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Abstract
The paper presents the results of a theoretical study focusing on a comparative evaluation of
the welfare effects of a preferential tariff reduction for agricultural exports from less developed
countJ;ies versus a generalized tariff reduction. The results are derived using a diagrammatic approach.
The analysis is developed within a partial equilibrium framework with one commodity,
three large countries (importing developed country, exporting developed country, developing
country), fixed exchange rates and zero transportation costs. The theoretical model makes provisions
for a country to switch from being an exporter to being an importer, or vice versa, as the
equilibrium price changes. Three alternative policy scenarios are analyzed: the imposition of a
non-discriminatory tariff, a preferential tariff reduction, and a generalized tariff reduction. Two
alternative definitions of the welfare functions are used. One is based on consumers' and producers'
surplus, the other adds domestic income and changes in foreign exchange earnings/expenditure.
Some methodological implications of the specific model used are discussed, along with the impact,
in terms of welfare, of the policy scenarios considered.