Eritrea Regional Trade Agreements

Eritrea is relatively open to foreign trade, which accounted for 37.5% of the country`s GDP in 2011 (World Bank, latest available data). The country has signed the African Continental Free Trade Agreement. Non-tariff barriers significantly impede trade. The State maintains strict control over foreign exchange reserves, as it is unable to obtain foreign currency through exports or international capital markets. While this has narrowed the gap between official and informal exchange rates, it also has serious implications for trade freedom and the vitality of the country`s economic development. Eritrea imports 90% of its cereal consumption, while agricultural exports (mainly livestock, coffee, cotton and leather) depend on climate conditions and underdeveloped irrigation systems. The country also exports textile and mineral products (copper, gold) and imports mainly capital goods and petroleum and food products. Eritrea`s main trading partners are China, the Republic of Korea, the United Arab Emirates, Spain and the Philippines (UNCTAD, 2017). The peace agreement signed with Ethiopia in July 2018 is expected to significantly improve trade and investment in Ethiopia. Eritrea is facing a growing trade deficit, as the country is dependent on imports of food, capital goods (which increase with construction projects) and oil (whose price is rising). In 2018, Eritrea`s merchandise exports totalled $683 million, while merchandise imports reached $1.1 billion, resulting in a large trade deficit. The perimeter of the AfCFTA is important.

The agreement will reduce tariffs between Member States and cover policy areas such as trade facilitation and services, as well as regulatory measures such as hygiene standards and technical barriers to trade. Full implementation of AfCFTA would transform markets and economies across the region and boost production in the services, manufacturing and raw materials sectors. For the current Eritrean government, the economy is another place of governance, which is why it opposes all “free” regional economic programmes, as it is prudent to cancel its propaganda projection of Eritrea as a kind of “closed garden” where its inhabitants are too busy with celebrations of mediocre young projects to achieve what they have. Why didn`t Eritrea sign the AfCFTA agreement? It`s mostly because of the repression. The World Bank report, The African Continental Free Trade Area: Economic and Distributional Effects, aims to help policymakers implement policies that can maximize the potential benefits of the agreement while minimizing risks.

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