Academic journal article Eastern Africa Social Science Research Review

South-South versus North-South Trade Linkages: A Case Study of Ethiopia and Implications for the Country's Industrial Development

Academic journal article Eastern Africa Social Science Research Review

South-South versus North-South Trade Linkages: A Case Study of Ethiopia and Implications for the Country's Industrial Development

Article excerpt

Abstract:

This article examines Ethiopia's trade with the North versus the South and uses the trade patterns that emerge to derive policy implications for the country's industrial development. Descriptive statistics in the form of tables and figures are used to reflect the emerging trade patterns. Grubel-Lloyd intra-industry trade indices are calculated for high technology manufactured goods so as to examine intra-industry trade opportunities between Ethiopia and its major trading partners. The Heckscher-Ohlin model, post-Heckscher-Ohlin models, as well as, tariff and non-tariff barriers currently in place are used to try and explain the trade patterns that emerge. The research finds that Ethiopia trades relatively more intensively with Asia and the Middle East than with countries in the North, thus depicting a "look East strategy". This is despite both the EU and the USA levying much lower applied tariffs on most of Ethiopia's exports. The geographical nearness of Asian and Middle East markets makes them more attractive, whilst non-tariff barriers like phytosanitary regulations, packaging and quality standards in markets in the North and the geographic distance make Ethiopia's exports less competitive. Ethiopia's intra-industry trade opportunities in high technology products lie mainly with countries in the North, especially Italy. Pursuing such trade opportunities with countries with well developed industrial bases would help Ethiopia to build a stronger manufacturing sector through an interchange of knowledge, skills and advanced up-to-date technology.

Keywords: South-South trade; intra-industry trade; applied tariffs

(ProQuest: ... denotes formulae omitted.)

1. INTRODUCTION

South-South cooperation describes the exchange of resources, technology, and knowledge between developing countries or countries of the global South. This form of cooperation takes place in various forms, e.g. on bilateral, trilateral, regional, sub-regional, as well as intraand interregional bases. South-South linkages at economic, social and political levels are on the increase with countries pooling their resources and working together to build their strengths so as to jointly meet the challenges that inevitably arise with globalisation (Ofodile 2008; Ewelukwa 2011). As such, various summits and conferences have been held to discuss and foster South-South cooperation. For example, Ofodile (2008:517, 518, 520) notes that the first South Summit to discuss South-South cooperation under the umbrella of the G-77 was held in Havana, Cuba from 10th to 14th April 2000. This was followed by the Asian-African Sub-regional Organisation Conference which was held from 29th to 30th July 2003 in Bandung, Indonesia. From 16th to 19th December 2003, a high-level conference on South-South Cooperation was held in Marrakech, Morocco. The second South Summit under the umbrella of the G-77 was held in Doha, Qatar from 12th to 16th June in 2005. The Asian-African Summit (Bandung II) was held on 24th April 2005. The increasing interest in South-South cooperation and the potential benefits has received support not only from the G-77, but also support and a platform from the UN through, e.g. the United Nations Conference on Trade and Development and the United Nations Development Program (Ofodile 2008:516). Thus, December 19th is now recognised as the UN Day for South-South Cooperation, as declared by the General Assembly of the United Nations through resolution 58/220 of December 23, 2003 (Ewelukwa 2011:515).

It has often been argued that, through escalated tariff structures, developed countries discriminate against developing countries' attempts to develop their manufacturing sectors. Thus, by examining South-South trade linkages and the composition of such trade and comparing that with NorthSouth trade, one will be able to ascertain: (i) whether the South is truly presenting opportunities for developing countries to diversify production; and (ii) exporting relatively high skill content manufactures which are products with greater developmental effects. …

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