The much anticipated continental-wide free trade area for Africa has been launched beginning January 1, 2021. However, negotiations are still ongoing  as to what degree and how early African countries open up their service sectors, such as finance.

The African Continental Free Trade Area (AfCFTA) initiative, to which Ethiopia is a signatory, is aimed at creating a free and single continental market for goods and services.

Negotiations of the free trade bloc were launched in 2015, and the agreement was signed three years later during the 10th ordinary session of the African Union Summit in Kigali, Rwanda. Except for one country, 53 states on the continent have signed the AfCFTA, which comprises a 3.4-trillion-dollar economy and 1.2 billion people. Out of the signatories, 34 countries, including Ethiopia, have ratified the agreement.

The agreement requires member states to make a 90pc tariff cut gradually. Members with more developed economies are expected to cut the tariff in five years, while less developed nations are expected to take 10 years to fully enact the tariff cut. Based on the agreed upon rules of origins and tariff offers, 41 countries and customs unions have submitted tariff reduction schedules.

After the agreement signing, the AfCFTA was meant to be kicked off in July 2020, but it was postponed due to the Novel Coronavirus (COVID-19) global outbreak, which restrained in-person negotiations. In December 2020, the extraordinary assembly of heads of state and government decided to transfer the AfCFTA instruments to the Secretary General of the AfCFTA, and the bloc was officially launched on January 1, 2021.

The Free Trade Area, the largest trade area established since the World Trade Organisation (WTO) in 1995, aims to double inter-African Trade by 2035. Launched under the theme of  “Creating One African Market,”  the initiative falls under Agenda 2063 of the African Union. African countries mostly sell primary commodities to other continents. Only 18pc of their exports are traded within Africa, where they often face high tariffs.

However, some negotiations are not closed yet, according to Moussa Faki Mahamat, a chairperson of the African Union Commission.

“We shall conclude the remaining negotiations by July 2021,” said Moussa Faki, during the virtual launching ceremony held on January 1, 2021.

Ethiopia, a founding signatory of the AfCFTA who had ratified the parliament's agreement in 2019, is one of the countries that did not make offers for negotiation to trade in services.

This is the first free trade agreement Ethiopia is part of, according to Mamo Mihretu, senior policy advisor and chief trade negotiator at the Office of the Prime Minister.

"It's consistent with our pan-Africanist foreign policy," said Mamo. "And economically, it makes sense for Ethiopia to sign the agreement."

The negotiations on trade in services are yet to happen, according to Mamo, who also says that there is no rule under AfCFTA that requires Ethiopia to open its financial sector.

"If we're going to open the financial sector," he said, "we'll do it at our own pace, according to our domestic regulations and taking our current reform programme into account."

With the opened trading bloc, Ethiopia will take part in the goods trade using its existing investment laws and regulations, according to Mamo.

Ethiopia has also reinstated the WTO accession process after an eight-year halt, placing a revised offer for goods and starting bilateral market access talks. The country exports about 14pc of its export products to the African market while receiving four percent of its imports from African countries.

Ethiopian authorities see the platform as a huge market opportunity for local manufacturers and exporters.