Trade Policy and Performance of Manufacturing Firms in Ethiopia

After pursuing a protective trade policy for decades, Ethiopia started to liberalize its trade regime early in the 1990s with the objective of revitalizing its manufacturing industry. The book critically reviews the trade policies pursued between 1975 and 2003, and the political economy of the reforms introduced in the 1990s. The book reveals that trade liberalization in deed imposes efficiency-enhancing pressures on firms. But this is of no significance since public firms misused the long period of protection and found it difficult to automatically raise resources for investment in upgrading their skills and technological capabilities in the wake of liberalization. Under such circumstances one common outcome is technical regress including a deliberate retreat of firms into producing very basic items with non-tradable characteristics. This market failure requires a well designed industrial policy to complement the trade liberalization. Scholars and policy makers interested in trade policy and industrialization in Africa and developing countries in general would find the book useful.