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186 CHAPTER 8


• The benefits of multilateral trade liberalization are generally greater than the benefits of regional trade agreements within MENA.


• Trade liberalization usually results in lower production and more imports of wheat but in higher production and more exports of fruits and vegetables.


In contrast, only a few studies have examined the distributional impact of trade liberalization, such as the effect on farmers or other poor groups in the MENA countries. One of the most thorough studies suggests that the lower agricultural prices associated with removing agricultural protection in Morocco could exacerbate poverty (Ravallion and Lokshin 2004). In the fol- lowing sections we summarize the results of our analysis of the distributional impact of trade liberalization in Egypt, Tunisia, Syria, and Morocco.


Agriculture, Trade, and Poverty in Egypt


Until 1987, agricultural policy in Egypt was characterized by various forms of state intervention in production, marketing, and trade. The policy of import substitution industrialization meant that the agricultural sector was heavily taxed through low official prices and compulsory sales. At the same time, some commodities were protected by import restrictions. During the late 1980s and the 1990s, Egypt gradually liberalized its agricultural markets and reduced the level of import protection. Wheat markets remained distorted by a combination of import controls, fixed producer prices, consumer subsidies on certain types of bread, and government control over the channels leading to the subsidized bread. In 2004 a series of significant tariff reductions was implemented, leading the World Bank to declare that Egypt had made more progress in trade liberalization than almost any other country. Even so, the degree of protection is higher in Egypt than in 40 percent of the countries of the world.


Full global trade liberalization would increase the prices of agricultural commodities by 5–15 percent. This would probably negatively affect the econ- omy because Egypt is a net agricultural importer, though the exact effect would depend on the price changes for each commodity. Given proportional increases for all agricultural commodities, Egypt would gain from higher rice and cotton prices but lose from higher wheat and maize prices. Domestic trade reform would reduce the domestic prices of imported commodities such as wheat, thus partly offsetting the effect of global trade liberalization, as well as providing efficiency gains.


We analyze the data from the 1998 Egypt Integrated Household Survey to examine the distributional effect of changes in agricultural prices. Changes in income for each household in the sample are estimated using hypothetical increases in agricultural prices and the composition of the income and expen-


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