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Ethiopia’s Trade Relation with the EAC and Sudan

Ethiopian Economic Association Lead Researcher Kibre Moges

Sponsored by Friedrich Ebert Stiftung

May 2008 Addis Ababa

Table of Contents Page List of Tables List of Figures Abbreviations Executive Summary iv v v vi

1. Introduction

1

2. Challenges and Opportunities of South-South Trade 2.1 Configuration of the current international trade integration 2.2 Policy initiated South-South trade integration 2.3 Opportunities and Challenges of trade Integration in East Africa

2 2 3 6

3. Economic Structure and Market Networks 3.1 Economic structure 3.2 Potential market size 3.3 Creating market access opportunities

8 8 9 10

4. The Trade Policy Regime in Ethiopia 4.1 Trade agreements 4.2 Export trade incentive schemes 4.3 The Tariff Regimes 4.4 Non-tariff barriers

14 14 18 21 29

5. Trade Flows 5.1 Export trade structure 5.2 Import structure 5.3 Ethiopia’s trade balance with the EAC and Sudan

30 30 35 41

ii

6. Intensity of Trade Integration between Ethiopia, the EAC & Sudan 7. Trade Complementarities between Ethiopia, the EAC & Sudan 8. Trade Competitiveness 8.1 Export diversification 8.2 Revealed Comparative Advantage 8.3 Trade restrictiveness 8.4 Other trade costs influencing competitiveness

42 46 48 49 51 53 58

9. Summary and Recommendations

62

References Annex Table 1a Annex Table 1b Annex Table 2

67 69 73 78

iii

List of Tables Page Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: South-South Exports 2005 Economic Structure of East African Countries Market size indicators Access to telecommunication services Eligibility for EU and USA GSP access Summary of MFN applied tariffs rates MFN applied duty rates by product group Frequency distribution Share of duty free imports in each product category Implicit import duty rates Annual growth of Ethiopia’s export to the EAC and Sudan Import share of EAC and Sudan from Ethiopia by broad product category Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: Table 19: Table 20: Table 21: Major imported product categories from Kenya and Sudan Ethiopia’s trade balance with the EAC and Sudan Bilateral Trade Intensity Indices Trade Intensity Mutual Indices Export structure: share of leasing export products Export Diversification/Concentration Reveled Comparative Advantage Indices Trade Restrictiveness Indices Partial indicators of external trade costs 35 41 42 44 45 47 50 53 55 59 5 8 9 13 14 22 24 25 27 28 34

iv

List of Figures Page Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Figure 10: Partial portray of East African economic cooperation galaxy Regional export markets Ethiopia’s major export markets African market’s share of Ethiopia’s export Import growth and export capacity t finance imports Regional import structure Import by specific country of origin Share of major African exports to Ethiopia Share of Ethiopia’s export to the EAC and Sudan Number of days required to export/import 4 30 31 32 36 37 38 39 42 60

Abbreviations ACP GSP African, Caribbean and the Pacific General System of Preference

MFN Most Favored Nations EAC East African Community Common Market for Eastern and Southern Africa

COMESA

SADC South African Development Cooperation WTO World Trade Organization EPA EBA Economic Partnership Agreement Everything But Arms

AGOA African Growth Opportunity Act NTBs Non-tariff barriers SSA Sub-Saharan Africa

LDCs Least developed countires FTA Free trade agreement

GATT General Agreement on Tariff and Trade DTIS Diagnostic Trade Integration Study NBE National Bank of Ethiopia

v

Executive Summary

1. Introduction

The structure of production of an economy determines not only the composition but also the direction of trade. The current pattern of trade is dominated by transactions among advanced countries, and to some extent,...
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