Revenue and Welfare Implications for Rwanda and Uganda from an Economic Partnership Agreement with the EU

At the end of the Cotonou Partnership Agreement, its members agreed to put in place a WTO-compatible free trade area. WTO-compatibility implies that 90% of the bilateral trade between the European Union (EU) and the Africa-Caribbean-Pacific (ACP) countries would have to be duty free and quota free within a reasonable (unspecified) period (e.g., 80% duty-free for ACP partners and 100% for the EU). The East African Community (EAC) negotiating group is in the process of finalizing its Economic Partnership Agreement (EPA) with the EU. The EU accounts for around 15% of Rwanda’s and for 14% of Uganda’s imports, and the share of the EU import in tariff revenue is around 14% for these two countries. This paper explores the effects of an EPA on Rwanda’s revenues, benefits to consumers and producers, net welfare effects and probable dynamic benefits.