Abstract
Summary This article analyzes the welfare effects of multilateral versus bilateral trade liberalization between Switzerland and the EU in the meat sector. A multi-market multi-region partial equilibrium model is used. The removal of tariffs and tariff rate quotas between Switzerland and the EU results in noticeable net welfare gains for Switzerland. The impacts on the EU and on the rest of the world are minimal. However, multilateral trade liberalization is still first best.
Highlights
The Swiss government has in past years increased its activities to sign bilateral free trade agreements (FTA)
The most favored nation (MFN) clause in Article I of the General Agreement on Tariffs and Trade (GATT) forbids member countries from pursuing discriminatory trade policies against one another. Preferential trade agreements such as FTAs or customs unions, which are a deviation from the MFN rule, are accommodated by Article XXIV GATT
The choice of a partial equilibrium model is motivated by the fact that very specific changes in trade policies on the markets for the four most important categories of meat are of interest
Summary
The Swiss government has in past years increased its activities to sign bilateral free trade agreements (FTA). This article seeks to analyze the welfare effects of trade liberalization of the Swiss meat market with the EU. The focus is on the meat sector only because it is besides milk the most important branch of Swiss agriculture. It is the most sensitive market; the majority of imports to Switzerland originate from outside the EU. A multi-market multi-product trade policy model is developed to measure the welfare effects on the parties involved. The organization of the paper is as follows: Section 2 discusses different concepts to measure welfare effects of FTAs and the interpretation of Article XXIV of the General Agreement on Tariffs and Trade (GATT).
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