Fiscal Revenue Losses and Trade Diversion from the Economic Partnership Agreements: Are the Concerns Justified?

Abstract

In contrast to existing published literature that assumed the EPAs tariff cuts, this paper uses the tariff cuts actually agreed by some African countries to quantify fiscal revenue losses from the EPAs. It finds that the profile in the tariff cuts vary significantly across countries. Revenue losses are limited and spread over long transition periods. Using taxable imports instead of total imports (a standard method of the literature), in order to take into account tax breaks and preferences granted to other partners in regional groups, increases the estimated revenue losses but they remain limited. Trade diversion, a source of additional indirect revenue loss, could be significant.