A General Equilibrium Analysis on the Impact of Tariff Reforms to Protect Agricultural Sector in Bangladesh

Abstract : This paper examines the impact of tariff reforms of the agricultural sector in Bangladesh to protect domestic agriculture using the social accounting matrix (SAM) obtained from the Global Trade Analysis Project (GTAP) database. The computable general equilibrium (CGE) model is employed to investigate the impact of tariff reforms on the agricultural sector in Bangladesh. The CGE model is used to assess the impact of economic shocks that reverberate across sectors and represent cumulative shocks across the country. The CGE model is calibrated to a social accounting matrix (SAM) obtained from the GTAP 8 database after integrating 57 sectors into 4 sectors, a consistent, complete and disaggregated data system. Hicksian Equivalent Variation (EV) is computed which measures the changes in the utility level in monetary terms of the total households of Bangladesh in Household income and Expenditure Survey 2010. All other 146 member countries of WTO are considered as the rest of the world and assuming that import tariff rates of these countries are set according to WTO norms and other guidelines. The simulation results show that the trade reforms would improve the welfare of Bangladesh. The results suggest that the agricultural sector would expand with these trade reforms whereas service and mineral sectors would contract. So, the government should protect this agricultural sector by reforming import tariffs to ensure food security that would lead to reduced poverty.