Revenue, Trade and Welfare Effects Of the Comesa Free Trade Agreement on the Democratic Republic Of Congo

Abstract 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 DRC. The study adopts a partial equilibrium model 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 and consumer welfare gain. Moreover, The WITS-SMART simulation results indicate that 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 due to the implementation of zero per cent tarrif rate on imports duty from the COMESA trading partners. Finally, the simultation results indicate that trade will be diverted from more efficient and low cost non-member states to high cost suppliers from the COMESA region. These findings shed light on policy implications.