WTO Accession of Afghanistan

Abstract

This article undertakes a cost and benefit analysis of Afghanistan’s accession to World Trade Organization (WTO) while attempting to shed light on the post-accession challenges. For the empirical part of our analysis, we have applied the WITS/SMART model to assess the implication of WTO membership. The partial equilibrium model embedded in World Integrated Trade Solution (WITS) allows users to estimate the impact of tariff reductions on trade flows, tariff revenue, and consumer surplus for a single market at a time. Tariff cut is an independent variable, and government revenue, trade creation, consumer welfare and general welfare of the economy are the other variables. The results show that Afghanistan consumers stand to benefit from tariff reforms with overall positive welfare gains to the economy. However, a reduction in tariff will lead to a fall in government revenue and a substantial increase in imports which may raise some concerns over the negative trade balance. The last section of the article studies the post-accession challenges of WTO accession with a special focus on developmental, institutional, legal and environmental challenges. Our analysis based on the sectoral mix of Afghanistan’s economy suggests that producers will lose out. Findings of this study support the argument to maintain maximum policy space for Afghanistan for its long-term development need purposes.