SUMMARY AND POLICY IMPLICATIONS 191


that an FTA with the other Maghreb countries in the context of the AMU would have little impact on the Moroccan economy because of the similarities in the economies in the region. A bilateral FTA with the E.U. would stimulate export significantly but have a small negative effect on national income and returns to unskilled agricultural labor. Global trade liberalization would combine a strong positive effect on exports and a small positive effect on national income but a large negative effect on the returns to unskilled agricultural labor. Simulations with the dynamic version of the MIRAGE model show that liberalization in services, trade facilitation, and increased investment would have a positive effect on exports and income but would not fully offset the negative effect of trade liberalization on the returns to unskilled agricultural labor.


Policy Implications


In this section we examine the implications of these findings on policies and programs in the MENA countries. How can policymakers in these countries maximize the benefits of trade liberalization and minimize the costs, par- ticularly with regard to the poor, particularly the rural poor? We divide the discussion into four topics: global trade liberalization, regional and bilateral trade liberalization, domestic liberalization, and complementary policies.


Policy on Global Trade Liberalization


As discussed earlier, global trade liberalization will likely increase world agri- cultural prices by 3–20 percent, imposing a terms-of-trade loss on all eight of the countries under consideration (though the loss would be small in Syria and Tunisia). The net food-importing countries have used the likely terms-of- trade loss associated with global trade liberalization to request special con- cessions in the form of reduced commitments to open their own borders. This position reflects the mercantilist perspective of trade negotiation, according to which import liberalization is a sacrifice that must be incurred to open up markets in other countries.


However, it is difficult to understand this position in terms of economic welfare. The mercantilist perspective is incomplete in that it takes into account only the gains and losses of producers, ignoring the effects of trade policy on consumers. As discussed earlier, economic studies on trade liber- alization suggest that most of the benefits to a country deriving from trade liberalization would result from reforms within the country. Empirical stud- ies of protection consistently demonstrate that the cost (in terms of higher prices to consumers) of saving each job in a protected sector is several times larger than the income earned through the job. Thus, the net food-importing countries appear to be demanding the right to forgo the efficiency gains asso-


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