The Impact of Ethiopia’s COMESA Membership on its Exports: An Augmented Gravity Modeling Approach
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Date
2008-06
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Addis Ababa University
Abstract
This paper attempts to assess the impact of Ethiopia’s COMESA membership on its export flows. In this regard the tobit random effects of the gravity model has been specified to annual exports of Ethiopia to twenty countries over the period 1981-2006. Accordingly, the results of the estimation show that COMESA membership has neither a significant effect of both export trade-creation and export trade-diversion on Ethiopia’s export flows. This can be interpreted as weak participation of the country within COMESA region. The empirical result also witnesses that Ethiopia tends to have highly sectoral and geographically concentrated destination of exports (a large share of its exports is destined to Europe and Asia) and consists of few primary export commodities. On the other hand; most of the traditional explanatory variables of the gravity model are the significant determinants on the flow of Ethiopia’s exports. Hence, the possible advices to the government to accelerate the growth of its exports to COMESA member countries are to diversify the economy, enhance the export competitiveness, and encourage the involvement of the private sector in the formulation and implementation of trade policy. Further study is also advised to investigate the potential pros and cons of being a full member of COMESA FTA on Ethiopia’s export flows since Ethiopia is not a member of Free Trade Area (FTA), has only done a 10 percent reduction of tariff for the goods coming from COMESA member states
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Ethiopia’s COMESA Membership on its Exports