WOLKITE UNIVERSITY

SCHOOL OF LAW

TITLE; ETHIOPIAN MEMBERSHIP TO AFRICAN CONTINENTAL FREE TRADE

AREA (ACFTA) AND ITS IMPACT ON DOMESTIC INDUSTRIES: AN ASSESSMENT
OF THE LEGAL AND POLICY RECOMMENDATION

BY:
NAME ID NO.
1. YEABSIRA CHERU 1225
2. NARDOS ZEGEYE 0941
3. BEZA MOGES 0298
4. SOFONIYAS HAIILE 1077
5. SUDI ABAYE 1089

JUNE, 2023
WOLKITE, ETHIOPIA
 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
:AN ASSEMENT OF THE LEGAL FRAME WORK AND POLICY RECOMMENDATION

ETHIOPIAN MEMBERSHIP TO AFRICAN CONTINENTAL FREE TRADE AREA

(ACFTA) AND ITS IMPACT ON DOMESTIC INDUSTRIES: AN ASSESSMENT OF
THE LEGAL AND POLICY RECOMMENDATION

THESIS SUBMITTED IN PARTIAL FULFILLEMENT OF THE REQUIREMENTS

FOR THE DEGREE OF BACHELOR OF LAWS (LLB) AT THE SCHOOL OF LAW
WOLKITE UNIVERSITY.
BY:
1. BEZA MOGES
2. YEABSIRA CHERU
3. NARDOS ZEGEYE
4. SOFONIYAS HAIILE
5. SUDI ABAYE

ADVISOR: HAILE MARIAM AHMED AND ESSA YUSSUF

SCHOOL OF LAW,
WOLKITE UNIVERSITY
JUNE, 2023

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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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THESIS APPROVAL
The Thesis Titled “; Ethiopian Membership To African Continental Free Trade Area (Acfta) And
Its Impact On Domestic Industries: An Assessment Of The Legal And Policy Recommendation’’
By Nardos Zegeye Beza Moges Yeabsira Cheru Ssofoniyas Haile And Suddi Abbaye Is
Approved For The Degree Of Bachelor Of Laws.

ADVISORS,
NAME SIGNATURE
1. HAILEMARIYAM AHMED __________
2. ESSA YUSSUF __________

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DECLARATION
We hear by declare that the thesis comprises our own work. Ideas and expressions borrowed
from other authors and materials are duly acknowledged and properly cited. We further declare
that the thesis, in whole or in part, has not previously formed the basis for the award of any
degree, diploma or other similar titles.

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DEDICATION

‘’We dedicate this research work to our loving parents , whose unwavering support and
encouragement have been our guiding light and their belief in our abilities and constant
encouragement have been invaluable throughout this journey. This work is dedicated to them
with heartfelt gratitude.’’

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ACKNOWLEDGEMNT

We would like to express our sincere gratitude to our advisor, Mr: Hailemariam Ahmed and
MR;Issa for their invaluable guidance and support throughout this research project .there
expertise and insightful feedback we instrumental in shaping the research design and
methodology. We also like to extend our appreciations to our parents who generously shared
some of their experiences regarding senior thesis and for their unwavering encouragement during
this research journey

LIST OF ACRONYMS
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
:AN ASSEMENT OF THE LEGAL FRAME WORK AND POLICY RECOMMENDATION

ADLI Agricultural development led industrialization

AfCFTA African continental free trade area
ASEAN Association of Southeast Asian nation
AU African union
BIAT Boosting intra African trade
CEPR Center for economic and policy research
COMESA Common market for east and South Africa
EU Europe union
EAC East African Community
FDI Foreign direct investment
FAQs Frequently Asked Questions
GATT General Agreement on tariff and trade
GTP Growth and transformation plan
GDP Growth Domestic product
IGAD Inter governmental authority on development
IDS Industrial development strategy
LDC Least developed country
MFN Most favored nation
NAFTA North America free trade area
NEDS National export development strategy
NT National treatment
PASDEP A Plan for Accelerated and Sustained Development to End Poverty
RECs Regional economic communities
SPS sanitary and Payton sanitary measure
SMEs Small and Medium Enterprises
SCM Subsidies and countervailing measure
SADC South Africa development Community
SEZs Special economic zones
SDT Special and differential treatment
TBT Technical barrier treatment
UNECA United nation economic commission for Africa
WTO World trade organization

TABLE OF CONTENTS

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DEDICATION.................................................................................................................................v
ABSTRACT...................................................................................................................................ix
CHAPTER ONE..............................................................................................................................1
1. INTRODUCTION....................................................................................................................1
1.1. BACKGROUND OF THE STUDY.................................................................................1
1.2. STATEMENT OF PROBLEM.........................................................................................4
1.3. OBJECTIVE OF THE STUDY........................................................................................6
1.3.1. GENERAL OBJECTIVES........................................................................................6
1.3.2. SPECIFIC OBJECTIVES..........................................................................................6
1.4. RESEARCH QUESTIONS...............................................................................................6
1.5. LITERATURE REVIEW.................................................................................................7
1.6. RESEARCH METHODOLOGY AND METHODS........................................................9
1.6.1. SOURCE OF DATA.................................................................................................9
1.6.2 DATA ANALYSIS...................................................................................................9
1.6 SIGNIFICANCE AND CONTRIBUTION......................................................................9
1.7 SCOPE OF THE RESEARCH.......................................................................................10
1.8 LIMITATION OF THE RESEARCH............................................................................10
1.9 ORGANIZATION OF THE STUDY.............................................................................10
CONCEPTUAL AND THEORETICAL FRAME WORK...........................................................11
(ON AFRICAN CONTINENTAL FREE TRADE AREA(AfCFTA)).........................................11
2.1 AFRICAN CONTINENTAL FREE TRADE AREA; OVERVIEW IN GENERAL.....11
2.2 THEORETICAL FRAMEWORK..................................................................................12
3 LEGAL ANALYSIS OF AfCFTA AND ITS PROTECTING MECHANISM FOR
DOMESTIC INDUSTRY AND INDUSTRIAL POLICY AND GAPS IN ETHIOPIA..............25
3.2 DOMESTIC INDUSTRY PRODUCTION POLICY OF ETHIOPIA................................28
3.1.2 POLICY GAP UNDER ETHIOPIAN INDUSTRIAL POLICY ACCORDING TO
ACFTA.......................................................................................................................................36
3.5 Prospects of ACFTA for DOMESTIC INDUSTRY PRODUCTION in Ethiopia.........42
3.6 Challenges of ACFTA on Domestic Industry Production in Ethiopia................................45
4 CONCLUSION AND RECOMMENDATIONS......................................................................46
4.1 CONCLUSION....................................................................................................................46
4.2 RECOMMENDATIONS................................................................................................47
BIBLIOGRAPHY..........................................................................................................................51

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ABSTRACT

This research study examines the impact of the African Continental Free Trade Area (AfCFTA)
on domestic industries in Ethiopia. The AfCFTA, which came into effect in January 2021, aims to
create a single market for goods and services among African Union member states, with the
potential to boost intra-African trade and promote economic integration .The findings indicate
that the implementation of the AfCFTA has both positive and negative effects on domestic
industries in Ethiopia. On the positive side, it offers opportunities for market expansion, access
to a larger consumer base, and increased competition, which can drive productivity and
innovation. However, challenges such as unequal competition with more developed industries,
tariff reductions affecting certain sectors, and limited infrastructure and logistical capabilities
pose significant obstacles for Ethiopian industries. The study recommends a comprehensive
policy framework that addresses these challenges while harnessing the potential benefits of the
AfCFTA. This includes measures to enhance domestic industries' competitiveness, infrastructure
development, investment in research and development, and capacity building. Additionally,
collaboration between the government, industry stakeholders, and international partners is
essential to maximize the positive impact of the AfCFTA on Ethiopia's domestic
industries .Overall, this research contributes to the understanding of the implications of the
AfCFTA on domestic industries in Ethiopia. It highlights the need for proactive strategies and
policy interventions to ensure the sustainable growth and competitiveness of Ethiopian industries
within the evolving regional economic landscape.

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CHAPTER ONE

1. INTRODUCTION
The African Continental Free Trade Area (AfCFTA) is a promising initiative that aims to
increase intra-African trade and boost economic growth. Ethiopia, being one of the largest
economies in Africa, has a significant role to play in the success of the AfCFTA. This research
paper aims to investigate the effects of Ethiopia's membership in the African Continental Free
Trade Area (AfCFTA) on its domestic industries. The study involves an in-depth analysis of the
various industries in Ethiopia and their readiness to compete with her African countries under the
AfCFTA. Additionally, it explores the potential benefits and challenges faced by Ethiopian
industries as a result of this new trade agreement, which aims to promote intra-African trade and
economic integration.
1.1. BACKGROUND OF THE STUDY
International trade integration has expanded over the past decades. Multilateral trade agreement
is the first best option for maximizing global output and welfare. 1 Nevertheless, countries are
increasingly resorting to regional and bilateral trade integration due to limited progress of the
multilateral trade agenda.2 Hence, Free Trade Agreements (FTAs) are growing rapidly in both
size and number and become a prominent feature in the world trading system. 3 Even though
trade integration has been in Africa for a long time 4 , creation of continental free trade area
becomes reality recently after long years of effort. In January 2012, during the 18th Ordinary
Session of the Assembly of Heads of State and Government of the AU, a decision to establish an
African Continental Free Trade Area was adopted. 5 Accordingly, the AfCFTA agreement was
signed at the 10th Extraordinary Summit of the AU Assembly on 21 March 2018 in Kigali,

1
Bell Ihua et al, „An Independent Study on the Potential Benefits of the African Continental Free Trade Area
(AfCFTA) on Nigeria‟ 11 African International Trade and Commerce Research. [2018]
2
Massimiliano Calì et al., „Economic and Distributional Impacts of Free Trade Agreements: The Case of
Indonesia‟ Policy Research Working Paper 9021, Macroeconomics, Trade and Investment Global Practice, p 4-9,
[2019].
3
Kimberly A., Customs Unions and Free Trade Areas‟15(3) Journal of Economic Integration 419, (2000).
4
Taylor & Francis Ernest Toochi, From Pan-Africanism to African regionalism: A chronicle, African Studies,
[2020] Group 1 available at https://doi.org/10.1080/00020184.2020.174097
5
International Trade Centre, “A business guide to the African Continental Free Trade Area Agreement,” (2018)
ITC, Geneva.
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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Rwanda.6 Since the establishment of the WTO, it is the world’s largest regional trading
arrangement by membership.7
The AfCFTA is a flagship project of the AU’s Agenda 2063, a milestone towards the goal of
creating an African Common Market and the realization of an AEC envisaged by the Abuja
Treaty.8 It has an ambitious objective of removing tariff and non-tariff barriers on goods and
services with the intent of facilitating intra-African trade, promote regional value chains to foster
the integration of the African Continent into the global economy. 9 The negotiation process of the
AfCFTA take place in three phases, the first phase, which went into effect at the end of May
2019, provides Protocol on Trade in Goods, Protocol on Trade in Services, Protocol on the
Settlement of Disputes and their Annexes. Phase II negotiations, which commenced in February
2019, covers investment, competition policy and intellectual property rights. Phase III will cover
E – Commerce. The AfCFTA entered into force on 30 May 2019 when the threshold for
operationalizing the agreement was reached. As of February 2022, 54 AU members have signed
10
the agreement and 41 of them had deposited the instruments of ratification. The operational
phase of the AfCFTA was officially launched on 7 July 2019 in Niamey, Niger at the 12th
Extraordinary Summit of the AU.11 Trading under the AfCFTA has been started on 1 January
2021 after it is extended due to the COVID 19 pandemic.12 The maiden trade under the AfCFTA
took place in January 2021, two consignments of alcoholic beverages and cosmetic products
were exported from Ghana to South Africa by air and Guinea by sea respectively.
The protocol on trade in goods is the first protocol to the AfCFTA Agreement and its central
objective is to supplement the AfCFTA by setting up a liberalized market for the trade in

6
Ibid.
7
Michael Asiedu, „The African Continental Free Trade Agreement‟ (2018) Global Political Trends Centre (GPoT)
Policy Brief 52, 1, http://www.jestor.com/stable/resrep19333 (accessed 12 December 2021).
8
Trade Law Centre (tralac), „Agriculture and the African Continental Free Trade Area‟ in Ron Sandrey and
Willemien Viljoen (eds) African integration and trade liberalisation: implications for agricultural trade (Trade Law
Centre (tralac) Stellenbosch, South Africa, 2018) 15.
9
Ernest Toochi, „African Continental Free Trade Area and African Union Agenda 2063: the roads to Addis Ababa
and Kigali‟ [2020] Journal of Contemporary African available at https://doi.org/10.1080/02589001.2020.1775184
10
Tralac, „Status of AfCFTA Ratification‟ (2022) Tralac infographics, 2022 available at
http://www.tralac.org/resources/infographic/13795-status-of-afcfta-ratification.html.
11
Tralac, „African Continental Free Trade Area (AfCFTA) Legal Texts and Policy Documents‟ available at
https://www.tralac.org/resources/our-resources/6730-continental-free-trade-area-cfta.html.
12
Olabisi D. Akinkugbe, „A Critical Appraisal of the African Continental Free Trade Area Agreement‟ in Franziska
Sucker and Kholofelo Kugler (eds) International Economic Law from a (South) African Perspective (South Africa:
JUTA Law, 2021) 5.
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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goods.13 The protocol is the most extensive document in the AfCFTA suite of documents. The
protocol contains comprehensive annexes on the schedule of tariff commitments, rules of origin,
customs cooperation, trade facilitation, non-trade barriers, TBT measures, SPS measures and
transit and trade remedies. The establishment of AfCFTA is an impressive political achievement
that holds immense economic and job-creating potential. 14 But it needs to be backed up with
action to make sure that Africa’s businesses and citizens actually benefit from it. 15 Also, as a
member driven framework arrangement, it requires actions from each member countries. 16
Hence, parties are expected to honor their commitments in terms of ratification, transposition and
conformity of laws, regulations and procedures.17
Ethiopia was one of the signatories to the AFCFTA with the objective of boosting its economic
development and growth through increased trade and investment.18 Ethiopia is among the
founding member of the AFCFTA Agreement. Government of Ethiopia has signed the
agreement on 21 March 2018.19 A year later, on March 21, 2019, the House of Peoples
Representative has unanimously ratified the agreement under Proclamation No 1124/2019, and
the instrument of ratification was deposited on 10 April, 2019. 20 As a state party, the country is
expected to honor the commitment and take individual action. Hence, the legal and institutional
framework should be reformed accordingly. Therefore, the study examines the regulatory and
institutional reforms Ethiopia is undertaking and has to undertake in line with AfCFTA –
Protocol on Trade in Goods commitment.21

13
Yakubu Idisire, „From OAU To AfCFTA - Analysing The Prospects For Economic Development In Africa‟
(LLM thesis, University of Cape Town 2018) (Unpublished) 43
14
Bernhard Tröster and Eva Janechová, „The long journey towards Pan- African integration: The African
Continental Free Trade Area and its challenges‟ (2021) OFSE Briefing Paper, No.31 Austrian Foundation for
Development Research (ÖFSE), Vienna 12
15
Virginia Mucchi et al.(eds.), „The African Continental Free Trade Area: From agreement to impact ECDPM‟s
Great Insights‟ 2020 9(1) European Centre for Development Policy Management (ECDPM) 2-4
16
Gerhard Erasmus and Trudi Hartzenber, „The ABC of the AfCFTA – as it stands‟ (2020) available at
https://www.tralac.org/blog/article/15040-the-abc-of-the-afcfta-as-it-stands.html
17
Philomena Apiko et al, „The promise of the African Continental Free Trade Area (AfCFTA)‟ (2020) ECDPM
Discussion Paper No.287/2020 9
18
African Union Commission. (2018). African Continental Free Trade Area: An Opportunity for African Economic
Transformation. Addis Ababa, Ethiopia.
19
Berhane Hailemariam, „Ethiopia Joins Frictionless African Trade Area‟ Addis Fortune (Addis Ababa 23 March
2019) available at https://addisfortune.news/ethiopia-joins-frictionless-african-trad-area
20
Instrument of Ratification, https://au.int/en/pressreleases/20190410/ethiopia-deposits-instruments-ratification.
21
Befetari Mulugeta Abate, Regulatory And Institutional Reform Of Ethiopia In Line With Africa Hawassa,
Ethiopiaan Continental Free Trade Area (Afcfta) – Protocol On Trade In Goods,pp1-3 june, 2022.
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The country has implemented various policies and programs aimed at promoting domestic
production and protecting local industries, including import restrictions and subsidies for local
producers. The implementation of the AfCFTA presents both opportunities and challenges for
Ethiopia's domestic production protection policies. On the one hand, the free trade agreement
provides Ethiopian businesses with access to a much larger market, potentially leading to
increased exports and economic growth. However, there are concerns that Ethiopia's membership
to AFCFTA may negatively impact its domestic industries due to increased competition from
other African countries. The increased competition could lead to a decline in the production of
local industries, loss of jobs, and a rise in the imports of goods and services, especially those that
Ethiopia has been producing.22
Therefore, it is important to conduct a study on the potential impact of AfCFTA on Ethiopia's
domestic production protection policies, in order to understand the opportunities and challenges
presented by the agreement and to develop strategies for maximizing the benefits while
minimizing the risks and this study seeks to evaluate the impact of Ethiopia's membership to
AFCFTA on its domestic industries, Specifically, we will examine the extent to which domestic
industries are likely to be affected by increased imports and competition from other African
countries. We will also explore potential legal remedies available to Ethiopia to protect its
domestic industries and maintain its economic development goal.23
1.2. STATEMENT OF PROBLEM
The African Continental Free Trade Agreement (AfCFTA) presents a significant opportunity for
Ethiopia to increase its trade and economic growth. Contracting states have to develop clear
national AfCFTA implementation strategies, create a conductive enabling environment, work to
change the mind set and take supportive complementary measures for SMEs. However, most
African States do not presently have the necessary regulatory and institutional arrangements in
place.24 Based on AfCFTA Year Zero report, the continent as a whole is less than 50%
committed and prepared for AfCFTA, and Ethiopia is ranked 34 th.25 As of February 2022, only

22
Ministry of Trade and Industry. The Ethiopian Trade Policy. Addis Ababa, Ethiopia, (2020).
23
UN Conference on Trade and Development Economic Development in Africa Report 2018. Geneva, witzerland,
(2018).
24
Gerhard Erasmus, „Implementing the AfCFTA: When and How?‟ available at
https://www.tralac.org/blog/article/13308-implementing-the-afcfta-when-and-how.html, (2018)
25
AfCFTA Year Zero Report, „An Assessment of African Governments‟ Commitment and Readiness for AfCFTA
Start of Trading in light of COVID-19Afro Champions, 20 and 26, ‟ (2020)
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29 tariffs fully comply and only 11 countries have validated AfCFTA implementation
strategies.26 On the other hand, some countries are taking a huge step in undertaking regulatory
and institutional reforms apace. Countries, such as Cameroon, Egypt and Cote d‟ivoire, have in
place the needed customs procedures and national committees. 27 Ghana developed National
AfCFTA policy Framework and Implementation Plan for Boosting Intra-African Trade (BIAT)
and National Export Development Strategy (NEDS). 28 Also the government has taken steps to
put up certain institutions; Inter-Ministerial Facilitation Committee, National AfCFTA
coordinating Office, National AfCFTA Steering Committee and Technical working Groups. 29
South Africa also submitted its tariff offer and the customs arrangements and administrative
procedures are in place.30
As a signatory state, Ethiopia has to make the necessary adjustments in domestic policies and
regulatory and institutional frameworks. Without such necessary adjustments, the country will
not be able to harness the enormous gains of AfCFTA and stand with the winner’s. However,
joining AfCFTA and implementing the commitment is challenging for Ethiopia due to the
countries little experience in regional and multilateral trade agreements.31 However, concerns
have been raised about the impact of the agreement on Ethiopia's ability to protect its domestic
industries from foreign competition. While the AfCFTA aims to promote free trade and reduce
trade barriers between African countries, it is unclear how Ethiopia's existing domestic
production protection policies align with the agreement. Hence, examining and strengthening
the regulatory and institutional frameworks is critical to ensure active involvement of the country
in the AfCFTA market.32

26
David Luke et al., „On implementing the AfCFTA in 2021‟ Trade for Development News, EIF available at
http://trade4devnews.enhancedif.org/en/op-ed /implementing-afcfta-2021,
27
ibid.
28
Royale Sphere Consult Services Ltd.,Preparedness of Local Businesses Participating in AfCFTA agreement
implementation in Ghana‟ Research report of Good Governance Africa, West-Africa Centre, 48, 2021
29
ibid. 49
30
Willemien Viljoen, „South Africa‟s implementation of the African Continental Free Trade Agreement: customs
arrangements and technicalities‟ available at https://www.tralac.org/blog/article/15083-south-africa-s-
implementation-of-the-african-continental-free-tradeagreement-customs-arrangements-and-technicalities.html,
(2021)
31
GIZ, „Programme Support to the African Continental Free Trade Area (AfCFTA): Ethiopia component‟
(Deutsche Gesellschaft fur International Zusammenarbeit (GIZ) Gmbh, available at
http://www.giz.de/en/downloads/, 2021
32
Befetar Mulugeta Abate, Regulatory And Institutional Reform Of Ethiopia In Line With Africa Hawassa, Ethiopian
Continental Free Trade Area (Afcfta) – Protocol On Trade In Goods , Pp1-3, june 2022,.
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1.3. OBJECTIVE OF THE STUDY

The research has the following general and specific objectives;
1.3.1. GENERAL OBJECTIVES
The main objective of the research is to analyze the potential impact of the African Continental
Free Trade Area (AfCFTA) on Ethiopia's domestic production protection policies. The study
aims to identify potential challenges and opportunities for Ethiopia's domestic production
protection policies under AfCFTA, and to provide suggestions for maintaining these policies
while benefiting from the opportunities of the free trade agreement. Ultimately, the research
seeks to contribute to a better understanding of the potential impact of AfCFTA on Ethiopia's
economy and its ability to protect its domestic industries.
1.3.2. SPECIFIC OBJECTIVES
Specific objectives of the research are;
1. To identify the potential legal remedies or measures that can be taken to mitigate any
detrimental effects of Ethiopia's participation in the AFCFTA on domestic industries.
2. To provide recommendations to policymakers on how to create an enabling environment
where Ethiopian industries can benefit from participation in the AFCFTA despite the
possible negative impact of the agreement.
3. To make an objective assessment of the effectiveness of current protective measures already
implemented by Ethiopia governing international trade.
4. To provide information on African countries that have successfully gone through this
transition and gained from signing such an agreement and suggest policy measures that
Ethiopia can learn from them.

1.4. RESEARCH QUESTIONS

1. How does the African Continental Free Trade Agreement (AfCFTA) impact Ethiopia's
domestic production protection policies?
2. What are the challenges and opportunities for Ethiopia to maintain its domestic production
protection policies under the AfCFTA? And "What legal tools has Ethiopia established to
mitigate and promote the effects of joining the African Continental Free Trade Area
(AFCFTA) on domestic industries in Ethiopia?"

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:AN ASSEMENT OF THE LEGAL FRAME WORK AND POLICY RECOMMENDATION

3. How do Ethiopia's domestic industrial policies align with the objectives of the AfCFTA?
4. What measures can Ethiopia take to ensure the protection of its domestic industries while
also benefiting from the AfCFTA's opportunities for increased trade and economic growth?
1.5. LITERATURE REVIEW
The African Continental Free Trade Agreement (AfCFTA) has been heralded as a game-changer
for intra-African trade and economic growth. Ethiopia, as one of the key economies in the
continent, joined AfCFTA in 2019 with the aim of boosting trade and investment cooperation
with other African countries. The Literature on the impact of AfCFTA membership on domestic
industries is limited, and very few studies have investigated the legal and policy framework for
implementing AfCFTA in Ethiopia.
A recent study by Deloitte Consulting LLP, analyzed the expected impact of AfCFTA on
Ethiopia's economy and highlighted the need for a sound implementation strategy to ensure that
Ethiopia reaps the benefits.33 The study argues that Ethiopia should focus on developing its
manufacturing sector, which is crucial for its export competitiveness.34
Another study by Dr. Tsegaye Chekagn, et al, examines Ethiopia's readiness for AfCFTA
compliance and discusses the challenges and opportunities related to its membership. 35 The study
recommends a comprehensive review of Ethiopia's legal and regulatory frameworks to align
them with AfCFTA's requirements.36
a paper by Yoseph Samuel, Tries to deeply look at the prospects and challenges of Ethiopia’s
membership to AfCFTA through critically examining the trade data of agricultural and
manufactured goods, and the used and unused export potentials of the country. 37 It also examines
the prospects and challenges of the country’s membership on its service trade focusing on the
AfCFTA identified prioritized service sectors.38

33
Deloitte Consulting LLP ,Unlocking Ethiopia’s potential through AfCFTA,2020
34
ibid
35
Dr. Tsegaye Chekagn, et al , A Critical Assessment of Ethiopia's Readiness for AfCFTA Implementation,
36
ibid
37
Yosef Samuel, Prospects And Challenges Of Membership To African Continental Free Trade Area On Trade In
Goods And Services: The Case Of Ethiopia,p 9 May 2020.
38
ibid
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Another paper by Befetari mulugeta, elaborated, as a signatory state, Ethiopia has to make the
necessary adjustments in domestic policies and regulatory and institutional frameworks. Without
such necessary adjustments, the country will not be able to harness the enormous gains of
AfCFTA and stand with the winner’s.39 However, joining AfCFTA and implementing the
commitment is challenging for Ethiopia due to the countries little experience in regional and
multilateral trade agreements.40 Hence, examining and strengthening the regulatory and
institutional frameworks is critical to ensure active involvement of the country in the AfCFTA
market. Specifically the protocol on Trade in Goods being under research. And the study
examined Ethiopia’s domestic adjustments: regulatory and institutional reforms, which have
been undertaking and has to be made in line to commitments of AfCFTA protocol on Trade in
Goods.41
The other paper is Zebiba Musema’s, dealt with the fact that Ethiopia is experiencing trade
deficit with this least participation and AFCFTA on the other hand regards REC a building block
to it.42 Therefore, with this whether Ethiopia as one of a member state need to further in to REC
so long as a building block or only focus on AFCFTA and integrate with Africa through it. 43 And
the thesis explored relevancy of participating in REC towards CFTA, obligations from the side
of Ethiopia and expected losses and prospects.44
There is a gap in the literatures above regarding a holistic assessment of Ethiopia's legal and
policy framework for implementing AfCFTA and how it impacts domestic industries. This study
aims to fill this gap by providing evidence-based recommendations for policymakers and
stakeholders to enable Ethiopia to develop robust strategies to maximize the benefits of AfCFTA
membership while addressing potential challenges in key areas such as trade facilitation, customs
procedures, and standards harmonization.

39
Befetari Mulugeta Abate, Regulatory And Institutional Reform Of Ethiopia In Line With African Continental Free
Trade Area (Afcfta) – Protocol On Trade In Goods , p40 June, 2022
40
GIZ, Programme Support to the African Continental Free Trade Area (AfCFTA) Ethiopia component‟ (Deutsche
Gesellschaft fur International Zusammenarbeit (GIZ) Gmbh, available at http://www.giz.de/en/downloads/giz-en-
support-africa-free-trade-area-ethiopia.pdf, 2021
41
Ibid,8
42
, Zebiba Musema Kedir, Participation Of Ethiopia In Regional Economic Community And Readiness Towards
African Continental Free Trade Area, Ll.M Thesisjanuary ,2020
43
ibid
44
ibid
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1.6. RESEARCH METHODOLOGY AND METHODS

1.6.1. SOURCE OF DATA
This research is doctrinal type research we are going to use primary and secondary sources of
data to attain its objectives. The primary data includes domestic legislations and policies,
regional and multilateral agreements on trade in goods. The secondary data includes research
findings, books, journal articles, and working papers, institutional publications and reports,
websites, and other literatures.
1.6.2 DATA ANALYSIS
The data collected from both primary and secondary sources will be systematically organized
and analyzed together with the theoretical and legal framework. Accordingly, power of reasoning
will be employed to synthesize, analyze, interpret and compare the data in accordance with
doctrinal legal research approach.
1.6 SIGNIFICANCE AND CONTRIBUTION
Ethiopia's membership in the AfCFTA signifies its commitment to regional economic
integration. By studying the impacts of this membership, the study can provide insights into the
potential benefits and challenges of participating in a large-scale free trade area. It can shed light
on how Ethiopian industries and businesses are adapting to increased competition and market
access within the AfCFTA framework.
The study can analyze the effects of the AfCFTA on Ethiopia's domestic production and trade
patterns. It can examine how the removal of trade barriers, such as tariffs and quotas, affects
different sectors of the economy. Understanding the changes in market dynamics and trade flows
can help policymakers and businesses make informed decisions regarding domestic production
and export strategies also the Findings from the study can inform policy formulation and
decision-making processes related to protecting domestic production. It can help policymakers
assess the potential risks and benefits of different policy measures, such as tariffs, subsidies, and
non-tariff barriers, in supporting domestic industries while balancing the advantages of regional
integration. This study can assess the impact of the AfCFTA on Ethiopia's industrial
development and competitiveness. It can examine how the opening of markets within the
AfCFTA affects the growth and competitiveness of domestic industries. This knowledge can
guide policymakers in developing strategies to enhance domestic industries' competitiveness and
foster sustainable economic development.

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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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In addition, the study can explore the socioeconomic impacts of Ethiopian membership in the
AfCFTA. It can examine how changes in domestic production and trade affect employment,
income distribution, poverty levels, and overall welfare. This understanding can help
policymakers design appropriate measures to mitigate potential negative consequences and
maximize the positive impacts of participation in the AfCFTA.
1.7 SCOPE OF THE RESEARCH
The scope of the study will be the participation of Ethiopia in ACFTA and its impact on
domestic production and its legal remedy. Therefore, the scope is limited to geographic area of
Ethiopia only including the current opportunities and challenges.
1.8 LIMITATION OF THE RESEARCH
Possible limitations that may be faced while conducting research for the title "Ethiopia's
membership to AFCFTA: the impact on domestic industries of Ethiopia and the possible legal
remedies" are:
Time constraints: Ideally, this research requires thorough examination and analysis,
which may be impractical given the short timeline and resources allocated.
Scope of the study: The scope of this study may be extensive considering the broad topic and
legal context involved, which can present a challenge in terms of focus and depth.
1.9 ORGANIZATION OF THE STUDY
This study comprises four chapters. The first chapter is assigned for proposal that discusses the
background of the study, statement of the problem, literature review, research questions,
objective of the research, methodology of the study, significant and scope of the study is
included in the chapter.
The second chapter of the research is left for issues like the conceptual understanding of
economic integration introduction to ACFTA and its background. The Stages in REC‘s, REC‘s
in Africa along with their performance. And also the related constraints and opportunities to the
economic communities are also addressed. A section is also dedicated over the approach of the
ACFTA towards REC‘s. The third chapter is the core chapter in which it focuses on the legal
analysis and specific objective of the research the chapter particularly discusses the domestic
production policy practiced at the current time the matters involved in the ACFTA and domestic
processes in Ethiopia are discussed. The status of Ethiopia towards trade policy direction,

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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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institutional readiness is addressed, recent changes towards enhancing trade along with CFTA is
discussed. The last chapter is dedicated for conclusion and recommendations.

CHAPTER TWO
CONCEPTUAL AND THEORETICAL FRAME WORK
(ON AFRICAN CONTINENTAL FREE TRADE AREA(AfCFTA))
2.1 AFRICAN CONTINENTAL FREE TRADE AREA; OVERVIEW IN GENERAL
The African Continental Free Trade Area (AfCFTA) is a trade zone established in the late 2010s
by African Union (AU) member states to foster greater intra continental trade- and investment
based economic integration and growth. The AfCFTA was established under a framework
agreement that has been signed by 54 of the 55 AU member states—all AU members except
Eritrea—and came into force in May 2019. The African Continental Free Trade Area (AfCFTA)
is a nascent goods and services free trade zone that African Union (AU) member states created to
foster greater intracontinental trade and investment as means of spurring economic integration
and growth in Africa. Fifty-four of 55 AU member states have signed a framework agreement
establishing the AfCFTA. The agreement centers on the implementation and continuing phased
negotiation of various commitments to reduce or eliminate tariffs, prospectively including up to
97% of all tariff lines, as well as nontariff barriers to trade. The AfCFTA is a framework
agreement signed by 54 of the 55 members of the African Union (AU) that aims to remove
barriers to intra-African trade and investment through the phased negotiation and implementation
of various commitment. AfCFTA members have committed to eliminate tariffs on 90% of tariff
lines over 5 years, or 10 years for the least developed countries, as of the nominal official start of
trading under the AfCFTA in early 2021.17 Of the remaining 10% of tariff lines, 7% are for
“sensitive” products, to be phased out over a longer period, while 3% of lines may be excluded.45
The negotiation process of the AfCFTA has two phases. Protocol on Trade in Goods, Protocol on
Trade in Services, Protocol on the Settlement of Disputes and their Annexes are among the first

45
African Continental Free Trade Area (AfCFTA): Overview and Issues for Congress Updated May 3, 2023
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phase issues whose negotiations are completed. Phase II of the AfCFTA negotiations, which
commenced in February 2019, covers three topics: investment, competition policy, and
intellectual property rights and are expected to be completed by June 2020. The Agreement has
both general and specific objectives. The general objectives include creating a single and
liberalized market for goods and services, contributing to the movement of capital and natural
persons and facilitate investments and enhancing the competitiveness of the economies of State
Parties within the continent and the global market. Progressive elimination of tariffs and non-
tariff barriers to trade in goods, liberalizing trade in services, cooperating on customs matters on
all trade related areas and implementation of trade facilitation measures are among the specific
objectives stated in the Agreement. There are also principles governing the AfCFTA: RECs’
FTAs as building blocks for the AfCFTA, flexibility and special and differential treatment,
transparency and disclosure of information, MFN, NT and reciprocity. 46 Ethiopia has signed the
Agreement on the 21st day of March, 2018 and the FDRE House of Peoples Representatives has
ratified the Agreement at its session held on the 21st day of March, 2019.
2.2 THEORETICAL FRAMEWORK
Infant industry arguments
The infant industry argument is the most known arguments for protection against free
international trade. The argument claims that protection is justified for new industries especially
in less developed countries in order to establish them sufficiently and to balance. These infant
industries are unable to compete with the old and well established industries located mostly in
developed countries. The main reasons are differences in efficiency in production, information,
and knowledge and capital endowment47.
The Origin of the List’s Theory
Friedrich List (1789-1846) was a critic of economic theory. He was an American citizen, a
German patriot and Universalist who believed in the ultimate harmony of national interests. His
famous work, The National System of Political Economy (1841) was written to oppose the free-
trade doctrines of Classical economics48.
After the first industrial revolution List developed the infant industry argument to react to the
divergence of the industrial development between Great Britain, the main European countries
46
Infra note 61
47
Suranovic, a positive analysis of fairnesss with application to international tarde,vol 23,p283-307,2004
48
Fonseca and Ussher and Lind, 1998-2004)
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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and the United States. At this time Great Britain was more developed than these other countries,
largely due the fact that industrial revolution took place mainly in that country.
A world of free trade cannot be achieved instantly due to the divergence of the industrial
development of the nations. A precipitate acceptance of global free trade would enduringly
favors the industrialized countries (like Great Britain in the 19th century and the United States
nowadays). To enable the infant industries of the developing countries to catch up, they had to be
protected. After this stage of development, the recently developed nations should slowly reduce
protection to be more engaged in free trade with the rest of the world.49
According to List (1841), every country should start with free trade to develop a strong
agricultural industry. They should export raw materials and import manufactures. But to develop
further, countries must industrialize, i.e. go from the Agricultural stage to the Agricultural united
with manufacturing stage and later to the Agricultural, Manufacturing and Commercial stage
List (1841) assumed that such developments cannot emerge automatically through the ‘natural
course of things’, i.e. through market forces. Therefore, infant industry protection becomes a
necessity for countries which are at the agricultural united with manufacturing stage to be
enabled for the competition with more developed countries.50
Static Arguments
Static arguments dictates that trade protection might influence the performance of firms in
developing countries are numerous. There are two groups of arguments: those that address
competitive pressures facing firms in developing countries and those that address the size of
market(s) in which these firms operate. According to arguments that focus on competitive
pressures, a combination of international trade and foreign direct investment (FDI) squeezes the
profitability of firms in developing countries, thereby inhibiting their investment in cost-reducing
capital and technology. Firms might seek loans for such investments but capital markets in most
developing countries cannot provide such loans; firms must then rely on retained earnings to
fund investment.
Protection can rehabilitate domestic firms’ prices and profitability, facilitating their investment in
capital and technology. In realizing the benefits of cost-reducing technology.51

49
Mattihas Hilgert, International Trade: Friedrich List's Theory of the infant industry argument,2005
50
Ibid
51
Matthew J. Slaughter, Tuck School of Business, Dartmouth College, Infant-Industry Protection and Trade
Liberalization in Developing Countries, May 2004
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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Dynamic Arguments
The dynamic argument states that firms realize productivity gains only by learning directly about
efficiency. Even if a firm’s managers understand in theory how to achieve efficiency, they
simply cannot make a quantum leap to it. Instead, they “learn by doing”: they commit the
inefficiencies then eliminate them. If this is so, then trade protection can buy protected industries
the time they require to learn by doing and to correct inefficiencies.52
Rationales for trade protection
Why is trade protectionism adopted?
Numerous reasons have been listed to justify why a nation adopts policies which are protectionist
in nature. Firms in developing countries cannot compete against foreign counterparts without the
protection afforded by tariffs and non-tariff barriers. Protection gives infant industries the
opportunity to prepare for freer trade by becoming more productive through protection. Though
this argument remains widespread and convincing in many developing countries. 53 The foreign
trade policy is concerned with whether a country should adopt the policy of free trade or of
protection. If the policy of protection for domestic industries is adopted, the question which is
faced whether protection should be achieved through imposing tariffs on imports or through the
fixation of quota or through licensing of imports. The foreign trade policy has been the subject of
heated discussion since the time of Adam Smith who advocated for free trade and recommended
that tariffs should be removed to avail of the advantages of free trade. Even today, economists
are divided over this question of foreign trade policy. Various arguments have been given for and
against free trade and protection. A powerful argument given in support of protection, especially
in the context of developing countries is infant industries should be provided protection from the
competition of low-priced imports of the mature and well-established industries of the developed
industrialized countries.
Free Trade and Trade Protection
This literature considers Free trade refers to the trade that is free from all artificial barriers to
trade like tariff, quantitative restrictions, exchange controls etc. Thus, under free trade, goods and
services flow between countries freely Protectionism is government trade policies eager to assist
domestic producers against foreign producers in a particular industry, by means of promoting the
52
Ibid
53
Tekletsadik Eka, Infant Industry Protection Policy In Ethiopia: Prospects And Challenges The Case Of Korean
Development Trajectories As A Role Model A Research Thesis Presented In Partial Fulfillment Of Master’s Degree
In Public Administration And Development Management November 2015 Addis Ababa, Ethiopia
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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price of foreign products, lowering cost for domestic producers, and restricting foreign
producers’ access to domestic market.54In other words, free trade implies absence of
governmental intervention on international exchange among different countries of the world.
Protection, on the other hand, refers to the government policy of protection to the domestic
industries from foreign competition. Trade protectionism refers to policies that seek to shield
local businesses from unfair foreign competition, through the creation of trade barriers. The
concept of protectionism is in contradiction to the idea of free trade, wherein governments
usually allow their citizens to conduct trade of their goods and services within other markets,
without interfering by creating obstacles or unnecessary constraints. The fundamental aim of
undertaking such measures by countries is to protect their national interests in terms of the
economy, including their most vital local industries, the production process, and the generation
of workforce employment. Protectionism in a particular area causes an effect on other areas as
well and wherein a smooth operation of international trading has to be secured, it is important to
preserve liberalism in the related areas as well.1 Free trade, however, promotes the idea of
domestic consumption on a larger scale, along with an optimal utilization of the resources
available. It strives towards economic growth and the enhancement of wealth creation inside the
borders of the country.
Numerous reasons have been listed to justify why a nation adopts policies which are protectionist
in nature. Theoretically as well as practically, it is sometimes believed that protectionism can be
advantageous. It can reallocate wealth, balance the subsidies that have been provided by foreign
governments to their industries as well as counter other systems of unfair international
competition, protect domestic industries, decrease the existent trade deficits, and assist industries
which have recently emerged. It is often perceived as providing huge benefits to a lesser people’,
while only causing only a slight loss to a much larger group of consumers.55
Arguments Supporting Protectionism
Protection of domestic jobs and industries

54
Suhail Abboushi, Article in Competitiveness Review An International Business Journal incorporating Journal
Global Competitiveness,Duquesne University 23, p387,October 2010

55
Ashutosh Panchbhai 1, Prof. Abhijit Vasmatkar 2 Roshni R. Shinde 3 1,2,3 Symbiosis Law School (SLS),
Symbiosis International University (Deemed University) (SIU), Pune, Maharashtra, A Comprehensive Exploration
of Trade Protectionism in the 21st Century, India.
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The most prominent argument for trade protectionism takes a standpoint from the perspective of
the livelihood of unorganized, domestic workers. It demonstrates how the protection of industries
and firms which hire these workers are important to boost the country’s economic growth and
security.56
Protection of consumers Domestic producers, consumers
Policymakers have claimed that internationally manufactured goods may not conform to the
product safety requirements in the process of production and distribution. It could lead to
sicknesses, risky products, or even death of the consumer in some rare, possible case. In order to
safeguard the consumers from harmful products which have been imported, various safety
obligations and production requirements have been imposed by the government and have to be
followed by mandatorily.
Protection of Infant Industries
Protecting infant industries might result in the expenditure of a significantly large quantity of
financial resources to the Government. It can promote incompetence in the industry supported,
owing to the fact that they would have no encouragement to invest efficiently, in long-term
plans, as they are borrowing funds and are supported by the Government. It interferes with the
vital process of maturation of the industry, and decreases the probability of the business
successfully competing in the foreign market with a comparative advantage.
It puts forth the reality about how newer manufacturers have an exceptionally difficult
experience, while in a competition against well-established and sufficiently funded companies
which tend to accrue huge profits in countries which are more developed. However, these
manufacturers who have recently come into existence in developing countries may lack financial
as well as technological resources, the substantial equipment, expertise in the field of research
and development while competing against long standing, established corporations57
FORMS OF PROTECTIONISM
Tariffs
Tariffs basically refer to the imposition of a tax or a duty on imported products from foreign
markets. It is usually implemented to increase the product cost for consumers, with the purpose
of making them either of equal cost, or more expensive than the locally produced goods and
services. It increases the price of imports, causing a reduction in domestic demand with excess
56
Ibid
57
Ibid
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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domestic supply. In cases of imposition of such tariff, the government seeks to limit the import
of foreign goods into the country and shield its local businesses and industries which
manufacture similar items that could not otherwise have competed with foreign producers.
Quotas
Quotas are direct restrictions on the quantitative limits (volume) of specific goods and products
which may be allowed to enter a nation through imports, within a specific time period. The main
objective behind the entire idea of quotas is to diminish the number of competitive products in
domestic markets which in return, increase the demand for local products. Instead of creating
barriers which make it tougher or costlier to allow the trading of goods, quotas tend to restrict the
quantity of products that enter a country. Foreign producers are often unable to avoid these
quotas58
Subsidies
Subsidies Governments also give subsidies (state aid) to domestic businesses which have been
facing financial problems, in order to help decrease the cost of production and allowing them to
gain status in foreign markets. Such assistance can be given in various forms, including cash
payments, loans with low interest rates, tax exemptions and ownership of common government
stock in domestic companies, to prevent imports59
ANTI-DUMPING MEASURES
‘Dumping’ happens when a company happens to export a product at prices which are
substantially lower than the normal charge in the domestic market. The goods are sold at a price
lower than the ‘fair market price’, due to excess supply with the purpose of gaining an extensive
share of that nation’s domestic market. It could flood any market with lowpriced imports,
making it difficult for local companies to stay in business. The Anti-Dumping Agreement allows
governments to take action in cases where dumping is genuine, and such policies include
regulations to prevent the sale of products at prices far below the actual cost, in a foreign market.
It may include tariff barriers or even non-tariff barriers.60
EXCHANGE RATE CONTROLS
Monetary protection often includes countries which intentionally undervalue their exchange rate
in order to enhance exports and lessen imports. The controls on exchange rates are often utilized

58
Ibid
59
Ibid
60
Ibid
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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to cheapen the goods of a country overseas, by reducing the currency’s value in the foreign-
exchange market. Theses controls work with the main idea being that a country would sell the
currency within the market until it loses its original value against other currencies. 61

Protectionism under WTO RULES and ACFTA

WTO under GATT
A number of provisions in the WTO rules deal with various measures that member States can use
to protect domestic suppliers and promote exports and technology transfer. Articles I and III of
GATT 1994 lay down MFN and national treatment for imported goods. However, up to the
bound rate (if a tariff item has been bound), tariffs can still be used to protect infant industries
and develop domestic capacity. Tariffs are often complemented by other tools of industrial
policy such as subsidies, which are used to both promote particular firms and industries and to
penetrate foreign markets. In this section we examine how the WTO rules have constrained the
flexibility of member States in the choice of instruments that may be used to pursue industrial
policy objectives.62
Import protection
Tariffs, non-tariff measures and subsidies protect domestic firms from import competition.
Although tariff protection has declined, there continue to be peak tariffs in some industries in
both developed and developing countries. Also, the dispersion of protection remains high in
many countries.
Import protection can also be achieved by challenging the fairness of the competition by using
anti-dumping or safeguard measures. In the context of industry policy both measures have often
been used in declining industries. The Final Agreement on Implementation of Article VI had a
few additional provisions in favour of developing countries as they try to develop their exports.

61
Ibid
62
Bijit Bora UNCTAD and Flinders University of South Australia Peter J. Lloyd University of Melbourne
Mari Pangestu Centre for Strategic and International Studies, Jakarta Industrial Policy and The WTO pp 1-12
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More important, there are still systemic issues in the implementation of Article VI that can
frustrate legitimate attempts by developing countries to exploit export markets.63

Subsidies and export promotion

The Agreement on Subsidies and Countervailing Measures (SCM) increases disciplines on the
use of subsidies and countervailing measures to offset any injury caused by subsidized imports.
It applies to non-agricultural products; there are separate (and more comprehensive) disciplines
on agricultural products in the Agreement on Agriculture 64 WTO rules relate to only a subset of
the policies typically associated with industrial policy. WTO rules do not exist to prevent state
intervention per se, typically discouraging certain forms of intervention that harm certain (not
necessarily all forms of) foreign commercial interests. And even when binding WTO rules exist,
their enforcement is not undertaken by an independent referee, but rather by self-interested and
adversely affected WTO members.
Protectionism under African continental free trade area (ACFTA)
ACFTA have its own trade protectionism provisions like Article 24(1) of the convention, Infant
Industries. ‘’For the purposes of protecting an infant industry having strategic importance at the
national level, a State Party may, provided that it has taken reasonable steps to overcome the
difficulties related to such infant industry, impose measures for protecting such an industry. Such
measures shall be applied on a non-discriminatory basis and for a specified period of time’’.
The major challenge for the continent will arise from the wider development gap among African
countries: Considerable economic growth and welfare gains may be experienced by those
countries with large productive capacities in manufacturing and those countries with small
economies and LDCs may face significant fiscal revenue losses and affects local industries.139
For instance, Egypt, Nigeria and South Africa contribute over 50% of Africa’s cumulative GDP
while 1% of the GDP is collectively contributed by Africa’s six sovereign island nations.140
Substantial tariff revenue losses and an unequal distribution of costs and benefits are also
mentioned as challenges.65

63
Ibid
64
Ibid
65
Yosef Samuel Prospects And Challenges Of Membership To African Continental Free Trade Area On Trade In
Goods And Services: The Case Of Ethiopia ,P 32 ,Addis Ababa Ethiopia May, 2020
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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Larger firms play an essential role in the national economy. Their productivity and technological
capability make them competent in the export sector. But, Ethiopian manufacturing sector is
characterized by the numerical dominance of small firms which makes the sector very difficult to
compete with large and sophisticated firm of other countries.
AfCFTA is aiming at creating liberalized single market for goods and, competitiveness is
expected from traders.220 Principles such as MFN and NT required the country to be
nondiscriminatory to other African countries’ products. To compete with such liberalized
market, the Government of Ethiopia should have to give remedy to the above mentioned export
and import trade challenges of the country through minimizing bureaucratic and time taking
procedures in import and export trade.
As there will be elimination of tariff revenue or demand shift on the products of small and
medium scale industries at the initial phase of the AfCFTA, the Government should also take
measures like improving taxation: by allowing industries to get low cost raw materials free of
taxation.224 To curb the potential impacts of implementing the agreement, it should also build
the capacity of its financial sectors such as trade and investment institutions. 66
EXPERINCES
Ethiopia’s experience with in other regional Economic communities
The trade reality of Ethiopia is similar with most African countries. It has been suggested that to
exploit the trade potential Ethiopia there is a need to diversify export, enter trade negotiations
and improve infrastructures.67 So far Ethiopia is member of two regional economic communities
COMESA and IGAD with no current trade agenda. Although Ethiopia has not yet joined the
COMESA FTA, it has played an active role in COMESA‘s formation and leadership. In 2002,
Ethiopia was elected to chair COMESA for a one-year period. Ethiopia also introduced a 10%
tariff reduction on goods imported from COMESA member states. 68 Ethiopia is one of six
countries chosen for an oil seed development project in the region. It has also been chosen as
COMESA‘s center for producing livestock medicine, the site of the COMESA leather institute,
and a regional site for manufacturing hand tools and spare parts.69

66
Ibid
67
International Journal of Economics and Business Research , Ethiopia's foreign trade potential: Inferences from a
dynamic gravity approach ,January 2015
68
Assessment study on Revenue impact on tariff reduction to member states of COMESA, Ministry of Trade, 2014
69
Zebiba Musema Kedir ,Participation Of Ethiopia In Regional Economic Community And Readiness Towards
African Continental Free Trade Area, Ll.M Thesis,January 2020
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The import-export trade growth in COMESA between 2013 and 2017 is from -2.53 in to 11.78
and 55.11 and 35.5 respectively.70 Therefore, there is significant potential for growth in trade
among COMESA member countries even if there is a deficit. 71 Besides this, as COMESA
member states are developing countries they have the potential to develop new sectors in which
they have comparative advantages, thus creating new trading opportunities and value chain
among themselves.72 As such, while trade volumes are likely to remain modest in the short term,
there is scope for expansion.73 Comparative advantages, thus creating new trading opportunities
and value chain among themselves. 74 As such, while trade volumes are likely to remain modest
in the short term, there is scope for expansion.75 Also the country applies unique tariff rate for
COMESA member states with ten percent tariff reduction from the normal rate. Well this tariff
reduction for COMESA members will obviously have impact on the revenue. So long as
reduction is made loss of revenue from import tariff is expected. According to a study made by
Ethiopian custom Revenue from the year 2004 to 2012 Ethiopia has lost 9,767,594 USD from
the reduction.76
Experience of other countries in which Ethiopia can get a lesson
Ethiopia can draw valuable lessons from countries that have demonstrated successful economic
integration and have experienced positive outcomes.
The NAFTA members’ experience
NAFTA was structured to increase cross-border trade in North America and build economic
growth for each party.77 NAFTA's immediate aim was to increase cross-border commerce in
North America, and in that respect, it undoubtedly succeeded. 78 By lowering or eliminating
tariffs and reducing some non-tariff barriers, such as Mexican local-content requirements,
NAFTA spurred a surge in trade and investment. 79 Most of the increase came from trade between

70
ibid
71
ibid
72
ibid
73
ibid
74
ibid
75
ibid
76
The total revenue impact of 10 percent reduction on Ethiopia‘s government revenue; calculation based on
Ethiopian revenue and customs authority data.
77
David Floyd, How did NAFTA affect the economies of participating countries?, january24, 2024
78
ibid
79
ibid
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the U.S. and Mexico, which totaled $3.2 trillion between 1993 and 2020, and the U.S. and
Canada trade, which totaled $7.4 trillion for the same period. Trade between Mexico and
Canada, though by far the fastest-growing channel between 1999 and 2020 (the data available),
totaled just $594 billion.80
From 1993 to the fourth quarter of 2019 (GDP plummeted in 2020 due to the Covid-19
pandemic—it is excluded because NAFTA had no influence with the drop), the U.S.'s real per-
capita gross domestic product (GDP) grew 48% to $57,585. 81 Canada's per-capita GDP grew
44% to $45,109 (from 1997), and Mexico's grew 26% to $9,819. 82 In other words, Mexico's
output per capita has grown more slowly than that of Canada or the U.S. This is despite the fact
that, normally, one would expect an emerging market economy's growth to outpace that of
developed economies.83
NAFTA is an enormous and enormously complicated deal. Looking at economic growth can lead
to one conclusion while looking at the balance of trade leads to another. Even if NAFTA's effects
are not easy to see, however, a few winners and losers are reasonably clear.84
NAFTA in United States of America / U.S.
U.S. Unemployment Rates
At 4.1% in December 2017, the unemployment rate was lower than it was at the end of 1993
(6.5%). It fell steadily from 1994 to 2001, and while it picked up following the tech bubble's
burst, it did not reach its pre-NAFTA level again until October 2008. The fallout from the
financial crisis kept it above 6.5% until March 2014.85
U.S. Manufacturing Jobs
NAFTA's implementation coincided with a drop in manufacturing employment, from 16.8
million to its lowest since 1940—11.5 million jobs in 2009. NAFTA ended with 11.99 million
manufacturing jobs at the end of June 2020—after which the USMCA went into effect and
manufacturing employment numbers.86
80
ibid
81
Federal Reserve Bank of St. Louis. “Real Gross domestic product per capita,
https://www.fred.stlouisfed.org/series/
82
Federal Reserve Bank of St. Louis. “Constant GDP per capita for Canada, https://fred.stlouisfed.org/series/
83
Supra note77
84
ibid
85
U.S. Government publishing office. “public papers of the presidents of the united states: William Clinton(1993,
Book II):September 14, 1993
86
U.S. Bureau of labor statics. “Top picks,https//data.bls. Gov/cgi-bin/surveymost?ce.” Choose manufacturing
Employment, seasonally adjusted; Change range to 1939 through 2022.
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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U.S. Trade Balance and Volume

Critics of NAFTA commonly focus on the U.S.'s trade balance with Mexico. While the U.S.
enjoys a slight advantage in services trade, exporting $31.16 billion in 2016 while importing
$24.4 billion, its overall trade balance with the country is negative due to a yawning $62.4 billion
2016 deficit in merchandise trade.87
U.S. Economic Growth
If NAFTA had any net effect on the overall economy, it was barely perceptible. A 2003 report by
the Congressional Budget Office concluded that the deal "increased annual U.S. GDP, but by a
very small amount—probably no more than a few billion dollars, or a few hundredths of a
percent."88

NAFTA in Mexico
Mexico's Economic Reforms
NAFTA appears to have locked in some of Mexico's economic reforms: The country has not
nationalized industries or run up massive fiscal deficits since the 1994 to 1995 recession. But
changes to the old economic models were not accompanied by political changes—at least not
immediately.89
Mexico's Manufacturing
Mexico's experience with NAFTA was not all bad, however. The country became a car
manufacturing hub, with General Motors (GM), Fiat Chrysler (FCAU), Nissan, Volkswagen,
Ford Motor (F), Honda (HMC), Toyota (TM), and dozens of others operating in the country—
not to mention hundreds of parts manufacturers. 90 These and other industries owe their growth in
part to the more than a four-fold real increase in U.S. foreign direct investment (FDI) in Mexico
since 1993.91
NAFTA in Canada
Canadian Trade

87
Congressional Research Service. Trade with major trading partners “4.pdf, U.S.,” Page 29
88
, Congressional Budget Office. “The effects of NAFTA on U.S.-Mexican Trade and GDP
89
Infra note91
90
Federal Reserve Bank of Chicago. “Mexico’s Growing Role in the Auto Industry under NAFTA: Who Makes
What and What Goes Where, https://www.chicagofed.org/publication/economic-perspective/2017/6.”
91
ibid
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Canada experienced a more modest increase in trade with the U.S. than Mexico did as a result of
NAFTA. Unlike Mexico, it does enjoy a mild trade surplus with the U.S. Even though Canada
was once the largest supplier to the U.S. prior to NAFTA, it was displaced by China in 2007 and
by 2015 Mexico creeped up to replace Canada as the second-largest.92
In recent figures, while it sells more goods to the U.S. than it buys ($26.8 deficit in 2019), a
sizable services trade surplus of $29.32 billion almost balances things out. 93 Canada did enjoy a
404% real increase in FDI from the U.S. between 1993 and 2013, and real GDP per capita grew
faster than its neighbor's from 1993 to 2015.94
As with the U.S. and Mexico, NAFTA did not deliver on its Canadian boosters' most extravagant
promises, nor did it bring about its opponents' worst fears. 95 The Canadian auto industry has
complained that low Mexican wages have siphoned jobs out of the country.96
Canadian Oil Exports
Supporters sometimes cite oil exports as evidence that NAFTA has helped Canada. According to
the Observatory of Economic Complexity, the U.S. imported $37.8 billion worth of crude oil in
1993, with 18.4% of it coming from Saudi Arabia and 13.2% of it coming from Canada.97
European Union (EU): The EU is a prime example of successful economic integration,
promoting trade, investment, and regional cooperation among its member states. Ethiopia can
learn from the EU's experiences in terms of establishing a single market, harmonizing
regulations, and facilitating the free movement of goods, services, capital, and people. The EU's
economic integration has led to increased trade flows, enhanced competitiveness, and overall
economic growth.98
Association of Southeast Asian Nations (ASEAN): ASEAN has achieved notable success in
economic integration among its ten member states, including Indonesia, Malaysia, Philippines,
Singapore, Thailand, and others. Ethiopia can gain insights from ASEAN's experiences in

92
Congressional Research Service. “The North American Free Trade Agreement (NAFTA)., https://sgp.fas.org/
crs/row/R42965.pdf,” Page 24.
93
Supra note 103
94
Office of United States Trade Representative. “Canada, https://ustr.gov/ .
95
David Floyd, How did NAFTA affect the economies of participating countries?, january24, 2024.
96
ibid
97
ibid
98
European Commission. the European Union and Economic Integration. Retrieved
from ,https://ec.europa.eu/info/policies/economic-and-monetary-union/economic-integration/european-union-and-
economic-integration_en , (2021).
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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establishing a regional market, promoting trade and investment, and coordinating regional
policies. ASEAN's economic integration has led to increased market access, improved
competitiveness, and sustained economic growth.99

CHAPTER THREE

3 LEGAL ANALYSIS OF AfCFTA AND ITS PROTECTING MECHANISM FOR

DOMESTIC INDUSTRY AND INDUSTRIAL POLICY AND GAPS IN ETHIOPIA

INTRODUCTION

Industrial policy of Ethiopia

When the EPRDF first came to power in 1991, addressing the crisis in agriculture was a
fundamental concern, with agricultural recovery also seen as a spark for renewed commitment to
industrialization. In 1994, the government adopted the Agricultural Development-Led
Industrialization (ADLI) strategy, to which it adhered for more than two decades. The industrial
development strategy (IDS) adopted in 2003 emphasised export-led industrialization, and
focused on labor-intensive industries, the development of infrastructure to support rapid
economic growth, and the development of small enterprises for massive job creation and poverty

99
ASEAN Secretariat.ASEAN Economic Community. Retrieved from https://asean.org/asean-economic-
community/,(2021).
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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reduction (FDRE 2002). The Ethiopian government focused on the transition to a market
economy and recovery in the 1990s, followed by execution of the industrial development
strategies in the 2000s. In the 2010s, the government’s five-year plans concentrated on both
growth and structural transformation
Economic liberalization, under the rubric of ‘structural adjustment,’ drew assistance from the
IDA, IMF, and other donors (World Bank
Some large firms (such as breweries) were sold to foreign firms to ensure expansion and a
foreign currency income. Government also introduced major reforms to improve the corporate
governance of state-owned enterprises, and in some cases this initiative has proven effective
During this period of privatization, government opened the banking sector to domestic investors,
while foreign banks were banned
Variations in industrial policy outcomes in Ethiopia Despite Ethiopia’s unified industrial
development strategy, the outcomes of policy have been uneven across sectors, and
understanding the key determinants for this is essential.
the leather and leather products industry and floriculture have been central in the government’s
efforts to promote export-oriented industries
The formative reform years: 1991 – 2002; This period can rather be well characterized as
formative years for Ethiopia. It involved building a new nation that just came out of a prolonged
war and command economy. Some of the major milestones during this period include restoration
of peace and security, drafting of a new constitution (which also covers private property
ownership), resuscitation of the suppressed private sector by lifting the imposed restrictions,
reestablishing relationships with the outside world, and other market reforms. In relation to
industrial policies and industrialization, the major economic liberalization and deregulation
reforms since 1991. From those the main one are the following;
the full transition to private property ownership (except for land) by instituting property rights,
property rights enforcement mechanisms, and by privatizing many SOEs.
• from inward-looking to out-ward looking export-led industrialization (since 1995);
• import liberalization through rationalization of the tariff structure,
• reduction of quantitative restrictions and simplification of licensing procedures on imports,
• liberalization of the foreign exchange market (such as the removal of restrictions and the
substantial devaluation of the Birr)2,
• removal of subsidies and export tax rebate;
• liberalization of input and output prices (except for petroleum),

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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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• introduction of a new investment code and labour and public enterprise laws and privatization
agency

The developmental period: 2003 to 2018

 Ethiopia started to implement the Agricultural Development Led Industrialization
(ADLI) in the mid-1990s. ADLI provides a broad policy vision and direction for Ethiopia
(Ohno, 2009), but it particularly defines the key role of Agriculture in early
industrialization. As defined in the ADLI policy, the role of agriculture in Ethiopia's early
industrialization is to provide initial capital and surplus labor for the industrial sector.
Agriculture has been and is a dominant sector in Ethiopia, contributing 33% to GDP,
76% to employment, and 79.2% to export (PDC, 2019), and capital required to finance
industrial expansion (at least in the early stages of development) would have to be largely
raised from this sector by taxation, voluntary transfer (savings), and foreign exchange
earnings. Also, when agricultural productivity increases, surplus labor gets reallocated to
the industrial sector. Although ADLI provided an overall policy vision and direction,
there were no specific industrial or sectoral policies targeting the industrial sector up
until 2003. In line with the ADLI framework, the government of Ethiopia formulated the
first-ever comprehensive Industrial Development Strategy (IDS) in 2003.
 The central theme of the IDS was to end (reduce) poverty and embark on industrial
development through the implementation of selected industrial instruments. The
industrial development strategy (IDS) has the following major pillars
 : It takes the private sector as an engine of industrial development
 It attaches great importance to the development of strong agro-industrial linkages and
integrated industrial value chains
 Promotion of export-oriented and labor-intensive industries to generate foreign currency
and create jobs.
 Government to play a leading role in coordination, creating a conducive business
environment (including the provision of infrastructure and skilled labor), and also to
make direct public investment in sectors where gaps exist in private investment. The state
is also tasked with promoting developmental capitalists (through incentive system) and
limit rent-seeking (through discouraging policies and regulations)
 Sustainable Development and Poverty Reduction Program (SDPRP) – (2003-2005) The
central objective of the SDPRP was poverty reduction and macroeconomic stability
(MoFED, 2002
 Plan for Accelerated and Sustained Development to End Poverty (PASDEP) –
(2006-2010)
 The objectives of PASDEP are (MoFED, 2005): i) registering and sustaining annual
economic growth of 7 to 10 percent through massive investments in key anti-poverty
sectors; ii) increasing agricultural productivity and production, with crop output rising
from approximately 15 million tonnes per year to 38 million tonnes; iii) increasing
exports by targeting export-oriented sectors such as the textile, leather and floriculture

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industries. Unlike the previous plan, the PASDEP was explicitly aligned with the MDGs
and outlines Ethiopia's medium-term plan for achieving the MDGs.

 GTP-I (2011 – 2015\

 Through the GTP, Ethiopia embarked on massive industrialization programs. The GTP_I
laid the basic foundation for industrialization through massive investments in
infrastructure including the construction of new, electrified, standard gauge railway lines;
a large dam on the Blue Nile with hydro-powered turbines with a design capacity of
about 5.8 gigawatts; road construction (both urban and rural)
 GTP-II (2016 – 2020) GTP-II came with even more ambitious and bold targets. The
broad objectives of GTPII included the consolidation of GTP-I achievements by
completing unfinished major infrastructure projects; maintaining the leading role of
public investment in new infrastructure development; enhancing the rural development
agenda of GTP-I with a special focus on investment and productivity improvement and
the expansion of the industrial sector (NPC, 2015). GTP-II especially underlined the
development of a dynamic domestic industrial sector through learning and capacity
building from FDI enterprises
 Ten-Year Perspective Plan The Ethiopian government has launched a new 10-year
perspective plan which will run from 2020/21 to 2029/30. The plan aims to sustain the
remarkable economic growth achieved under the Growth and Transformation Plans while
putting more emphasis on the private sector
Major Industrial Policy Tools
FDI
Foreign direct investment (FDI) can play a positive role in this. In recognition of this, the
Government of Ethiopia (GOE) has recently renewed its interest to attract FDI and particularly
into manufacturing. As a result, the country has already become the preferred destination for FDI
in sub-Saharan Africa
Export promotion Ethiopia’s development strategy, as described in GTPII (NPC, 2015) has been
to promote an agricultural-based, manufacturing sector-driven, and export-led development
strategy. Ethiopia has invested heavily in infrastructure, industrial skills development, and
agricultural productivity, all of which are critical to industrial development and faster growth of
exports by reducing production costs, and augmenting global competitiveness. The issue of
export promotion appears to be extremely important to policy due to the exceedingly pressing,
binding, balance of payments constraint and the frequent foreign exchange shortages Ethiopia is
grappling with.
Development of Industrial Sites Ethiopia followed an industrial land and infrastructure cost-
saving approach in its industrial development process. To create a conductive business
environment for investment by providing key infrastructures, Ethiopia has been developing what

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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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Ethiopia calls “development corridors or development hubs,” which include industrial and
integrated agro-parks.
Technological Development To develop the technological capacity of the priority sectors,
Ethiopia established industry-specific institutions for promoting and developing.
Sample for Findings
Research finding is the outcome gotten from data analysis and represents the factual link or
association between or amongst the variables being interrogated by the researcher. It is any
results arrived at and portrays the true position of how two or more variables relate with one
another
For example

The article finds that there is no clear and exhaustive understanding of what the definition of
industrial policy entails. In part this is also a result of a limited and incoherent use of the concept
of structural transformation in the definition and policy formulation of industrial policy.

3.1 Legal frameworks under AfCFTA and its mechanism to protect domestic industry
The African Continental Free Trade Area (AfCFTA) includes provisions that aim to protect

The African Continental Free Trade Area (AfCFTA) includes provisions and safeguards aimed at
protecting domestic industries within member countries. One specific provision that addresses
the protection of domestic industries under the AfCFTA is the Safeguard Measures, as outlined
in Article 18 of the AfCFTA Agreement.Article 18 of the AfCFTA Agreement, titled "Safeguard
Measures," acknowledges the need for safeguard mechanisms to protect domestic industries that
may face serious injury or threat of serious injury due to increased imports resulting from trade
liberalization within the AfCFTA. This provision recognizes that rapid and significant increases
in imports can adversely affect domestic industries, particularly those that may not be
immediately prepared to compete on a regional scale.The specific measures outlined in Article

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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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18 allow member countries to take temporary safeguard actions to protect their domestic
industries in such cases. These safeguard measures may include the imposition of tariffs, quotas,
or other restrictions on imports to prevent or alleviate the injury caused to domestic
industries.Importantly, Article 18 also establishes clear conditions and procedures for invoking
safeguard measures. It requires member countries to provide evidence of serious injury or threat
of serious injury to their domestic industries, demonstrate the link between the injury and
increased imports under the AfCFTA, and follow transparent and non-discriminatory procedures
when implementing safeguard actions. The provision emphasizes that these measures should be
temporary and gradually phased out as the affected domestic industries adjust and become more
competitive.The inclusion of Safeguard Measures in the AfCFTA Agreement reflects the
commitment to balancing the benefits of trade liberalization with the protection of domestic
industries. It recognizes the importance of ensuring a level playing field and allowing member
countries to protect vulnerable industries during the transition to a more integrated regional
market.It is worth noting that the specific implementation and utilization of safeguard measures
will depend on the individual member countries and their assessment of the impact on their
domestic industries. Each member country has the flexibility to determine the appropriate
safeguard actions based on their specific circumstances and industry needs.100

Here are the summary of the some key provisions of the AfCFTA;
 Rules of Origin: The AfCFTA establishes rules of origin, which determine the criteria
for determining the origin of goods. These rules are crucial for preventing non-members
from taking advantage of the trade agreement. By defining specific requirements for
goods to be considered as originating from a member country, the rules of origin
safeguard domestic industries against unfair competition and ensure that they receive
preferential treatment within the AfCFTA .101
 Tariff Liberalization Schedules: The AfCFTA includes schedules for the gradual
elimination of tariffs on goods traded among member countries. These tariff
liberalization schedules allow domestic industries to benefit from reduced or eliminated
tariffs on inputs and raw materials, enhancing their competitiveness and reducing
100
African Union. Agreement Establishing the African Continental Free Trade Area. Retrieved from
afcfta_english.pdf,(2018).

101
Article 13 Of Agreement Establishing The African Continental Free Tared Area Protocol On Trade In Goods,signed marche
21,2018.
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production costs. This provision protects domestic production by making it more cost-
effective compared to imports from non-member countries.
 General Elimination of Quantitative Restrictions; In principle the State Parties shall
not impose quantitative restrictions on imports from or exports to other State Parties.102
 Trade Remedies: The AfCFTA provides provisions for trade remedies that enable
member countries to address unfair trade practices or surges in imports that may harm
domestic industries. These remedies may include anti-dumping measures, countervailing
duties, or safeguards. These provisions allow member countries to take appropriate
measures to protect their domestic industries from unfair competition, ensuring a level
playing field for domestic producers.103

 Special and Differential Treatment: The AfCFTA recognizes the different levels of
development among member countries and includes provisions for special and
differential treatment. This means that countries with less-developed domestic industries
or economies can receive targeted support and flexibility to protect and promote their
domestic production. This provision helps to address the potential challenges faced by
less competitive industries, allowing them to gradually adjust and become more
competitive over time.104
 Dispute Settlement Mechanism: The AfCFTA establishes a robust dispute settlement
mechanism to address trade disputes between member countries. This mechanism
ensures that member countries can seek resolution when their domestic production is
adversely affected by unfair trade practices or violations of the AfCFTA provisions. By
providing a transparent and impartial process for dispute settlement, the AfCFTA
safeguards the interests of domestic industries and promotes fair trade practices.105
These provisions within the AfCFTA contribute to the protection of domestic production by
creating an enabling environment for domestic industries to compete, grow, and benefit from

102
Ibid Article 9

103
Ibid Article( 17-20)

104
Ibid Art,6

105
Supra note 1 PART VI Article 20
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regional trade. They ensure that member countries have the necessary tools and mechanisms to
address challenges and safeguard their domestic industries, promoting

3.2 DOMESTIC INDUSTRY PRODUCTION POLICY OF ETHIOPIA

According to FDRE constitution article 89(1) ’’Government shall have duty to formulate policies
which ensure that all Ethiopians can benefit from the country’s legacy of intellectual and
material resources’’. And also under article 55(1)(b)’’ Inter-State commerce and foregin trade’’.
By virtue of this constitutional duty currently Ethiopia, has implemented a domestic industry
production policy aimed at fostering economic growth, reducing reliance on imports, and
promoting self-sufficiency. In recent years, the Ethiopian government has recognized the
significance of developing a robust domestic production sector to enhance industrialization,
create employment opportunities, and alleviate poverty. Ethiopia is still largely agrarian. 85% of
the workforce is engaged in the rural economy, mostly in agriculture.4 Agriculture accounts for
43% of GDP (down from 50% in 2000). Agriculture is dominated by smallholders, the majority
cultivating less than 0.5 ha and producing mostly basic staples for the subsistence of their
households. Manufacturing has stagnated at about 5% of GDP over the last 20 years. The
decreasing share of agriculture has been compensated for by a similar promotio in services.
Manufacturing industry is mainly limited to simple agro-processing activities (sugar, grain
milling, edible oil production, leather tanning) and production of basic consumer goods (beer,
footwear, textiles and garment). Ethiopia’s government recognizes the need to support private
sector development as the crucial for economic growth and productivity enhancement, and it is
clearly committed to sophisticated industrialization and other high-value activities. 106 This
section explores the key components of Ethiopia's domestic production policy, its objectives, and
its impact on the country's socio-economic landscape. As we mentioned above Ethiopia has
implemented various policies and strategies to promote domestic production and industrial
development .Some key aspects of Ethiopia's industrial production policy include;

1. Diversification of Agricultural Sector:

The most prominent focus is on agricultural development-led industrialization (ADLI).From an
inclusive growth perspective, . At the moment, 85% of the workforce is rural, with the vast
106
Tilmann Altenburg, Industrial Policy in Ethiopia ,pp( 1-12) 2010
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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majority engaged in agriculture, and agriculture is hardly connected to manufacturing but less in
our country. Low productivity and income severely constraint rural demand for manufactured
products, and only 5% of intermediate inputs demanded by agriculture are produced by the
domestic manufacturing industry.107
The diversification of Ethiopia's agricultural sector is a central focus of the country's domestic
production policy. Given its predominantly agrarian economy, the government aims to enhance
food security, expand export opportunities, and mitigate the impact of climate change by
encouraging the cultivation of a wide variety of crops. although much progress has been made in
recent years.108 To achieve this, the policy includes various measures to support farmers,
including the provision of improved seeds, fertilizers, irrigation infrastructure, and training
initiatives. By empowering small-scale farmers and promoting sustainable agricultural practices,
Ethiopia seeks to increase productivity and decrease dependence on food imports and reduce
food transaction costs.109
2. Agro-processing:
The government has prioritized agro-processing industries to add value to agricultural products.
Policies have been implemented to support agro-based industries, including access to credit,
market linkages, and infrastructure development.
Agriculture and agro-processing play vital roles in Ethiopia's economy, contributing significantly
to employment, income generation, and overall food security. The government recognizes the
importance of these sectors and has implemented various policies and strategies to promote
agricultural development and value addition through agro-processing. Here are key aspects
related to agriculture and agro-processing in Ethiopia:
Agricultural Development: Agriculture is a cornerstone of Ethiopia's economy, employing a
large portion of the population. The government has prioritized agricultural development to
enhance productivity, improve food security, and increase farmers' income. This includes
investments in agricultural research and extension services, irrigation infrastructure, access to
finance for smallholder farmers, and the dissemination of improved farming practices. ‘’In
2011/12, within the manufacturing sector the share of agro processing was around 20.2 %, next

107
Ibid p 17

108
(Zewdie Bishaw,Abebe Atilaw,Ethiopian Journal of aagricultural Sciences27, page 101-130,2016)

109
B Adenew-eJADE,Electronic Journal of agricultural and development economics page 138-153,2004
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to the leather and textile sub sectors which have 44.1 % and 33% shares respectively. After GTP
within the last two years, the export of agro processing has shifted to non-sugar products such as
processed oilseeds, food, spices, honey, beverages, and other processed export products. The
export of these products increased from 17.86 million USD in 2008/9 budget year to 51.76
million USD in 2011/12. The export of oil seeds was increasing from 17 million USD in 2010/11
to 26 million USD in 2011/12, followed by different food products like spices from 577
thousands USD to 4.1 million USD. Moreover, the export performance of meat and meat
products is increasing from 26 million USD in 2009/10 to 78 million USD in 2011/12.’’110
Crop Diversification: Ethiopia has encouraged crop diversification to increase the range of
agricultural products. The government supports the cultivation of various crops, including
cereals, pulses, oilseeds, fruits, vegetables, and coffee. Diversification helps to minimize risks
associated with over-reliance on a single crop, to minimize the difficulties that farmers facing in
maintaining a livelihood in an environment of low grain prices 111 promotes resilience in the
agricultural sector, and expands opportunities for agro-processing.112

 Value Addition and Agro-processing: Agro-processing involves adding value to

agricultural products through processing and manufacturing activities. Ethiopia has
focused on promoting agro-processing industries to increase the value of agricultural
products and create employment opportunities in order increase production of Ethiopian
agricultural sector 113 Agro-processing activities include grain milling, oil extraction, fruit
and vegetable processing, coffee roasting, meat processing, and dairy products
manufacturing.
 Agricultural Cooperatives: Ethiopia has a strong tradition of agricultural cooperatives,
which are expected to play a key role in linking small holder 114 farmers' access to
resources, technology, and markets. Cooperatives facilitate collective action, promote

110
Infra note 123 p 21

111
Chande Tewari Harish ,Dwi Asmono,Suresh Guduru,Mohammed Hassena,Intwernationa Center for development
oriented research in agriculture(ICRA),2002

112
https://au.int African union

113
B Sonneveld,Ma Keyzer-Land Degradation &Developmet,2003
114
GN Francesconi, N Heerink-Journal of African Economics ,2011
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efficiency in input procurement and marketing, and support farmers' participation in

agro-processing activities.
 Access to Finance and Inputs: The government has implemented measures to improve
access to finance for agricultural activities, including agro-processing. This includes
providing credit facilities, microfinance services, and targeted loan programs for
smallholder farmers and agro-processing enterprises. Ethiopia is well endowed in part
with a improving farms access to fertilizer, improved seeds, fertilizers, and agrochemicals
is also prioritized to enhance agricultural productivity and the quality of raw materials for
agro-processing.115
 Market Linkages and Export Promotion: Ethiopia has focused on strengthening market
linkages for agricultural products, both domestically and internationally. The government
has developed long term and strategic frame work to improve the quality of farm product,116.
Industrialization and Manufacturing:
Another key aspect of Ethiopia's domestic industry production policy is the promotion of
industrialization and manufacturing Ethiopia has pursued an active industrial policy since the
early 2000s with a large set of carefully designed policy instruments. Manufacturing - Sector
level Projects: The major projects and activities to be undertaken at the manufacture sector level
focus on the deepening and expansion of the current manufacturing priority sectors. In particular,
product and market diversification as well as productivity enhancement are central to this
program. In this regard, six relevant projects are identified in the whole sector. These include:-
Enhancing investment capability and business climate project; Human Resource Development
Project; Enhancing quality and quantity of industrial raw material and inputs; Developing and
diversifying markets project; Enhancing technology development and transfer project; and
Strengthening institutional support project.117 These include the promotion of exports and
productive investment, industrial financing, and the use of state-owned enterprises (SOEs) to
shape strategic sectors. The government has identified the manufacturing sector as a crucial
driver of economic growth and job creation. To achieve this, the government has implemented

115
Samuel Gebreselassie ,Future Agricultures Consortium Meeting At The Institute Off Development Studies,Page
20-22,2006

116
T Hailu, E Sala,W Seyoum- Marketing and consumer Research, 2016

117
supra note 20
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various strategies, including the establishment of industrial parks, investment incentives, and the
provision of infrastructure development. These efforts have attracted both domestic and foreign
investors, leading to the growth of industries such as textiles, leather products, agro-processing,
and pharmaceuticals. The development of the manufacturing sector contributes to import
substitution, enhances export capacity, and stimulates overall economic development. Thus
Ethiopia adopted the following strategies;
 Industrial Parks: The Ethiopian government has established several industrial parks
throughout the country. These parks offer various incentives and facilities to attract
domestic and foreign investors, including tax breaks, infrastructure support, streamlined
administrative processes, and access to utilities. Industrial parks play a crucial role in
promoting industrial development and attracting investment in many countries, including
Ethiopia. Industrial parks are designated areas that provide a range of infrastructure and
support services to facilitate the establishment and operation of industrial enterprises. These
parks are designed to create an environment conducive to manufacturing, enhance
productivity, especially on road development and promote economic growth. Here are some
key aspects of industrial parks in Ethiopia their Purpose and Objectives is that Industrial
parks in Ethiopia are established with the aim of attracting domestic and foreign investors,
promoting export-oriented industries, generating employment opportunities, and driving
economic development. These may include tax breaks, customs duty exemptions on
imported machinery and raw materials, simplified administrative procedures, and access to
financial services. Additionally, industrial park management entities may provide assistance
in obtaining permits, licenses, and other regulatory approvals. Also Industrial parks in
Ethiopia are strategically located in various regions of the country, aiming to promote
balanced regional development. Some notable industrial parks in 118. Those parks have the
potential to create employment opportunities, particularly for the growing workforce. By
attracting investment and fostering industrial growth, these parks contribute to job creation,
income generation, and poverty reduction. Additionally, the establishment of industrial
parks can stimulate local economies by creating demand for goods and services from
surrounding communities.

118
https://au.int (African union)
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3. Infrastructure Development:
. The government has invested heavily in infrastructure projects such as roads, railways,
airports, and energy production. By improving transportation and connectivity, Ethiopia aims to
reduce production costs, enhance market access for rural areas, and attract investment in various
sectors. Telecommunications infrastructure to facilitate the growth of industries and improve
their connectivity to domestic and international market
Access to reliable energy is also crucial for the growth of industries and manufacturing. The
development of infrastructure not only supports domestic production but also facilitates regional
integration and trade.119
4. The Industrial Development Strategy (IDS):
The strategic plan for the Ethiopian industry development (2013 -2025) provides the overall
framework in terms of the vision, goal, strategies and programs that need to be implemented in
the coming thirteen years in order to support the country’s progress towards becoming a middle-
income country by the year 2025. The main target of the programs related to industry sector
under (PASDEP) was on enhancing small scale manufacturing enterprises as they are the
foundation for the establishment and intensification of medium and large-scale industries. The
small scale manufacturing enterprises also had opened employment opportunity for those who
had not engaged in other sectors also had created employment opportunity for those who had not
engaged in other sectors120. From the beginning of the( PASDEP), the share of the industrial
sector including manufacturing, construction, hydropower, and mining, has not exceeded 14%
of the GDP on average of which the manufacturing sector (cottage industry, small and micro
enterprises and medium and large scale manufacturing industries) accounted for 5.5% of the
GDP on average. The average share of manufactured products to total exports did not exceed
5% of GDP on average. To realize the objective of the (PASDEP), the strategic principles
installed in the PASDEP have played aessentialt role in laying a foundation for the growth of the
industrial sector in general and the manufacturing sector in particular. The pillars related to
strengthening the infrastructure cornerstone of the country, Building all inclusive
implementation capacity and strengthening human resource development were instrumental.
Moreover, the policy direction and plan states that it is the private firms, not state owned
enterprises that must be the engine of production and investment. It also contends that state must
119
http://www.moti.gov.et/( Ministry of Trade and Industry of Ethiopia)
120
(N Mhazo ,BM Mvumi,E Nyakudya, african journal,2012)
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use its authority to guide private firms away from rent seeking and toward investment,
technology and global competition. In light with the aforementioned directions, several activities
were carried out in the last two years of the GTP period.121
The Industrial Development Strategy (IDS) of Ethiopia is a comprehensive plan and framework
that aims to accelerate industrialization and promote sustainable economic growth in the
country. The strategy sets out a roadmap for transforming Ethiopia into a middle-income
economy by developing a strong and diversified industrial sector key features and objectives of
the Industrial Development Strategy include:
 Priority Sectors: The IDS identifies several priority sectors for industrial development,
including manufacturing, agro-processing, textiles and garments, leather and leather
products, pharmaceuticals, chemicals, construction materials, and electronics. These
sectors have been chosen based on their potential for value addition, job creation, and
export competitiveness.
 Export Promotion: The IDS places a strong emphasis on export promotion and aims to
increase the country's export earnings through the development of competitive industries.
It focuses on value addition, quality improvement, and market diversification to enhance
Ethiopia's global competitiveness.
 Access to Finance and Investment Support: The strategy acknowledges the need for
adequate and affordable financing for industrial development. It focuses on improving
access to finance for industrial enterprises, promoting public-private partnerships, and
creating an enabling investment climate through supportive policies and regulations.
 Small and Medium Enterprises (SMEs): The IDS recognizes the vital role of SMEs in
industrialization and job creation. It includes measures to support the growth and
development of SMEs through capacity building, access to finance, market linkages, and
entrepreneurship development programs.
.
 Skills Development and Technology Transfer: The IDS emphasizes the importance of
human capital development and technology transfer to enhance industrial productivity
and competitiveness. It includes measures to strengthen technical and vocational

121
(FDRE Ministry of Industry, Ethiopian Industrial Development Strategic Plan (2013-2025), page9-10 Addis
Ababa September ,2013)
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education and training, promote research and development activities, and facilitate
knowledge and technology transfer through partnerships and collaborations.
 Then we can say The Industrial Development Strategy serves as a guiding framework for
the Ethiopian government's efforts to promote industrialization, attract investment, and
create employment opportunities. It is important to refer to the latest official sources or
contact relevant government agencies for the most up-to-date information on the
Industrial Development Strategy and its implementation progress.122

5. Export Promotion:

Export promotion is a set of policies and strategies implemented by governments to stimulate

and support the export activities of businesses within a country. The goal of export promotion is
to increase the volume, value, and competitiveness of a country's exports, thereby boosting
economic growth, creating jobs, and generating foreign exchange earnings. In the context of
Ethiopia, export promotion has been a significant focus of the government's economic
development plans. Here are some key aspects of export promotion in Ethiopia. The policy
creates critics are that efficient import substitutions may have the same positive effects on the
foreign exchange account; and, even more importantly, entry barriers may be much lower, as
local entrepreneurs do not have to cope with international standards, economies of scale, and
high transport costs involved in the export business.
Export promotion is an ongoing process, and the strategies and initiatives employed by the
Ethiopian government may evolve over time. For the most up-to-date and detailed information
on export promotion in Ethiopia, it is advisable to refer to official government sources and
contact relevant government agencies responsible for trade and export promotion.123

122
ibid
123
Ibid
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3.1.2 POLICY GAP UNDER ETHIOPIAN INDUSTRIAL POLICY ACCORDING

TO ACFTA
The AfCFTA is a comprehensive trade agreement that covers various sectors, including the IT
industry. The implementation of the agreement, despite provisions made for the LDCs being the
Special and Differential Treatment (SDT) and being afforded a longer implementation
timeframe, was premature for LDCs. The issue concerning the different levels of development
between developed and developing countries and the uneven benefits of free trade has been a
major point of contention for a while now. The assumption that all states were economically
equal and should undertake the same level of trade commitments and obligations was challenged
by developing countries in the General Agreement on Tariffs and Trade (GATT) when they
became decolonized.
The implementation of the Agreement was, therefore, very premature. Despite having been given
a longer implementation period, LDCs should be afforded a chance to temporarily halt
undertaking any obligations and enjoying any benefits so that they can first deal with their
internal issues which will be their downfall if not addressed and dealt with before engaging in
major steps like the AfCFTA.
The AfCFTA is being implemented in two phases. Phase I provides a framework for the
liberalization of trade in goods and services, and a mechanism for dispute settlement. For trade in
goods, the agreement sets the path for eliminating tariffs on 90 percent of product categories.
Countries can implement tariff reductions over a longer period in the case of sensitive goods or
maintain existing tariffs—where the products are excluded—for the remaining 10 percent of
product categories (tariff lines).
So this implementation affects lower economic level countries those LDCs and developing
countries like Ethiopia in fact, it’s controversial that Ethiopia is LDCs or developing countries.
For the time being this is not our issue, so if we come to our point , two thirds of membership
are LDCs and many of which are in customs union with non-LDCs including Ethiopia this
mainly affects its domestic industries regarding the agreements main aim is progressive trade
liberalization. Special and differential treatment (SDT) operationalized in such a context in a
manner not to defeat the overall AfCFTA objective of boosting intra-African trade and
compromising the interest of developing and LDCs like Ethiopia.

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The major framework of the Modalities for AfCFTA tariff negotiations were adopted
by the African Union member States in June 2017 at the occasion of the third meeting of the
African Ministers of Trade (AMOT) (Niamey, Niger). The Modalities provided for a product
coverage of 90 per cent of tariff lines with a general implementation period
of 5 years for non-LDCs and 10 years for LDCs At the level of determining product coverage,
such SDT may consist of allowing those countries concerned a narrower product coverage, i.e.,
greater product exclusion, or lesser extent of tariff reduction for covered products.
The following are potential legal gaps that could arise in Ethiopia's IT industry production
policy:124
 Regulatory Framework: Ethiopia may need to review and update its existing
regulations and policies related to the IT industry to align with the provisions of the
ACFTA. This could involve addressing issues such as intellectual property rights
protection, data privacy and security, e-commerce regulations, and digital services
provisions.125
 Standards and Technical Regulations: The IT industry often requires adherence to
technical standards and regulations. Ethiopia may need to harmonize its standards and
regulations with those of other African countries to facilitate trade and ensure
compatibility in the IT sector. This may include areas such as software development,
telecommunications, cyber security, and electronic transactions.126
 Cross-Border Data Flows: The ACFTA aims to promote the free flow of data across
African countries. Ethiopia may need to establish policies and regulations to facilitate
cross-border data flows, while also ensuring data protection and privacy. This could
involve enacting or updating laws that govern data localization, cross-border data
transfers, and data protection standards.127
 Skills Development and Capacity Building: The IT industry requires a skilled
workforce. Ethiopia may need to focus on developing a comprehensive strategy for skills
development and capacity building to meet the demands of the sector. This could include

124
https://au.int/ 12(African union)
125
http://www.investethiopia.gov.et/ accessed on may 12Ethiopian Investment Commission
126
ibid
127
ibid
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establishing training programs, promoting STEM education, and fostering collaboration

between industry and academia to bridge the skills gap.128
.
In generally according to article 43(1) ‘’The people of Ethiopia as a whole and each Nation
Nationalities and people in Ethiopia in particular have the right to improved living standard and
to sustainable development’’ from this provision we understand that every Ethiopian have a right
to development and improve their living standard by producing products engaging in trade and
in the constitution article 43(3) ‘’All international agreements and relations concluded,
established or conducted by the State shall protect and ensure Ethiopia’s right to sustainable
development’’ so the external relation of the country’s and agreements shall protect and ensure
the the right to sustainable development and economic rights. And also a government have
according to article 55(1)(b) of FDRE constitution a power to enact law in area of inter-state
commerce and foreign trade. so based on this the gaps under domestic policy is that our current
policy does not address this issue which means our domestic industry trade policy doesn’t
consistent with the AfCFTA his greatly affect our domestic industry in general and infant
domestic industry in particular and the time granted for progressive trade liberalization is
insufficient for compliance its domestic laws and policies and the other gap is that the most
provisions of ACFTA refers to WTO, GATT provisions the Ethiopian accession process to
WTO is still in process , so non-membership of Ethiopia hampers the effective implementation
of ACFTA.

3.3 THE MOST TO BE AFFECTED SECTORS IN DOMESTIC INDUSTRIES DUE TO

THE PARTICIPATION OF ETHIOPIA IN THE AfCFTA TRADE AGREEMENT
When examining the impact of Ethiopia's participation in the African Continental Free Trade
Area (AfCFTA) on domestic industries, several sectors may be particularly affected. It is
important to conduct a comprehensive analysis to determine the specific sectors that are most to
be affected and to investigate the extent of their impact. However, based on general trends and
considerations, the following sectors are commonly identified as having significant implications:
1. Manufacturing Sector: The manufacturing sector in Ethiopia may experience both
opportunities and challenges under the AfCFTA. Increased market access and regional

128
ibid
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integration can benefit Ethiopian manufacturers by providing access to a larger customer

base and promoting economies of scale. However, increased competition from other African
countries may also pose challenges to domestic manufacturers. Ethiopia's participation in the
African Continental Free Trade Area (AfCFTA) has had a significant impact on its
manufacturing sector. By joining the AfCFTA, Ethiopia gains access to a larger market of
over 1.3 billion people, creating opportunities for increased trade and export growth. The
removal of trade barriers and the facilitation of intra-African trade within the AfCFTA
framework have the potential to attract more foreign direct investment (FDI) into Ethiopia's
manufacturing sector. This can lead to the expansion and diversification of industries, the
transfer of technology and skills, and the stimulation of innovation. Additionally,
participation in the AfCFTA can promote regional integration, encouraging collaboration and
knowledge-sharing among African countries. However, Ethiopia also faces challenges in
terms of competition from other African countries' manufacturing sectors. To fully benefit
from the AfCFTA, Ethiopia must enhance its industrial competitiveness, improve
infrastructure, address logistical barriers, and strengthen its value chain capabilities. Overall,
Ethiopia's participation in the AfCFTA presents both opportunities and challenges for its
manufacturing sector, necessitating strategic measures to capitalize on the benefits of
regional integration while mitigating potential risks.
2. Agriculture and Agro-processing: The agricultural sector is a key component of Ethiopia's
economy. Under the AfCFTA, agricultural products may face increased competition from
imports from other African countries. The impact on the agricultural sector depends on the
`specific products and their competitiveness in the regional market. Agro-processing
industries that rely on local agricultural inputs may also be affected. While the African
Continental Free Trade Area (AfCFTA) has the potential to bring various benefits to
Ethiopia's economy, including its manufacturing sector, there are concerns about potential
negative impacts on the country's agriculture sector. It's important to note that the actual
impact is subject to multiple factors and can vary depending on specific circumstances and
implementation. However, some arguments suggest potential challenges for Ethiopia's
agriculture.
The other challenge is Threats to Food Security: While the AfCFTA aims to promote
regional food security, there are concerns that increased agricultural imports might have

43
 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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adverse effects on Ethiopia's own food security. As highlighted by Mohammed (2020), if

Ethiopia becomes heavily reliant on imported agricultural products, it could undermine its
domestic production capabilities, potentially leaving the country vulnerable to disruptions in
the regional supply chain or price fluctuations in international markets. 129 It is important to
note that these concerns are subject to debate, and mitigation measures, such as targeted
policies and investments in agricultural productivity, can help address potential negative
impacts. The actual outcomes will depend on Ethiopia's ability to adapt to the changing trade
dynamics and leverage opportunities provided by the AfCFTA to enhance its agricultural
competitiveness.
3. Textile and Apparel Industry: The textile and apparel industry is a significant contributor
to Ethiopia's export earnings. With the implementation of the AfCFTA, Ethiopian textile and
apparel manufacturers may face competition from other African countries with established
textile industries. The impact on this sector depends on factors such as production efficiency,
cost competitiveness, and product quality. While the AfCFTA presents numerous
opportunities for Ethiopia's overall economic development, there are potential challenges and
negative impacts that the textile and apparel industry may face. Increased competition, the
influx of low-cost imports, challenges in meeting quality standards, infrastructure limitations,
and the need for transitioning to higher-value products are factors that need to be addressed
to mitigate the potential negative consequences. It is crucial for Ethiopia to adopt proactive
measures, such as investing in technology, improving infrastructure, and supporting skill
development, to enhance the resilience and competitiveness of its textile and apparel industry
within the AfCFTA framework.
4. Services Sector: The services sector, including sectors such as tourism, transportation, and
professional services, may also experience the impact of Ethiopia's participation in the
AfCFTA. Increased regional integration can create opportunities for service providers, such
as tourism operators and logistics companies. However, competition from other African
service providers may also arise. The African Continental Free Trade Area (AfCFTA) aims
to foster economic integration and boost intra-African trade. While the AfCFTA presents
opportunities for many sectors, it is crucial to examine its potential negative impact on
specific industries. This essay explores the potential adverse effects of AfCFTA on the
129
Mohammed, Y. (African Continental Free Trade Area (AfCFTA): Its implications for agricultural development
and food security in Africa. Journal of Agribusiness and Rural Development, 56(4), 375-387, 2020.
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service sector in Ethiopia, considering factors such as competition, market access, and policy
challenges. Ethiopia's service sector, including areas such as finance, telecommunications,
and professional services, may face increased competition due to the liberalization of markets
under the AfCFTA. As other African countries gain access to the Ethiopian market, local
service providers may face challenges from foreign competitors offering similar services.
This heightened competition could potentially impact the market share and profitability of
Ethiopian service providers, especially if they are not adequately prepared to compete on a
regional scale. There is also Policy Challenges, Harmonizing policies and regulatory
frameworks across African countries poses a significant challenge under the AfCFTA. The
service sector in Ethiopia may be affected by disparities in regulations, licensing
requirements, and standards among member countries. This lack of regulatory coherence can
create barriers to entry, limit market access, and increase operational complexities for
Ethiopian service providers looking to expand into other African markets. Additionally,
differences in intellectual property rights protection and enforcement could undermine the
competitiveness of Ethiopian service providers, particularly in knowledge-based sectors.
Skills and Human Capital is also another challenge The AfCFTA's emphasis on the free
movement of people and services can impact Ethiopia's service sector in terms of skills and
human capital. While the mobility of skilled professionals can foster knowledge exchange
and capacity building, it may also result in a brain drain, with talented individuals seeking
better opportunities in other African countries. This outflow of skilled workers could pose
challenges for the development and growth of the service sector in Ethiopia, particularly in
areas requiring specialized expertise. Also however, the availability and quality of
infrastructure and connectivity vary across African countries. In Ethiopia, inadequate
infrastructure in terms of transportation, logistics, and digital connectivity could hinder the
efficient delivery of services and limit the sector's potential to benefit from the AfCFTA.
Uneven infrastructure development across the continent may disproportionately impact
Ethiopian service providers, restricting their ability to compete effectively in regional
markets.130

130
Ibid
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3.5 Prospects of ACFTA for DOMESTIC INDUSTRY PRODUCTION in Ethiopia

According to Article 23 of the Agreement Establishing the African Continental Free Trade
Agreement (AfCFTA), entry into force occurs 30 days after the 22nd instrument of ratification is
deposited with the Chairperson of the African Union Commission (AUC) – the designated
depositary for this purpose. The Agreement entered into force on 30 May 2019 for the 24
countries that had deposited their instruments of ratification by this date. The House of People’s
Representatives (HPR) have approved Ethiopia’s membership to the Africa Continental Free
Trade Agreement (AfCFTA). The AfCFTA, one of the biggest trade agreements since the
creation of the World Trade Organization (WTO), aims to create a single market in Africa. The
African Continental Free Trade Agreement (AfCFTA) was endorsed by leaders of more than 40
countries in March last year. Since then more countries have joined the agreement, including
Ethiopia.
The AfCFTA is meant to create a tariff-free continent that can grow local businesses, boost intra-
African trade, revamp industrialization and create jobs. The agreement creates a single
continental market for goods and services as well as a customs union with free movement of
capital land business travelers. The African Continental Free Trade Agreement (AfCFTA) can
bring several Advantage to Ethiopia's domestic production policy once it is ratified and
implemented. Here are some potential advantages:131
 Value Chain Development: The African Continental Free Trade Area (AfCFTA) is a
landmark initiative that seeks to promote intra-African trade and economic integration.
Central to its success is the value chain development, which involves enhancing the
efficiency and competitiveness of the production process across different stages within
the region. The AfCFTA recognizes the importance of value chains in unlocking
economic potential, creating jobs, and fostering sustainable development.
 Fostering Competitiveness: The AfCFTA fosters competition among African industries,
which can incentivize Ethiopian businesses to enhance their competitiveness. To thrive in
the regional market, domestic industries may need to improve product quality, adopt
advanced technologies, optimize production processes, and innovate. This can lead to
increased productivity and efficiency, benefiting the overall competitiveness of Ethiopian

131
https://unctad.org /United Nations Conference on Trade and Development (UNCTAD)
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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
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industries.132 Enhanced Competitiveness will be assured. The AfCFTA fosters

competition among African businesses, which can drive efficiency and productivity
improvements. Ethiopian producers and manufacturers will be motivated to enhance their
competitiveness to capture opportunities in the larger African market. This can lead to
innovation, technology adoption, and increased productivity, benefiting the overall
domestic production sector
 Expanded Market Access: The AfCFTA creates a single market of over 1.3 billion
people across Africa, offering Ethiopian businesses access to a much larger consumer
base. This expanded market access can stimulate demand for Ethiopian products and
boost domestic production.
 Diversification of Export Markets: The AfCFTA encourages Ethiopian businesses to
explore new export markets within Africa. By diversifying export destinations, Ethiopia
can reduce its reliance on traditional export markets and mitigate risks associated with
external shocks. This can enhance the stability and sustainability of the country's
domestic production.
 Industrial Development and Value Addition: The AfCFTA aims to promote
industrialization and value addition within Africa. Ethiopia can leverage this opportunity
by developing and expanding its manufacturing and agro-processing sectors. Increased
regional trade can encourage the growth of value chains, supporting local value addition
and job creation133.
 Collaboration and Knowledge Sharing: The AfCFTA provides a platform for
collaboration and knowledge sharing among African countries. Ethiopia can learn from
best practices and experiences of other countries, leading to improved domestic
production policies and strategies. Collaboration in research and development,
technology transfer, and capacity building can enhance Ethiopia's capabilities and
competitiveness.
 Economic Integration and Regional Stability: The AfCFTA contributes to deeper
economic integration and regional stability. By strengthening economic ties and fostering
cooperation among African nations, the agreement can promote peace, stability, and

132
http://www.mit.gov.et/( Ministry of Innovation and Technology of Ethiopia)

133
ibid
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mutual development. A more integrated and stable region can create an enabling
environment for domestic production, attracting investment and stimulating economic
growth.
 It is important to note that the actual advantages for Ethiopia's domestic production
policy will depend on the successful implementation of the AfCFTA and the specific
policies and strategies adopted by the Ethiopian government. Monitoring progress,
engaging with relevant stakeholders, and referring to official government sources will
provide the most up-to-date and accurate information on the benefits and opportunities
arising from the AfCFTA for Ethiopia's domestic production sector.134

3.6 Challenges of ACFTA on Domestic Industry Production in Ethiopia

While the African Continental Free Trade Agreement (AfCFTA) presents potential benefits for
Ethiopia's domestic production policy, there may also be some challenges and contradictory
issues that need to be addressed. Here we will see a few key considerations:135
 Competition for Domestic Industries will be more challenging The AfCFTA creates a
more open and competitive market among African countries. This can lead to increased
competition for domestic industries in Ethiopia, particularly smaller or less competitive
sectors. Domestic producers may face challenges in competinfg with more established or
efficient industries from other countries within the AfCFTA. Also Uneven Capacity and
Standards will also be the most difficulty African countries vary in terms of their
production capacities, technological advancements, and adherence to quality and safety
standards. Some Ethiopian industries may struggle to meet the competition due to
disparities in infrastructure, technology, and product quality.
 The liberalization of trade under the AfCFTA could lead to trade imbalances, where
imports outweigh exports for certain industries in Ethiopia. If domestic industries face
difficulties in accessing markets in other African countries, this could result in increased
imports without corresponding export growth. Strategies to enhance export
competitiveness and promote market access for Ethiopian goods and services are crucial
to mitigate trade imbalances.
134
: http://www.moti.gov.et/ Ministry of Trade and Industry of Ethiopia accessed on may 15
135
https://www.wto.org/ accessed on may16 (world trade organization)
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 Sectoral Vulnerabilities Some industries in Ethiopia may be more vulnerable to

competition than others due to differences in productivity, scale, and value chain
development. Industries that are less competitive and lack the necessary support
mechanisms may face challenges from imports within the AfCFTA. Identifying and
supporting these vulnerable sectors through targeted policies, investment, and
technological advancements can help them withstand competition and thrive 136.
 Transition and Adjustment Costs is another headache the adjustment to new trading
patterns and market dynamics under the AfCFTA may entail transition costs for
Ethiopian industries. Businesses may need to adapt their production processes, upgrade
technologies, and meet new standards and regulations.
CHAPTER FOUR
4 CONCLUSION AND RECOMMENDATIONS

4.1 CONCLUSION
The African Continental Free Trade Area (AfCFTA) represents a significant opportunity for
Ethiopia to enhance its domestic industry and stimulate economic growth. This research explores
the potential impacts of the AfCFTA on Ethiopian domestic industry, considering factors such as
market access, competition, industrial development, and policy considerations. Under the
AfCFTA, Ethiopian domestic industries gain access to a larger market of 54 African countries.
This expanded market presents opportunities for Ethiopian manufacturers to expand their
customer base and increase export volumes. Access to a larger market can drive economies of
scale, leading to cost efficiencies, improved productivity, and enhanced competitiveness.
Participation in the AfCFTA brings Ethiopian domestic industries to heightened competition
from other African countries. This increased competition can drive innovation, productivity
improvement, and product diversification as Ethiopian industries strive to remain competitive.
By adapting to competition, Ethiopian industries have the opportunity to enhance their quality
standards and product offerings. The AfCFTA can serve as a catalyst for industrial development
in Ethiopia. The agreement encourages value chain development and promotes intra-African
trade. This incentivizes domestic industries to invest in modernization, technology adoption, and
skills development to move up the value chain. As a result, Ethiopian industries can strengthen
their manufacturing capabilities, produce higher-value products, and capture a larger share of the
136
ibid
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regional market. Effective policies and regulatory frameworks are crucial for maximizing the
benefits of Ethiopian domestic industry. Ethiopian policymakers should ensure the creation of a
conducive business environment that supports industrial growth. This includes implementing
policies that attract investment, facilitate trade, and promote entrepreneurship. Additionally,
addressing infrastructure gaps, enhancing logistics capabilities, and streamlining customs
procedures can further support domestic industries in leveraging the opportunities presented by
the AfCFTA.
AfCFTA encourages collaboration and partnerships among African countries. Ethiopian
domestic industries can benefit from joint ventures, technology transfers, and knowledge sharing
initiatives with industries in other African countries. Such collaborations can lead to the transfer
of best practices, access to new technologies, and increased innovation, contributing to the
growth and competitiveness of Ethiopian industries.
The African Continental Free Trade Area (AfCFTA has the potential to significantly impact
Ethiopian domestic industry; by providing expanded market access, driving competition,
fostering industrial development, and encouraging collaboration, the AfCFTA offers
opportunities for Ethiopian industries to grow, diversify, and strengthen their positions in the
regional market. However, there are challenges as we have mentioned like that of : Domestic
producers may face challenges in competing with more established or efficient industries from
other countries, trade imbalances, Sectoral Vulnerabilities, and Transition and Adjustment Costs.
To overcome those challenges Ethiopian policymakers to address challenges; With proactive
policies, investment in infrastructure, and strategic partnerships, Ethiopian domestic industries
can position themselves to thrive in the era of the AfCFTA, contributing to sustainable economic
growth, job creation, and overall development in Ethiopia.

4.2 RECOMMENDATIONS
Based on what we have mentioned above we stipulate our recommendation in order to save our
industries from overcoming risks in the future when Ethiopia effectively implements ACFTA
provisions.
In order to address these problems we recommend as follows;

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 ETHIOPAN MEEMEBERSSHIP TO ACFTA AND IT’S IMPACT ON DOMESTIC INDUSTRIES
:AN ASSEMENT OF THE LEGAL FRAME WORK AND POLICY RECOMMENDATION

1. Enacting legal remedies and revising the existing policy available to Ethiopia to
protect its economic development goal due to membership of ACFTA: This may
involve a combination of targeted support measures, sector-specific interventions,
investment in infrastructure and technology, and capacity building initiatives.
Stakeholder engagement and consultation with industry representatives and trade
associations will be essential in developing policies that strike a balance between reaping
the benefits of the ACFTA and safeguarding the interests of domestic industries.
Adopting legal strategy for Ethiopia to use and increase the benefit of membership of
AfCFTA, as per 55(1) (b) FDRE constitution government shall enact specific law in areas
interstate commerce and foreign trade.

2. Conduct sector-specific impact assessments: Conduct comprehensive assessments to

understand the potential impacts of ACFTA membership on different domestic industries.
Identify sectors that may face challenges due to increased competition and those that can
benefit from expanded market access. This will help in formulating targeted mitigation
strategies.

3. Creating awareness about the African Continental Free Trade Area (ACFTA) among
domestic industry sectors in Ethiopia is crucial for their active participation. Here are
some ways to promote awareness: Organize workshops and seminars, Develop
informational materials or Establish an ACFTA information center Create (brochures,
fact sheets, and pamphlets, and a one-stop resource for information on the ACFTA),
Conduct awareness campaigns(through various media channels, including television,
radio, print, and online platforms), Engage industry associations and chambers of
commerce, Foster public-private dialogues (between government officials, policymakers,
and industry representatives to address concerns, clarify misconceptions, and discuss
strategies to maximize the benefits of the ACFTA).Provide training and capacity-building
programs: Offer training programs focused on trade-related topics, such as export
readiness, trade finance, market analysis, and compliance with ACFTA regulations.

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These programs can be conducted in partnership with industry associations or training

institutions.

4. Engage academia and research institutions: Collaborate with academic institutions and
research organizations to conduct studies and publish reports on the potential impact of
the ACFTA on various sectors. Share these findings through conferences, workshops, and
publications.

5. Promote regional value chains: Ethiopia can participate in regional value chains by
fostering linkages between its industries and those in other African countries. This
involves identifying complementary industries in neighboring countries and establishing
partnerships to enhance production capacities and value addition.
6. Strengthen trade finance mechanisms: Ethiopia should establish and strengthen trade
finance mechanisms to support exporters and importers in accessing working capital,
trade credit, and export financing. This will facilitate trade transactions within the
ACFTA and mitigate financial barriers.
7. Implement transitional support measures: To mitigate the negative impacts on
vulnerable industries, consider implementing transitional support measures. These could
include temporary trade safeguards, adjustment assistance programs, and capacity-
building initiatives to enhance competitiveness and productivity .this cbe done as the
provisions of the acfta which is stipulated as the follows;

.Safeguard measures Utilize safeguard measures permitted as per article (18-20) the ACFTA
agreement. These measures can be implemented to provide temporary protection to domestic
industries facing significant import surges or market disruptions. Examples include imposing
temporary tariffs, quotas, or other trade restrictions for specific sectors.
.Anti-dumping and countervailing duties: Apply anti-dumping and countervailing duties to
address unfair trade practices, such as dumping or subsidized imports that harm Ethiopian
industries. As per article 17 of the ACFTA state can take measures can to create a level playing
field and protect domestic producers from unfair competition.

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:AN ASSEMENT OF THE LEGAL FRAME WORK AND POLICY RECOMMENDATION

.Infant Industry protection; as per article 24 of the ACFTA if it is essential for strategic
importance at national level state parties can take reasonable action in order to protect domestic
industries.
So Ethiopia shall focus in those specific provisions and create a specific provisions in order to
protect its domestic industry production
8 Bilateral and regional negotiations: Engage in bilateral and regional negotiations to address
specific concerns and protect Ethiopia's economic interests. This can involve seeking agreements
on sensitive sectors, trade remedies, or sector-specific exemptions to safeguard industries crucial
to Ethiopia's economic development.137in this issue we will argue that in the event of conflict as
per Article 19, any inconsistency between such agreements and AfCFTA will need to be
resolved on the basis of the lex posterior rule under Article 30 of the VCLT. As between a State
party to both treaties and a State party to only one of the treaties, the treaty to which both States
are parties governs their mutual rights and obligations and also the Billateral trade agrements
shall prevail over the afcta as long as they promote regional integration. As long as its consistent
with the object and purpose of AfCFTA.
9 Try to hasten the Ethiopian accession process to WTO; Unfortunately, Ethiopia is not a
member of WTO, still the accession process is on going so, Ethiopia can take immediate
measure inorder to finalize the process in short period before the effective implementation of
AfCFTA, because, the most provision of the AfCFTA retrieve to GATT provisions.

137
In this specific issue of bilateral and regional integration there are two arguments as the scholars mentioned on
the definition of what constituent regional integration
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:AN ASSEMENT OF THE LEGAL FRAME WORK AND POLICY RECOMMENDATION

BIBLIOGRAPHY

LAWS

 Agreement Establishing the African Continental Free Trade Area including the Protocol
on Trade in Goods and its 9 Annexes and the Protocol on Trade in Services (signed
March 21, 2018).
 Agreement Establishing the AfCFTA, Ratification Proclamation No.1124/2019, (enacted
on April5, 2019)
 GATT,1994
 OAU Charter (signed May 25, 1963)
 The constitution of federal democratic republic of Ethiopia(1995)
 Treaty Establishing the African Economic Community (signed June 3, 1991)
 Vienna convention on the law of treaties (1969)

BOOKS
 African Union Commission. African Continental Free Trade Area: An Opportunity for

 African Economic Transformation. Addis Ababa, Ethiopia (2018).

 Berhane Hailemariam, „Ethiopia Joins Frictionless African Trade Area‟ Addis Fortune
(Addis Ababa 23 March 2019) available at https://addisfortune.news/ethiopia-joins-
frictionless-african-trade-area
 Bell Ihua et al, „An Independent Study on the Potential Benefits of the African Continental
Free Trade Area (AfCFTA) on Nigeria 11 African International Trade and Commerce
Research [2018].

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:AN ASSEMENT OF THE LEGAL FRAME WORK AND POLICY RECOMMENDATION

 Ernest Toochi, „African Continental Free Trade Area and African Union Agenda 2063, the
roads to instruments-ratification.
 Ernest Toochi, „From Pan-Africanism to African regionalism: A chronicle, African Studies,
Taylor & Francis, [2020]
 Ethiopian Industrial Development Strategic Plan (2013-2025) FDRE Ministry of Industry
September 2013 Addis Ababa
 Gerhard Erasmus, „Implementing the AfCFTA: When and How?(2018)
 Instrument of Ratification, https://au.int/en/pressreleases/20190410/ethiopia-deposits-
 Michael Asiedu, „The African Continental Free Trade Agreement‟ Global Political Trends
Centre (GPoT) Policy(2018)

 Ministry of Trade and Industry. The Ethiopian Trade Policy. Addis Ababa, Ethiopia UN
Conference on Trade and Development. (2018). Economic Development in Africa Report
2018. Geneva, Switzerland (2018).

 Regulatory And Institutional Reform Of Ethiopia In Line With Africjune, , Ethiopian

Continental Free Trade Area (Afcfta) – Protocol On Trade In Goods , Befetari Mulugeta
Abate, Hawassa2022

 Regulatory And Institutional Reform Of Ethiopia In Line With Africjune, 2022 Hawassa,
Ethiopiaan Continental Free Trade Area (AfCFTA) – Protocol On Trade In Goods , Befetari
Mulugeta Abate

 Trade Law Centre (tralac), „Agriculture and the African Continental Free Trade Area‟ in
Ron Sandrey and
 Willemien Viljoen (eds) African integration and trade liberalization, implications for
agricultural trade (Trade Law Centre (tralac) Stellenbosch, South Africa, 2018)
 Yakubu Idisire, „From OAU To AfCFTA - Analysing The Prospects For Economic
Development In Africa‟ (LLM thesis, University of Cape Town 2018) (Unpublished)

WEBSITE
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:AN ASSEMENT OF THE LEGAL FRAME WORK AND POLICY RECOMMENDATION

 https://doi.org/10.1080/00020184.2020.1740974.
 http://www.jestor.com/stable/

 http://www.tralac.org/resources/infographic/13795-status-of-afcfta-ratification.html
 https://www.tralac.org/resources/our-resources/6730-continental-free-trade-area-cfta.html

 https://www.tralac.org/blog/article/15040-the-abc-of-the-afcfta-as-it-stands.html

 https://www.tralac.org/blog/article/
 http://trade4devnews.enhancedif.org/en/op-ed/implementing-afcfta-2021
 https://www.tralac.org/blog/
 http://www.giz.de/en/downloads/
 http://www.giz.de/en/downloads
 https://ec.europa.eu/info/policies/economic-and-monetary-union/economic-integration/
european-union-and-economic-integration_en
 https://au.int
 http://www.moti.gov.et/( Ministry of Trade and Industry of Ethiopia)

RESEARCHS
 Ethiopia’s investment policy and the ACFTTA; opportunities and challenges by Biniyam
Afewerk Demena(2020)
 International Trade Centre, “A business guide to the African Continental Free Trade Area
Agreement,” ITC,Geneva. (2018)
 Kimberly A.„Customs Unions and Free Trade Areas‟ (2000) 15(3) Journal of Economic
Integration 419

 Massimiliano Calì et al., „Economic and Distributional Impacts of Free Trade

Agreements: The Case of Indonesia‟ Policy Research Working Paper 9021,
Macroeconomics, Trade and Investment Global Practice[2019]
 Tralac,„Status of AfCFTA Ratification‟ Tralac infographics,.
 The impact of AfCFTA on Ethiopias industrialization challenges and opportunities by
Assefa admase and Tafese Birru 2021

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:AN ASSEMENT OF THE LEGAL FRAME WORK AND POLICY RECOMMENDATION

 Yosef Samuel Prospects And Challenges Of Membership To African Continental Free

Trade Area On Trade In Goods And Services: Pp 32 The Case Of Ethiopia , Addis
Ababa, Ethiopia May, 2020

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