Study after study shows that Ethiopia's industry is not internationally competitive. A conclusion often derived from this is that it needs to be protected against international competitors.
In a commentary published by AddisFortune Dan Ciuriak, Derk Bienen and Mamo Mihretu argue that tariff protection has not worked. Rather, what Ethiopia needs is a vastly greater variety of businesses. It needs a veritable eco-system of firms interacting in each other’s supply chains. The Government could facilitate the development of such an eco-system by streamlining business registration and licensing, devising an efficient financing scheme for start-ups, and reducing the cost of trade through trade facilitation.
The bottom line is that a competitive economy requires competitors, not protection from competition. The key to unlocking Ethiopia’s competiveness puzzle is not tariff protection but the removal of domestic constraints on entry of new businesses.