Epsilon Archive for Student Projects

Abstract

This thesis aims to test the concerns about the Economic Partnership Agreement (EPA) between the EU and six southern African countries, based on a policy simulation with the GTAP-Model. As with other EPAs, opponents worried about the state budgets, the current accounts, the regional trade, the agricultural sector and the industry. Other than in other model based studies of the EPAs, which concentrate on general welfare effects, this thesis aims to give detailed answers to the named concerns:

The state revenue decreases. An increase in sales taxes can balance the state budget, if deteriorations for some sectors are accepted.

The current account does not suffer strongly from the agreement, but the trade balance to the EU is strongly impaired, and so are the terms of trade of the African partners.

The regional trade decreases, but this is offset by increasing trade with the EU and increasing exports to other countries.

Agriculture and industry are not strongly affected in their value added, but concentrate stronger on exports, which probably challenges smallholders and possibly small manufacturers. Additionally, wages, employment and land rents are discussed.

Even if the changes are often moderate, different effects accumulating in certain countries (like Mozambique) might present policy makers with difficult problems.