Poverty Impacts of an Economic Partnership Agreement between Uganda and the EU

This paper analyzes the poverty impacts of an economic partnership agreement (EPA) between Uganda and the EU. As Ugandan exports are also eligible for duty-free access to the EU under the Everything But Arms scheme the main impact of the EPA will be to require liberalization of EU exporters’ access to the Ugandan market. There are fears this could threaten the incomes of poor people through lower prices for agricultural commodities, the crowding out of vulnerable industries, and loss of government revenue. We examine these fears by means of a qualitative analysis using data from a 1999 social accounting matrix of the Ugandan economy and the 2002/2003 household budget survey. We then quantify the effects on the economy and poverty employing a combined CGE-microsimulation model. The qualitative analysis shows that the scope for trade liberalization with the EU is very limited and that particularly the poor have only weak links to formal markets. The quantitative analysis suggests that the macroeconomic impacts of an EPA are minor but positive, implying that the economic adjustment costs might turn out to be low. Whether the very small poverty effects are positive or not depends on the selection of sensitive products in the EPA, although under all scenarios the very poorest appear to lose.