Ethiopia's accession to the World Trade Organisation: implications on market access and balance of payment disequilibrium

Abstract

The role of international trade in countries development process is well documented. In this era of globalisation, the notion of free international trade has dominated both the political and economic discourse. It is presumed that integration of poor countries into the world economy will be advantageous to sustain economic development. A growing number of economists however, doubted the benefit that could emanate by engaging in trade liberalisation most importantly multilateral trade agreements. Primarily because membership necessitates opening up their immature economy to stiff foreign competition. Nevertheless, many developing countries have joined the WTO with its perceive benefits of increasing market access and integration into the global market. Theoretically, both the Classical and Neo-classical trade theories signify the benefits of unrestricted trade towards the development of economies. This research report investigates the rationality or otherwise of Ethiopia’s accession into the WTO. Specifically, the research has looked at the possible economic benefits of joining WTO as a result of increased market access and pinpoint the challenges the country could face with regard to current account BOP disequilibrium. The economic rationale of the integration of developing countries has been closely linked to the benefits to be derived from increasing market size. The study employed secondary data to answer the research questions and reach at conclusion. The results indicate that for the country to be benefited from the increased market access, there is a need to diversify the export basis as well as adding value to the existing export commodities. The trend analysis with regard to BOP current account deficit illustrate that the trade deficit is widening in the recent time. Appropriate measures should be in place to reduce the aggravated BOP disequilibrium.