What shapes Ethiopia’s foreign economic policy? The case of Ethiopia’s accession to the WTO

The objective of this paper is to analyze Ethiopia’s WTO accession process, including its institutional capacity (in terms of human capital and other resources) and how the various domestic political aims, structures and constraints affect the accession process. WTO accession involves a complex and lengthy process, especially for LDCs that aim to implement industrial policies in terms of supplying credit, foreign exchange allocation, import tariffs, export subsidy, etc. Such industrial policies require autonomous policy space, which sometimes run counter to WTO principle and agreements. Ethiopia is a case in point. The combination of its desire to practice industrial policy and thus its need to have a policy space and the availability of favorable access to international markets suggests that joining the WTO shouldn’t be high on the agenda of the government of Ethiopia. However, the government has put forward its desire to join the WTO and the reasons behind it include: the existence of non-tariff barriers despite AGOA and EBA, the binding tariff rate of the goods market being not much lower than Ethiopia’s current rate, and the fact that it gets more stringent to join once the country achieves middle income status. Given this desire to join the WTO one expects the process of accession to proceed at a much faster rate. Examination of the reasons for the delay reveals two different potential explanations: (i) rigid policies and restrictions in the service sector (notably telecom and finance) that stem from the ideology of developmental governance, and (ii) lack of experienced and trained man-power in trade areas. We found, on the other hand, that political constraints due to interest groups and various political aims had little impact.