AGRICULTURE, TRADE, AND POVERTY IN TUNISIA 123


rise in the retail prices of cereals, vegetables, and other crops, which would induce a reduction in the internal demand (see Table 5.10). The higher world prices of agricultural commodities would also cause reductions in most of the important agricultural and food imports (cereals, legumes, “other crops,” and sugar) while expanding the most important agricultural exports (fruit, consisting mainly of olives).3 In spite of the higher agricultural prices, the consumer price would decline relative to the base scenario, reflecting the importance of nonfood items in the consumption basket. Thus, global trade liberalization is associated with higher food prices, reduced agricultural imports, and higher agricultural exports (see Tables 5.11 and 5.12).


This situation was actually observed for olive oil in Tunisia during the 2005 agricultural year, when high world prices led to a rise in domestic retail prices, which curbed local demand and, consequently, stimulated exports. This scenario would thus result in a favorable income gain for olive-producing farm households because of the rise in producer prices. Global trade liberalization, with the 15 percent increase in world agricul- tural prices, would cause poverty to decline from 8.1 percent in the base sce- nario to 5.4 percent. This is the largest drop among the four simulations, and it would be entirely the result of progress in rural areas, where the poverty rate would fall by half, from 15.8 percent in the base scenario to 7.9 percent. The fact that rural poverty would decline from 14.1 percent in Simulation 3 (import liberalization for all goods from all countries) to 7.9 percent in Simulation 4 suggests that the higher agricultural prices would be responsible for the poverty reduction in rural areas, as well as the modest increase in urban poverty. Compared to the base scenario, the number of poor people in Tunisia would decline by one-third, or 248,000 people.


Summary


Tunisia has carried out a number of reforms as a result of its structural adjustment program, but its level of agricultural protection remains one of the highest in the world. At the same time, Tunisia has a relatively good investment climate, which contributed to significant inflows of foreign direct investment and a healthy growth rate through the 1990s. Like many MENA countries, Tunisia is a net agricultural importer. Its main exports are olives and dates, and its principal imports are wheat and maize. Multilateral liberalization is expected to raise agricultural prices. If all agricul-


3 Although some commodities would show dramatic percentage increases in imports, these are commodities with very modest or negligible import volumes.


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