Is increased agricultural protection beneficial for South Africa?

Abstract

Using a top down computable general equilibrium microsimulation model of South Africa, this paper explores the impact on household well being of an increase in agricultural protection. This issue 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. The model predicts that gross domestic product would be unaffected while real private consumption falls. The real exchange rate appreciates while unemployment levels are unaffected. Food, other manufactures, trade and hotels are the clear losers. All other industries experience small positive gains or no impact on their output. The impact on households depends on their factor endowments and their consumption patterns. The impacts on poverty reduction are very small. Poverty indicators increase more in urban areas than in rural areas. Poverty increases slightly more among Asian households, followed by White and then Coloured households. African households experience small declines in poverty.