Agricultural Trade Liberalization in a Multisector World Model: Implications for Argentina, Brazil, and Mexico

Impacts of agricultural and nonagricultural trade liberalization on agriculture are assessed in a multicommodity. multicountiy framework. By modelling simultaneously all goods sectors of the economy, the importance of (l) relative price changes between sectors and (2) income and exchange rate adjustments that follow trade liberalization in a world of floating rates are evaluated. Specifically, four cases are compared using a static world policy simulation (SWOPSIM) model: industrial market ecooomy agricultural Jiberalizatioo, global agricultural liberalization, all-sector industrial market economy liberalization, and all sector global liberalization. Under all sector liberalization scenarios, exchange rates are allowed to float for all countries/regions. In all cases, agricultural corrunodity prices tend to increase, an effect that is more pronounced when currency values adjust but less pronounced under global relative to industrial market economy liberalization. Three Latin American countries are modelled individually: Argentina, Brazil, and Mexico. Argentina and Brazil have the most significant advances in agricultural trade with an all-sector global liberalization. The deterioration of the Mexican agricultural trade balance is reduced when exchange rates are allowed to vary