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A Comparative Analysis of the EU-Morocco FTA vs. Multilateral Liberalization

  • Elbehri, Aziz
  • Hertel, Thomas

An applied general equilibrium model with oligopoly and scale economies, based on detailed plant-level data, is used to contrast the impacts of the Morocco-EU free trade area (FTA) to multilateral trade liberalization on Morocco’s economy. Simulation results show that the FTA agreement is likely to have adverse effects on Morocco due to: (a) deteriorating terms of trade, (b) reductions in output per firm in industries dominated by scale economies, (c) diversion of imports away from non-EU suppliers, and (d) potentially adverse effects on the aggregate demand for labor. We contrast this FTA with a multilateral liberalization scenario along the lines of those proposed under the Doha Development Round and find this more beneficial to Morocco, with overall welfare gains due to: (a) lesser terms of trade losses, (b) positive scale effects, (c) non-preferential liberalization of imports into Morocco, and (d) a positive impact on aggregate labor demand. We conclude that Morocco would be better off pursuing trade liberalization in the multilateral arena.

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Paper provided by Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University in its series GTAP Working Papers with number 1643.

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Date of creation: 2004
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Handle: RePEc:gta:workpp:1643
Note: GTAP Working Paper No. 30
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