Tanzania is at a crossroad, either to sign or not to sign the EU–ECA economic partnership agreement (EPA) deal. Fear of the unknown (potential losses) and uncertain benefits continue to delay the signing, ratification, and implementation of trade and investment agreements in many countries, hampering meaningful regional and global integration.
Applying a suitably calibrated and empirically tested partial equilibrium framework, this study examines the trade, revenue, and welfare effects of Tanzania signing, ratifying, and implementing the EU–EAC EPA deal. Focusing mainly on the products for which the EU is the dominant supplier, the results suggest that EPA deal will increase the imports from EU markets by 4% under full and 3 % under partial liberalization (the effects more than double when we allow for all products). However, the partial equilibrium analysis shows that this happens at the expense of short-run adjustment costs in terms of revenue and welfare loss. The revenue loss as a percentage of the total import duty revenue under full liberation (allowing for current imports, consumption and trade creation, and diversion effects) is expected to be 23 % in 2020; which is equivalent to 2% of the total revenue, to 1% of total government budget and to 0.1 % as proportion to GDP.
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