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Preferential Trade Agreements and the Optimal Liberalisation of Agricultural Trade

Author

Listed:
  • 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.

Suggested Citation

  • Scott McDonald & Terrie Walmsley, 2004. "Preferential Trade Agreements and the Optimal Liberalisation of Agricultural Trade," Working Papers 2004010, The University of Sheffield, Department of Economics, revised Aug 2004.
  • Handle: RePEc:shf:wpaper:2004010
    as

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    File URL: http://www.shef.ac.uk/content/1/c6/03/91/71/SERP2004010.pdf
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    File URL: http://www.shef.ac.uk/content/1/c6/03/91/71/SERP2004010.pdf
    File Function: Revised version, 2004
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    References listed on IDEAS

    as
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    4. Jeffrey D. Lewis & Sherman Robinson & Karen Thierfelder, 2003. "Free Trade Agreements and the SADC Economies," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(2), pages 156-206, June.
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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 0407013, EconWPA.

    More about this item

    Keywords

    Fair trade agreement; GTAP; South Africa.;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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