Cameroon’s Bilateral Economic Partnership Agreement: A Microsimulation Approach

Abstract

This article studies the impact of the bilateral economic partnership agreement between Cameroon and the European Union on microeconomic indicators including poverty and inequality. The analyses are based on a dynamic microsimulation model on which the scenario of the complete cancellation of customs tariffs on imports of the EU origin products is applied. This is based on a social accounting matrix that we have implemented for 2016 and the ECAM 4 household data survey collected in 2014. The results show that: The Cameroon’s EPA on the macroeconomic aspect leads to an increase of imports against a decrease of exports and production; the increasing of imports is going through a decreasing of market price for domestic market against an increase of imported price. This leads to an elevation of the exchange rate and then discourages the imports of agricultural products; contrary, there is a decreasing of industrial price for imported products on domestic market. This break the local industries efforts since their indirect taxes are increasing. There are also GDP loses of about 0.14% per year. On the microeconomic aspect, it undermines and even exacerbates poverty reduction efforts through indicators of incidence, depth and severity of poverty. This impact increases from 2016 to 2040, period of our simulations, and is more pronounced in rural than in urban areas. For inequality, our results show that the agreement leads to an increase in inequalities ranging from 0.43 to 0.46 during the period 2016-2023. However, the impact is vanished between the period 2033-2040.