UNCLAS ADDIS ABABA 003293

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD EINV PGOV ET
SUBJECT: ETHIOPIA: WTO ACCESSION LEAPS FORWARD WITH MFTR
SUBMISSION


1. Summary. Ethiopia reached a significant milestone in its
bid to join the World Trade Organization (WTO) when the GOE
submitted the Memorandum of Foreign Trade Regime (MFTR) to
the WTO Secretariat on (date). From application to
membership, WTO Accession comprises three major phases: fact
finding; sectoral and bilateral negotiations; and submission
of working party report and protocol of accession. With
submission of the MFTR, Ethiopia now embarks on the beginning
of the phase two sectoral and bilateral negotiations, the
most active and important phases in the accession process.
With the formal submission of the MFTR and the emergence of a
strong WTO champion, political insider Trade Minister Girma
Birru, the Ethiopian government has demonstrated political
commitment to the WTO Accession negotiations. There remains,
however, a significant need for on-going coordination to
ensure Ethiopia's ownership of its accession process. End
Summary.


2. Comment. For Ethiopia, the MFTR milestone confirms the
GOE's political commitment to join the WTO, signals a reform
process anchored to international standards and demonstrates
intent to improve Ethiopia's overall business environment.
Moreover, after submission of the MFTR, Ethiopia will be
expected to comply with the "standstill provision" which
requires Ethiopia to refrain from issuing new laws that
violates the WTO Agreements. Submission of the MFTR triggers
the accession process in earnest and it is in these next
phases that the real work of accession begins. Based on the
experience of former acceding countries, the most significant
challenge stems from the disparity between a nation's
internal legal and regulatory capacity and the requirement
for WTO integration. As such, assistance from donors,
including USAID, is imperative to avoid pitfalls that could
slow down the Working Party discussion at the early stage of
the negotiations. Ethiopia's accession also presents the
opportunity for the USG to constructively engage the GOE
within the structured forum that the WTO engenders. End
Comment.

MFTR SPARKS DEBATE, CREATES A WTO CHAMPION
--------------


3. The issue of Ethiopia's membership to the WTO has been the
focus of much economic and political debate between the
government and relevant stakeholders. A technical committee
of 15 officials drawn from various GOE ministries delivered a
draft of the MFTR in October 2004 to the government body
responsible for approving the document, the Council of
Ministers. Since 2004, approval of the MFTR stalled while
government officials debated the merits of WTO accession.
According to government officials and media sources, the
opening of Ethiopia's financial sector to foreign investment
and the lowering of customs and duty tariffs were the main
sources of contention during government debates. During a
November 10 Council of Ministers meeting, WTO champion
Minister of Trade and Industry Girma Birru bluntly responded
to Prime Minister Meles' concerns about being "forced" to
open up the financial section by saying that it was better
for Ethiopia to "open up and try to become a member rather
than closing the door and trying to argue." At this same
November 10 meeting, the Council of Ministers approved the
MFTR and its submission to the WTO Secretariat in Geneva.

ROADMAP TO WTO ACCESSION
--------------


4. Current estimates by the World Bank (WB) envision
Ethiopian Accession by 2009; however, the pace of the
accession process depends on both internal and external
factors that are difficult to project. Without respect to
time, the GOE's path the WTO accession includes the following
activities.


5. Translation of the MFTR: Following submission of the
officially sanctioned MFTR, the WTO Secretariat in Geneva
will translate the document into the three working languages
of the WTO (English, French and Spanish). The timeframe
necessary to complete translation may take between 30-90 days.


6. Working on Questions and Answers: After translation, the
MFTR will be circulated to WTO members. Those countries that
will be participating in the Working Party meetings may
require time to review and comment on the Ethiopian
documentation. However, the Ministry of Trade and Industry
(MoTI) may begin receiving questions as early as 30 days
after submission of the official MFTR. In total, Ethiopia
can expect to receive hundreds of questions from Working
Party members. The question and answer phase will also
include preparation of various documents - namely the ACC
documents - that play key roles in the accession process.
The ACC documents are technical notes that provide detailed

information on the agricultural and services sectors,
sanitary and phyto-sanitary standards (SPS), technical
barriers to trade (TBT), and intellectual property rights
(TRIPS) policies. Drafts of these documents will be prepared
in tandem and subsequent to the first round of Working Party
questions. The World Bank (WB) Roadmap study allocates
approximately six months for this process.


7. Convening of the Working Party Meeting: After responding
to the initial round of questions, the first Working Party
meeting will convene. An official delegation composed of key
members of the GOE's trade team, and led by a "chief
negotiator," will travel to Geneva to meet formally with
members of the Working Party. This meeting may be held over
one or more days and will involve a presentation by the GOE
officials as well as queries and comments by the WTO members.
At the conclusion of the Working Party meeting, the Chair
will report on the next steps to be taken, namely a list of
additional information that the GOE will be expected to
generate in anticipation advance of a follow-up meeting.
Working Party members can be expected to present the GOE with
lists of questions on Ethiopia's trade regime. The WB
Roadmap assumes the first Working Party meeting will take
place sometime in mid-2007.


8. Legislative Action Plan: Ethiopia will be required to
submit a legislative action plan, outlining the legislative
work program underway, as well as target dates for
completion. This document should be submitted prior to the
first Working Party meeting. A draft version of the action
plan has been prepared by USAID in cooperation with the
Ministry of Justice and will be submitted in early 2007.
Draft legislation for both trademarks and customs laws have
been tendered and are currently under review by the relevant
ministries. Updates of the legislative action plan will
occur as Ethiopia becomes aware of laws and regulations
necessary to reach compliance.


9. Stakeholder Consultation: Dialogue between the relevant
stakeholders, including Parliament, regional officials, the
business community and civil society, is important in order
to gain a full view of the possible impacts of WTO accession.
In May 2006, USAID presented information on WTO laws and
practices to the Trade and Industry Committee Members of the
Parliament. Beginning in September 2006, USAID developed and
implemented a series of WTO awareness workshops in Ethiopia's
major regional hubs. Participants include members of
academia, the public sector and the private sector with
particular emphasis on the private sector. Additional
regional workshops, as well as industry specific workshops
with key individuals from major exporting sectors, are
planned for 2007.


10. Capacity Building: Significant work is required to
strengthen the capacity of members of the national technical
committee for WTO accession. During the coming months, USAID
will assist the technical committee by working directly with
national negotiating teams, assisting in the preparation of
documentation required by the WTO Secretariat, preparing
analytical papers and briefings, organizing brainstorming
meetings and disseminating trade policy information. At the
same time, USAID will coordinate with relevant technical
committee members to ensure that the GOE does not introduce
laws inconsistent with the WTO after the MFTR is submitted.
Over the coming year, efforts are focused on improving the
negotiation capacity of national officials. A study tour for
selected Ethiopian officials to a current or formerly
acceding developing country is planned so that these
officials will have practical explanation for concerns that
may arise during accession process.


11. Initial Offer and Bilateral Negotiations: Concurrent
with the multilateral Working Party process, the GOE, through
its designated chief negotiator, will be developing offers on
market access for both goods and services. Trading partners
may be expected to request reductions into Ethiopian tariffs
for their products and also to request that Ethiopia make
certain market access commitments to allowing operation of
foreign service providers to operate in the country. The
initial offer could be prepared during 2007, and bilateral
negotiations could begin by the of the year, continuing
through 2008.


12. Conclusion and Accession: Following the successful
completion of bilateral and multilateral negotiations on
commitments, as well as the manner and timing with which
Ethiopia is to harmonize its trade regime with WTO
obligations, the terms of the agreement will be approved by
WTO's General Council and ratified by the GOE.

BACKGROUND ON USAID'S WTO ACCESSION PROJECT

--------------


13. The objective of the USAID Doha WTO Accession Project is
to provide a framework for technical assistance that will
enable the GOE to accede into the WTO in an organized manner.
The Project focuses on assisting Ethiopia with the legal and
regulatory aspects of WTO accession, as resolution of these
issues are central to Ethiopia's accession to the WTO. The
overarching goals of the project are: development of
Ethiopia's policy and legal framework so that it complies
fully with WTO rules; outreach to build the necessary
political, public and private sector support for accession;
and building of institutional capacity within the Ethiopian
government in order to effectively analyze trade policy
measures.

Legal and Regulatory Support


14. The Doha Project's top priority continues to be
assisting the GOE in making concrete gains in WTO-related
internal reform. Identifying laws and regulations that must
be brought into compliance with WTO rules is very important
as submission of the memorandum will trigger full-scale work
in answering working party members' questions. In
preparation for this development, the project team is
identifying in advance some areas of potential
questions/issues anticipated to come from the working party
group.


15. To date the Doha Project team has completed and
submitted policy memos to the MoTI regarding Ethiopia's
import licensing regime, export ban of hides and skins,
import ban of used clothing, intellectual property rights
protection and customs law. This work has resulted in draft
legislation on both customs and intellectual property rights.
Currently, the Doha team is finalizing work in the areas of
foreign exchange and trading rights. In December, work will
begin on Ethiopia's import ban on ethyl and denatured
alcohol, the import ban on opiate and narcotic drugs, and the
import bans on organic fertilizer and soil.

Outreach


16. The Doha Project frequently engages members of the
technical committee, advisory committees and other interested
stakeholders. To date, the project has participated in the
training of approximately 375 key civil servants,
Parliamentarians, members of the private sector and civil
society in semi-formal training programs. Members of the
Doha Team have addressed law school classes and forums
organized by stakeholders at both the federal and regional
levels. We have also participated in programs organized in
and outside of Addis Ababa in preparation for the Economic
Partnership negotiations. These stakeholder consultations
have afforded the project a rare opportunity to consult with
grass-roots level associations and individuals.


17. In partnership with the WTO Affairs Department at MoTI
and the Ethiopian Chamber of Commerce, the Doha Project is
currently sponsoring a series of WTO awareness workshops in
Ethiopia's major regional hubs. Participants include members
of academia, the public sector and the private sector with
particular emphasis on the private sector. In September, a
mixed group of 70 participants attended the project's first
regional workshop in Bahir Dar. Another workshop in November
reached a similar group in Awassa; additional workshops are
planned next year in Mekele and Nazret.


18. The accession process, though guided and accomplished by
the GOE, can be further driven by participation of the
private sector and civil society. For this reason,
significant additional outreach programming is essential to
expediting Ethiopia's accession.

Institutional Capacity Building


19. The Doha team has been coordinating with members of the
WTO technical working groups and has provided materials
regarding WTO rules, analytical indices, explanatory notes,
articles and WTO cases. The same has been done for the WTO
Affairs Department in MoTI. Coordination will extend to the
lawyers in the ministries from which technical committee
members were selected. Per a WB Roadmap study, a WTO
Reference Center is under construction with research tools,
computers and books. Earlier analysis by the project team
revealed that the regulations and directives of a number of
Ethiopian ministries and agencies have not been published.
As such, a MoTI website is being designed to help MoTI comply
with WTO transparency requirements.
WILGUS