Tariff Liberalization in the Manufacturing Sector in South Asia and Its Impact on a Small Nation
Abstract
The recent policy changes in Nepal towards tariff liberalization to facilitate trade in South Asia shows its undeterred commitment to expand its economy. This paper attempts to quantify the impact of tariff liberalization in the manufacturing sector on key macro-economic variables by using CGE modeling. Three simulations were run by removing tariff in light manufacturing, heavy manufacturing and light and heavy manufacturing combined and it is found that second scenario where there is complete removal of the tariff in heavy manufacturing, results in improvement of key indicators of development. The study suggests that initially Nepal should remove the tariff on heavy industries thereby augmenting its ability to build infrastructure and capacity so that it can reap the benefits of liberalization.
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