The Impacts of Trade Liberalization on Agricultural Export Performance in Ethiopia

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Addis Ababa University


Developing countries have experienced extensive and rapid trade liberalization in recent years which undertaken both in the context of multilateral trade negotiations and as part of the conditionality linked to the structural adjustment and stabilization programs agreed with the International Monetary Fund (IMF) and the World Bank (WB). The impact of Trade Liberalization/Economic reforms on export performance is controversial even if it is widely adopted in developing countries. The aim of this paper is to analyze the impact of economic reform policies on the agricultural export performance of Ethiopia; especially, diversification, competitiveness and openness for the period 1974 to 2004. The main question addressed here is whether the reforms made has a positive impact on the export performance of the country; and to analyze the relative importance of domestic supply related factors such as diversification, competitiveness and openness as compared with external demand conditions in determining agricultural export performance of the country. The performance of the sector is analyzed using these four indicator time series variables to capture the effects of both international market potential and domestic supply side policy reforms. The data are analyzed using Ordinary Least Squares (OLS) and Error Correction Model (ECM) frameworks to examine the impact of trade policy on the agricultural export expansion of the country both in the short run and in the long run. The main findings of the analysis are agricultural export performance is more sensitive to the domestic supply side policy reforms like diversification and openness. Among them diversification is an important factor that explains export performance both in the short run and in the long run, indicating that the country should continue to diversify her exports.



Applied Trade Policy Analysis, Trade Policy Analysis, Trade Policy