Bilateral free trade agreements and customs unions: The impact of the EU Republic of South Africa free trade agreement on Botswana

The EU has indicated that after 2008 its trade relationships with developing countries will be dominated by the development of preferential trade agreements. Although not a consequence of the Cotonou Agreement, the free trade agreement between the EU and the Republic of South Africa (EU RSA FTA) was clearly one of the first fruits of this approach to trade relationships. However, there is no evidence that the design of the EU RSA FTA incorporated a comprehensive general equilibrium evaluation of the agreement for either the signatories or the other southern African nations. The analyses reported here indicate that while the EU RSA FTA may substantially benefit the signatories, there are appreciable negative impacts for other states, especially the Republic of South Africa's immediate neighbours. Moreover, the analyses indicate that the structural adjustments for African economies signalled by the FTA are substantial, which implies that there will be substantial economic costs associated with the FTA.