Supply and Demand Side Constraints as Barriers for Ethiopian Exports – Policy Options

BKP Development, Trade and Development Discussion Paper No. 02-2010

56 Pages Posted: 16 Aug 2010 Last revised: 5 Sep 2010

See all articles by Dan Ciuriak

Dan Ciuriak

Ciuriak Consulting Inc.; Centre for International Governance Innovation (CIGI); C.D. Howe Institute; Asia Pacific Foundation of Canada; BKP Development Research & Consulting GmbH

Date Written: August 1, 2010

Abstract

This study seeks to identify and estimate the relative importance of supply - versus demand - side constraints on Ethiopia’s exports. Ethiopia has tried radically different trade strategies in the past, including a strategy of import replacement/protection for infant industries during the Imperial period, a heavily state-managed trading system during the military government era, and a market-oriented liberalized approach supported by the international financial institutions in the most recent period. It is presently engaged in various trade initiatives, including accession to the World Trade Organization, negotiations with the European Union on an Economic Partnership Agreement discuss and with African regional partners towards a Tripartite Free Trade Area (TFTA). This study finds that the constraints on Ethiopia’s trade performance are mainly domestic, secondarily in its neighborhood, and thirdly in its trade with African partners more generally. Ethiopia’s macroeconomic policy mix and high administrative costs of trade work both to depress the share of trade in economic activity and to widen the deficit on goods trade. At the same time, the high costs of firm formation and the high margins and concentrated market structure of producer services, both a function of domestic policy frameworks, help to explain the evidently under-developed state of Ethiopia’s private sector; unless addressed, this would limit the supply side response to trade liberalization. Optimistically, the paper argues that eminently achievable infrastructure and regional customs cooperation developments, in conjunction with domestic administrative process reforms, would be “game changers” for Ethiopia in terms of its trade performance and industrial development.

Keywords: Ethiopia, Exports, Liberalization, Trade Costs, Firm-Level Dynamics

JEL Classification: F13, F14, F15

Suggested Citation

Ciuriak, Dan, Supply and Demand Side Constraints as Barriers for Ethiopian Exports – Policy Options (August 1, 2010). BKP Development, Trade and Development Discussion Paper No. 02-2010. Available at SSRN: https://ssrn.com/abstract=1659655 or http://dx.doi.org/10.2139/ssrn.1659655

Dan Ciuriak (Contact Author)

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

C.D. Howe Institute ( email )

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

Asia Pacific Foundation of Canada ( email )

Canada

HOME PAGE: http://ciuriakconsulting.com/

BKP Development Research & Consulting GmbH ( email )

Romanstrasse 74
München, 80639
Germany

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