Trade Policy Reforms in the Cereals Sector of the SADC Region: Implications on Food Security

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This study evaluates the welfare implications of tariff reforms in the cereals sector of the SADC region. Applying the global simulation model (GSIM), a multi-country partial equilibrium model, to the cereals industries of thirteen SADC countries, the study computes price and welfare effects of tariff reforms on different economic groups in each country, and evaluates responsiveness to external supply shocks. Results indicate that on net, elimination of intra-regional tariffs is welfare reducing for the region - a robust result as indicated by the sensitivity tests. South Africa emerges as the sole beneficiary of intra-regional tariff elimination, with positive net welfare gains attained through higher producer surplus; whereas the rest of SACU experiences losses in consumer surplus, and the rest of SADC experiences losses in producer surplus. Imports from the rest of the world drop for most net-importer SADC countries, whereas trade with the SADC region generally increases, indicating that both trade diversion and trade creation result from these tariff reforms. The negative net welfare effects suggest that the trade diversion effects exceed the trade creation effects for most of SADC. Larger, positive welfare effects are expected for all of SADC, except South Africa and Zimbabwe, when countries implement indiscriminate reform of MFN tariff rates, although gains come at major costs to regional producers. Imports from both the region and the world are also expected to increase. Tariff reforms also seem to serve the purpose of spreading price and quantity risk, albeit meagerly, from supply shocks generated within the region, making it less intense in countries of origin, and more intense for the rest of SADC.
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WP 2006-17 July 2006
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Charles H. Dyson School of Applied Economics and Management, Cornell University
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