CGE Modelling and Trade Policy: Reassessing The Agricultural Bias

Abstract

We analyse the economic impact of common trade policies within a computable general equilibrium (CGE) framework, focussing on the implications for the agricultural terms of trade. The Mozambican CGE-model used is characterised by (i) high foreign capital inflows, (ii) high investment expenditures facilitated by high capital inflows, (iii) high marketing margins, (iv) an important traded service sector, and (v) an almost non-traded agricultural sector. Under such circumstances, standard partial equilibrium conclusions about the existence of a trade policy induced bias against agriculture are challenged.