Abstract:
This paper focuses on the effects that a higher tariff on agriculture and food imports could
have on poverty and the macroeconomy using a top down computable general equilibrium
microsimulation model. This question is of broader relevance to developing countries that
may be contemplating the use of World Trade Organisation permissible trade barriers so as
to achieve a domestic policy objective. Generally speaking, the results suggest that doubling
protection of agriculture and food would lead to a reallocation of labour toward the sectors
with high initial protection and those with high domestic orientation. Agriculture and food
sectors are harmed by increased protection if the government chooses to use indirect tax
rates to compensate for revenue changes because of induced demand contraction by the
indirect tax adjustment. Exports and imports in general decline. The analysis also shows that
increasing food and agricultural protection has very negligible but negative effects on welfare and poverty.
