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SUMMARY AND POLICY IMPLICATIONS 197


• The percentage of households that are net sellers of agricultural goods is relatively small because in most MENA countries, less than half the popula- tion is in farming and a significant share of farmers are net buyers.


• Farmers who are net sellers tend to be richer than the average farmer, so higher farm incomes do not always translate into lower poverty.


• Even those farmers who are both poor and net sellers rely on nonagricul- tural activities for a significant share of their incomes.


In other words, agricultural protection is a costly and imprecise tool with which to address the problem of rural poverty. In the sections that follow we discuss alternative policies that address rural poverty more directly. Another argument for agricultural protection is that it serves as a use- ful bargaining chip in international negotiations, giving developing countries something to offer in exchange for greater access to markets in high-income countries. Although there is some merit in this argument, it is not clear that developing countries see agricultural protection merely as a means to extract reciprocal liberalization among trade partners. The fact that the LDCs have been able to avoid almost all of the disciplines built into the URAA suggests that they view agricultural protection as an end rather than a means. Although political considerations may limit the ability of governments to implement unilateral trade liberalization, policymakers and trade negotia- tors should at least be aware that in many situations the aggregate benefits exceed the costs. The example of Egypt’s trade reforms of 2004 indicates that there is some scope for trade reform outside the context of reciprocal trade agreements.


Complementary Policies to Facilitate Adjustment


Several studies have indicated that the size of the gains from trade liberal- ization depends on the existence of complementary policies and programs. The gains are smallest (or the losses largest) when consumers and producers are limited in their ability to respond to new opportunities and new prices. Studies of trade liberalization in Morocco and Tunisia show that if factor mar- kets are flexible, the benefits of trade liberalization are three to five times greater than when factor markets are rigid (see Dennis 2006b). Flexible fac- tor markets allow factors of production (such as land, labor, and capital) to be reallocated from formerly protected sectors to newly profitable sectors. Examples of rigidities in MENA factor markets include: • regulations limiting the use of temporary workers and expatriates, • the complicated bureaucratic procedures involved in dismissing workers, • large severance allowances, • delays in the application for and issuance of land and construction permits,


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