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42 CHAPTER 3


In this chapter we briefly examine the literature that has addressed these issues in the context of the liberalization options for MENA countries, with a focus on poverty. The chapter is divided into two sections. Reflect- ing the study’s concentration on agriculture, the first section describes the global markets for five agricultural commodities (wheat, rice, sugar, cotton, and dairy products) that are more distorted by import barriers and produc- tion subsidies and that are important for MENA countries. This information is important in understanding the direction and size of the terms-of-trade effect associated with trade liberalization. The second section provides a selective review of studies that evaluate the impact of trade liberalization on the MENA countries. These studies consider the impact of multilateral, regional, and bilateral trade liberalization as well as trade reform undertaken within the context of countries’ domestic policy agendas.


Global Agricultural Markets


In this section we review policies that distort the global markets for five agricultural commodities (wheat, rice, sugar, cotton, and dairy products), as well as estimates of the impact that global trade liberalization would have on the related prices. As mentioned earlier, this information sheds light on the direction and size of the terms-of-trade effects that global trade liberaliza- tion would have on the MENA countries.1


Wheat


Wheat provides nearly one-fifth of the world’s calorie supply. More than 18 percent of the global demand for wheat is met through international trade, mostly as exports from the OECD countries to developing countries. Although nearly 30 percent of wheat production was stored as a buffer against produc- tion shortages in the early 2000s (Mitchell and Mielke 2004), more recent events stemming from the food crisis have brought the global stock level to its lowest in 25 years, 18 percent of wheat production. The major single-country exporters in descending order of importance are the United States, Canada, Argentina, Australia, and Russia. These five coun- tries account for nearly 60 percent of world wheat exports. The EU25 is a net exporter, accounting for 26 percent of world wheat exports and 22 percent of world wheat imports. Among net importing regions, MENA accounts for 22 percent of world wheat imports. Algeria and Egypt are the world’s fourth


1 Trade flows and AVE rate calculations for the five commodities presented in this section are based on the MAcMap-HS6 database for 2004 unless otherwise indicated (CEPII 2008; Boumel- lassa, Laborde, and Mitaritonna 2009).


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