Should agriculture be exempt from trade policy reforms in South Asia?

Sumudu Perera, Mahinda Siriwardana () and Stuart Mounter
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Sumudu Perera: UNE Business School, University of New England, Armidale, New South Wales 2351, Australia
Stuart Mounter: UNE Business School, University of New England, Armidale, New South Wales 2351, Australia

Asia-Pacific Development Journal, 2014, vol. 21, issue 1, 67-106

Abstract: Contracting parties to the Agreement on South Asian Free Trade Area (SAFTA) are committed to trade liberalization within a fixed time frame. Most contracting parties have kept agriculture out of their tariff liberalization commitments. A key question therefore is: should agriculture receive dispensation given the sector's important contribution to South Asia's economic structure? An enhanced multi-household framework within a multi-country computable general equilibrium (CGE) approach was used to assess the impacts on trade flows, government fiscal revenues and income distribution among households in countries that are contracting parties to SAFTA, assuming full trade liberalization and trade liberalization with the protection of the agricultural sector. The results indicate that, although both policies would facilitate economic growth and lead to a reduction in income disparity among household groups in all South Asian countries, the overall welfare gains would be greater under full trade liberalization. Hence, the removal of agricultural sector tariffs should be an important consideration in future SAFTA discussions; such a step would be a principal means for strengthening intraregional trade.

Keywords: Agricultural sector; income distribution; multi-country computable general equilibrium (CGE) model (search for similar items in EconPapers)
JEL-codes: F13 F15 F47 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:unt:jnapdj:v:21:y:2014:i:1:p:67-106

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