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The Potential Impact Of A Southern African Common External Tariffs Regime On The Economy Of Lesotho

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  • Bahta, Yonas Tesfamariam
  • Groenewald, Johannes Andries

Abstract

The aim of this paper is to determine the impact of Southern Africa Common External Tariff (CET) on the economy of Lesotho using a Computable General Equilibrium (CGE) model. Lesotho Social Accounting Matrix (SAM) was the core database and a base scenario for the application of a CGE model. The result indicate that CET for non-SACU (Southern African Custom Union) members were likely to cause significant decrease in exports of textile the main export product of Lesotho. The quantity of agriculture export varies from -1.78% (raw wool) to 0.25% (egg), the highest increase of quantity export observed in egg sector and the lowest quantity of export observed in raw wool sector. The quantity of agricultural import decreased in general, it ranges from -3.74% for skin and hide sector and -0.76% for egg sub-sector. In the textile sector, the quantity of aggregated marketed commodities was decreasing significantly. Quantity of aggregated marketed for processing of grain and grain products increase by 1.58%. Output prices and intermediate aggregate inputs of micro industry were increasing. Agricultural output decreased by 0.63%. CET also causes Lesotho household welfare, labour and capital to decline. The study concludes that CET within SACU (South African Custom Union) region will not benefit Lesotho, a country with a fragile economy. Lesotho should strength trade partnership with Rest of the world in order to boost the economy of the country.

Suggested Citation

  • Bahta, Yonas Tesfamariam & Groenewald, Johannes Andries, 2015. "The Potential Impact Of A Southern African Common External Tariffs Regime On The Economy Of Lesotho," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 3(2), pages 1-15, April.
    • Handle: RePEc:ags:ijfaec:206308
    DOI: 10.22004/ag.econ.206308
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    References listed on IDEAS

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    1. Robert Kirk & Matthew Stern, 2005. "The New Southern African Customs Union Agreement," The World Economy, Wiley Blackwell, vol. 28(2), pages 169-190, February.
    2. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
    3. Y.T. Bahta & B.J. Willemse & B. Grove, 2014. "The role of agriculture in welfare, income distribution and economic development of the Free State Province of South Africa: A CGE approach," Agrekon, Taylor & Francis Journals, vol. 53(1), pages 46-74, March.
    4. Lawrence E. Hinkle & Maurice Schiff, 2004. "Economic Partnership Agreements Between Sub‐Saharan Africa and the EU: A Development Perspective," The World Economy, Wiley Blackwell, vol. 27(9), pages 1321-1333, September.
    5. Bahta, Yonas Tesfamariam, 2013. "Modelling The Lesotho Economy: A Social Accounting Matrix Approach," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 1(01), pages 1-14, July.
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    2. Ozoh, Joan Nwamaka & Amaka, G. Metu & Madueke, Chinwe, Monica & Monica and Chika Maureen, Okaforocha, 2023. "Common External Tariff and Household Welfare in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(5), pages 108-119, May.

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