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184 CHAPTER 8


In 2001 the E.U. launched the Everything But Arms Initiative, under which the LDCs have duty-free access to E.U. markets for almost all goods. Among the eight countries under consideration, only Djibouti can take advantage of the initiative’s provisions. Bananas, rice, and sugar were temporarily exempted. Under the U.S.–Middle East Free Trade Initiative, the United States has signed bilateral FTAs with Jordan and Morocco and intermediate agreements with other MENA countries. The effect of the U.S.-Jordan FTA will be small because Jordan’s level of protection is already low and because the volume of U.S.-Jordan trade is small. The effect of the U.S.-Morocco FTA will be larger because Moroccan trade barriers are higher. Of particular importance, Morocco’s wheat tariffs will be phased out over 10 years. The U.S. African Growth and Opportunity Act allows duty-free access to U.S. markets for Sub-Saharan African countries that meet certain criteria in human rights, reducing corruption, and fighting terrorism. Djibouti qualifies, but its exports to the United States are negligible. The other Sub-Saharan African countries in the MENA region (Somalia, the Sudan, and Yemen) do not qualify.


A number of bilateral and regional agreements within the MENA region have been signed, including that establishing GAFTA and the Agadir Agreement. Nonetheless, a number of MENA countries, most notably Egypt and Tunisia, have reduced tariff barriers unilaterally in recent years. In other words, trade liberalization does occur outside the context of global, regional, and bilateral trade agreements.


The Impact of Trade Liberalization


The evidence suggests that global trade liberalization will increase world agricultural prices by reducing agricultural support policies in OECD coun- tries and by reducing protection. Wheat production is subsidized by the E.U. and the United States, and numerous countries (including those in the MENA region) impose high tariffs. Studies indicate that trade liberalization would increase world wheat prices by 5–12 percent. Rice is also subsidized by the E.U. and the United States, while Japan, the Republic of Korea, and other countries severely limit imports. Global models suggest that trade liberaliza- tion would raise the world price by 3–35 percent. Sugar producers are sub- sidized and protected from imports in many countries, making sugar one of the most distorted agricultural markets. Partial equilibrium models of trade liberalization suggest that sugar prices would rise by as much as 48 percent, while general equilibrium models show increases of less than 5 percent. Like- wise, removing distortions in world cotton markets would increase the world price by 2–13 percent. Dairy production in the E.U., Japan, the United States, and many developing countries is protected through a complex system of sup-


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