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SUMMARY AND POLICY IMPLICATIONS 193


programs that may assist vulnerable households more effectively and more economically.


Thus far, we have assumed that adjustment to a new trade regime is costless. In fact, there are transition costs associated with any policy change that affects relative prices. As resources are reallocated within the economy, there will be a period during which factors of production will be under- utilized. For example, as labor moves from formerly protected sectors to newly profitable ones, costs will be associated with unemployment and retraining. These transition costs are real and constitute an argument for phasing in the trade reform and for providing training and credit to assist those sectors that are adversely affected. Because the transition costs will be temporary, while the efficiency gains will be permanent, it is unlikely that transition costs rep- resent a valid argument against implementing the trade reforms. The fact that the costs occur in the short term while the benefits accrue over time does, however, help explain the political resistance to trade liberalization. Of course, the MENA countries should push aggressively for market access for the agricultural commodities that they export. Egypt, Jordan, and Morocco have a strong interest in opening up the E.U. market for fruits and vegetables. This would include taking steps to ensure that sanitary and phytosanitary regulations regarding fruit and vegetable imports into the E.U. are based on scientific evidence and are not a reflection of protectionist sentiment. Like- wise, Tunisia would benefit from a reduction in E.U. tariffs on olive and olive oil imports, while Egypt would gain from reduced domestic support by the United States and (to a lesser extent) the E.U. for their cotton growers. In contrast, none of the MENA countries would gain from global trade lib- eralization (including reductions in domestic support) in the wheat market. Such reforms would increase the world price of wheat by 4–20 percent, thus adversely affecting the terms of trade of importers in the region. The effects of these higher prices on consumers could be offset in many countries by reducing import tariffs to retain the original domestic price.


Policy on Regional Trade Liberalization


The benefits of regional integration within the MENA region have been limited to date. There are three explanations for this, two of which may be corrected and one of which cannot. One reason for the limited benefits of regional trade agreements such as GAFTA is that these agreements tend to be fairly flexible, allowing numerous exceptions for sensitive goods, permitting protection to vary by season, and granting countries the right to suspend tariff reductions under certain circumstances. Because the costs of protection rise more than proportionately with the level of protection, allowing a relatively small num-


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