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Abstract
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.