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The Impact of Joining the Comesa Fta On The Ethiopian Economy: The Case Of The Manufacturing Industry

Abstract: 

This study assesses the impact of joining the Free Trade Area (FTA) of the Common Market for Eastern and Southern Africa (COMESA) on the Ethiopian economy in general and on Ethiopia's manufacturing sector in particular. The study employed the SMART model in WITS to simulate two scenarios, namely total import tariff elimination for products coming from COMESA member states, and a 50 percent tariff reduction on such products. The simulation was also undertaken for different product groups, namely all products, all manufacturing products, as well as products of the textile and leather industries. Furthermore, the study analysed the revenue, welfare and trade effects of such trade liberalization on the Ethiopian economy, while trade effects were also analysed for the COMESA member states and for the rest of the world. The results show that complete tariff elimination on imports from COMESA yields about 3 percent tariff revenue loss, but there are also welfare gains to the consumers. The major sources of revenue loss and welfare gain are manufacturing products. Furthermore, this option brings a positive trade effect for COMESA member states, especially Egypt, Kenya and Sudan (which together account for about 91 percent of the trade creation), and a negative trade effect for Ethiopia’s traditional trading partners (China, Saudi Arabia and Malaysia). When a 50 percent tariff reduction is considered, the impacts are almost half of the result obtained under full liberalisation. In particular, this partial liberalization will bring relatively less severe negative effects to such industries as electrical equipment and plastic products. Therefore, some of the policy measures that need due consideration alongside the trade liberalisation option for Ethiopia include addressing supply side constraints; broadening the tax base; and enhancing the  competitiveness of selective domestic firms through different incentive packages

Corporate Author: 
Getnet Alemu, Worku Gebeyehu & Demirew Getachew (Editors) & Ethiopian Economic Association (EEA)
Publisher: 
Ethiopian Economic Association (EEA)
ISBN/ISSN: 
978-99944-54-37-2
Primary Descriptors: 

Manufacturing sector - COMESA

Secondary Descriptor: 

COMESA;  Free Trade Model

Geographic Descriptors: 
Ethiopia
Cataloge Date: 
03/11/2015
Broad Subject heading: 
Manufacturing Industry - COMESA - Ethiopia
Call Number: 
330.963 PRO 2014
Serial Key Title: 
Proceedings of the Eleventh International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
I
Publication date: 
2014-06-02 00:00:00
Forum or Discussion date: 
2013-07-17 00:00:00
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annually