Ethiopia’s AfCFTA Strategy: A Phased Blueprint For Prosperity

5

Sep

Ethiopia’s AfCFTA Strategy: A Phased Blueprint For Prosperity

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The official gazetting of Ethiopia’s Provisional Schedule of Tariff Concessions (PSTCs) under the African Continental Free Trade Area (AfCFTA) is a landmark achievement, signifying a critical and deliberate move from policy to practice. Far from a simple procedural tick-box, this action is a strategic masterclass in phased economic integration, one that positions Ethiopia not only to reap the benefits of the world’s largest free-trade area but also to assert itself as a leader in the continent’s new economic order.

This momentous step, six years after Ethiopia ratified the AfCFTA agreement, follows a period of calculated deliberation. Rather than rushing to liberalize, the government has carefully crafted a tariff schedule that balances the imperative of continental integration with the protection of vital domestic interests. By doing so, Ethiopia is effectively taking a highly strategic approach to liberalization, one that deserves commendation for its foresight and pragmatism.

A Strategic Masterclass in Phased Liberalization

The AfCFTA framework mandates the liberalization of 90% of tariff lines for non-sensitive products. Ethiopia’s regulation, Council of Ministers Regulation No. 574/2025, which was officially gazetted on July 14, 2025 (DABLO Law Firm), makes public only its list of Category A products, omitting specific details on the sensitive (Category B) and excluded (Category C) lists. This is not a sign of hesitation but rather a strategic play to maintain flexibility and protect the country’s most valuable sectors.

The most striking aspect of this strategy is what has been left off the immediate zero-tariff list. Key exports and services like coffee, sesame, khat, banking, and telecommunications are conspicuously absent from Category A (Africa Sustainability Matters 2025; CoffeeTalk 2025). This calculated decision serves to protect crucial domestic revenue streams and allows these high-value sectors to continue maturing before facing the full force of continental competition. In a post-COVID-19 world, where the principle of “resilience” has pushed nations toward greater self-sufficiency, Ethiopia’s approach demonstrates a sophisticated understanding of how to balance global integration with national economic security.

Conversely, the list of products included in Category A reveals a deliberate supply-side strategy aimed at bolstering domestic industrial and agricultural capacity. By granting immediate zero-tariff access to agricultural inputs, fertilizer, cement, cotton, and processed leather (Africa Sustainability Matters 2025), Ethiopia is actively lowering production costs for its farmers and manufacturers. This strategic choice makes its exports more competitive and supports its broader industrialization and diversification plans. It is a clear signal that the government intends to use AfCFTA not just as a gateway to new markets, but as a catalyst for strengthening its production base from the inside out.

The Gateway to a $3.4 Trillion Market

With the final procedural hurdle cleared, Ethiopia is now poised to capitalize on the immense potential of the AfCFTA. The pact creates a single market of 1.3 billion people with a combined GDP of over $3 trillion. For a country currently navigating foreign exchange shortages, high inflation, and post-conflict reconstruction (Policy Studies Institute 2025), this expanded market provides a significant opportunity to generate economic activity and alleviate fiscal pressures.

The country’s exporters are now primed to access new African markets with lower or zero tariffs, making their goods more competitive. This is particularly promising for the agri-food sector, where products such as pulses, oilseeds, and horticultural goods can now enter markets in West and Southern Africa at reduced tariff rates, capitalizing on existing demand for Ethiopian organic produce. The liberalization of processed goods also supports the country’s industrialization goals by encouraging value-added production and attracting foreign investment in sectors like agro-processing and horticulture.

This move is also expected to provide a boon for Ethiopia’s key service providers. Ethiopian Airlines, a leading carrier on the continent, is set to benefit from the expected increase in cross-border trade and travel, creating new avenues for its passenger and cargo services. Furthermore, by leveraging its network of industrial parks, Ethiopia can use the expanded market to drive increased production, attract foreign investment, and foster the development of regional value chains.

The Path Forward

While the gazetting of the tariff schedule is a significant victory, the work is far from over. The true success of the AfCFTA for Ethiopia hinges on its ability to address the non-tariff barriers that can often be more prohibitive than tariffs themselves (ResearchGate 2025). This requires a dedicated and coordinated effort to enact complementary reforms.

One of the most pressing needs is institutional reform. A lack of institutional capacity and fragmented, manual processes for permits and licenses currently create significant delays and non-tariff barriers (The Reporter Ethiopia 2024). To address this, Ethiopia has established the National AfCFTA Coordination Office (NACO) under the Ministry of Trade and Regional Integration, tasked with coordinating the implementation of the AfCFTA and streamlining related trade processes (Ministry of Trade and Regional Integration). However, the government must go further by centralizing and digitizing institutional procedures to reduce bureaucracy and ensure that the full benefits of tariff liberalization are not lost to administrative inefficiency.

Furthermore, Ethiopia must continue to invest in improving its logistical and infrastructural capabilities. High freight costs, port congestion, and limited warehousing could easily erode the benefits of lower tariffs. This requires significant investment in infrastructure, including the expansion of the Ethio-Djibouti railway, to ensure that the physical movement of goods can keep pace with the new regulatory framework.

Finally, the private sector, particularly small and medium-sized enterprises (SMEs), must be brought into the fold. Many businesses are currently in a “wait-and-see” mode and lack the necessary awareness and experience to compete on a continental scale (International Economics Consulting Ltd. n.d.). The government must pivot to a bottom-up, capacity-building strategy that empowers the private sector with the knowledge, skills, and access to finance needed to thrive in this new market environment.

Ethiopia’s official gazetting of its AfCFTA tariff concessions is a commendable and strategic step forward. It is a powerful signal of the country’s commitment to continental integration and a pragmatic approach to trade liberalization. While the journey ahead is challenging, the political will and strategic foundation laid by this action bode well for Ethiopia’s future as a key player in Africa’s economic renaissance. The government has provided the blueprint; the next phase is to build the operational architecture that will transform this promise into a prosperous reality.

By Tsega’ab Amare, Researcher, Horn Review

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