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AGRICULTURE, TRADE, AND POVERTY IN MOROCCO 177


would increase, the terms-of-trade effect would be negative, meaning that the prices of Moroccan exports would decline and/or the prices of its imports increase. The net effect would be a small decline in national income. The impact on the returns to unskilled labor would be negative but small (see Table 7.1).


Bilateral FTAs between the Maghreb countries and the United States would have a similar but more muted effect. Moroccan exports would expand, but only by 4.8 percent, partly because U.S. agricultural tariffs are initially lower and partly because there is less trade between Morocco and the United States. Again, there would be a small decline in national income, but the distributional effects would be stronger: the returns to unskilled agricultural labor would decline by 6.4 percent, while returns to skilled labor would rise by 2.3 percent. The adverse impact on unskilled labor would presumably be due to the fact that an FTA with the United States implies that there would be wheat imports and lower wheat prices (see Table 7.1). Regional FTAs between the Maghreb countries and the E.U. and the United States would result in an almost 40 percent increase in exports for Morocco but a 6.1 percent decline in the terms of trade. Competing countries would now have better access to U.S. and particularly E.U. markets, thus depress- ing the price of Moroccan exports. Overall, national income in Morocco would decline by 0.1 percent, less than in the previous scenarios. Like the U.S. FTA, the regional FTA would result in a significant decline in the returns to unskilled agricultural labor and a small increase in the returns to skilled labor. Full trade liberalization would generate the largest benefits for Morocco. Exports would grow by 47.8 percent thanks to more open borders in countries that import Moroccan goods. Although the terms of trade would decline by 8.1 percent, national income would grow by 0.8 percent. In this case, the expansion of exports would more than offset the disadvantage of the shift in prices in generating net gains for Morocco. These gains would be unequally distributed, however: returns to unskilled agricultural labor would fall by 8.3 percent, while returns to skilled labor would rise by 5.7 percent (see Thomas et al. 2008).


Under the dynamic framework of MIRAGE, Scenario 4 from the static ver- sion was simulated to examine the effect of (1) trade liberalization in services, (2) trade facilitation, and (3) increased domestic investment (see Table 7.2). Restrictions on trade in services are an important barrier to trade, but they are difficult to measure because they result from a complex set of laws, regulations, and local standards rather than from a simple tariff rate. However, CEPII has estimated effective rates of protection in services by using a gravity model and assuming that differences between actual trade in services and what would be expected based on proximity represent implicit


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