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Preferential trade agreements between the monetary community of Central Africa and the European Union: Stumbling or building blocks? A general equilibrium approach

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  • Ngeleza, Guyslain K.
  • Muhammad, Andrew

Abstract

"This paper uses a computable general equilibrium approach to simulate two opposing views describing regional trade agreements either as building blocks for or stumbling blocks to multilateral trade liberalization. This study focuses on the free trade agreement (FTA) between the Economic and Monetary Community of Central Africa (CEMAC) and the European Union (EU). Results show that although a regional trade agreement may slightly raise welfare among the members of the agreement, the cost to nonmembers can be high. In this paper we argue that multilateral liberalization and a regional free trade agreement between the EU and CEMAC are not mutually exclusive. Regional trade agreements should be complementary and consistent with a multilateral agreement, not an attempt to replace it. The regional breakdown in our design considers 14 regions, allowing for country-specific analysis for one least-developed country (Democratic Republic of Congo) and one non-least-developed country (Cameroon). Multilateral liberalization amplifies welfare gain for Cameroon. The Democratic Republic of Congo, with its weaker institutional capacity, is affected negatively. An EU-CEMAC FTA without multilateralism produces gains for both Cameroon and the Democratic Republic of Congo. The gain for Cameroon is, however, moderate compared with that achieved when the EU-CEMAC FTA is accompanied with a multilateral agreement." from authors' abstract

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 859.

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Date of creation: 2009
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Handle: RePEc:fpr:ifprid:859

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Keywords: Regional trade; multilateral trade; Computable General Equilibrium Models; European Union; Development strategies;

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References

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  1. Karacaovali, Baybars & Limão, Nuno, 2008. "The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union," Journal of International Economics, Elsevier, vol. 74(2), pages 299-327, March.
  2. Walmsley, Terrie & Scott McDonald, 2003. "Bilateral Free Trade Agreements and Customs Unions: The Impact of the EU Republic of South Africa Free Trade Agreement on Botswana," GTAP Working Papers 1644, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  3. Lawrence E. Hinkle & Maurice Schiff, 2004. "Economic Partnership Agreements Between Sub-Saharan Africa and the EU: A Development Perspective," The World Economy, Wiley Blackwell, vol. 27(9), pages 1321-1333, 09.
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  13. Costas Hadjiyiannis, 2004. "Regionalism and Multilateral Trade Liberalization with Asymmetric Countries," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 395-411, 08.
  14. Nuno Limao, 2006. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," American Economic Review, American Economic Association, vol. 96(3), pages 896-914, June.
  15. Louise Curran & Lars Nilsson & Douglas Brew, 2008. "The Economic Partnership Agreements: Rationale, Misperceptions and Non-trade Aspects," Development Policy Review, Overseas Development Institute, vol. 26(5), pages 529-553, 09.
  16. Bhagwati, Jagdish & Greenaway, David & Panagariya, Arvind, 1998. "Trading Preferentially: Theory and Policy," Economic Journal, Royal Economic Society, vol. 108(449), pages 1128-48, July.
  17. Charalambos G. Tsangarides & Jan Kees Martijn, 2007. "Trade Reform in the CEMAC," IMF Working Papers 07/137, International Monetary Fund.
  18. John Romalis, 2007. "Market Access, Openness and Growth," NBER Working Papers 13048, National Bureau of Economic Research, Inc.
  19. Arvind Panagariya, 2000. "Preferential Trade Liberalization: The Traditional Theory and New Developments," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 287-331, June.
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