Trade Facilitation in Ethiopia: The Role of WTO Accession in Domestic Reform

Author:TE Kassahun
Position:PhD Candidate (International Law and Economics) Bocconi University, Milan-Italy. LL.M (Business Law) Addis Ababa University, LL.M (International Economic Law and Policy, IELPO) University of Barcelona. The author teaches at Haramaya University College of Law and is currently on study leave.
Pages:145-189
SUMMARY

Ethiopia is one of the countries with excessive challenges in cross border trade. The high cost of doing business across borders in Ethiopia has become a major constraint. The focus of this article is trade facilitation which requires the examination of the dynamic gains associated with lowering trade transaction costs and identifying the relative importance of related trade policy reform... (see full summary)

 
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Trade Facilitation in Ethiopia:
The Role of WTO Accession in Domestic Reform
Tilahun Esmael Kassahun
Abstract
Ethiopia is one of the countries with excessive challenges in cross border trade.
The high cost of doing business across borders in Ethiopia has become a major
constraint. The focus of this article is trade facilitation which requires the
examination of the dynamic gains associated with lowering trade transaction
costs and identifying the relative importance of related trade policy reform
measures in Ethiopia. In particular, the current state of the law and practice in
trade facilitation and the international trading environment in Ethiopia are
examined. The article focuses on customs law, border institutions, transport and
logistics services and various issues related with investment and trade policy. In
so doing, it attempts to examine how Ethiopia’s WTO Accession and trade
facilitation instruments can be streamlined with domestic reform.
Key words
Trade facilitation, customs valuation, logistic services, WTO, Ethiopia
DOI http://dx.doi.org/10.4314/mlr.v8i1.5
PhD Candidate (International Law and Economics) Bocconi University, Milan-Italy.
LL.M (Business Law) Addis Ababa University, LL.M (International Economic Law
and Policy, IELPO) University of Barcelona. The author teaches at Haramaya
University College of Law and is currently on study leave. He would like to give his
sincere gratitude to the editorial team at Mizan Law Review and the two anonymous
reviewers for their valuable comments, remarks, and suggestions. He can be reached
at <tilahun.kassahun[at]phd.unibocconi.it>.
Acronyms
CV Customs valuation
CVA Customs Valuation Agreement
ERCA Ethiopian Revenues and Customs Authority
EPPCF The Ethiopian Public Private Consultative Forum
ESLSE Ethiopian Shipping and Logistics Services Enterprise
GATS General Agreement on Trade in Services
GATT General Agreement on Tariffs and Trade
MTO Multimodal transport operator
OECD Organization for Economic Cooperation and Development
TFA Trade Facilitation Agreement
UNCTAD United Nations Conference on Trade and Development
UNECE United Nations Economic Commission for Europe
WTO World Trade Organization
146 MIZAN LAW REVIEW, Vol. 8, No.1 September 2014
Introduction
The high cost of doing business across borders in Ethiopia is said to have
become a major constraint to economic development.1 Ethiopia is one of the
countries with the highest set of challenges in cross border trade. The World
Bank study of trading across borders ranking puts the country at 166th in the
world.2 While, on average, sub-Saharan African customs delays are the longest
in the world, the average delay is 12 days in the region compared with 7 days in
Latin America; the longest delays in the region are in Ethiopia - where the
average trader has to wait more than 30 days for customs to clear goods.3
Transportation delays along the Ethiopia-Djibouti transport corridor are also
widespread. Numerous stages in the process of clearing and transporting
commercial goods in transit from the port of Djibouti to Addis Ababa can take
more than 20 days. This has contributed to the country’s current 132nd rank out
of 189 nations in the World Bank doing business index.
The cost of accessing information, discrepancy and unpredictability in
government policy decisions, general issues of custom which in particular
includes customs valuation, and anticompetitive practices in transport,
especially road and sea transport are directly related to the costs of trading in
addition to the delay in time taken from the port to the inland destination, or the
vice versa. The longer the time taken for import/export procedures or journey,
the more expensive imports, exports and production becomes rendering
Ethiopian exports less competitive.
The ability of countries to deliver goods and services on time and at the
lowest possible cost is a key determinant of integration into the world economy
today.4 With the expansion in the volume of trade, policies that remove non-
tariff barriers and expedite the movement of goods and services across borders,
i.e., ‘international trade facilitation’, have emerged at the forefront of the trade
1 Tsegaye Teklu and Endris Negus (2011), The Impact of Border Clearance Procedures
on the Cost of Doing Business in Ethiopia, Private Sector Development Hub, Addis
Ababa Chamber of Commerce and Sectoral Associations.
2 See World Bank Trading Across Borders (2013),
<http://www.doingbusiness.org/data/exploretopics/trading-across-borders> (Last
accessed April 2014).
3 The country’s score on the Logistics Performance Index (LPI), which measures the
extent of trade facilitation in the country, is 2.59, on a scale of 1 to 5, ranked to be
104th among 160 countries. See World Bank Logistics Performance Index
<http://lpi.worldbank.org/international/global/2014> (Last accessed April 2014)
4 Jayanta Roy and Shweta Bagai (2005) “Key Issues in Trade Facilitation, Summary of
World Bank/ EU Workshops in Dhaka and Shanghai – 2004”, World Bank Policy
Research Working Paper 3703, (September 2005), p. 4.
Trade Facilitation in Ethiopia: The Role of WTO Accession in Domestic Reform 147
agenda.5 As Grainger notes; “over the last few decades customs tariffs have
been significantly reduced. […] Consequently, the gap between tariff duties and
transaction costs has narrowed; … in view of such low trade tariffs, the
transaction cost associated with paying duties is actually higher than the duties
themselves.”6
Experience shows that trade facilitation is highly dependent on infrastructural
developments.7 However, trade facilitation is not only about the physical
infrastructure for trade.8 Studies indicate now that, “only about a quarter of the
[trade] delays is due to poor road or port infrastructure.”9 “Seventy five percent
is due to administrative hurdles - numerous customs procedures, tax procedures,
clearances and cargo inspections - often before the containers reach the port.” 10
Accordingly, while undertaking the necessary infrastructural changes to
implement deep trade facilitation is still important, most other measures seem to
depend on strong political will.11 Development of this political will requires a
clear understanding of the needs and benefits of trade facilitation in an
economy.
This seems to be one part of the trade facilitation challenges in Ethiopia
which suffers from excessive border bottlenecks, lack of reform and drawbacks
in private investment.12 This has affected Ethiopia’s international trade relation
5 Andrew Grainger (2008), “Customs and Trade Facilitation: From Concepts to
Implementation”, World Customs Journal, Volume 2, Number 1, p. 17.
6 Andrew Grainger (2007) “Trade Facilitation: A Review”, Working Paper:
<www.tradefacilitation.co.uk> , p10 (Last accessed April 2014).
7 Jean-Paul Rodrigue (2013), Transportation, Globalization and International Trade,
chapter 5 <http://people.hofstra.edu/geotrans/eng/ch5en/conc5en/ch5c2en.html>, (last
accessed April 2014) Also see UNDP, Global Event of Landlocked Developing
Countries And Transit Countries On Trade And Trade Facilitation, Trade, Trade
Facilitation and Transit Transport Issues For Landlocked Developing Countries,
<http://www.unohrlls.org/UserFiles/File/Elle%20Wang%20Uploads/LLDCs%20Publi
cation.pdf> .
8 Gary Clyde Hufbauer (2012), Trade facilitation matters!, 14 September 2012.
<http://www.voxeu.org/article/trade-facilitation-matters> (last accessed April 2014).
9 Simeon Djankov et al. (2006), “Trading on Time”, World Bank Policy Research
Working Paper 3909, p. 9.
10 Ibid.
11 Dan Ciuriak (2010), “Supply And Demand Side Constraints As Barriers For
Ethiopian Exports – Policy Options”, Bkp Development Research & Consulting,
Trade and development discussion paper no. 02/2010 , p. 12.
12 A report for instance states in this regard, “Customs administration and administrative
entry barriers appear to be the major NTB affecting Ethiopia’s trade with COMESA
member states. The NTBs reported within this area with the greatest frequency
include import licensing, customs valuation and formalities, and to a lesser extent,

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