The present research attempts to assess the likely revenue, trade and welfare implications of the Common Market for Eastern and Southern Africa (COMESA) Free Trade Agreement (FTA) on the Democratic Republic of Congo (DRC). The study adopts a partial equilibrium model based on the World Integrated Trade Solution 2010 database and the Software for Market Analysis and Restrictions on Trade (WITS-SMART) as the methodological approach. The findings of the research reveal that the COMESA FTA will be beneficial to the DRC in terms of an increase in exports of US$371.57 million and consumer welfare gain amounting to US$28.49 million. Moreover, The WITS-SMART simulation results indicate that around US$322.10 million of trade will be created in the DRC as a result of the COMESA FTA. Notwithstanding the fact that trade creation will have a positive effect on welfare, as the Congolese consumers would benefit from lower prices, some local industries in the DRC may be threaten of closure due to the lack of competitiveness. In addition, the simultation results show that the country will experience a huge fiscal revenue loss amounting to US$107.01 million due to the implementation of zero per cent tarrif rate on imports duty from the COMESA trading partners. Finally, the simultation results indicate that an equivalent value of US$49.47 million of trade will be diverted from more efficient and low cost non-member states to high cost suppliers from the COMESA region. In light of these results, the research recommends that the DRC’s government needs to come up with a strategic plan in order to protect the national industry that would be negatively affected by the trade-creation effect. In order to mitigate the expected revenue loss, the implementation of the COMESA FTA in the DRC should be accompanied by fiscal reforms to improve the tax-collection system from sales or value-added taxes (VAT) and domestic excise. Regarding the trade-diversion effect, the inefficient producers from the COMESA region could be displaced through building new capacities in short, medium and long term based on comparative advantage in order to address supply constraints in these sectors affected by trade diversion.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nmmu/vital:27493 |
| Date | January 2017 |
| Creators | Ndungo, Lusenge Patrick |
| Publisher | Nelson Mandela University, Faculty of Business and Economic Sciences |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis, Masters, MCom |
| Format | x, 67 leaves, pdf |
| Rights | Nelson Mandela University |
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