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F&V Trade Model to Assess Euro-Med Agreements. An Application to the Fresh Tomato Market

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Abstract

The complexity derived from the bilateral trade liberalisation process in the Mediterranean region is difficult to represent in a trade model, not only because of the range of instruments still constraining trade but also because of the special nature of the most important traded goods (product differentiation and seasonality). Tariff-rate quotas (TRQ's) and the entry price system are clearly defined on a monthly basis for the fruits and vegetables trade flows towards the European Union (EU). This point makes efforts to model such a trade in yearly basis not representative of reality. We propose a static partial equilibrium model tailored to model trade impacts of specific policy instruments which considers imports from different sources as imperfect substitutes, following the non-linear Armington type model. Different policy scenarios have been run using the model, considering changes in TRQ's and Entry Price regimes, its tariffication and preference erosion. The results of model runs show that, as regards to EU producers, bilateral trade liberalisation with extension of TRQs would be the least dramatic scenario. By contrast, the phasing out of the entry price system would have serious consequences on EU producers. The model has also given detailed information on Morocco's interests in the negotiation, although it could easily include a larger number of suppliers. Morocco appears to be interested in multilateral liberalisation as well as in bilateral liberalisation. In fact, multilateral liberalisation will not cause a great deal of preference erosion against Moroccan exporters, unless tariff reductions only affect MFN suppliers.

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