HWWI Research Paper

The Economic Partnership Agreements (EPAs) between the group of African, Caribbean and Pacific (ACP) countries and the European Union could serve as an opportunity to accelerate global and regional trade integration of ACP countries. Moreover, the European Commission intends to use EPAs as a tool for development and the eradication of poverty in ACP countries. To achieve their potential development, however, there are a number of preconditions in ACP countries to be fulfilled. This paper argues that institutional quality plays a key role in a successful trade liberalisation. In fact, only countries with high-quality institutions, partly in the form of good government regulations, are likely to benefit from trade. Unfortunately, the vast majority of African ACP countries have excessive regulations that hinder them from taking advantage of trade. For the necessary institutional reforms to resolve this problem, we will discuss a number of important issues that have to be addressed to enable ACP countries to take full advantage of EPAs. JEL Classification: F15, O17, P48