Domestic and Foreign Market Access

Overview: Trade Policy and Business Environment

The federal democratic republic of Ethiopia is classified as a low-income country with a long-term vision to become a middle-income economy. Ethiopia is in the process of accession to the WTO, which is believed to accelerate the country's integration into the global trading system. The country was ranked 106th out of 132 countries in the World Economic Forum Enabling Trade Index (2012), which measures institutions, policies and services to facilitate trade in countries. Its business and regulatory environment is deficient in competition and the availability and quality of transport infrastructure, and information and communication technology are low. In particular, identifying potential markets and buyers as well as access to trade finance are the most problematic factors for trade.

WTO, 2013, Accession Status (Ethiopia)
WTO, 2013, Tariff profile (Ethiopia)
African Union, 2013, Commission Status of Integration in Africa
World Economic Forum, 2012, The Global Enabling Trade Report

INDICATOR, UNITS RANK/132 SCORE
Domestic Market Access The pillar assesses the level and complexity of a country’s tariff protection as a result of its trade policy. This component includes the effective trade-weighted average tariff applied by a country, the share of goods imported duty free and the complexity of the tariff regime, measured through tariff variance, the prevalence of tariff peaks and specific tariffs, and the number of distinct tariffs. 124 3.41
Foreign Market Access The pillar assesses tariff barriers faced by a country’s exporters in destination markets. It includes the average tariffs faced by the country as well as the margin of preference in destination markets negotiated through bilateral or regional trade agreements or granted in the form of trade preferences. 54 2.94
Tariff rate (%) This indicator is calculated as a trade-weighted average of all the applied tariff rates, including preferential rates that a country applies to the rest of the world. The weights are the trade patterns of the importing country’s reference group (2012 data). An applied tariff is a customs duty that is levied on imports of merchandise goods. 124 12.68
Complexity of tariffs , index 1-7 (best) This indicator is calculated as the average of the following indicators: Tariff dispersion, Specific tariffs and Number of distinct tariffs. See description of each individual indicator for more details. Prior to averaging, values for each indicator were transformed to a 1–7 score, using the min-max method. 37 6.50
Tariffs dispersion (standard deviation) This indicator reflects differences in tariffs across product categories in a country’s tariff structure. The variance is calculated across all the tariffs on imported merchandise goods, at the 6-digit level of the Harmonized Schedule. 103 11.60
Tariffs peaks (%) This indicator is the ratio of the number of tariff lines exceeding three times the average domestic tariff (across all products) to the MFN (most-favoured nation) tariff schedule. The tariff schedule is equal to the total number of tariff lines for each country. These tariffs are revised on a yearly basis. 1 0.00
Specific tariffs (%) This indicator is the ratio of the number of Harmonized System (HS) tariff lines, with at least one specific tariff, to the total number of HS tariff lines. A specific tariff is a tariff rate charged on fixed amount per quantity (as opposed to ad valorem) 1 0.00
Number of distinct tariffs This indicator reflects the number of distinct tariff rates applied by a country to its imports across all sectors. 25 6.00
Share of duty-free imports (%) Share of trade, excluding petroleum, that is imported free of tariff duties, taking into account MFN tariffs and preferential agreements. Tariff data is from 2013 or most recent year available and imports data is from 2012 119 13.37
Tariffs faced (%) This indicator is calculated as the trade-weighted average of the applied tariff rates, including preferential rates that the rest of the world applies to each country. The weights are the trade patterns of the importing country’s reference group (2012 data). A tariff is a customs duty that is levied by the destination country on imports of merchandise goods 24 4.96
Index of margin of preference in destination markets, 0-100 (best) This indicator measures the percentage by which particular imports from one country are subject to lower tariffs than the MFN rate. It is calculated as the average of two components: 1) the trade-weighted average difference between the MFN tariff and the most advantageous preferential duty (advantage score), and 2) the ratio of the advantage score to the trade-weighted average MFN tariff level. This allows capturing both the absolute and the relative margin of preference. 74 22.68
Source : World Economic Forum, Global Enabling Trade Report 2014

Trade Policy and Market Access

In January 2003 Ethiopia officially applied for membership into the WTO. Although several challenges remain and, therefore, the process of negotiations is slow, Ethiopia is expected to meet all of the requirements set out for accession and become a member in the near future. Ethiopia is a member of the following organisations and regional markets: Common Market for Eastern and Southern Africa (COMESA); the Africa Free Trade Zone (AFTZ); African Union (AU); the African, Caribbean and Pacific Group of States (ACP); the Intergovernmental Authority on Development (IGAD); and the Economic Commission for Africa (EAC). However, Ethiopia its commitment to regional integration remains at the lower end. Although Ethiopia is a founding member of the COMESA since 1993, it remains as a COMESA non-FTA member country; nevertheless goods imported from COMESA countries are afforded a 10 per cent tariff preference. Ethiopia's average MFN applied tariff in 2012 was 17.3 per cent. Agricultural products face higher tariffs (22.4 per cent) compared to non-agricultural products (16.5 per cent). High import tariffs policy is adopted to protect certain industries such as the clothing and textile industries.

Standard Compliance and Other Relevant Import/Export Restrictions

In the process of WTO accession, the Quality and Standard Authority of Ethiopia, which used to oversee the quality and standards accreditation and certification, were divided into the Ethiopian Standard Agency, the Ethiopian Conformity Assessment Enterprise, the National Accreditation office, and the National Metrology Institute, so as to ensure a clear division of responsibilities and the efficient handling of tasks. Among them, the Ethiopian Standards Agency was designated as the WTO Technical Barriers to Trade (TBT) National Enquiry in 2010. The agency aims to have ten thousand items standardized by the end of 2017. Moreover, the country has yet set up the formal relationship with the WTO Sanitary and Phytosanitary Information Management System (SPIMS) through its SPS Enquiry Points and National Notification Authority. Ethiopia signed the Comprehensive African Agriculture Development Programme (CAADP) compact in 2009, which targets key sub-sectors like the livestock, in which Ethiopia leads the region. The compact underpins existing food security and nutrition programs which relates to World Trade Organization (WTO) accession and implementation.

COMESA Secretariat, 2013, Establishing Priorities for SPS Capacity-Building Using Multi Criteria Decision Analysis in Ethiopia