Ethiopia's Path to Regional Integration within COMESA: Synergies and Trade-offs

Ethiopia has undertaken a range of policy shifts and liberalization measures since the post-2018 political reform period, with the aim of transforming its economic landscape. This study thus examines how Ethiopia's ongoing policy shifts and liberalization measures shape the country's engagement in regional and continental integration frameworks, with a particular emphasis on COMESA. It further explores the tradeoffs that engagement in regional integration frameworks can bring to Ethiopia's economy. Methodologically, the research followed a qualitative approach, using primary and secondary data collected from key informant interviews and various institutional and academic sources. The findings of the study indicate strong policy convergence between recent Ethiopian economic reforms and the COMESA FTA regime across trade policies, industrial development initiatives, financial reform activities, and the energy and infrastructure sectors. Accession to FTAs is found to support economic growth, improve welfare gains, expand market access opportunities, promote domestic and foreign direct investment, foster economic specialization based on comparative and competitive advantage, and enhance economies of scale in some product items. However, Ethiopia’s immediate full accession to regional trade through the COMESA FTA could face vulnerabilities, including unfavorable terms of trade, limited export diversification, tariff revenue loss, and limited private sector competitiveness. The study thus concludes that Ethiopia must begin with a clear and phased strategy to accede to the COMESA FTA, deepen financial reforms to strengthen the interbank foreign exchange convertibility, enhance a regional payment system, and introduce currency swap arrangements with key trade partners of COMESA to reduce dependence on foreign exchange reserves is critical. Additionally developing a private sector strategy oriented toward the regional market, strengthening institutional and regulatory capacity for trade governance, and diversifying export commodities can enhance its effectiveness in free trade arrangements like the COMESA FTA