Ethiopia's Accession to the WTO and its Implication to Poverty: A Qualitative Analysis Based on a CGE Model
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Date
2009-04
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A.A.U
Abstract
Ethiopia is on the process of becoming a member of the WTO. to be accepted as a member,
the country has to address the supply side constraints and fulfill a number of preconditions
including the upgrading of the existing laboratory infrastructure used for regulating imports
and exports, strengthening or creating appropriate national institution that can ensure the
implementation of and administration of the TBT Agreement in compliance with the WTO
TBT principles, the creation or building of local capacity to respond to a National Enquiry
Point for the WTO TBT Agreement and the creation of a national system certification service
provider for certifying ISO, HACCP, EUREPGAP, BRC and others required for foreign
markets. But, fulfilling these requirements incur high costs. The Thesis tries to analyze the
impact of implementing the WTO accession requirements on the national economy and
evaluates its implication on poverty using a Computable General Economic Model (CGE)
and the 2002 Ethiopian SAM CGE models can be used to analyze the impact of
macroeconomic policy and external shocks on income distribution, employment and poverty.
The result of the analysis shows that if Ethiopia tries to implement the membership
requirements for accession without farther looking for compensating measures, the most
disadvantaged group of the society will be adversely affected seriously, at least in the short
run, as these groups are exposed to price risks. It was further shown that the increase in
government consumption on goods and services induced by the need for fulfilling the
accession requirements will have the tendency to increase the prices of goods and services
consumed by the poor and to the deterioration of the terms of trade of the sector in which
they are employed. The result of the analysis has also shown that an attempt to finance the
investment necessary for compliance by diverting resources away from the pro poor
expenditure sectors would end up adversely affecting the poor. Although trade liberalization
may have a positive effect in the long-run for the poor by stimulation growth, increasing
demand for unskilled and semi-skilled workers, and increasing government revenues, the
poor may also, at the same time, be at a disadvantage in the short run. The policy implication
of this is therefore that the movement should {(Ike cautious measures in implementing the
requirements for WTO accession. These measures may include implementing the
requirements sequentially on priority basis and seeking technical and financial supports from
the Standards and trade Development facility of the WTO for compensating the diverted
resources and for injecting additional pro-poor spending. The limitation of this Thesis is that
focus was given to the analysis of short-term impacts of shocks. Given the dynamic nature of
the global economy and the ever changing modalities of trade relationships among countries,
however, a more rigorous analysis involving dynamic CGE model and the Incorporation of
more disaggregated households in the analysis would have helped to elucidate the impacts of
accession on poverty and inequality.
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Keywords
Ethiopia's Accession, Qualitative Analysis