62 CHAPTER 3


ing fruits; these would sustain a price decrease of more than 40 percent, while the prices of sugar would fall by 14 percent and those of wheat by nearly 7 percent (Radwan and Reiffers 2003, 20). The net effect of this scenario sug- gests that tariff dismantling by Mediterranean partner countries has a larger effect than the removal of protection by OECD countries. The negative effects of a net price decrease on rural producers and therefore rural income will be greater than the positive effects on urban consumers and exporters, biasing the distribution of gains from liberalization against the more vulnerable population group. Radwan and Reiffers (2003) concluded that the liberalization should be reciprocal but gradual, starting with the reduction of domestic support by the E.U., followed by tariff reduction by Mediterranean partner countries. The third scenario reproduces the second scenario, but, by taking into account the varying capacities to bear the changes among countries in the region, it introduces an asymmetrical implementation process whereby the E.U. would liberalize while Mediterranean partner countries would liberalize partially and at a slower rate. It also provides for structural instruments similar to those used by the Fonds Européens d’Orientation et de Garantie Agricole,10 which remove price supports, include support for agricultural modernization, upgrade infrastructure and institutions, and support diversification in rural activities. If the implementation of these structural tools is successful, it could reduce (if not eliminate) the list of losers among the Mediterranean partner countries. The main difficulties will be to avoid rent-seeking behavior among farmers in Mediterranean partner countries and to target the support toward the sectors in rural areas that have been the most affected by the liberaliza- tion process. This last scenario seems to simulate the recent developments in the EMAAs under the Europeans Neighborhood Policy and the adoption of new action plans forging an E.U. agricultural roadmap with regard to their Mediter- ranean partners (see Chapter 2 for a brief summary of the EMAAs).


Unilateral Trade Liberalization


Several of the studies on bilateral trade liberalization we have reviewed have also considered the impact of unilateral trade liberalization. For example, in Tunisia unilateral trade reforms were found to be detrimental to rural households (Chemingui and Dessus 2001). These studies are usually based on country CGEs and can sometimes provide more information on the distribu- tional effects of liberalization.


Feraboli and Trimborn (2008) used a dynamic CGE model of Jordan aug- mented by heterogeneous households from a household survey to examine the


10 The Fonds Européens d’Orientation et de Garantie Agricole (European Agricultural Guidance and Guarantee Funds) have been established within the overall E.U. budget to finance the com- mon agricultural policy.


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