Agricultural Protectionism and Welfare in a Small Open Economy

Agricultural Protectionism and Welfare in a Small Open Economy

The recently concluded multilateral trade agreement, GATT, proposes to reduce export subsidies on agricultural items. This paper discusses, in a general equilibrium framework, the welfare implications of such a move on a small open economy that imports as well as exports agricultural products. The paper shows that, depending upon the pattern of agricultural trade as a whole, the volume of trade and price sensitivity of import demand, the welfare implications of agricultural trade liberalization can go either way.

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