formal application to join the World Trade Organization in 2003 and the policy, regulatory, and institutional reforms it took in line with the membership request.

However, the process of accession to the WTO has not yet been completed. Besides, Ethiopia does not have effective bilateral and regional trade agreements with other countries, except with Sudan. Nor is it a member of the Common Market for Eastern and Southern Africa (COMESA) Free Trade Area, despite being one of COMESA’s members.

In the absence of trade agreements, Ethiopia exports its products under unilateral trade schemes such as the EU’s Everything but Arms, the US’s African Growth and Opportunity Act (it is currently suspended from this scheme), and other similar arrangements.

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Unlike trade agreements, which result from negotiations and reciprocal concessions of the member countries, these schemes are based on the unilateral decisions of the granting countries to give access to exports from the least developed and developing countries (including Ethiopia) to their market without tariffs and quotas (restrictions on the amount of goods exported). This means Ethiopia did not negotiate with and make reciprocal trade concessions to these countries to benefit from the schemes.

In a move that deviates from its long-standing reluctance to sign trade agreements, Ethiopia commendably joined the AfCFTA, showcasing its support for economic integration on the continent. Albeit this is not surprising given the country’s leading role in forming and hosting the AU (previously the Organization of African Unity), which has strengthening continental economic integration as one of its main objectives, it is an important measure that can have a significant impact on the competitiveness of the Ethiopian economy in general and its people’s living standards, to say the least.

As a result of the country’s very limited experience in trade agreement negotiation and implementation, it does not have a strong capacity for trade policy, even compared to most of its peers on the continent that are members of the WTO and/or regional economic communities and have developed relatively better experience.

The experience of the Ethiopian private sector in engaging in trade agreement negotiations and implementation issues is also a reflection of the government’s level of exposure to and experience with them.

Despite this challenge, the private sector needs to sufficiently engage in AfCFTA-related discourses since it is the main stakeholder. Even though it is the governments of the AU Member States that negotiated and signed the AfCFTA Agreements, it is principally private businesses from the Member States that trade and invest under the rules of the free trade bloc.

This does not, however, mean that businesses do not have any role in the process of negotiating and signing trade agreements. In fact, in countries with a strong private sector, it is common for businesses to shape the negotiation and contents of trade agreements in various ways, including by lobbying their governments.

As the main stakeholders, businesses are the beneficiaries of the opportunities of the AfCFTA, as it enables them to trade with and invest in other markets on the continent under predictable and transparent rules. They are also the ones that could be adversely affected by the challenges the AfCFTA might pose. It is, therefore, imperative for the private sector to be engaged in the AfCFTA implementation and the remaining negotiations.

This means, aside from participating in trade and investment under the AfCFTA, Ethiopian businesses need to engage mainly through the Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA) and other associations. This is particularly important because the AfCFTA is the first regional free trade area that the country joined, and businesses need to learn how to engage in trade policy reforms to also effectively partake in other similar forums in the future, including the ongoing WTO accession negotiation and bilateral trade agreement negotiations.

There are different ways for the private sector to engage in the AfCFTA. Most importantly, the sector needs to build its capacity on the AfCFTA and its impact on Ethiopian businesses, including by partnering with different stakeholders. This is because the private sector cannot engage in other activities on the AfCFTA, such as providing input for negotiations and implementation, without first building its internal capacity on the AfCFTA.

This demands, among others, training the leadership and staff of ECCSA, other business member organizations (BMOs), and specific businesses. Businesses then also need to actively participate in the outstanding negotiations and other AfCFTA-related works, such as preparing an AfCFTA Implementation Strategy, including by using the seat allotted for the private sector in the National Technical Committee on trade negotiations.

The private sector also needs to regularly conduct research on areas of trade policy reform and submit policy proposals to the government, even without the latter’s request. This will help shape the government’s negotiating positions on the outstanding agreements and facilitate the successful implementation of the AfCFTA, maximizing Ethiopia’s gains from the Agreement.

The sector also should engage in regular and sustainable public-private dialogues (PPDs), which can allow the government to hear the sector’s concerns and views on the AfCFTA and other issues and accordingly take necessary policy, regulatory, and other measures to increase the benefits from the AfCFTA. For these to materialize, the private sector needs to better organize itself, improve the management of its BMOs, and speak in one voice on issues of common interest.

The government also has an indispensable role to play in ensuring strong private sector engagement in the AfCFTA. Most importantly, it needs to view the private sector as a partner in negotiation for and implementation of the AfCFTA and sufficiently engage with the sector accordingly, including by inviting it to regular and sustainable PPDs and genuinely working to address its concerns. It should also request the private sector’s input on the outstanding negotiations and implementation issues.

The government needs to embolden the private sector to proactively express its concerns, views, and positions on different AfCFTA-related issues. It is also essential for the government to be receptive to the private sector’s evidence-based recommendations and be open to being challenged by the sector.

Hence, the robust engagement of the private sector is essential for Ethiopia to effectively benefit from the AfCFTA. This necessitates the continued collaboration of the government and the private sector.

Bereket Alemayehu is a consultant at the United Nations Economic Commission for Africa and a part-time lecturer of law at Addis Ababa University. This article reflects only his personal views. He can be reached at [email protected].

Contributed by Bereket Alemayehu

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