Economic and Welfare Impacts of the EU-Africa Economic Partnership Agreements

Th is study examines the economic and social impacts of the trade liberalization aspects of the proposed Economic Partnership Agreements (EPAs) between the European Union (EU) and African countries. It provides a quantitative assessment of the likely implications of EPAs establishing Free Trade Areas (FTAs) between the EU and the various African Regional Economic Communities (RECs). Th e focus of the empirical analysis is on the trade liberalization component of the EPAs. In particular, the following questions are addressed. First, how will an EPA that includes reciprocal market access agreements between the EU and Africa impact on African countries’ GDPs, levels of employment and other macroeconomic aggregates? Second, what sectors in Africa are most likely to lose and what sectors gain with EPAs? Th ird, what are the welfare implications for African countries from the EPAs? Fourth, how will the formation of EPAs aff ect trade expansion through trade creation and trade diversion eff ects? Fifth, what are the potential fi scal implications of the EPAs? Th e main conclusions drawn from the results and the discussions are that full reciprocity will be very costly for Africa irrespective of how the issue is looked at. A focus on deepening integration with a view to enhancing intra-African trade would provide positive results. But it is the scenario that off ers unrestricted market access for Africa, which deals eff ectively with barriers associated with sensitive European products, that portends the largest gain for the continent. Even with reciprocity, a free trade area that includes sectors of export interest to Africa and one that deals with non-tariff barriers promises positive results for African countries.