Agricultural policy reforms and trade liberalisation in the Mediterranean Basin : A partial equilibrium analysis of regional effects on the EU-27 and on the Mediterranean Partner Countries
This study examines agricultural trade flows around the Mediterranean basin and gives insights on the likely impacts of agricultural policy reforms on the Mediterranean agriculture. Currently trade relationships are characterised by complexity due to the numerous bilateral regional trade agreements between the Mediterranean countries. The most important of them are the Euro-Med Agreements - also known also as Barcelona Agreement - an initiative of the EU which started in 1995 and aims to establish a free trade area after 2010 with all non-EU Mediterranean countries. The analysis showed that the interests of the involved countries to intensify their trade relationships are diverging and the expected changes of the agricultural policy create uncertainty for the future of agriculture around the Mediterranean. Based on the theory of applied welfare economics, this study analyses empirically the impacts of different policy scenarios on Mediterranean countries by using an extended and modified version of the trade policy model, AGRISIM. The simulation results indicated that the CAP reform of Mediterranean commodities affects only very slightly the markets for cotton, olive oil and tobacco and then only within the EU Mediterranean member states. The enlargement of the EU to include Bulgaria and Romania only affects these two countries. Trade liberalisation, either within the framework of the WTO or within the Barcelona Agreement leads to overall welfare gains, with the effects being of a small magnitude. Differences are observed between the net trade performance of the countries across the north and the south coast of the Mediterranean with the former being more favoured than the later. The Mediterranean EU Member States show a positive evolution of their net trade performance but an overall deterioration of the net trade of the EU s Mediterranean Partner Countries is observed, particularly evident for commodities such as olive oil and oranges. The WTO liberalisation has more marked effects only on EU markets leading to a reduction in the internal supply of highly protected commodities, such as beef, while the demand for these commodities increases. This point, that liberalisation would not be harmful, but on the contrary it would be beneficial for the Mediterranean agricultural markets due to the positive welfare effects should be taken into consideration by policy makers.
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