How to Balance the Outcomes of the Economic Partnership Agreements for Sub‐Saharan African Economies?

Romain Perez and Stephen Karingi

The World Economy, 2007, vol. 30, issue 12, 1877-1899

Abstract: Since 2002, the Sub‐Saharan African countries (except South Africa which already has a free‐trade agreement with the EU) have embarked on free‐trade agreement negotiations with the European Union. These arrangements will replace the Cotonou scheme, which requires these countries to eliminate their tariffs on ‘substantially’ all their European imports. Based on a general equilibrium analysis, this study estimates the potential effects of these agreements by considering different levels of reciprocity in the commitments of the Sub‐Saharan African countries. It shows that the ‘standard’ EU proposal, whereby Sub‐Saharan African countries would cut tariffs on 80 per cent of their European imports, would not be enough to balance the outcome of the Economic Partnership Agreements. As a result of the asymmetries between European and African protections and supply‐side capacities, African countries could experience a balance of trade deficit of USD 1.8 billion associated with a 0.1 per cent decrease in GDP. This proposal, which also induces an industrial restructuring to the benefit of the agro‐processing industries, will create a significant fiscal burden. A lesser level of commitment could largely mitigate these unfavourable results; by reciprocating tariff eliminations on only 60 per cent of their European imports, African countries would reduce the trade imbalance and fiscal losses induced by these agreements by 21 and 51 per cent respectively.

Date: 2007
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