Munich Personal RePEc Archive

Revenue, Welfare and Trade Effects of European Union Free Trade Agreement on South Africa

GUEI, KORE MARC ANTOINE (2017): Revenue, Welfare and Trade Effects of European Union Free Trade Agreement on South Africa. Published in: South African Journal of Economic and Management Sciences , Vol. 20, No. 1 (25 October 2017)

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Abstract

The study used the partial equilibrium WITS-SMART Simulation Model to assess the impact of liberalization under the Trade Development and Cooperation Agreement (TDCA) of a free trade area between the EU and South Africa. The findings of the study reveal that total trade effects in South Africa are likely to surge by US$1.036 billion with a total welfare valued at US$134 million. Dismantling tariffs on all EU goods would be beneficial to consumers through net trade creation. Total trade creation would be US$782 million. However, South African producers are likely to contribute a trade diversion of US$254 million which has a negative impact on consumer welfare. The country might also experience a revenue loss amounting to US$562 million due to the removal of tariffs. On trade, the country’s export and import to the EU is expected to increase by US$12.419 million and US$1.266 million respectively. To mitigate revenue loss, the country should try to diversify its current tax base.

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