Tuesday, July 23, 2024
NewsCustoms revenue losses under AfCFTA insignificant: study

Customs revenue losses under AfCFTA insignificant: study

Fears of customs revenue losses after the operationalization of the African Continental Free Trade Area (AfCFTA) are unwarranted, according to an assessment conducted by UNECA.

The Commission’s findings indicate Ethiopia stands to lose less than 0.5 percent of customs revenues after implementing the trade deal. The losses would be insignificant as Ethiopia’s trade with fellow African nations is minimal.

Experts foresee the benefits of AfCFTA outweigh the drawbacks of customs revenue losses.

“Ethiopia’s economy will be stimulated by AfCFTA. Ethiopia stands to gain more from this economic activation. The compensation of economic activity through AfCFTA will be much higher than the customs revenue losses,” said Melaku Desta (PhD), coordinator of the Africa Trade Policy Centre at UNECA.

In partnership with the Africa Capacity Building Foundation, Melaku’s center has provided training for diplomats and officials from all African states. The two-day training took place at the AU headquarters this week.

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“There is a capacity gap in all African countries to implement AfCFTA. From a private sector perspective, too, there is a lack of awareness. For instance, SMEs constitute nearly 80 percent of the African private sector. However, SMEs have insufficient knowledge about AfCFTA,” said Mamadou Bieteye, executive secretary of the Foundation.

Intra-Africa trade typically accounts for less than 15 percent of the continent’s trade.

“Every country, including Ethiopia, might lose some amount of customs revenue by operationalizing AfCFTA. We have to see Ethiopia’s share of trade with African countries. We have conducted a study at ECA on how much customs revenue Ethiopia will lose by operationalizing AfCFTA. It is very small because Ethiopia’s trade volume with Africa is very small. Ethiopia’s imports from African markets are very small, so Ethiopia’s customs revenue loss will be very small as well,” said Melaku.

He urges African governments to fast-track implementation.

Although 47 African states have ratified AfCFTA and the continental trade bloc officially launched in January 2021, only nine countries have begun trading under AfCFTA thus far.

“There are several challenging factors. The most basic is that the private sector does not know about AfCFTA. Border trade barriers must be removed to facilitate implementation, but the AfCFTA will offer immense opportunities and economic activation for all African economies,” said Melaku.

Ethiopia is expected to join the nine countries soon. Trade officials recently presented tariff schedule lines to the AfCFTA secretariat in Ghana.

“This is big progress. The next step is operationalizing the AfCFTA, but before that, Ethiopia has to publish the goods and service tariff lines on the Negarit Gazette. The Council of Ministers has already ratified AfCFTA,” said Melaku.  “Whether Ethiopia needs a new institution to implement AfCFTA or not, will be a political question. The government can decide whether it is going to implement AfCFTA with existing institutions, or create a new one.”

He advises the authorities to leave the mandate of implementing AfCFTA to the Ministry of Trade and Regional Integration.

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