Trade Policy, Factor Markets and Social Structures in Africa

Different reciprocal and non-reciprocal trade arrangements are under evaluation for African countries, including regional trade arrangements (SADC) and EU’s initiatives ("Everything but Arms", Cotonou agreement). In this paper we present simulations with GTAP5 database of these interacting trade policy shocks for SADC countries. A detailed regional disaggregation makes it possible to formulate case studies for a range of countries when adverse impacts are an outcome of symmetric shocks or asymmetric shocks produce different impacts for different countries. As an asymmetric shock we formulate the EBA initiative, which treats LDC countries more favorably compared to the GSP treatment. In this paper the main results are presented and the basis for deeper analysis on the transmission of trade policy to the capacity building level are laid out. In the ex-post analysis we assume that the description of economies in GTAP 5 database and model are a starting point for the analysis when country specific observations on imperfections in the market are necessary to get a picture of how the social structures are conditioned the outcome and how they are affected by the structural changes due to the trade policy reforms. Additionally, the GTAP database has been improved regarding preferential treatment imposed by e.g. GSP system and, for countries included in Lomé Convention, by European Union. For this purpose, we use tariff data obtained from the TRAINS database. The economy wide effects seem to be negative for many African economies in scenarios representing free trade area between EU and SADC and different changes in EU's protection policy. The pure free trade area between SADC countries turns out to generate negative welfare effects for some of the participating countries. Effects are mainly due to strong model specific terms of trade effects but resource allocation varies also between countries.