Impact of the Economic Partnership Agreement on Poverty in Mali: A dynamic CGE model analysis

Kofi Nouve, Cristina Rampulla and Charles Vellutini   
ECOPA Working Paper 10, March 2008

The Economic Partnership Agreement (EPA) between the Economic Community of West African States (ECOWAS) and the EU will lead to the elimination of tariffs on ECOWAS imports originating in the EU. Through its impacts on production, consumption, private and public incomes, the EPA has the potential to change poverty dynamics in Mali. This study measures the impact of the EPA on Mali's welfare and poverty indicators using a dynamic Computable General Equilibrium model representative of the Malian economy. Several scenarios are simulated and important lessons emerge from the analysis. First, a full liberalization of imports between EU and ECOWAS in 2008 would have resulted in a 7-8% rise in household welfare, as compared to the baseline welfare in the absence of the EPA, and would have reduced poverty incidence by 1.2 percentage points. Secondly, using a more realistic scenario, when imports are liberalised over twelve years, welfare gains would amount to 3-4% and gains in poverty reduction would be 0.4%. Thirdly, the largest gains would come from an EPA scenario which extends the common market of the West African Economic and Monetary Union to EU and ECOWAS. Finally, despite its expected gains, it is useful to stress that EPA’s contribution to poverty reduction in Mali remains negligible compared to the millennium development goal to halve poverty incidence by 2015.