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SACU-EU FTA Removal of EU tariff barriers vis a vis Botswana

SACU-EU FTA Removal of EU tariff barriers vis a vis Botswana. Jonathan Munemo and David Kay. Outline. Motivation South Africa-EU and SACU-EU liberalizations compared Closure Shocks Results Conclusions. Motivation.

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SACU-EU FTA Removal of EU tariff barriers vis a vis Botswana

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  1. SACU-EU FTARemoval of EU tariff barriers vis a vis Botswana Jonathan Munemo and David Kay

  2. Outline • Motivation • South Africa-EU and SACU-EU liberalizations compared • Closure • Shocks • Results • Conclusions

  3. Motivation EU could negotiate FTA inclusive of all SACU countries under Economic Partnership Agreements (EPAs) It is useful to evaluate the potential trade and welfare effects to see whether the impacts on Botswana and the rest of SACU would be significant

  4. Closure No change from SA-EU case Fixed trade balance Unemployment allowed (Africa,ROW) Mining (diamond) world price and quantity of Botswana’s exports are fixed Quantity of Botswana’s meat exports to EU are fixed Most agricultural/crop exports from Botswana are fixed

  5. Experiment • EU liberalizes imports from Botswana in the same degree that it does for SA (the rest of SACU) • Method:we replaced set for Rest of SACU with SACU in all shocks

  6. Results - Welfare

  7. Botswana’s Change in Exports (qxw),SA and SACU Experiments

  8. Botswana’s Changes in Value AddedSA and SACU Experiments

  9. Conclusions • Botswana is not as badly harmed in terms of welfare when EU tariffs are reduced (inclusion in the EU-SACU FTA) • Most of this improvement is due to better terms of trade effects • Botswana’s exports of livestock and textiles increase, but from a small base (minor import changes only) • Since minerals (diamonds) are the only sector in which Botswana’s exports are large, and diamond exports are fixed, Botswana has few opportunities to expand exports except in small sectors

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