Proceedings of The 2nd International Conference on Research in Management and Economics
Impact of Tariff and Protectionism on Egypt: Overviewing the Egyptian – European Union Association Agreement
Mayar Bakeer and Hebatallah Ghoneim
In a world promoting free trade, trade policies should be designed to help increase economic welfare. Egypt is one of the countries with great prospective to economically excel and prosper; nevertheless, it is still categorized as a developing one. The European Union association agreement was one of the main agreements that helped the tariff rates within the Egyptian economy decrease gradually till almost approaching zero. Such trade liberalization is expected to increase the welfare. The purpose of this paper is to evaluate the effect of the changes in the tariff rates imposed by the E-EUAA Agreement and the consequences it will have on Egyptian welfare. A Computable General Equilibrium model will help mimic the tariff rates of the agreement. The paper uses the Global Trade Analysis Project (GTAP) to perform the simulations and calculate the welfare through the equivalent Variation. An unemployment shock is added to the model. The results showed that the higher the trade liberalization, the lower the consumer welfare which is mainly attributed to the low export level within the country and high inflation. The research also highlights the impact of unemployment on the Egyptian welfare amidst the lowering tariff rates.
Keywords: CGE Simulation, Trade Policy, EU, Unemployment, Consumer Welfare.