Ethiopia’s accession to world trade organization and the implications to its financial sector policies<sup>1</sup>

Abstract

Ethiopia’s Accession to World Trade Organization (WTO) has a number of implications to existing economic and financial sector polices of the country. Assessing major areas of possible policy amendments and reversals is critically important in the financial sector for the accession process as well as its aftermath. This paper attempted to deal with this issue based on qualitative policy analysis. It is found that a comparative analysis of the existing financial sector policies vis‐a‐vis the principles and practices of WTO suggests that there are different policies in the financial sector system that are incompatible with requirements of the General Agreement on Trade in Services ( GATS) and the practices in trade negotiations. One of such incompatibility is related to the existing policy that prohibits the participation of foreign financial institutions in the domestic financial market. It is submitted that the way forward for Ethiopia is gradual and selective liberalization of the financial sector that may balance protection of social and economic policy objectives on the one hand and integrating the financial sector to the ever expanding global financial market rather than complete closure of the sector from international competition. In addition to this, since accession to WTO and undertaking any commitment in the service sector under GATS require the existence of transparent financial laws and regulations, effective judicial system and strong financial regulatory organ including the need to revisit the existing restriction in international payments, there is compelling need to make the necessary policy amendments in the financial sector regulatory framework. Key Words: GATS, WTO, Liberalization, Accession, Financial Sector, NBE