Full Trade Liberalization Research Articles

The Farsighted Stability of Global Trade Policy Arrangements

In this paper, we study and compare the stability of trade policy arrangements in two different regulatory scenarios, one with and one without Preferential Trade Agreements (PTAs), i.e. current vs. modified WTO rules. Unlike the existing literature, our paper considers an extensive choice set of trade constellations, containing both available PTAs, Customs Unions (CUs) and Free Trade Agreements (FTAs), as well as Multilateral Trade Agreements (MTAs), while assuming unlimited farsightedness of the negotiating parties. With symmetric countries and under both the current and the modified WTO rules, the Global Free Trade (GFT) regime emerges as the unique stable outcome. In the case of asymmetry, the results are driven by the relative size of the countries. If the world is in the vicinity of symmetry and two out of three countries are close to identical while relatively smaller than the other one, the area where the GFT regime is stable increases when prohibiting PTAs. However, when two similar countries are relatively larger, the availability of PTAs is conducive to the stability of the GFT regime. Finally, if the world is further away from symmetry, full trade liberalization is not attainable at all and an area where the Most-Favoured-Nation (MFN) regime is stable appears in the scenario without PTAs. Thus, the direction of the effect of PTAs on trade liberalization depends on the degree of asymmetry among countries.

Is there a role for trade liberalization in mitigating the impacts of climate change on agriculture?

Using a computable general equilibrium framework, this paper uses Sri Lanka and Bangladesh as case studies in examining the associated macroeconomic and sectoral impacts under two different climate change scenarios. Our results indicate that a nation’s welfare deteriorates due to technical efficiency losses from climate change. Neither unilateral nor regional trade liberalization as a mitigating option improves welfare in these countries. For Sri Lanka, global full trade liberalization of all commodities is the optimum policy with some welfare gains. For Bangladesh on the other hand, regional partial agricultural trade liberalization is the optimum option with the least welfare deterioration. These results show that under climate change, countries within South Asia should respond differently to climate-induced crop productivity changes and no one optimum policy fits all.

The Transboundary Impacts of Trade Liberalization and Climate Change on the Nile Basin Economies and Water Resource Availability

A multi-country, multi-sector computable general equilibrium (CGE) model is used for the first time to evaluate the economic and water resource availability effects of trade liberalization (removal of import tariffs) and facilitation (reducing non-tariff barriers) under climate change in the Nile Basin. The analysis uses the GTAP 9 Database and the GTAP-W model that distinguishes between rainfed and irrigated agriculture and implements water as a factor of production directly substitutable in the production process of irrigated agriculture. A full trade liberalization and improved trade facilitation scenario is considered with and without climate change. The study reveals that trade liberalization and facilitation generates substantial economic benefits and enhances economic growth and welfare in the Nile basin. The effect of instituting a free trade policy on water savings is found to be limited, while climate change improves water supply and hence irrigation water use, enhancing economic growth and welfare in the basin.

Addressing climate change cause and effect on land cover and land use in South Asia

This paper evaluates the role of trade liberalization and agricultural intensification in mitigating climate change cause and effects on land use and emissions using a computable general equilibrium model. Our results indicate that cropland expansion triggered by climate-induced crop productivity changes results in deforestation and increases emissions in South Asia and globally. Global full trade liberalization on all goods is the optimum policy for South Asia despite significant global deforestation, but for the world, unilateral partial trade liberalization on all goods is a more appropriate policy while ensuring a considerable emissions reduction for South Asia. These results indicate that mitigation responses to climate change are location specific and no one trade policy is suitable at the regional and global levels. Lastly, agricultural intensification by improving productivity growth is the best strategy in land-based emissions mitigation, thereby avoiding the transformation of forest and pasture lands for agricultural cultivation both at regional and global levels.

The Farsighted Stability of Global Trade Policy Arrangements

In this paper, we study and compare the stability of trade policy arrangements in two different regulatory scenarios, one with and one without Preferential Trade Agreements (PTAs), i.e. current vs. modified WTO rules. Unlike the existing literature, our paper considers an extensive choice set of trade constellations, containing both available PTAs, Customs Unions (CUs) and Free Trade Agreements (FTAs), as well as Multilateral Trade Agreements (MTAs), while assuming unlimited farsightedness of the negotiating parties. With symmetric countries and under both the current and the modified WTO rules, the Global Free Trade (GFT) regime emerges as the unique stable outcome. In the case of asymmetry, the results are driven by the relative size of the countries. If the world is in the vicinity of symmetry and two out of three countries are close to identical while relatively smaller than the other one, the area where the GFT regime is stable increases when prohibiting PTAs. However, when two similar countries are relatively larger, the availability of PTAs is conducive to the stability of the GFT regime. Finally, if the world is further away from symmetry, full trade liberalization is not attainable at all and an area where the Most-Favoured-Nation (MFN) regime is stable appears in the scenario without PTAs. Thus, the direction of the effect of PTAs on trade liberalization depends on the degree of asymmetry among countries.

Should agriculture be exempt from trade policy reforms in South Asia?

Contracting parties to the Agreement on South Asian Free Trade Area (SAFTA) are committed to trade liberalization within a fixed time frame. Most contracting parties have kept agriculture out of their tariff liberalization commitments. A key question therefore is: should agriculture receive dispensation given the sector’s important contribution to South Asia’s economic structure? An enhanced multi-household framework within a multi-country computable general equilibrium (CGE) approach was used to assess the impacts on trade flows, government fiscal revenues and income distribution among households in countries that are contracting parties to SAFTA, assuming full trade liberalization and trade liberalization with the protection of the agricultural sector. The results indicate that, although both policies would facilitate economic growth and lead to a reduction in income disparity among household groups in all South Asian countries, the overall welfare gains would be greater under full trade liberalization. Hence, the removal of agricultural sector tariffs should be an important consideration in future SAFTA discussions; such a step would be a principal means for strengthening intraregional trade.

Enhancing Pakistan’s Agricultural Sector Exports to India

The study aims to identify potentially competitive agricultural products or product clusters for exports to India, probable challenges at the border, behind the border and beyond the border to exploit export opportunities. The study also sets out the defensive strategy to identify vulnerable agricultural product or clusters susceptible to import surges; and suggests recommendation for policy reform to make the vulnerable sector competitive in long run and stave off unfair trade practices during the transition phase. The study employs analytical methodology using the ‘Summary Indicators of Potential’ (SIP) namely ‘Relative Growth Rates of Merchandise Exports and Imports’; ‘Revealed Comparative Advantage (RCA)’; ‘Trade Similarity Index’; ‘Trade Specialization Index’; ‘Trade Intensity Index’; ‘Index of Intra-industry Trade’ and ‘Trade Complementarity Index’ at a dis-aggregated 6 digit level of the Harmonized Systems of Product Classification. Stakeholders’ survey questionnaire, Public Sector Dialogue and Consultation process have also been integral part of this research. The major findings of the study are as under: • The comparison of top importing agricultural products by India and Pakistan reveal import basket similarity as both tend to import vegetable oil crudes (Palm-oil, soya bean oil and sunflower oil), oil hydrogenated, cotton lint, sugar, tea, pulses, lentils, rubber and wheat. However, there is dissimilarity of import items also: India tends to import beans (dry), dry and fresh fruits, silk raw, dates and alcohol beverages; whereas, Pakistan tends to import chick peas, areca nuts (betel nut), jute, garlic, ginger, and food preparations items. While comparative analysis of top export products by India and Pakistan reveal that both are close competitors in rice, cotton lint, buffalo meat, sugar, vegetable products, sesame seed and mangoes. • Pakistan has export competitive edge in tangerines, mandarins, potatoes, molasses, dates, goat and sheep meat, frozen vegetables and dried fruits whereas India has export competitive edge in tobacco (unmanufactured), tea, oil of castor beans, coffee (green), chillies and peppers (dry) and oil essentials. Pakistan can export dates, fresh and dry fruits and wool to India. Similarly, India can export tea, garlic, ginger and vegetables especially during seasonal shortages. The study recommends that managed trade liberation in agricultural trade with India is more prudent policy option for Pakistan. Before transition to full trade liberalization in agricultural sector, the study suggests import quota regime (IQ) under the Pakistan Safeguard Ordinance 2002. The quantum of IQ may be fixed on the basis of average value of last five years import figures in each of tariff line in the agriculture sector. Non-transferable import quota may be awarded on first-come first serve basis on payment of 5 %of the value of quota. On exhaustion of Import Quota, MFN bound rate tariff will progressively be applied. For example, a 10 %increase in imports above IQ limits would entail an increase of MFN applied tariff by 10 %and so on. During this transitory protective regime, the study also recommends addressing structural issues in agricultural competitiveness like focusing on agricultural productivity, developing yield improvement and disease resistant varieties, improving irrigation and water usage efficiency and reducing water wastage, controlling water logging and salinity; improving ASC (Agricultural Supply Chain) and reducing the produce wastages during the sowing, harvesting, storage (cool chain) , and improving infrastructure for packaging and preservation and transportation (reefer and containerized cargo). The other policy recommendations include restructuring of the National Tariff Commission; incentives for cluster farming through legislative cover to facilitate the farmers to join a agri-cluster and get support for agricultural/ farming extension services, credit; and to initiate the Trade Adjustment schemes especially for small agricultural farms and farmers who may become noncompetitive due to trade liberalization with India. The research finding support the trade liberalization efforts with India in agricultural sector as counterfactual policy of insulating domestic agriculture from import competition would be poverty and mal-nutrition inducing for Pakistani consumers especially for those in lower two quintiles of population (poorest 40 %) who spend almost 50-70 % of their income on food.

Haiti's Post-Earthquake Transformation: What of Agriculture and Rural Development?

AbstractThis article examines post-earthquake aid to agriculture and food security in Haiti. It argues that the much-heralded increase in assistance to rural development is likely to fall short of expectations because it comes with a superficial rebranding of a not very useful approach. Macroeconomic policy content remains largely nonnegotiable, full trade liberalization is still favored, and a reliance on free market forces that tend to favor relatively well off, export-oriented farmers still lingers. Furthermore, conflicting approaches to addressing food insecurity highlight an already severe democratic deficit. It appears that the contours of agricultural and food security policy, and hence the destinies of rural Haitians, stand to be shaped from the outside yet again. While new aid resources may offer some modest relief, they hold out only limited opportunities for addressing the profound deprivations and disparities that afflict the rural hinterland.

Trans Pacific Stategic Economic Partnership With Japan, South Korea and China Integrate: General Equilibrium Approach

Problem statement: The Trans-Pacific Strategic Economic Partnership Agreement (TPP) is a high standard and broad based Free Trade Agreement that aims to integrate the economies of the Asia-Pacific region. Recently, the US is pressing Japan to join the group. Japan is considering joining the TPP because of the dual considerations of its own economy and the political situation in East Asia. While, South Korea has yet to agree to join the TPP over concerns that their agriculture will be seriously affected. In addition, Japan and the US are employing both military and economic strategies to isolate China. However, China has contacted those already participating in TPP negotiations and shares some common views with Japan and South Korea on agricultural issues. Therefore, in this study, we attempt to assess the possibility of reaching full trade liberalization or trade creation through the TPP with the addition of new member countries including Japan, Korea and China. Approach: A Computable General Equilibrium (CGE) or Global Trade Analysis Project (GTAP) model is used to evaluate the economic effects of a TPP agreement among TPP countries with trade creation. In this study, seven cases were created to distinguish the welfare and trade effects of policy changes. Results: We found that the new member countries among TPP countries with East Asia countries including Japan, South Korea and China would benefit from the FTA among member countries. They gain much more from the real GDP and welfare than the TPP agreement, particularly Vietnam and Korea. This is particularly a fact for trade in the meat product sectors between TPP with Japan, Korea and China, which most of them gain benefit. Conclusion: Therefore, the TPP would benefit both economies and welfare with the eliminate tariff rate.

Effects of Serbian accession to the European Union

In this article, the global simulation model (GSIM) of Joseph F. Francois and Keith H. Hall (2009) for analyzing global, regional, and unilateral trade policy changes was applied to Serbia. This was to measure the effects of full trade liberalization with the EU after Serbian accession to the EU. As anticipated, most of the changes in welfare after full liberalization of trade between Serbia and EU can be expected in sectors where Serbia has specialized; protection against imports from the EU is strong. However, losses could also occur in sectors that currently face strong protection against the rest of the world and this protection is lost after EU accession. Trade liberalization will lead to a substantial loss of tariff revenues. Reduced consumer prices might, on the one hand increase consumer surplus but on the other hand decrease producer surplus and output in certain industries.

Agricultural Trade Liberalization, Productivity Gain, and Poverty Alleviation: A General Equilibrium Analysis

Computable General Equilibrium (CGE) models have gained continuously in popularity as an empirical tool for assessing the impact of trade liberalization on agricultural growth, poverty, and income distribution. However, conventional models ignore the channels linking technical change in agriculture, trade openness, and poverty. This study seeks to incorporate econometric evidence of these linkages into a CGE model to estimate the impact of alternative trade liberalization scenarios on poverty and equity.The analysis uses the Latent Class Stochastic Frontier Model (LCSFM) and the metafrontier function to investigate the influence of trade openness on agricultural technological change. The estimated productivity effects induced from higher levels of trade are combined with a general equilibrium analysis of trade liberalization to evaluate the income and price changes. These effects are then used to infer the impact on poverty and inequality following the top-down approach. The model is applied to Tunisian data using the social accounting matrix of 2001 and the 2000 household expenditures surveys. Poverty is found to decline under agricultural and full trade liberalization and this decline is much more pronounced when the productivity effects are included.

Impact of the Indo-Sri Lanka Free Trade Agreement on the Sri Lankan Economy

The Indo-Lanka Free Trade Agreement (ILFTA), which was signed in December 1998 at the highest political level, and its subsequent implementation in March 2000 marked an important milestone in India–Sri Lanka relations, and in trade relations in particular, as it concretized and paved the way for closer economic integration. This article provides a quantitative assessment of the impact of the ILFTA on macroeconomic variables, welfare and output focusing on the Sri Lankan economy. In addition, the study investigates the impact of trade liberalization on trade structure, bilateral trade between Sri Lanka and India and trade partners of Sri Lanka. We perform simulations using the Global Trade Analysis Project (GTAP) model Version 6, to quantify the impacts of liberalized trade between Sri Lanka and India. The GTAP is a computable general equilibrium (CGE) model of the world economy. The results indicated that both Sri Lanka and India will experience welfare gains from the ILFTA. Moreover, it was evident that the Indo-Lanka full trade liberalization scenario ensures higher welfare to both the countries than the Indo-Lanka FTA with negative lists. Hence, the scenario with negative lists could be treated as a second best solution as ‘with-negative-lists’ scenario where both the countries could not reap the maximum benefits under the FTA. The simulation results demonstrate that trade diversion effects are not much significant due to trade liberalization between the two countries. The industry analysis reflected that the industries, such as metal products, paper products and publishing, electronic equipment, chemical, rubber and plastic products, machinery and equipment necessaries and other primary products will benefit due to the ILFTA. However, it could be seen that the industrial sector is benefiting more than the agricultural sector due to trade liberalization between the two countries.

The Economic Impact of EPAs in SADC Countries

The Cotonou Agreement introduces new fundamental principles with respect to trade between the European Union and African, Caribbean and Pacific countries relative to the Lome Convention: in particular non-reciprocal preferential market access for ACP economies will only last until 1 January 2008. After that date, it will be replaced by a string of Economic Partnership Agreements meant to progressively liberalise trade in a reciprocal way. The progressive removal of barriers to trade is expected to result in the establishment of Free Trade Agreements between the EU and ACP regional groups in accordance with the relevant WTO rules and help further existing regional integration efforts among the ACP. In this paper, an applied general equilibrium model (15 regions, 9 sectors) is used to simulate the impact of EPAs for countries of the Southern African Development Community. The standard Global Trade Analysis Project (GTAP) model has been extended to include the elimination of textile quotas, EU enlargement to 25 members as well as tax revenue sharing and a common external tariff among Southern African Customs Union countries. A number of comparisons between different scenarios are undertaken, in particular: (i) the EPA scenario is compared to the multilateral liberalization scenario; (ii) SADC liberalization with the EU only is compared to a scenario with simultaneous regional integration among African economies and to the case of the EU also signing an FTA with Mercosur; and (iii) a complete reduction of import barriers is contrasted with partial liberalization (i.e. only 50 per cent tariff reductions in agriculture) and with full trade liberalization that includes the elimination of subsidies. The issue of tariff revenue loss is also addressed and the required tax replacement is calculated. Selected experiments are re-run under an unemployment closure. Simulation results show that EPAs with the EU are welfare-enhancing for SADC overall, leading also to substantive increases in real GDP. For most countries further gains may arise from intra-SADC liberalization. The possibility of the EU entering an FTA with other countries, such as Mercosur, reduces estimated gains, but they still remain largely positive. Similarly, estimated gains need to be revised downwards if agriculture liberalization is not as far reaching as a reduction of import barriers for manufactures. At the sectoral level, the largest expansions in SADC economies take place in the animal agriculture and processed food sectors, while manufacturing becomes comparatively less attractive following EU-SADC liberalization. Interestingly, multilateral liberalization would instead foster some of the manufacturing sectors (textile and clothing and light manufacturing). Results also show the need for the SACU tariff pooling formula to be adjusted to reflect new import patterns as tariffs are removed.

Pollution effects of free trade areas: Simulations from a general equilibrium model

A two-factors, two-goods, three-countries general equilibrium model is developed to assess the effects of a Free Trade Area (FTA) on pollution emissions. It also makes it possible to compare the effects of a discriminating commercial policy with alternative–non discriminating–policies, such as full trade liberalization or non-discriminating protection. A theoretical model is first developed in order to take into account country-differences in factor endowment, environmental regulation, pollution abatement technology, marginal disutilities of pollution, as well as terms of trade effects. This model is subsequently calibrated and computed in accordance with empirical evidence. The main conclusion shows that the move from protection to FTA reduces world pollution emissions. A second result indicates that, in case of full trade liberalization, world pollution is further reduced.

Agricultural Trade Liberalization and Greenhouse Gas Emissions: Modeling the Linkages Using a Partial Equilibrium Trade Model

Global attempts to limit greenhouse gas (GHG) emissions may impact on agricultural trade and producer returns, particularly in countries such as New Zealand, where a relatively large proportion of GHG emissions originate from the agricultural sector. This study uses an extended partial equilibrium agricultural trade model to analyze the effects of trade policy liberalization on agricultural production and trade, as well as on GHG emissions. Further analysis combines trade liberalization with GHG mitigation policy in the New Zealand and European dairy sectors, and the effects on producer returns and GHG emissions are predicted. As expected, full trade liberalization in the OECD (Organization for Economic Cooperation and Development) countries enhances producer returns in New Zealand's dairy sector, but reduces returns in the European Union's dairy sector.

Export Dynamism and Market Access

Market access liberalization has influenced product-specific growth of world exports and contributed to the shift in the structure of world exports of manufactures towards electrical and electronic goods (including parts and components), goods that require high R&D expenditures, and labour-intensive products such as clothing. Multilateral trade liberalization has strongly improved market access conditions for manufactures and partly explains why manufactures have experienced particularly strong growth in exports. The increased importance of vertical international production sharing and the associated preferential trading arrangements between geographically close countries with significantly different wage rates have been a key determinant of differences in export-value growth across individual manufactured products, as well as of the distribution of market shares for some of these products among developing countries. Projections based on a standard trade model suggest that moving to full trade liberalization would lead to an increase in the share of agricultural products in total world trade by almost two percentage points and give greater weight to the textile, clothing and automotive sectors within manufactured exports.

An Economic Analysis of the Effects of the Uruguay Round Agreement and Full Trade Liberalization on the World Dairy Sector: Discussion

Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomieVolume 47, Issue 5 p. 201-202 An Economic Analysis of the Effects of the Uruguay Round Agreement and Full Trade Liberalization on the World Dairy Sector: Discussion Jean-Christophe Bureau, Jean-Christophe Bureau INAPG and INRA, Grignon, France.Search for more papers by this author Jean-Christophe Bureau, Jean-Christophe Bureau INAPG and INRA, Grignon, France.Search for more papers by this author First published: 15 July 2005 https://doi.org/10.1111/j.1744-7976.1999.tb00260.xAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat No abstract is available for this article. Volume47, Issue5December 1999Pages 201-202 RelatedInformation

An Economic Analysis of the Effects of the Uruguay Round Agreement and Full Trade Liberalization on the World Dairy Sector

A dairy trade model of the world dairy economy is developed. The model incorporates the allocation of milk fat and solids‐ nonfat among dairy commodities in a spatial equilibrium context. The model is used to simulate the market equilibrium impacts of the Uruguay Round Agreement and full free trade in the world dairy sector, including prices, production, consumption and trade flows. The free trade results indicate average world prices for farm milk near current U.S. levels, while farm milk prices in western Europe, Japan and Canada fall by 25.8%, 36.4% and 32.3%, respectively. In contrast, Australia and New Zealand farm milk prices rise by 22.5% and 50.8%, respectively.Un modèle de l'économic laitière mondiale est développé. Le modèle analyse l'allocation spatiale du lait, de ses composantes (c'est‐à‐dire, matière grasse, protéine) et des produits laitiers. Il est utilisé pour simuler les effets de l'accord de l'Uruguay et de la libéralisation des marchés sur l'économie laitière, y compris sur les prix, la production, la consommation et les échanges commerciaux. Les résultats indiquent qu‘en présence de marchés libres, les prix mondiaux seraient proches des prix courants aux États‐Unis, alors que leprix du lait diminuerait de 25,8 %, 36,4 % et 32,3 % en Europe de l'Ouest, au Japan et au Canada, respectivement. Par contraste, le prix du lait en Australie et en Nouvelle Zélande augmenterait respectivement de 22,5 % et 50,8 %.