Trade Liberalization and Poverty in the Middle East and North Africa

AGRICULTURE, TRADE, AND POVERTY IN MOROCCO 179

Table 7.3 Estimated impact of trade liberalization in Morocco using the dynamic MIRAGE model (percent change)

Returns to unskilled

Trade scenario

+ liberalization of services

+ trade facilitation

Total Terms National labor in exports of trade income agriculture

U.S.-EU25-Maghreb FTA 37.8

42.6 47.9

+ increased investment 50.5 –2.5 –0.2

–2.6 0.2 –2.1 1.2 –2.2 1.6

–7.5

Returns to unskilled labor in

sectors

–7.7 0.3 –7.2 1.4 –5.3 3.9

Returns

other to skilled labor

–0.2 3.4

4.9 6.8

10.8

Source: Thomas et al. (2008). Notes: EU25, European Union (25 members as of 2004); FTA, Free Trade Agreement; U.S., United States.

50 percent. As shown in Table 7.3, adding trade facilitation to the regional FTA would further boost exports and contribute to a higher national income compared to the regional FTA without trade facilitation. Trade facilitation would also have a modest effect in partially offsetting the negative effect of the regional FTA on the returns to unskilled agricultural labor, reducing it from –7.5 percent to –7.2 percent.

Finally, FTAs are expected to improve the environment for private-sector productive investment by increasing the size of the market, facilitating the inflow of new technology, and reassuring investors regarding the stability of the policy environment. This was simulated by assuming a 5 percent increase in the propensity to save in the Maghreb countries. The higher savings would result in greater domestic investment, which in turn would increase the pro- ductive capacity of the economy in future years. As shown in Table 7.1, add- ing increased investment to the effect of the regional FTA would have modest effects on exports and the terms of trade but would increase national income from –0.2 to +1.6 percent. In addition, it would have the strongest effect of the three complementary measures in offsetting the negative impact of the FTA on returns to unskilled agricultural labor.

Summary

The Kingdom of Morocco is a lower-middle-income country with a population of about 30 million, more than half of which lives in urban areas. The agricul- tural sector accounts for about 16 percent of GDP. Like most other countries in the region, Morocco is a net agricultural importer whose main agricultural import is wheat. The agricultural exports of Morocco are the second-largest among MENA countries. Fruits and vegetables, which typically account for 20–30

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