The Impact of Economic Partnership Agreements on African, Caribbean and Pacific Countries Imports and Welfare

This paper estimates the impact on a sample of 34 African, Caribbean and Pacific (ACP) countries of eliminating tariffs on imports from the EU under Economic Partnership Agreements (EPAs), considering trade, welfare and revenue effects. Even assuming ‘immediate’ complete elimination of all tariffs on imports from the EU, some two-thirds of ACP countries are likely to experience welfare gains; the ACP overall and the average ACP country gain. The overall welfare effect relative to GDP tends to be very small, whether positive or negative. While potential tariff revenue losses are non-negligible, given that countries have at least ten years in which to implement the tariff reductions, there is scope for tax substitution. An important issue is identifying the sensitive products (SPs) to be excluded from tariff reduction. We exclude products where ACP imports compete with the EU (as SPs have to be agreed at the regional ACP level). In general, excluding SPs on these criteria reduced the welfare gain (or increased the welfare loss) compared to estimates where no products are excluded. It remains the case that the ACP overall and on average gains, although only 13 countries (38%) experience a net gain in this scenario (but for another nine the net effect is zero or almost zero). This is to be expected as if ACP products are excluded as SPs the potential trade creation gains are reduced. However, as the exclusion criterion was products that are traded between ACP countries, these import losses would be offset by gains to ACP exporting countries. Perhaps the most surprising result is that even where EPAs imply a welfare loss (on imports), the losses are likely to be very small.EU-ACP, Economic Partnership Agreement, ACP Imports, International Relations/Trade,

Adjusting to Bilateral Trade Liberalisation under an EPA: Evidence for Mauritius

This paper estimates the impact and adjustment costs for Mauritius of eliminating tariffs on imports from the EU under an EPA, considering trade, revenue, welfare, production and employment effects, and considering the potential benefit of preserving preferential access to the EU market. Assuming ‘immediate’ complete elimination of all tariffs on imports from the EU, there is a small welfare loss (-0.17% of 2002 GDP) unless we include potential production gains (generating a welfare gain of 0.06% of GDP). Excluding up to 20% of imports as sensitive products, the overall welfare loss is -0.19% of GDP. However, potential adjustment costs are much greater than these low welfare effects suggest: tariff revenue will fall by 33-52% of 2002 levels, domestic (non-export) production will decline by almost a quarter and direct employment by 12% (about 11,000 jobs lost overall). Preferences under an EPA are unlikely to support any growth in the major export sectors (sugar and garments), so absorbing the adjustment costs will be difficult.EU-ACP, Economic Partnership Agreements, Mauritius

EU-ACP Economic Partnership Agreements and ACP Integration

The direct effects of EPAs on ACP countries arise from the requirement to eliminate tariffs on most imports from the EU. While consumers gain from cheaper imports, the government losses tariff revenue and producers face increased completion, implying adjustment costs. This paper estimates the consumer welfare and revenue impact for a sample of 34 ACP countries of eliminating tariffs on imports from the EU under an EPA, and discusses the associated adjustment costs. Although the ACP overall and on average experiences consumer welfare gains, the gains (or any losses) are small and associated with significant revenue losses and potential adjustment costs. As the gains are associated with increased imports from the EU, larger welfare gains tend to be associated with larger revenue losses and adjustment costs. There is scope for tax substitution to address revenue concerns, but addressing adjustment costs (especially employment) will be much more difficult. ACP countries can exclude up to 20% of imports from the EU from tariff elimination (sensitive products). The paper argues that regionally traded goods should be classified as sensitive and excluded from liberalization. Although this reduces consumer welfare gains (or increases welfare losses), these are likely to be more than offset by the benefits from lower revenue losses and trade effects that reduce adjustment costs. This also serves to encourage increased intra-regional trade: regional exporters gain from the preservation of their regional market share and in all countries domestic producers are likely to produce some regionally traded goods.ACP, EPAs, Imports, Welfare Effects, Integration

Trade Facilitation in Developing Countries

Measures to actively facilitate trade are increasingly seen as essential to assist developing countries in expanding trade and benefiting from globalisation. Although often viewed as narrowly concerned with the ease and speed of Customs procedures, even greater trade cost reductions and trade and welfare benefits may be reaped from a broader view of trade facilitation (TF) that incorporates transportation, distribution and communication issues. A number of TF reforms are particularly beneficial: improving procedures, especially Customs clearance; introducing automation and use of information technology; reducing excessive documentation requirements; addressing lack of transparency in import and export requirements; addressing lack of modernisation of and cooperation between Customs and other government agencies. The review identifies the types of TF reforms that could address these problems and deliver a return in terms of increased revenue collection efficiency, reductions in trade costs and promotion of greater regional cooperation (at least in Customs and transport, especially as many TF measures are appropriate for inclusion in regional integration agreements).Trade Facilitation, Regional Integration

Competition Policy and Public Procurement in Developing Countries

Measures to support Competition Policy and enhance the efficiency of Public Procurement can enhance the impact of regional integration agreements. The first part addresses Competition Policy - measures employed by government to ensure a fair competitive market environment. Competition policy aims to ensure that markets remain competitive (through anti-trust or anti-cartel enforcement) or become competitive (through liberalisation). For a variety of reasons, competition is often restricted in developing countries and there are benefits from establishing some level of competition policy. Although the literature does not provide a blueprint, it provides guidance on the most useful ways to incorporate Competition Policy in regional agreements. The second part addresses issues in opening up public procurement and outlines the main potential sources of welfare gains. Open and transparent procurement can bring gains in terms of price reduction, competition and reduced corruption. While developing countries recognize these benefits for domestic policy, they appear opposed to including procurement commitments in international agreements.Competition Policy, Public Procurement, Regional Integration

Do Sales Matter? Evidence from UK Food Retailing

This paper assesses the role of sales as a feature of price dynamics using scanner data. The study analyses a unique, high frequency panel of supermarket prices consisting of over 230,000 weekly price observations on around 500 products in 15 categories of food stocked by the UK’s seven largest retail chains. In all, 1,700 weekly time series are available at the barcode-specific level including branded and own-label products. The data allows the frequency, magnitude and duration of sales to be analysed in greater detail than has hitherto been possible with UK data. The main results are: (i) sales are a key feature of aggregate price variation with around 40 per cent of price variation being accounted for by sales once price differences for each UPC level across the major retailers are accounted for; (ii) much of the price variation that is observed in the UK food retailing sector is accounted for by price differences between retailers; (iii) only a small proportion of price variation that is observed in UK food retailing is common across the major retailers suggesting that cost shocks originating at the manufacturing level is not one of the main sources of price variation in the UK; (iv) own-label products also exhibit considerable sales behaviour though this is less important than sales for branded goods; and (v) there is some evidence of coordination in the timing of sales across retailers insofar as the probability of a sale at the UPC level at a given retailer increases if the product is also on sale at another retailer.Sales, price variation, retail, Consumer/Household Economics, Demand and Price Analysis, L16, L66, Q13.,

The incidence and trade effects of protection Evidence for Malawi

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