An integrated approach to agricultural trade and development issues: exploring the welfare and distribution issues

Computable general equilibrium (CGE) analysis has become a well-established methodology for the estimation of trade and welfare effects resulting from trade liberalization. This paper reviews CGE studies of trade liberalization within the Asia Pacific Economic Cooperation (APEC), including studies of the effects of agricultural trade liberalization. Using a proposal known as the APEC Food System as a case study, the paper outlines and illustrates an extension of CGE liberalization, and of how welfare and distribution outcomes can be modified by various types of policies designed to improve labour productivity in the agricultural sector. In the process it shows how this extended CGE methodology can throw light on the potential of appropriately designed policies of this kind to simultaneously improve both welfare and distribution outcomes of trade liberalization.