SACU-EU FTASACU-EU FTARemoval of EU tariff barriers vis a vis Removal of EU tariff barriers vis a vis

BotswanaBotswana

Jonathan Munemo and David Kay

OutlineOutline

MotivationMotivation South Africa-EU and SACU-EU South Africa-EU and SACU-EU

liberalizations comparedliberalizations compared• ClosureClosure• ShocksShocks

ResultsResults ConclusionsConclusions

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

ClosureClosureNo change from SA-EU caseNo change from SA-EU case

• Fixed trade balanceFixed trade balance• Unemployment allowed (Africa,ROW)Unemployment allowed (Africa,ROW)• Mining (diamond) world price and Mining (diamond) world price and quantity of Botswana’s exports are quantity of Botswana’s exports are fixedfixed•Quantity of Botswana’s meat exports Quantity of Botswana’s meat exports to EU are fixedto EU are fixed•Most agricultural/crop exports from Most agricultural/crop exports from Botswana are fixedBotswana are fixed

ExperimentExperiment

EU liberalizes imports from Botswana EU liberalizes imports from Botswana in the same degree that it does for in the same degree that it does for SA (the rest of SACU)SA (the rest of SACU)

Method:we replaced set for Rest of Method:we replaced set for Rest of SACU with SACU in all shocksSACU with SACU in all shocks

Results - WelfareResults - Welfare

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

-50 -40 -30 -20 -10 0 10 20 30 40

1 grain2 veg

3 oagric4 lstoc5 mine6 meat7 milk8 sug

9 ofood10 bev11 text

12 wood13 pchem

14 metal15 mprod

16 vtran17 oman

18 util19 cons20 trad20 serv

SACU-EU

SA-EU

Botswana’s Changes in Value AddedBotswana’s Changes in Value Added

SA and SACU ExperimentsSA and SACU Experiments

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

SA SACU

ConclusionsConclusions Botswana is not as badly harmed in terms of Botswana is not as badly harmed in terms of

welfare when EU tariffs are reduced (inclusion in welfare when EU tariffs are reduced (inclusion in the EU-SACU FTA)the EU-SACU FTA)

Most of this improvement is due to better terms Most of this improvement is due to better terms of trade effectsof trade effects

Botswana’s exports of livestock and textiles Botswana’s exports of livestock and textiles increase, but from a small base (minor import increase, but from a small base (minor import changes only)changes only)

Since minerals (diamonds) are the only sector in Since minerals (diamonds) are the only sector in which Botswana’s exports are large, and diamond which Botswana’s exports are large, and diamond exports are fixed, Botswana has few exports are fixed, Botswana has few opportunities to expand exports except in small opportunities to expand exports except in small sectorssectors