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The aim of this paper is to determine the impact of Southern Africa Common External Tariff (CET) on the economy of Lesotho using a Computable General Equilibrium (CGE) model. Lesotho Social Accounting Matrix (SAM) was the core database and a base scenario for the application of a CGE model. The result indicate that CET for non-SACU (Southern African Custom Union) members were likely to cause significant decrease in exports of textile the main export product of Lesotho. The quantity of agriculture export varies from -1.78% (raw wool) to 0.25% (egg), the highest increase of quantity export observed in egg sector and the lowest quantity of export observed in raw wool sector. The quantity of agricultural import decreased in general, it ranges from -3.74% for skin and hide sector and -0.76% for egg sub-sector. In the textile sector, the quantity of aggregated marketed commodities was decreasing significantly. Quantity of aggregated marketed for processing of grain and grain products increase by 1.58%. Output prices and intermediate aggregate inputs of micro industry were increasing. Agricultural output decreased by 0.63%. CET also causes Lesotho household welfare, labour and capital to decline. The study concludes that CET within SACU (South African Custom Union) region will not benefit Lesotho, a country with a fragile economy. Lesotho should strength trade partnership with Rest of the world in order to boost the economy of the country.


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