Financing EPA: The fiscal impact of EPA on ECOWAS

Abstract: The European Union (EU) and the Africa, Caribbean and Pacific (ACP) countries have been negotiating Economic Partnership Agreements (EPAs) since 2002. The EPAs are intend to replace present agreements which due to its discriminatory element against other developing countries, not are compatible with the WTO regulations. The liberalisation of the EPAs has triggered some concerns regarding the risk of large decline in tariff revenues and the negotiations proved to be more complicated than predicted. The purpose of this study is to determine the Economic Community of West African States (ECOWAS) countries reliance on tariff revenues in order to evaluate the EPA negotiations. An examination on whether the ECOWAS countries’ present level of tariff revenues impacts their willingness to sign the EPAs and thus affecting the negotiations. Observations show a significant reliance on tariff revenues for ECOWAS countries, with total revenues accounted for 53 percent on average. Tariff revenues from the EU play a significant role and are observed to contribute with 18 percent out of the total government revenue. The main concerns for ECOWAS countries are their lack of institutional capabilities to mitigate the loss in tariff revenues. This will most likely make the ECOWAS a bit reluctant to sign an EPA, since their significant reliance on tariff revenues can lead to a substantial decline in government revenues. Further, other characteristics are also likely to affect the ECOWAS willingness to sign the EPAs due to their concerns of losing tariff revenues. These concerns are the possible trade diversion effect, undiversified economical structure as well as the possibility to trade under the EBA. The significant reliance on tariff revenues is most likely to affect the members of ECOWAS’ willingness to sign the EPA and thus also the negotiations.