IDEAS home Printed from https://ideas.repec.org/p/etd/wpaper/019.html
   My bibliography  Save this paper

Ethiopia’s export promotion and the misalignment of the tariff and exchange rate regimes

Author

Listed:
  • Mulu Gebreyesus

    (Ethiopian Development Research Institute)

  • Alekaw Kebede

    (Ethiopian Development Research Institute)

Abstract

By examining how much aligned the tariff and exchange rate regimes are with the export promotion in Ethiopia, this study tries to shed some light on why the export performance of the country and particularly that of manufacturing sector remained poor despite continued government promotion and support. Toward this it quantifies the extent of effective protection and defacto anti-export bias generated by the existing tariff and foreign exchange rate regimes. The disaggregated (approximately 2-digit) industry level estimates of the NRP, ERP and anti-export bias in the manufacturing sector show wide difference among industries. With about 35% nominal duty rate, the export oriented sectors such as Textiles, Apparels, Leathers, Footwear industries are the most protected ones within the manufacturing sector. The anti-export bias estimates suggest that the value added obtainable in the domestic market vis a vis exporting is greater than 1.5 times for the Leather and Footwear industries and more than 70% for the Textile & Apparel industries. The anti-export bias in these sectors remained large, even after considering a 100% of duty drawback on imported inputs, making the domestic market lucrative relative to the export market. This study further shows that exporters are penalized by the increasing overvalued exchange rate of the Birr. Finally, it highlights the inconsistency of the tariff and exchange rate policies with the export promotion of the country and provides some recommendations to address these anomalies.

Suggested Citation

  • Mulu Gebreyesus & Alekaw Kebede, 2017. "Ethiopia’s export promotion and the misalignment of the tariff and exchange rate regimes," Working Papers 019, Policy Studies Institute.
    • Handle: RePEc:etd:wpaper:019
    as

    Download full text from publisher

    File URL: https://psi.gov.et/index.php/working-papers?download=19:ethiopia-s-export-promotion-and-the-misalignment-of-the-tariff-and-exchange-rate-regimes
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tokarick, Stephen, 2007. "How large is the bias against exports from import tariffs?," World Trade Review, Cambridge University Press, vol. 6(2), pages 193-212, July.
    2. Charles Ackah, 2005. "Working Paper 78 - Trade Policy and Performance in Sub - Saharan Africa since the 1980s," Working Paper Series 213, African Development Bank.
    3. Arne Bigsten & Mulu Gebreeyesus & Måns Söderbom, 2016. "Tariffs and Firm Performance in Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 52(7), pages 986-1001, July.
    4. William Tyler, 1983. "The anti-export bias in commercial policies and export performance : Some evidence from the recent Brazilian experience," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 119(1), pages 97-108, March.
    5. W. M. Corden, 1966. "The Structure of a Tariff System and the Effective Protective Rate," Journal of Political Economy, University of Chicago Press, vol. 74(3), pages 221-221.
    6. Mulu Gebreyesus & Ashagrie Demile, 2017. "Why export promotion efforts failed to deliver? Assessment of the export incentives and their implementation in Ethiopia," Working Papers 017, Policy Studies Institute.
    7. Prema‐chandra Athukorala, 2006. "Trade Policy Reforms and the Structure of Protection in Vietnam," The World Economy, Wiley Blackwell, vol. 29(2), pages 161-187, February.
    8. Howard J. Shatz & David G. Tarr, 2017. "Exchange Rate Overvaluation and Trade Protection: Lessons from Experience," World Scientific Book Chapters, in: Trade Policies for Development and Transition, chapter 5, pages 115-127, World Scientific Publishing Co. Pte. Ltd..
    9. Westphal, Larry E, 1990. "Industrial Policy in an Export-Propelled Economy: Lessons from South Korea's Experience," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 41-59, Summer.
    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. Moges Tufa & Mans Söderbom & Zerayehu Sime, 2023. "The Impact of Sector-Specific Industrial Policy on Manufacturing Firm Performance: Quasi-experimental Evidence from Ethiopian Chemical Industries," Journal of Industry, Competition and Trade, Springer, vol. 23(3), pages 363-397, December.

    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. Lord, Montague, 2000. "Viet Nam: Small Scale Technical assistance for Capacity Building of Ministry of Finance to Support Tariff, Industry and Subsidy Analysis for the WTO Accession," MPRA Paper 41158, University Library of Munich, Germany.
    2. Marks, Stephen V., 2011. "Lao economic policies and effective rates of protection," Journal of Asian Economics, Elsevier, vol. 22(2), pages 115-127, April.
    3. Riandy Laksono & Arianto A. Patunru, 2024. "The dynamics of labor share decline in manufacturing: Evidence from Indonesia," Departmental Working Papers 2024-3, The Australian National University, Arndt-Corden Department of Economics.
    4. Bao Ho Dinh & Hai Nguyen Phuc & Trinh Bui & Hau Nguyen, 2020. "Declining Protection for Vietnamese Agriculture under Trade Liberalization: Evidence from an Input–Output Analysis," Economies, MDPI, vol. 8(2), pages 1-11, June.
    5. Zamani, Omid & Chibanda, Craig & Pelikan, Janine, 2021. "Investigating Alternative Poultry Trade Policies in the Context of African Countries: Evidence from Ghana," 2021 Conference, August 17-31, 2021, Virtual 315173, International Association of Agricultural Economists.
    6. Ben Shepherd, 2021. "Effective Rates of Protection in a World With Non-Tariff Measures and Supply Chains: Evidence from ASEAN," Working Papers DP-2021-27, Economic Research Institute for ASEAN and East Asia (ERIA).
    7. Haynes, J.E., 1985. "Rural Assistance Levels: The Influence Of Policies And World Price Changes," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 29(1), pages 1-17, April.
    8. Kym Anderson & Johan Swinnen, 2008. "Distortions to Agricultural Incentives in Europe's Transition Economies," World Bank Publications - Books, The World Bank Group, number 6502.
    9. -, 1999. "Competitiveness of the manufacturing and agro-industrial sectors in the Caribbean with a focus on Dominica, Guyana, Saint Vincent and the Grenadines and Trinidad and Tobago," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 27458, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    10. Prema-chandra Athukorala & Hal Hill, 2010. "Asian trade: long-term patterns and key policy issues," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 24(2), pages 52-82, November.
    11. Francis, Bill B. & Hasan, Iftekhar & Hunter, Delroy M., 2008. "Does hedging tell the full story? : Reconciling differences in US aggregate and industry-level exchange rate risk premia," Research Discussion Papers 14/2008, Bank of Finland.
    12. Murat A. Yülek, 2017. "On the Middle Income Trap, the Industrialization Process and Appropriate Industrial Policy," Journal of Industry, Competition and Trade, Springer, vol. 17(3), pages 325-348, September.
    13. Vanzetti, David, 2006. "Open Wide: Vietnam’s Agricultural Trade Policy," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139916, Australian Agricultural and Resource Economics Society.
    14. Do Thi Thao & Zhang Jian Hua, 2016. "ARDL Bounds Testing Approach to Cointegration: Relationship International Trade Policy Reform and Foreign Trade in Vietnam," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(8), pages 1-84, August.
    15. Florian A. Alburo, 2018. "Export Promotion Policy and Economic Growth in the Philippines: A Comparative Context," UP School of Economics Discussion Papers 201805, University of the Philippines School of Economics.
    16. Volpe Martincus, Christian & Carballo, Jerónimo, 2010. "Beyond the average effects: The distributional impacts of export promotion programs in developing countries," Journal of Development Economics, Elsevier, vol. 92(2), pages 201-214, July.
    17. My Duong & Mark J. Holmes & Anna Strutt & Steven Lim, 2019. "Effects of Trade Agreements and Foreign Direct Investment on Trade: Evidence from Vietnam," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 116-126.
    18. Bailey Klinger & Miguel Angel Santos & Camilla Arroyo & Ekaterina Vashkinskaya, 2023. "Growth Diagnostics and Competitiveness Study of the Manufacturing Sector in Tanzania," CID Working Papers 152a, Center for International Development at Harvard University.
    19. Haiou Mao & Holger Görg, 2020. "Friends like this: The impact of the US–China trade war on global value chains," The World Economy, Wiley Blackwell, vol. 43(7), pages 1776-1791, July.
    20. Arvind Panagariya, 2004. "Miracles and Debacles: In Defence of Trade Openness," The World Economy, Wiley Blackwell, vol. 27(8), pages 1149-1171, August.

    More about this item

    Keywords

    Export promotion; protection; anti-export bias; macroeconomic policy; Ethiopia;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:etd:wpaper:019. 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: Dagmawi Atnafu (email available below). General contact details of provider: https://www.psi.gov.et .

    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.