Short-Run Impacts of WTO Accession on the Ethiopian Economy.

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Date

2007-07

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A.A.U

Abstract

Using it Structuralist CGE modeling approach, this ptlper cXLIIl1incs the short-run i mp~lc[s of \'((1'0 accession on the Ethiopian economy. The analysis is made based on Ethiopian Social Accounting Matrix (SAM) of 2001/2002 constructed by IFPIU. The simulation cxpcriments suggest that impact of trade liberalization, import tariff reduction, has it mixed effecl on the Ethiopian economy. Import ta ri ff reduction is likely to increase domestic production il lld expons of cOlllmodities particularly produced in agri culture and service sector. Connected to import tariff IccluctjOIl, liberaLization also have a positive effect on domestic investment and growth due to increase the demand for inVCStlllcnt in agri cultLII:e and ser vice sector which arises frolll a decrease in prices of intermediate commodity and subscclucnt incrca sc in demands o f domestically produced cOlnmodity by the resl of the world. On the othcr hand, tariff reduction has nega tive errects on govcrnmcnt fi scal revcnucs, public investment and on terms o f trade balance. ?--. fo reovcr, liberalization is likely ro red uce domestic productio n of manufactured goods due to it switch of consump tion in a Elvor of cheep imports whjch intern can lead to the domestic unpoft competing flrlns to [ace a downward pressure on sales and profit s. An imp orta n t poLicy impl.ication o f this an al ys is is that the su ccess of uacle liberalization criticaLly depends on the extent 1:0 which trade policies; uacle facilitation and institution are syn chronized for moderni zing Ihe public sector, improvi ng tax colJection and playing th e regulatoq' [ole in order to atUact local and foreign investment by incentive measures in favor of exporting companies. jV[oreover, a convincing programmes and policy action has to be suppotled by tech nical ass istance to sl rengthen Ethiopia's ability to increase its participation in world tlĀ·ade by en h an c ing its compcLitivencss' and conscCJuendy [0 derive larger benefits from tracle

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Ethiopian Economy

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