**Table 3: Revenue Implications of an Economic Partnership Agreement (EPA) with the European Union**

|in millions of USD<br>**Country**<br>EP|**Tan**<br>A<br>Sen|**zania**<br>sitive list<br>exem|ptions cut<br>EPA|**Ken**<br><br>Sen|**ya**<br>sitive list<br>exem|ptions cut<br>EPA|**Ethi**<br><br>Sen|**opia**<br>sitive list<br>exem|ptions cut|
|---|---|---|---|---|---|---|---|---|---|
|Old imports|5802.8|5802.8|5802.8|10057.5|10057.5|10057.5|3589.7|3589.7|3589.7|
|New Import|5819.4|5805.5|5770.2|10093.3|10057.7|9984.0|3610.9|3589.8|3576.5|
|Change|16.6|2.7|‐32.7|35.8|0.2|‐73.5|21.2|0.2|‐13.2|
|% Change|0.3%|0.0%|‐0.6%|0.4%|0.1%|‐0.7%|0.6%|0.0%|‐0.4%|
|Old tariff revenue|270.3|270.3|270.3|443.0|443.0|443.0|291.7|291.7|291.7|
|New tariff revenue|231.4|264.7|318.6|357.2|420.3|537.8|241.8|275.6|305.6|
|Change|‐38.9|‐5.7|48.2|‐85.7|‐22.6|94.8|‐49.9|‐16.0|13.9|
|% Change|‐14.4%|‐2.2%|17.8%|‐19.4%|‐5.7%|21.4%|‐17.1%|‐5.5%|4.8%|
|Old excise revenue|294.4|294.4|294.4|525.3|525.3|525.3|68.9|68.9|68.9|
|New excise revenue|294.0|294.4|294.3|524.2|525.3|525.2|70.1|68.9|70.0|
|Change|‐0.4|0.0|‐0.1|‐1.1|‐0.1|‐0.1|1.2|0.0|1.1|
|% Change|‐0.1%|0.0%|0.0%|‐0.2%|0.0%|0.0%|1.7%|0.0%|1.6%|
|Old VAT revenue|528.5|528.5|528.5|810.3|810.3|810.3|297.1|297.1|297.1|
|New VAT revenue|525.3|528.3|528.6|803.7|809.1|803.4|293.8|296.3|295.5|
|Change|‐3.2|‐0.1|0.1|‐6.6|‐1.2|‐6.9|‐3.2|‐0.8|‐1.5|
|% Change|‐0.6%|0.0%|0.0%|‐0.8%|‐0.2%|‐0.9%|‐1.1%|‐0.3%|‐0.5%|
|Old total revenue|1093.2|1093.2|1093.2|1778.6|1778.6|1778.6|657.7|657.7|657.7|
|New total revenue|1050.8|1087.4|1141.4|1685.1|1754.7|1866.4|605.7|640.8|671.1|
|Change|‐42.4|‐5.8|48.2|‐93.5|‐23.9|87.8|‐52.0|‐16.8|13.4|
|% Change|‐3.9%|‐0.5%|4.4%|‐5.3%|‐1.5%|4.9%|‐7.9%|‐2.6%|2.0%|
|Old collected tariff rate|4.7%|4.7%|4.7%|4.4%|4.4%|4.4%|8.1%|8.1%|8.1%|
|New collected tariff rate|4.0%|4.6%|5.5%|3.5%|4.2%|5.4%|6.7%|7.8%|8.5%|

Table 3 contains simulation results for trade reform scenarios related to the implementation of the EPAs. We consider three countries for which EPAs are currently high on the policy agenda: Tanzania, Kenya and Ethiopia. For each of the three countries, the first column of the table considers an EPA scenario in which all tariffs on products from the EU are set to zero. As discussed earlier, countries are being allowed to exclude around 20 percent of their imports from the EU from liberalization. The revenue losses predicted in this first exercise should thus be seen as an upper bound on the likely impact of the agreement<sup>22</sup> .

As a result of removing tariffs on imports from the EU the average level of protection falls in all countries, with average import weighted collected tariff rates falling from 4.7 to 4.0 percent in Tanzania, from 4.4 to 4.1 percent in Kenya and from 8.1 to 6.7 percent in Ethiopia. All three countries loose more than 10% of tariff revenue due to the EPA which leads to overall trade tax revenue losses of 3.9 percent in Tanzania, 5.3 percent in Kenya and 7.9 percent in Ethiopia.

In the following, we chose Ethiopia as an example to consider the results of the simulation exercise in somewhat more detail. Table 4 presents some of the basic summary statistics for Ethiopian imports that TRIST automatically produces. The first row shows the share of each of the four main groups of import suppliers in Ethiopian imports. The EU accounts for just under a quarter of Ethiopian imports. COMESA countries, on the other hand, are relatively small suppliers of the Ethiopian market, with other countries contributing the vast majority of imports. The second row shows that the

> 22 Notice also that, in order not to convolute the analysis, we have chosen a specific set of elasticities here. In general, it would be useful to check for the robustness of the results to changes in the elasticity values.

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