Assessing The Impact Of Trade Liberalization On The Sudanese Economy In A Global Modeling Framework

Tariffs on imports are particularly important for developing countries as a source of revenue. Developing nations do not have the institutional capacity to levy income and sales taxes effectively. As Sudan is negotiating its accession to the WTO since 1994, it is essential to assess the impact of changes in the level of tariffs on the economy. These are policy reforms that are likely to take place in the future. In addition, production taxes in Sudan contributed 16% and 14% to the total government revenue in the years 2000 and 2004, respectively. As the WTO negotiations are unsuccessful due to several political obstacles among others, this paper tries to assess the implications of a situation in which the country liberalize its trade regime. In addition, a scenario that abolishes domestic taxes is also simulated to reduce the burden on the domestic producers and enhance their ability to participate in the domestic and external market. The computable general equilibrium model of the Global Trade Analysis Project and its Africa database are employed. Results indicate that full liberalization, although unlikely to take place with its simulated specifications, will be harmful for the Sudanese economy. The likely-to-happen stepwise liberalization, although not investigated in this paper, may have better consequences as it enable the economy to adapt transferring its trade to liberalization in a harmonized way.