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Economic sanctions and trade diversions in Sudan

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  • Siddig, Khalid

Abstract

The latest episode of the armed conflict between Northern and Southern Sudan erupted in 1983 and ended with the signing of the "Comprehensive Peace Agreement (CPA)" in 2005. The CPA allows for a referendum on independence for South Sudan in 2011. A similar scenario is possible for Darfur, where an armed conflict broke out in 2003 over demands for greater decentralization and development in the region. The peace agreement between the central government and the Eastern Sudan region continues to be fragile and the risk of escalation of across the border spillovers of conflicts with Uganda and Chad persists. The U.S., EU, among other global players, is putting pressure on the Khartoum government to change its policies. Economic sanctions are among the tools used by the U.S. government while encouraging others follow suit. This paper investigates the response of the Sudanese economy to eliminating trade flows with the EU in the first phase and with East-Asian countries in the second. It discusses the changes in the macro-indicators, trade variables, and welfare measures that would result. Moreover, it assesses the potential trade diversion and resource reallocation due to sanctions in each phase. To simulate these scenarios, detailed economic databases for Sudan, EU, East-Asian region, MENA, COMESA, and the rest of the world are needed. For this purpose, GTAP Africa database and the standard GTAP model are employed. The 57 sectors of Africa database are aggregated to ten sectors including: grains and crops, livestock and meat products, mining and extraction, processed food, textiles and clothing, light manufacturing, heavy manufacturing, utilities and construction, transport and communication, and other services. Moreover, the database regions are aggregated to six including Sudan, the EU, East Asia, MENA, COMESA, and the Rest of the world. Results show that Sudanese trade reallocates to Asia in the first phase and to COMESA and MENA regions in the second. Sanctions exact a devastating toll on the Sudanese economy: GDP declines, trade shrinks, and welfare deteriorates. The deterioration in the country’s trade is mainly in the imports side, which justifies an improvement of the country’s balance of trade, while welfare losses are derived by a deteriorated terms of trade and allocative efficiency.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22041.

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Date of creation: 11 Apr 2010
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Handle: RePEc:pra:mprapa:22041

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Keywords: Sudan; sanctions; GTAP Africa database; EU; East Asia;

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  1. W. Jill Harrison & K.R. Pearson, 1994. "Computing Solutions for Large General Equilibrium Models Using GEMPACK," Centre of Policy Studies/IMPACT Centre Working Papers ip-64, Victoria University, Centre of Policy Studies/IMPACT Centre.
  2. Khalid H. A. Siddig, 2011. "From Bilateral Trade To Multilateral Pressure: A Scenario Of European Union Relations With Sudan," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 55-73.
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