Currently, the European Union is negotiating an free trade agreement, called Economic Partnership Agreement (EPA), with Caribbean countries as part of the Cotonou Agreement between the European Union and African, Caribbean and Pacific countries. The paper empirically assesses the impact of the proposed EPA on trade flows and government revenue for Caribbean countries. The results indicate that the decline in import duties due to the preferential tariff elimination might be of some cause for concern in a number of countries, and that complementary fiscal and economic policies have to be implemented before or at the time the EPA comes into force.

JEL classification: F15, O24, O54