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The Impact of Laos’ Accession to the World Trade Organization

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  • Kyophilavong, Phouphet
  • Takamatsu, Shinya
  • Ko, Jong-Hwan

Abstract

World Trade Organization (WTO) accession produces tangible benefits but also has costs, especially for transitional economies and Least Developed Countries (LDC) like Laos. Despite the benefits and costs of WTO accession, there are very few quantitative studies on Laos‟ accession to the WTO. Therefore, the main objective of this paper is to attempt to quantify the economy-wide impact and poverty of Laos‟ WTO accession. We employ a standard GTAP model for this analysis. The simulation results show that Laos will gain from accession to the WTO, but these gains are quite small. The real GDP will increase about 0.5% and welfare (equivalent variation) will increase by about US$ 8 million. On the other hand, the trade deficit will increase and output in some sectors will be reduced. Therefore, it is difficult to conclude that Laos will gains benefits from WTO accession. The micro-simulation using the household survey indicates that the change in household welfare due to the tariff reduction is heterogeneous. The winners from the tariff reduction are households which live in Vientiane capital, and are the non-poor in the urban area. The losers from this policy change are the households which do not belong to the above categories, and their household income drops and their poverty rates increase slightly. The policy implication is that social safety nets for the possible losers are necessary in the future when the trade liberalization policy is implemented. Since this study focuses only the impact of the tariff reduction, the obtained impact might underor over-estimate all of the impact of the WTO accession.

Suggested Citation

  • Kyophilavong, Phouphet & Takamatsu, Shinya & Ko, Jong-Hwan, 2010. "The Impact of Laos’ Accession to the World Trade Organization," Conference papers 331967, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331967
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    References listed on IDEAS

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