Occasional Paper

Ethiopia, Regional Integration and the COMESA Free Trade Area

Arguments that free trade enhances welfare are persuading more and more countries to
liberalise their trade regimes. One way of doing this is to join a free trade area (FTA). The benefits of free trade are not straightforward, and countries considering taking this route should carefully study the potential costs and benefits in the context of their specific political
and economic circumstances. This paper assesses Ethiopia’s participation in COMESA, the projected costs and benefits of joining the FTA, and the implications of the country’s growing economic engagement with its neighbours. It starts by briefly tracing Ethiopia’s political history, outlining the complex peace and security situation on the Horn, and the
role played by Ethiopia in maintaining it. Next, it traces Ethiopia’s political and diplomatic relations with individual countries on the Horn followed by the development of COMESA, Ethiopia’s role in establishing this body, and the potential costs and benefits to Ethiopia of
joining its FTA.