The potential impact of trade on the economy of Lesotho

[摘要] The potential impact of trade on the economy of Lesotho was assessed using the Lesotho Social Accounting Matrix (SAM) 2000 as a data base to construct a Computable General Equilibrium (CGE) model, to design trade policy scenarios, and to simulate the impact of trade policy scenarios on the Lesotho economy Since the Lesotho SAM was unbalanced, it was necessary to balance the initial matrix, using the cross-entropy optimization procedure with the aid of GAMS software.Four simulation sets were carried out. Results from two sets (duty-free access (DFA) and a +10% increase in world prices) indicate significantly increased textile exports anddecreased prices for imported commodities. DFA will also be associated with increasedtextile imports, while a +10% increase in world prices will lead to increased crop imports.Demand and supply prices of textile commodities produced and sold domestically willdecrease, as will composite goods prices in the textile sector. Average output price oftextiles will decrease with DFA and with a 10% increase in world prices; the aggregatedmarketed commodity quantity for textiles will increase. Output prices of fruit and vegetable processing and intermediate aggregate inputs for the textile sector decrease with DFA. An increase of 10% in world prices will lead to increased water service prices. The textile sector will experience increased value added prices in both scenarios. Gross domestic product (GDP) for the textile sector will increase significantly.Lesotho will gain in welfare, measured in terms of equivalent variation (EV). Effects onlabour categories depend on changes in productive activities. In the textile sector, labourdemand, labour income, and capital income will increase significantly. Lesotho's netcommodity exports and gross government expenditure will also increase.Erosion of existing preferential access (EEP) and common external tariffs for non-SACUmember states (CET) will reduce the quantity of textile products exported; with EEP, theprice of imported textiles will increase and the quantity decrease. CET will have similareffects on the skins and hides sector. Demand and supply prices of textile commoditiesproduced and sold domestically (with EEP) and pharmaceutical products (with CET) willincrease. Prices of composite textile goods will increase slightly. Average output price fortextiles at EEP and pharmaceutical products at CET will increase, and the aggregatedmarketed commodity quantity for the textile sector will decrease in both scenarios.With EEP, prices of output and intermediate aggregate outputs of textiles and microindustry outputs will increase. CET effects will be smaller. The textile sector at EEP andaccommodation-catering services at CET will experience decreased prices of valueadded. Gross domestic product (GDP) of the textile sector will decrease. Welfare orequivalent variation (EV) will decline. Employment in the textile sector will decline witha concomitantly small decrease in labour and capital income.The EEP regime will lead to decreased total government consumption expenditure, while CET will cause a slight increase; this translates into decreased net commodity imports. Effects vary among economic sectors. Performance in U.S. markets indicates that Lesotho's textile exporters have been competitive under MFA/ AGOA arrangements. This competitiveness can, however, be jeopardized by lower costs in some Asian countries. The policy makers should develop permanent comparative advantage to avoid the risk of losses when temporary tariff preferences are discontinued.Lesotho's export trade is highly concentrated, both in terms of products (textiles) andmarkets. Diversification of products and markets is prerequisite for avoiding failure andfor sustainable development of the country; considerable manufacturing potential forexport diversification exists in furniture, bricks, sandstone and ceramics, wool andmohair products, pharmaceutical products, and the recently revitalised diamond industry.Export trade development and market penetration to non-US destinations should receiveattention.In this process, the government should strengthen the capacity of the private sector todeal effectively with rapid change and growing competition by means of, for example,knowledge dissemination, technological transfers, and negotiations for improved marketaccess for textile and other potential export products.

[发布机构] University of the Free State