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

What is it about?

In contrast to existing published literature that assumed the Economic Partnership Agreements (EPAs) tariff cuts, this paper uses the tariff cuts actually agreed by some African countries to quantify fiscal revenue losses from the EPAs and estimate potential trade diversion. It finds that the profile in the tariff cuts varies significantly across countries and that revenue losses are significant but 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. However, the potential trade diversion, a source of additional indirect revenue loss, could be significant.

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