A partial equilibrium analysis of the impact of the ECOWAS-EU Economic Partnership Agreement

Using the partial equilibrium WITS-SMART model, we tried to assess the impact of liberalization under the EPAs, assuming full liberalization of imports from the EU into ECOWAS. We more specifically looked at trade creation and diversion results as well as the impact on tariff revenues. We also identified which products are likely to show the greatest impact, and how the results vary across countries. Total EU exports to ECOWAS would surge by some 1.8 billion dollars, with France and the UK being the largest gainers. Dismantling tariffs on all EU goods would be beneficial to consumers through net trade creation. However, more than 365 million dollars would be diverted in favour of less efficient EU producers. Regional producers are likely to be hit by trade diversion as 6.7% of the trade diverted originates from ECOWAS countries. Tariff revenues will be reduced by the agreement. Some of the ECOWAS countries could face severe shortfalls in their overall budget revenues (excluding grants). For example, we showed that Guinea-Bissau and Ghana could lose approximately 19% of their budget revenues. Several recommendations can be proposed in light of our findings. First, in order to tamper the losses in budget revenues, countries should seek to diversify their tax base and should try to secure assistance in doing so. Secondly, the timing of liberalization is important and ECOWAS countries should seek to consolidate regional integration prior to liberalizing trade with the EU. Finally, if the consumers are to truly benefit of EPAs, the national capacity to limit rent capture by importers and exporters should be strengthened.