Assessing the potential and challenges for trilateral trade integration among Egypt, Sudan, and Ethiopia

Abstract

Egypt, Sudan and Ethiopia possess diverse natural resources and a substantial labor force that permit forming a successful trade integration. However, the recent dispute over the Grand Ethiopian Renaissance Dam (GERD) project between Ethiopia and downstream countries, Egypt and Sudan, has weakened the bilateral relations and disrupted trade flows among the three countries. This paper investigates the pattern of trilateral trade between Egypt, Sudan and Ethiopia during the period between 1995 and 2018. The study also examines the prospects and challenges for establishing a trilateral trade integration between the three countries. The study adopted the gravity model approach, along with the export diversification and trade complementarity indices, in order to scrutinize the pattern and structure of trade between the countries under study. The analysis indicated that Egypt is the most diversified economy with many crucial comparative advantages, which may grant it a leader position in the integration. Moreover, the paper revealed many challenges that may hinder the implementation of trilateral trade integration including, export concentration, poor infrastructure and disputes over water resources. Finally, the paper recommends that facilitating bilateral trade among the riparian countries of Eastern Nile Basin would mitigate the complex clashes over water rights.