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Preferential Trade Agreements and the Optimal Liberalisation of Agricultural Trade

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  • Scott McDonald

    ()
    (Department of Economics, The University of Sheffield)

  • Terrie Walmsley

Abstract

Recent years have seen a rapid growth in the number of preferential trade agreements (PTAs) between developed and developing economies. Typically however many of these PTAs only incorporate a partial liberalisation of food and agricultural trade by developed economies. This paper reports the results from simulations conducted using a global comparative static model CGE model that has been calibrated with data from the GTAP database (version 5). Using the EU RSA FTA as an example the results indicate that the optimal degree of food trade liberalisation by the EU is less than 100 percent, and declines appreciably after the optimum. Qualitatively similar results emerge for South Africa. However, the welfare gains for South Africa increase rapidly with the increasing liberalisation of EU food and agricultural trade, while the welfare gains for the EU increase slowly with the increasing liberalisation of South African food trade. These results indicate that bilateral trade negotiations between developing and developed countries may involve a complex bargaining process, wherein the payoffs from different strategies are neither necessarily intuitively obvious nor are they necessarily consistent with the full liberalisation of food trade by developed economies.

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Bibliographic Info

Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2004010.

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Length: 27 pages
Date of creation: Aug 2004
Date of revision: Aug 2004
Handle: RePEc:shf:wpaper:2004010

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Related research

Keywords: Fair trade agreement; GTAP; South Africa.;

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References

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  1. Hanslow, Kevin, 2000. "A General Welfare Decomposition for CGE Models," GTAP Technical Papers 498, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  2. Hamilton, Bob & Whalley, John, 1983. "Optimal tariff calculations in alternative trade models and some possible implications for current world trading arrangements," Journal of International Economics, Elsevier, Elsevier, vol. 15(3-4), pages 323-348, November.
  3. Lloyd, P.J. & MacLaren, D., 1998. "Measures of Trade Openness Using CGE Analysis," Department of Economics - Working Papers Series, The University of Melbourne 659, The University of Melbourne.
  4. Whalley, John, 1984. "The North-South Debate and the Terms of Trade: An Applied General Equilibrium Approach," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 224-34, May.
  5. Whalley, John, 1982. "An evaluation of the Tokyo Round trade agreement using general equilibrium computational methods," Journal of Policy Modeling, Elsevier, Elsevier, vol. 4(3), pages 341-361, November.
  6. Kilkenny, Maureen & Robinson, Sherman, 1990. "Computable General Equilibrium Analysis of Agricultural Liberalization: Factor Mobility and Macro Closure," Staff General Research Papers 11124, Iowa State University, Department of Economics.
  7. Deardorff, Alan V. & Stern, Robert M., 1981. "A disaggregated model of world production and trade: An estimate of the impact of the Tokyo Round," Journal of Policy Modeling, Elsevier, Elsevier, vol. 3(2), pages 127-152, May.
  8. Lewis, Jeffrey D. & Robinson, Sherman & Thierfelder, Karen, 2001. "Free trade agreements and the SADC economies," TMD discussion papers 80, International Food Policy Research Institute (IFPRI).
  9. Huff, Karen & Thomas W. Hertel, 2001. "Decomposing Welfare Changes in GTAP," GTAP Technical Papers 308, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  10. Brown, Drusilla K., 1987. "Tariffs, the terms of trade, and national product differentiation," Journal of Policy Modeling, Elsevier, Elsevier, vol. 9(3), pages 503-526.
  11. Krueger, Anne O & Schiff, Maurice & Valdes, Alberto, 1988. "Agricultural Incentives in Developing Countries: Measuring the Effect of Sectoral and Economywide Policies," World Bank Economic Review, World Bank Group, World Bank Group, vol. 2(3), pages 255-71, September.
  12. Walmsley, Terrie & Scott McDonald, 2003. "Bilateral Free Trade Agreements and Customs Unions: The Impact of the EU Republic of South Africa Free Trade Agreement on Botswana," GTAP Working Papers 1644, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  13. Hamilton, Robert W & Whalley, John, 1985. "Geographically Discriminatory Trade Arrangements," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 446-55, August.
  14. John Whalley, 1984. "Trade Liberalization among Major World Trading Areas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262231204, December.
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Cited by:
  1. Tom Achterbosch & Hakim Ben Hammouda & Patrick Osakwe & Frank van Tongeren, 2004. "Trade liberalisation under the Doha Development Agenda Options and consequences for Africa," International Trade, EconWPA 0407013, EconWPA.

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