Impact of Trade Liberalization on Ethiopian Agriculture Vs Industry

EPA between EU and ACP. Ethiopia is taken as a sample study. Two major economic sectors - agriculture and industry are selected. SAM of 2005/06 data of EDRI is used. Recursive CGE model is used. The paper considers two scenarios on the two sectors -complete and gradual removal of import tariff. Applying both scenarios on industry sector resulted in export of agriculture to reduce while industry with strategic products to increase. Strategic products import for gradual reduction on leather & metal decreases while clothing remains constant; tobacco with textile increases. Industrial with strategic products import increases in complete removal. Agricultural items import also increases. Labour demand for agriculture and industry which includes skilled labour indicates mixed results in both shocks. GDP increases at market price and factor cost in both shocks. Applying the scenarios on agriculture sector resulted in similar values between FTA and baseline scenarios on both sectors. In conclusions gradual reduction of tariff rate reduces negative impact. On strategic products government should consider other alternatives strategy to solve supply problems and promote productivity.