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Preferential Trade Agreements and the Optimal Liberalisation of Agricultural Trade

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Author Info
Scott McDonald () (Department of Economics, The University of Sheffield)
Terrie Walmsley

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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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File URL: http://www.shef.ac.uk/content/1/c6/03/91/71/SERP2004010.pdf
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Publisher 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.;

Find related papers by JEL classification:
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models
F15 - International Economics - - Trade - - - Economic Integration
O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. 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. [Downloadable!] (restricted)
  2. 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. [Downloadable!]
  3. Whalley, John, 1982. "An evaluation of the Tokyo Round trade agreement using general equilibrium computational methods," Journal of Policy Modeling, Elsevier, vol. 4(3), pages 341-361, November. [Downloadable!] (restricted)
  4. Brown, Drusilla K., 1987. "Tariffs, the terms of trade, and national product differentiation," Journal of Policy Modeling, Elsevier, vol. 9(3), pages 503-526. [Downloadable!] (restricted)
  5. John Whalley, 1984. "Trade Liberalization among Major World Trading Areas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262231204.
  6. 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). [Downloadable!]
    Other versions:
  7. 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, vol. 15(3-4), pages 323-348, November. [Downloadable!] (restricted)
  8. 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, vol. 3(2), pages 127-152, May. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
  10. 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. [Downloadable!]
  11. Kilkenny, Maureen & Robinson, Sherman, 2003. "Computable General Equilibrium Analysis of Agricultural Liberalization: Factor Mobility and Macro Closure," Staff General Research Papers 11124, Iowa State University, Department of Economics.
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  12. Lloyd, P. J. & MacLaren, D., 2002. "Measures of trade openness using CGE analysis," Journal of Policy Modeling, Elsevier, vol. 24(1), pages 67-81, March. [Downloadable!] (restricted)
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  13. 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. [Downloadable!]
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  14. 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, Oxford University Press, vol. 2(3), pages 255-71, September.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Achterbosch, T.J. & ben Hammouda, H. & Osakwe, P.N. & van Tongeren, F.W., 2004. "Trade Liberalisation Under The Doha Development Agenda; Options And Consequences For Africa," Report Series 29104, Agricultural Economics Research Institute. [Downloadable!]
    Other versions:
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