Analysing the Welfare Impacts of an RTA Between China and Nigeria

Abstract

Regional trade agreement is a tool for economic integration between two or more nations. It takes several forms and there exists different types of agreements depending of its purpose. Just like any trade blocks it has advantages and shortfalls especially if the trading partners are not natural partners. Regional Trade Agreements (otherwise known as RTA) yield welfare benefits in form of consumer surplus, trade creation, revenue and income to the trading partners This paper analyses the welfare impacts of a possible RTA between Nigeria and China. There is huge trade flow between the two countries The major commodities traded and covered in this paper include fuels, machineries and transport. equipment and chemicals. Using data sourced mainly from the World Integrated Trade Solutions (Comtrade, WTO/IDB, WTO/CTS) the paper uses descriptive statistics in measuring the welfare impacts of the agreement The paper reveals that Nigeria possess a Revealed Comparative Advantage (RCA) of export of fuels to China while China possess an RCA of textile, clothing and foot wears export. Its further reveals that if the two economies could focus on trade in the goods with highest RCA, trade will be created and welfare achieved. More so, the RTA leads to deep economic integration. The paper recommends Nigeria and China should hasten the signing of RTA agreement for mutual benefits.