Assessing the Consequences of the Economic Partnership Agreement on the Ethiopian Economy

Ben Hammouda, Hakim and Karingi, Stephen and Ouedraogo, Ben Idrissa and Oulmane, Nassim and Sadni Jallab, Mustapha (2006): Assessing the Consequences of the Economic Partnership Agreement on the Ethiopian Economy.

Abstract

The results presented indicate that a free trade area would reinforce the linkages between Ethiopia and European countries, including traditional partners such as Italy, with implications for the regional integration arrangements that Ethiopia is currently involved in. There will be significant trade diversion away from other African countries currently trading with Ethiopia. The diversion will occur in the lowtechnology sectors, which are potentially good foundations for deepened regional integration based on trade in industrial goods. The results further indicate some important implications with respect to Ethiopia’s industrialization strategy. The liberalization of industrial sectors result in more trade effects, particularly negative trade diversion, compared to the results from agricultural liberalization. The loss in revenue, which is a strong feature in general liberalization, is at the sectoral level, more pronounced in the industrial liberalization. The economic structure of Ethiopia, which supports self-reliance in food from the agriculture sector, underpins the limited losses in agriculture as compared to the industrial sector. Clearly, instead of opening the doors to economic diversification, the EPA could lead Ethiopia to deepen its comparative advantages in agricultural products.

• Item Type: MPRA Paper
• Language: English
• Keywords: Ethiopia- Economic Partnership Agreement- Trade impact
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations

References

Baunsgaard, T. and M. Keen, (2004), “Tax Revenue and (or) Trade Liberalization? ” IMF Working Paper, WP/05/112.

Befekadu Degefe and Berhanu Nega (eds.), (1999/2000), Annual Report on the Ethiopian, publication of the Ethiopian economic association.

Busse, M., A. Borrmann, and H. Großmann, (2004), “The Impact of ACP/EU Economic Partnership Agreements on ECOWAS Countries: An Empirical Analysis of the Trade and Budget Effects”, Final Report, Hamburg Institute of International Economics, Hamburg, Germany.

Busse, M. and G. Koopmann, (2002), “The EU-Mexico Free Trade Agreement: Incentives, Context and Effects”, Journal of World Investment, Vol. 3, No. 1, pp. 97-126.

Busse, Matthias (1996), “NAFTA’s Impact on the European Union”, Aussenwirtschaft, Vol. 51, No. 3, pp. 363-382. COMESA, (2002), “Discussion Paper on Trade Policy Compatibility and Impact Assessment of Economic Partnership Agreements and Preliminary Adjustment Scenarios”, COMESA Secretariat, Lusaka, Zambia.

DTIS (2004), Ethiopia: Trade and Transformation Challenges-Diagnostic Trade and Integration Study.

ECA, (2004), Assessment of Regional Integration in Africa, Economic Commission for Africa, Addis Ababa.

ECA, forthcoming, Trade Liberalization under the Doha Development Agenda: Options and Consequences for Africa, Trade and Regional Integration Division, Economic Commission for Africa, Addis Ababa.

EEA/EEPRI (2004). Annual Report on the Ethiopian Economy, Publication of the Ethiopian Economic Association Vol.II. EEA (2005). Ethiopian Economic Association CD ROM. Ethiopian Customs Authority Different Publications.

European Center for Development Policy Management (ECDPM), (2001), The Cotonou Agreement at a glance, Cotonou infokit 2, www.ecdpm.org.

European Center for Development Policy Management (ECDPM), (2001), History and evolution of ACP-EU cooperation, Cotonou infokit 3, www.ecdpm.org.

EUROSTEP, (2004), “New ACP-EU Trade Arrangements: New Barriers to Eradicating Poverty?”, EUROSTEP, Brussels, Belgium.

Karingi, S.N., M. Siriwardana, and E.E. Ronge, (2002), Implications of the COMESA Free Trade Area and Proposed Customs Union: Empirical Evidence from Five Member Countries using GTAP Model and Database, COMESA, Lusaka Zambia.

Karingi, S.N., R. Lang, N. Oulmane, R. Perez, M. Sadni Jallab and H. Ben Hammouda, (2005) “Economic and Welfare Impacts of the EU-Africa Economic Partnership Agreements”, African Trade Policy Center, Work in Progress No.10.

Laird S. and A. Yeats, (1986), “The UNCTAD Trade Policy Simulation Model: A Note on the Methodology, Data and Uses”, UNCTAD Discussion Paper No. 19, Geneva.

Meyn, M., (2004), “Are Economic Partnership Agreements likely to Promote or Constrain Regional Integration in Southern Africa? Options, Limits and Challenges Botswana, Mauritius, and Mozambique are Facing”, NEPRU Working Paper No. 96, The Namibian Economic Policy Research Unit, Windhoek, Namibia.

Milner, C., O. Morrissey, and A. McKay, (2002), “Some Simple Analytics of the Trade and Welfare Effects of Economic Partnership Agreements: The Case of the EU-EAC”, mimeo, CREDIT, University of Nottingham.

Morrissey, O., C. Milner, and A. McKay, (2000), “A Critical Assessment of Proposed EU-ACP Economic Partnership Agreements”, CREDIT Research Paper No.00/8, University of Nottingham.

MOFED(2002), Ethiopia: Sustainable Development and Poverty Reduction Program.

MOTI (2004), ‘National Study on the impact and sustainability of the Economic Partnership Agreement for Ethiopia.’ Final Report (December)’ prepared by TRANSTEC Consultants.

National Bank of Ethiopia, Quarterly Bulletins and Annual Reports.

Panagariya, A., (1995), “Rethinking the New Regionalism”, Paper Presented at the UNDP-World Bank rade Expansion Conference, January 1995, World Bank, Washington D.C.

Siriwardana, M., (2001), “Some Trade Liberalization Options for Sri Lanka”, East Asian Studies Review Volume 25 Number 4, pp 453-477.

Tekere, M. and D. Ndlela, (2003), “Impact Assessment of Economic Partnership Agreements on Southern African Development Community and Preliminary Adjustment Scenarios”, Final Report, Trade and Development Studies Centre, Harare, Zimbabwe.

The Federal Democratic Republic of Ethiopia, FDRE (2002): Poverty Reduction Strategy Paper, Annual Progress Report. World Bank, (2003), Global Economic Prospects 2004: Realising the Development Promise of the Doha Round. Washington, D.C.