IDEAS home Printed from https://ideas.repec.org/a/spr/jecstr/v10y2021i1d10.1186_s40008-020-00232-2.html
   My bibliography  Save this article

Impact of alternative regional trade arrangements on the Ethiopian economy

Author

Listed:
  • Habtamu Shiferaw Amogne

    (Kobe University)

  • Taiji Hagiwara

    (Kobe University)

Abstract

The Common Market for Eastern and Southern Africa (COMESA) is a Free Trade Area (FTA) regional trade agreement in Africa. Currently, Ethiopia is negotiating to join COMESA FTA. This study assesses the impact of three regional trade arrangements, COMESA FTA, customs unions, and the European Partnership Agreement (EPA) on the economy of Ethiopia. The analysis is based on a static Global Trade Analysis Project (GTAP) model, version 9 database. Unlike previous studies, the customs union scenarios are designed at the detailed Harmonized System (HS) level. COMESA FTA (scenario 1) with standard GTAP model results in a welfare loss for Ethiopia due to negative terms of trade and investment-saving effect, but with unemployment closure (scenario 2); Ethiopia enjoys a welfare gain mainly due to endowment effect. In scenario 3 (COMESA customs union) and scenario 4 (European Partnership Agreement), Ethiopia loses due to negative terms of trade and investment-saving effect. There is a large increase in demand for unskilled labor force in Ethiopia by around US$23 million, US$112 million, and US$43 million for scenario 2, 3, and 4 respectively. Moreover, there is a positive output effect for oilseeds, leather, and basic metals across all scenarios. The world, as a whole, enjoys welfare gains with COMESA FTA (scenario 1 and 2). However, with scenario 3 and 4, there is an overall welfare loss. There is no strong reason for Ethiopia to move to the customs union, and the EPA in the short run. Therefore, a transition period is necessary, but it is recommended for Ethiopia to join COMESA FTA.

Suggested Citation

  • Habtamu Shiferaw Amogne & Taiji Hagiwara, 2021. "Impact of alternative regional trade arrangements on the Ethiopian economy," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-26, December.
    • Handle: RePEc:spr:jecstr:v:10:y:2021:i:1:d:10.1186_s40008-020-00232-2
    DOI: 10.1186/s40008-020-00232-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s40008-020-00232-2
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1186/s40008-020-00232-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ngepah, Nicholas & Udeagha, Maxwell C., 2018. "African Regional Trade Agreements and Intra-African Trade," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 33(1), pages 1176-1199.
    2. Edward J. Balistreri & Maryla Maliszewska & Israel Osorio-Rodarte & David G. Tarr & Hidemichi Yonezawa, 2016. "Poverty and Shared Prosperity Implications of Reducing Trade Costs Through Deep Integration in Eastern and Southern Africa," Working Papers 2016-07, Colorado School of Mines, Division of Economics and Business.
    3. Sébastien Jean & David Laborde & Will Martin, 2008. "Choosing Sensitive Agricultural Products in Trade Negotiations," Working Papers 2008-18, CEPII research center.
    4. Rojid Sawkut & Seetanah Boopen, 2010. "An Assessment of the Impact of a COMESA Customs Union," African Development Review, African Development Bank, vol. 22(2), pages 331-345.
    5. Baldwin, Richard & Jaimovich, Dany, 2012. "Are Free Trade Agreements contagious?," Journal of International Economics, Elsevier, vol. 88(1), pages 1-16.
    6. Chen, Maggie Xiaoyang & Joshi, Sumit, 2010. "Third-country effects on the formation of free trade agreements," Journal of International Economics, Elsevier, vol. 82(2), pages 238-248, November.
    7. Burfisher,Mary E., 2011. "Introduction to Computable General Equilibrium Models," Cambridge Books, Cambridge University Press, number 9780521766968, December.
    8. Badri Narayanan & Sachin Kumar Sharma, 2016. "An Analysis of Tariff Reductions in the Trans-Pacific Partnership (TPP): Implications for the Indian Economy," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 10(1), pages 1-34, February.
    9. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    10. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
    11. Ben Hammouda, Hakim & Karingi, Stephen & Ouedraogo, Ben Idrissa & Oulmane, Nassim & Sadni-Jallab, Mustapha, 2005. "Assessing the consequences of the Economic Partnership Agreement on the Ethiopian economy," Conference papers 331395, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    12. Vollmer, Sebastian & Martínez-Zarzoso, Inmaculada & Nowak-Lehmann D., Felicitas & Klann, Nils, 2009. "EU-ACP Economic Partnership Agreements - Empirical Evidence for Sub-Saharan Africa," Proceedings of the German Development Economics Conference, Frankfurt a.M. 2009 39, Verein für Socialpolitik, Research Committee Development Economics.
    13. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    14. Karingi, Stephen & Perez, Romain & Oulmane, Nassim & Lang, Rémi & Sadni Jallab, Mustapha, 2006. "Assessment of the Impact of the Economic Partnership Agreement between the COMESA countries and the European Union," MPRA Paper 13294, University Library of Munich, Germany.
    15. Jacob Wanjala Musila, 2005. "The Intensity of Trade Creation and Trade Diversion in COMESA, ECCAS and ECOWAS: A Comparative Analysis," Journal of African Economies, Centre for the Study of African Economies, vol. 14(1), pages 117-141, March.
    16. Albert Makochekanwa, 2014. "Welfare Implications of COMESA-EAC-SADC Tripartite Free Trade Area," African Development Review, African Development Bank, vol. 26(1), pages 186-202.
    17. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
    18. Krueger, Anne O., 1997. "Free trade agreements versus customs unions," Journal of Development Economics, Elsevier, vol. 54(1), pages 169-187, October.
    19. Burfisher,Mary E., 2011. "Introduction to Computable General Equilibrium Models," Cambridge Books, Cambridge University Press, number 9780521139779, December.
    20. Persson, Maria, 2008. "Trade Facilitation and the EU-ACP Economic Partnership Agreements," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 518-546.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alemayehu Geda & Addis Yimer, 2023. "The trade effects of the African Continental Free Trade Area: An empirical analysis," The World Economy, Wiley Blackwell, vol. 46(2), pages 328-345, February.
    2. Pousseni Bakouan & Mahamadou Diarra & Idrissa M. Ouedraogo, 2024. "How Can Tariff Elimination and Trade Facilitation Affect East African Economies?," Foreign Trade Review, , vol. 59(1), pages 117-145, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leone Walters & Heinrich R. Bohlmann & Matthew W. Clance, 2016. "The Impact of the COMESA-EAC-SADC Tripartite Free Trade Agreement on the South African Economy," Working Papers 201669, University of Pretoria, Department of Economics.
    2. Antoni Estevadeordal & Gaston Nievas, 2024. "Trade and diplomacy Economic determinants of international cooperation agreements and its effect on international trade in the post World War II era: 1945-2022," PSE Working Papers halshs-04721902, HAL.
    3. Xuepeng Liu, 2016. "Trade Agreements and Economic Growth," Southern Economic Journal, John Wiley & Sons, vol. 82(4), pages 1374-1401, April.
    4. Scott L. Baier & Jeffrey H. Bergstrand & Ronald Mariutto, 2014. "Economic Determinants of Free Trade Agreements Revisited: Distinguishing Sources of Interdependence," Review of International Economics, Wiley Blackwell, vol. 22(1), pages 31-58, February.
    5. Leudjou, Roland, 2021. "Assessing the impacts of eliminating Non-Tariff Barriers in the framework of the African Continental Free Trade Area on Cameroons economy," Conference papers 330231, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2015. "Can Trade Agreements Curtail Trade Creation and Prevent Trade Diversion?," Review of International Economics, Wiley Blackwell, vol. 23(2), pages 221-238, May.
    7. Bergstrand, Jeffrey H. & Egger, Peter, 2013. "What determines BITs?," Journal of International Economics, Elsevier, vol. 90(1), pages 107-122.
    8. Innwon Park & Soonchan Park, 2017. "Formation of interdependent regional trade agreements and production networks," The World Economy, Wiley Blackwell, vol. 40(10), pages 2032-2055, October.
    9. Koen Jochmans & Vincenzo Verardi, 2022. "Instrumental‐variable estimation of exponential‐regression models with two‐way fixed effects with an application to gravity equations," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(6), pages 1121-1137, September.
    10. Tibor Besedeš & Erik P. Johnson & Xinping Tian, 2020. "Economic determinants of multilateral environmental agreements," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 832-864, August.
    11. Osman, Rehab Osman Mohamed, 2012. "The EU Economic Partnership Agreements with Southern Africa: a computable general equilibrium analysis," Economics PhD Theses 0412, Department of Economics, University of Sussex Business School.
    12. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2012. "The Geography of Conflicts and Regional Trade Agreements," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 1-35, October.
    13. Cosimo Beverelli & Gianluca Orefice & Nadia Rocha, 2016. "The Impact of Offshoring and Migration Policies on Migration Flows," Working Papers 2016-21, CEPII research center.
    14. Chiedza L. Muchopa, 2021. "Economic Impact of Tariff Rate Quotas and Underfilling: The Case of Canned Fruit Exports from South Africa to the EU," Economies, MDPI, vol. 9(4), pages 1-17, October.
    15. Fontagné, Lionel & Santoni, Gianluca, 2021. "GVCs and the endogenous geography of RTAs," European Economic Review, Elsevier, vol. 132(C).
    16. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g8m2hh491 is not listed on IDEAS
    17. Simon Blöthner & Mario Larch, 2022. "Economic determinants of regional trade agreements revisited using machine learning," Empirical Economics, Springer, vol. 63(4), pages 1771-1807, October.
    18. Adam Rose & Zhenhua Chen & Dan Wei, 2023. "The economic impacts of Russia–Ukraine War export disruptions of grain commodities," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 645-665, June.
    19. Roland Rieder, 2006. "Playing Dominoes in Europe: An Empirical Analysis of the Domino Theory for the EU, 1962-2004," IHEID Working Papers 11-2006, Economics Section, The Graduate Institute of International Studies, revised Jun 2006.
    20. Muhammad Shahzad Iqbal, Sofia Anwar, Kakali Mukhopadhay, Muhammad Aamir Khan, 2017. "GSP Plus Status and Income Distribution: A CGE Model for Pakistan," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 4(1), pages 27-53, March.
    21. Steven Buigut, 2016. "Trade Effects of the East African Community Customs Union: Hype Versus Reality," South African Journal of Economics, Economic Society of South Africa, vol. 84(3), pages 422-439, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jecstr:v:10:y:2021:i:1:d:10.1186_s40008-020-00232-2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.