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GTAP Resource #1462

"The Moroccan-American FTA - Effects on the Agricultural and Food Sectors in Morocco "
by Ait El Mekki, Abdelkader and Wally Tyner

This paper undertakes policy simulations using the GTAP model framework and database to anticipate consequences of the free trade agreement (FTA) between Morocco and the US. A GTAP standard closure with import tariffs updating (Altertax tool) is used along with Gragg solution method for the model implementation. The data aggregation based upon the 1997 GTAP database distinguishes twenty economic sectors and four regions (Morocco, USA, European Union and the Rest of the World). The introduction of the EU as a separate region in the model is justified by the importance of its economic partnership with Morocco. Both the FTA and complete multilateral liberalization are simulated in order to contrast the bilateral and multilateral results.

The major conclusion is that Morocco gains much more from multilateral trade liberalization than from the FTA. Under multilateral liberalization, Moroccan GDP increases 4 percent, and welfare increases by $2.7 billion. Thus if both complete multilateral liberalization and an FTA were possible outcomes, Morocco would be better off pursuing the multilateral liberalization. However, as the recent Cancun failure illustrates, complete multilateral liberalization is highly unlikely. That meeting failed far short of complete liberalization. Indeed, complete liberalization has never even been discussed. So while the multilateral case is very interesting, it may not represent a realistic option.

Turning to the FTA, the bottom line is that Morocco neither gains nor loses in aggregate from the agreement. There is a very small increase in real GDP, and a very small decrease in welfare. In the agricultural sector, the largest production impact is on red meat followed by wheat. These results are in accordance with prior expectations. Red meat and wheat are both highly protected in Morocco at present. However, the changes are not huge with red meat falling 22 percent and wheat 8 percent. In terms of imports from the US, the largest changes are in wheat and red meat with wheat imports increasing $249 million and red meat $224 million. These changes account for over half the increase in US imports. Of course part of these increases are due to trade diverted from the EU and ROW and not net additional imports. Also, the final agreement limits imports through quotas.

For Moroccan exports, the picture is different. The largest change is in wearing apparel, which also is in accordance with expectations. However, exports increase more to the EU than they do to the US, including wearing apparel. In fact, exports increase for all products to all three regions. This change is largely due to the reduced prices of export goods.

The results of this analysis largely confirm prior expectations. In a comparative static framework, the FTA does not offer significant gains for Morocco. The largest sector gains are for wearing apparel. But the losses in agriculture are real, albeit smaller than some have estimated.

However, proponents of the FTA have never claimed large comparative static gains. Most of the gains will come from the policy restructuring Morocco will undertake as part of the FTA. This restructuring will render the Moroccan economy more efficient and more capable of competing in the global economy. Also, the FTA should encourage more US direct investment in Morocco, which is not captured in the comparative static analysis.

Resource Details (Export Citation) GTAP Keywords
Category: Other
Status: Not published
By/In: n/a
Date: 2004
Created: Tyner, W. (4/29/2004)
Updated: Dimaranan, B. (10/13/2004)
Visits: 3,048
- Preferential trading arrangements
- Africa (North)

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