Efforts to enrol in an Economic Partnership Agreement (EPA), a multilateral trade link with the European Union (EU) negotiated with African, Caribbean and Pacific countries, await government decisions. But trade negotiators and the private sector remain concerned about opening up Ethiopia's market to Europe too soon.

Led by Mamo Mehiretu, chief trade negotiator and policy advisor to the Prime Minister, Ethiopia will have to offer tariff reductions applicable over a defined period as part of an agreement.

The agreement entails a reciprocal but asymmetrical tariff reduction where the EU provides full duty- and quota-free market access to signatories that commit to open at least 75pc of their markets to Europe. Three blocks have finalised negotiations and offered tariff reductions ahead of the rest of the groups.

The Economic Community of West African States (ECOWAS) offered 75pc applicable over 20 years, while the Southern African Development Community (SADC) has agreed to an 80pc reduction applicable over the same period. The East African Community, comprising five countries including Kenya and Tanzania, has offered an 82.6pc tariff reduction to be implemented over 25 years.

Kenya is the only country that has ratified the agreement from the East African Community.

Negotiations for EPA were initiated in 2002, encompassing Caribbean and African countries divided into six blocks. Ethiopia is included in the Eastern & Southern Africa group with 10 countries such as Sudan, Mozambique, Mauritius, Zimbabwe and Zambia. Among the East & Southern Africa group countries, seven had already signed interim agreements in 2007. Four countries (Madagascar, Mauritius, Seychelles and Zimbabwe) have signed the final agreement, and Comoros began implementation in 2019.

This has businesses and the government concerned as other African countries are finalising negotiations ahead of Ethiopia. Fear abounds Ethiopia's market share will be overtaken by other countries that produce similar products. As the EPA agreement offers a more lucrative market to EU member countries, they would prefer to trade with these countries.

Ethiopia is a beneficiary of the Everything But Arms (EBA) preferential trade regime the EU offered to over 40 least developed countries (LDCs). Under this regime, the EU allows duty- and quota-free access to European markets for products other than guns. Ethiopia's exports to the EU member countries are traded through the EBA.

Some sectors, such as floriculture, benefit from EBA. However, according to Mussie Mindaye, director of multilateral, regional & bilateral trade negotiations at the Ministry of Trade & Regional Integration, it is underutilised. A strict restriction on rules of origin that require exported products to meet a certain degree of value addition, supply-side constraints and stringent quality standards are behind the underutilisation of these agreements.

"We always request they continue giving us access to EBA until we graduate from LDC status," said Mussie.

The tariff loss the country would have to incur is another concern officials have.

A study published by the UNDP eight years ago identified that an 80pc price reduction implemented under the EPA would result in revenue losses of 144.5 million dollars a year. Although old, the study indicated that revenue losses from import duties could be compensated by increased exports from the widened trade access and raising domestic taxes and VAT on imported luxury goods.