Ethiopia: Enhancing African Trade Relationship With Emerging Economies

African trade relationship with the emerging economies is a reflection of its growing role in global trade.

It is an economic reality that when a country has an abundant amount of natural resources, it should be able to make use of it. These resources are present in the form of land, labor, capital and entrepreneurship. The continent has developed its capacity to develop these resources for the production of goods and services. These outputs are traded with the rest of the world, taking comparative advantage into consideration.

Ethiopia has been an instrument in the trading of African goods and services at the global markets. Using its airlines and shipping services it has been able to trade with rest of the world. These efforts have enabled the country to engage in exports that earned it foreign exchange. With these earnings, Ethiopia could import inputs which it needed for the development of different sectors of the economy. In this endeavor, Ethiopia has been able to promote trade relations between Africa and other emerging economies, including China, India, Brazil, and other members of BRICS.

Despite enhanced socio-economic performance within Africa, the advancement of trade relationship with emerging economies is faced with world politics and Western dominance. Consequently, the easiest way to advance the economic development of developing countries becomes an endless struggle. Faced with this reality, African countries have to find ways and means of enhancing their economic development with the objective of improving the living standards of the African people. In this respect, international financial institutions may help Africa to increase its export earnings. This may be done through increasing its capacity for export its agricultural and industrial products and services.

Africa may be able to attract foreign direct investment (FDI) by providing favorable investment and trading policies. In this regard, it is important to underline the potential role of Africa in global trade with the AU as its guiding instrument. It has been focusing on the interests of the continent by challenging global forces that exploit its resources.

In the past, the AU member countries, including Ethiopia, had been challenging the power relations in multilateral institutions and the global trade functions. But now, these relationships have changed and Africa is becoming a contender in world trade like never before. In the past few years, many positive changes have impacted the economy of African countries. Africa’s share of global trade has been small, but rising because of its focus on global trade to reduce the poverty level and boost its economy.

African countries, including Ethiopia, may need to focus on mitigating global trade issues. The AU focuses on removing barriers to global trade faced by African countries when they engage with the developed world. Ethiopian experts on international trade and development have proposed the enhancement of African trade relationship with the emerging economies. They have also indicated the strategy that will initially minimize and finally eliminate Africa’s trade barriers.

Though Africa, including Ethiopia, has immense resources and huge potential for growth and development, its global trade is relatively small compared to the developed world. Yet, studies reveal that Africa can generate immense revenues from its exports provided that it is well managed. Mismanagement of natural resources is one of the reasons why the African continent is stuck in poverty irrespective of its untapped potential.

Though there is effort to build the continental economy that would reduce poverty, Africa’s global trade has not yet improved. This is indicated by the fact that even the trade among Africans is low, leading to the small volume of gross trading in the continent. This is comparatively lower when compared to the intra-regional trade between Asia and Europe. These have serious implications and impacts on Africa’s economy, causing poverty, underemployment, and low productivity.

Africa has several challenges to achieve its trade potential. Experts point out that some of these challenges are complicated trade regulations, inefficient logistical support, and infrastructural deficiencies. These challenges reduce the chance of Africa to engage in global trade within African countries and globally.

International trade has an immense impact on a country’s consumption and economic growth. When an African country expands on global trade, it will eventually focus on comparative advantages and benefits. It will engage with larger international markets, and earns the benefits of economics of scale. The larger its economic engagements with the rest of the world, the more its benefits are. This is expressed in terms of high employment, improved income and enhanced standard of living of the people of Africa. This chain of events and outcomes promotes advanced technology across African countries. This will ultimately encourage innovations and tech in Africa when it engages in global trade.

Global trade contributes to stability and peace in the continent as a pre-requisite for interdependence between African nations. It will also promote cultural exchange among African countries that are engaged in trade. To achieve all these benefits from global trade, African countries need to develop effective economic and social policies, programs, and regulations that facilitate trade. Apart from these, they have to create and promote economic communities that open trade entries to other countries. This makes it easier to purchase and sell local products and services thereby contributing to continental economic growth.

African countries become members in the global economies that provide them access to a wider market and larger customer base. This development guarantees the real pathways for business expansions and growth in Africa. Also, being members of African economic communities, countries may focus on foreign direct investment (FDI) that contributes to their economic growth and development. This takes place due to preferences of businesses for solid trade agreements and easy entry into multiple African markets.

Africa becomes a better negotiator with global trading partners that produce modern tech that may be used in the various economic sectors. They cooperate in areas such as railways, shipping, telecom and manufacturing industries. In acquiring these techs, Africans use modern trade negotiation skills that will help them to advance their interests. African countries, including Ethiopia, may strengthen their own economy by being members of African economic communities. These communities provide mutual support and coordinated policies and programs for the advancement of regional economic development.

In this respect, African initiative for global trade would play a role in sharing experience of development at continental level. Such initiative focuses on the promotion of investment and trade opportunities across the African continent. It also creates a conduit for African businesses to connect with global markets. This will create better investment opportunities for the continent. It will also impact their growth positively, boosting the economy of African countries, including Ethiopia.

Enhancing African trade relationship with emerging economies has created forums and events for tapping trade potentials. The emerging economies of BRICS use economic potentials for sustainable development projects and partnerships in African countries, including Ethiopia. For instance, the international trade and investment forum has been a focal point for such partnership. Experts pointed out that this forum has dealt with areas such as infrastructure, finance, power, and overall economic growth as focal points for partnership. Such measures are targeted to improve the development infrastructure of Africa as it has a large share in the continental development.

Also, the forum supports African businesses to reach an international customer base. This will support them in handling international trade regulations. It provides them with global outreach and fosters African global connections which will improve trade, giving Africa, including Ethiopia, to merge with the global economy.

As a sub-Saharan nation, Ethiopia has been promoting stronger trade relations between Africa and the emerging economies. Its economy has been growing for years with improved health and education status of its population. The proportion of extremely poor people has fallen to a low percentage. These economic and social advancements represent the successful achievement of its economic development plan.

Ethiopia does no longer want to be considered a poor developing country that is dependent of food and economic aid from donors. To achieve this, the country is opening itself to the global market, mainly by building and operating large agricultural and manufacturing industries. The growth and development of these industries attract more investment that generates more output, employment, and revenues for the state. It also produces goods and services for export that generate foreign exchange.