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SUMMARY AND POLICY IMPLICATIONS 185


port prices, import barriers, and market controls. One study has estimated that global trade liberalization would increase the price of nonfat dry milk by 13 percent.


Almost all the MENA countries are net agricultural importers, so there is clearly some basis for concern that these countries will lose as a result of global trade liberalization. Our analysis confirms that the terms-of-trade effect of a 15 percent increase in all world agricultural prices on the eight MENA countries would be approximately US$922 million, or 0.4 percent of regional GDP. The actual impact of trade liberalization, however, is likely to be more positive for three reasons: • First, the previous analysis overstates the cost of higher world agricultural prices because it assumes no response on the part of producers and con- sumers in the region. A net importer that is almost self-sufficient could actually benefit if the higher prices induced it to become an exporter of one or more commodities (Anderson 2003).


• Second, it assumes that the price increase would be the same for all com- modities. A net importer could gain if the increases in agricultural prices were not proportional across commodities. For example, Egypt could gain from global liberalization if the price of cotton (which it exports) were to increase more than the price of wheat (which it imports).


• Finally, the analysis estimates the terms-of-trade effect of trade liberal- ization, but it does not include the efficiency gains associated with reduc- ing distortions in domestic agricultural markets. Most studies of trade liberalization suggest that the efficiency effects would be larger than the terms-of-trade effect.


Several dozen studies have been undertaken to examine the macro- economic impact of various types of trade liberalization in the MENA region. Most of these studies use CGE models to simulate the effect of alternative trade policies. The results of these studies may be summarized as follows: • Multilateral trade liberalization generally results in net gains to countries in the region, with real GDP expansion of 1–3 percent.


• The benefits of trade liberalization to a country depend largely on the degree of domestic liberalization carried out by the country. Most of the gains from agricultural trade liberalization are associated with domestic reform rather than with changes in trade policy in other countries. This confirms this well-known concept in studies of trade liberalization: what you do determines what you get.


• The benefits of multilateral trade liberalization are generally greater than the benefits of bilateral trade liberalization with the E.U. or the United States.


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