Cape Verde in the ECOWAS : from free trade agreement to a customs union : a CGE analysis at the product level (HS6)

Abstract

This thesis aims to assess the impact on trade, GDP, and aggregate welfare of Cape Verde's full incorporation into ECOWAS. For simulation purposes, a Computed General Equilibrium (CGE) model was developed, whose particularity lies in the disaggregation of bilateral trade between Cape Verde and its trading partners of interest at the subheading level of the Harmonized System. This level of detail makes it possible to focus on those import-sensitive products or of export interest to Cape Verde, from which the greatest gains and/or losses associated with both the FTA and the CU will arise. The model calibration required a Social Accounting Matrix (SAM) for Cape Verde in 2017 as an input and, in addition, this information is complemented with bilateral trade and protection data from CEPII (BACI 2017, MacMap-HS6 2016). Two progressive scenarios were simulated, one involving full trade liberalization between Cape Verde and the rest of the ECOWAS members, and another in which the adoption of the ECOWAS CET was added to the previous scenario. Among the main results, we can say that both scenarios improve trade relations of Cape Verde with the rest of ECOWAS to the detriment of trade with the rest of the world, particularly under the CU scenario where the implementation of the CET implies tariff increases to some products modifying relative protection across products and partners. For total trade, while the FTA improves the TOT to Cape Verde, the CU scenario deteriorates them showing a greater increase in total imports than exports in value.

Keywords: FTA, CU, ECOWAS, Cape Verde, CET, CGE model.