Modelling the Impact of Tariffs and Non-Tariff Measures on Trade Policy and Food Security of Nepal: A Computable General Equilibrium (CGE) Analysis

Keywords: Tariffs, NTMs, CGE, GTAP, SAFTA, BIMSTEC, Food Security, Nepal
Session Type: Virtual Guided Poster Abstract
Day: Monday
Session Start / End Time: 2/28/2022 05:20 PM (Eastern Time (US & Canada)) - 2/28/2022 06:40 PM (Eastern Time (US & Canada))
Room: Virtual 8

Abstract

Nepal aims to end hunger and make the country food secure by the end of 2030. Agricultural and livestock sectors are the largest contributors towards gross domestic product (GDP) after the service sector and play a crucial role in ensuring food security and Nepal’s economic environment. However, Nepal is still vulnerable to food insecurity with limited arable land and several trade agreements in action. Thus, the main objective of this research is to analyze the economy wide impact of trade agreements on agricultural sectors. This study used a Computable General Equilibrium Model to estimate the econometric effects of differential tariff cut scenarios for South Asian Free Trade Area (SAFTA) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) trade agreements signed by the country. For SAFTA , 100% elimination of tariffs resulted in decreased imports of commodities by $176 million (1.96%) and increased the export of commodities by $307 million (15.90%) in comparison to baseline year 2020. For BIMSTEC, 100% tariff removal also resulted in decreased imports by $177 million (1.97%) and the export of the commodities increased by $312 million (16.10%). Although there was a negative change in GDP of 0.12% to 0.38%, results suggest that the elimination of tariff and non-tariffs under both trade agreements are improved with increased exports and decreased imports off agricultural commodities. The findings from this study could provide policy makers with support to revise current tariffs and impose appropriate changes so that Nepal experiences greater economic strength and food security.