Multilateral trade liberalisation and Preference erosion: Effects on the agricultural sector of the EU's Mediterranean Partner Countries

This paper analyses preference erosion effects on the agricultural sector of the EU’s ten Mediterranean Partner Countries (MPCs). The modelling exercise is carried out with the partial equilibrium multi-commodity multi-region world trade model AGRISIM. The effects vary between the markets and depend mainly on the initial level of trade protection. Supposing that level of preferences granted to the MPCs by the EU remains as of 2001 then the effects are particularly distinguishable for high protected markets like beef in Turkey, milk and rice in Morocco and olive oil in all MPCs. Supposing that the free trade area with the EU is accomplished, then the impacts are evident mainly on beef, milk and sugar markets, where the prices among the preferential partners are much higher than the world market ones. The farmers are faced with lower supply and prices, which in turn reduce their income and their surplus, but to the benefit of the consumers and of the tax payers resulting to an increase of the overall welfare. Preference erosion effects on typical Mediterranean commodities such as olive oil, oranges and tomatoes are smoother when the free trade area is in force.