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THE IMPACT OF TRADE LIBERALIZATION 55


In a separate analysis, Tokarick (2005) compares the effects of trade lib- eralization in developed countries only, in developing countries only, and in all countries using an 18-region global CGE model. The MENA region would gain more from a developing-country-only scenario—US$10.4 billion, or 1.4 percent of GDP—than from a global trade liberalization scenario (US$9 billion, or 1.2 percent of GDP), largely because of eliminating internal distortions. The region would lose US$1.9 billion (0.3 percent of GDP) from a developed- country-only trade liberalization scenario. In this last case, the higher agricul- tural prices would hurt the region because it is a net importer of agricultural goods, and there would be no offsetting efficiency gains from domestic trade liberalization.


A study by Anderson (2003) found similar results. Using a CGE model with 18 regions, the author found that liberalizing agriculture would contribute the larger share (65 percent) of the global benefits from trade liberalization. The author also showed that developing countries would capture, on balance, a larger share of the gains from trade liberalization in developing countries than from liberalization in developed countries. These results confirm that a country or region is more likely to benefit from trade liberalization the stron- ger its participation in the trade liberalization. Results for MENA show that the region would lose from all trade liberalization scenarios, but the losses would be larger in a developed-countries-only trade liberalization scenario than in a developing-countries-only scenario. In the developed-countries scenarios, the terms-of-trade losses due to agriculture liberalization would be large and would be only partially offset by terms-of-trade gains from the liberalization of manufacturing.


What would be the impact of trade liberalization on the poor, particularly the rural poor? Trade theory suggests that, under certain conditions, trade lib- eralization should equalize the return to labor across countries because exports of labor-intensive goods from low-wage economies to high-wage economies increase wages in the former and reduce wages in the latter. In practice, the impact of liberalization is more complicated because of variations in protection across sectors, preferential agreements, and the imperfect mobility of factors. In particular, if trade liberalization reduces protection on a labor-intensive sec- tor such as agriculture, agricultural labor demand could decline. Few of the global trade models are designed to simulate the impact of lib- eralization on different types of households, but some of them disaggregate the labor market into skilled and unskilled categories, the latter of which contributes wage income to the poor.


Anderson, Martin, and Van der Mensbrugghe (2005) showed that unskilled wages would increase by 4.1 percent for the MENA region, and Bayar et al. (2000) found that trade liberalization in manufactured goods would induce


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