Projected Economic Impacts of the New Partnership Agreement Between the EU and ACP States on the Senegalese Groundnut Sector

With the signing of the New Partnership Agreement (Cotonou Convention) between the European Union and the African, Caribbean, and Pacific States in June 2000, the trading relationship between Senegal and the European Union (EU) has taken a new direction. Under the new agreement, Senegal must decide by 2004 if it will enter into a Regional Economic Partnership Agreement (REPA) with the EU, similar to a free trade arrangement, or move to an enhanced form of the Generalized System of Preferences (GSP). Given the high percentage of Senegalese groundnut products that are exported to the European Union and the significance of the groundnut sector to the Senegalese economy, this study examines the economic impacts of both options on the Senegalese groundnut sector in conjunction with changes in development funding, infrastructural investments, and structural adjustment policies.

Overall, the study finds that the REPA option is the more beneficial for the Senegalese groundnut sector. This result stems partially from the ability of increases in development funding to offset any adverse economic impacts caused by the REPA. Though overall more harmful than a REPA, moving to an enhanced GSP does have the benefit of increasing groundnut (in-shell and shelled) exports by a significant amount. Thus, the Senegalese government must weigh the benefit of a boost in the confectionery sector against the adverse impact on producers caused by the GSP.

This study provides needed information for policy decisions by the Senegalese government, and a framework for future modeling efforts pertaining to the Senegalese groundnut sector.