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GTAP Resource #3933

"Trade Policy, Productivity Growth and Resource Allocation: The Case of EU ACP Economic Partnership Agreement and Impact on Sub-Saharan Africa"
by Khorana, Sangeeta, Manitra A. Rakotoarisoa and Badri Narayanan

Background: There has been a proliferation of free trade and reciprocal preferences agreements in the world economy. The European Union (EU) has been the major driving force behind the spread of Free Trade Agreements (FTAs) and Economic Partnership Agreement (EPA) partnerships. Trade preferences granted by the EU were formulated under successive Lomé Convention Agreements, which have now been negotiated under the EPAs with the ACP countries and replace non-reciprocal preferences by creating a free trade area between partner countries.

Discussions indicate that reciprocal preferences and trade agreements lead to elimination of tariffs and non-tariff barriers progressively which supports countries’ efforts to integrate into the global economy. There is also evidence that preferential trade increases trade revenue opportunities for developing countries but a related issue which merits attention is about the locking up of factor resources from such agreements that could be employed in other sectors of the economy, with an adverse impact on the factor prices. This is in line with the thought that for low income countries, reciprocity in preferential trade can potentially reduce factor prices which can in turn exacerbate the decline in domestic factor prices (including wages). Productivity shocks, which have an impact on resource utilisation, are usually exogenously imposed in most CGE studies, while it is desirable to estimate them using econometric or data analysis.

Existing literature: Earlier studies that analyse the effects of EU-FTAs use GTAP 5 or CGE models, such as those on South Africa (Lewis, Robinson, & Thierfelder, 1999; McDonald & Walmsley, 2003), Turkey (Alessandri, 2000; Harrison, Rutherford, & Tarr, 1996), and Egypt (Dessus & Suwa-Eisenmann, 1998) assume full liberalisation between partner countries. Other studies analyse the impact of non-reciprocal preferences and these employ partial equilibrium (PE) models which show that EU exporters are t...

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Not published
Date: 2012
Created: Khorana, S. (4/30/2012)
Updated: Batta, G. (4/30/2012)
Visits: 1,512
No keywords have been specified.

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