Expected Benefits and Shortcomings of the DCFTA
The new DCFTA will facilitate trade between the EU and Tunisia. Indeed, only the agricultural sector will benefit from tariff reduction, as tariffs on industrial products are already eliminated. Agricultural tariffs on Tunisian imports from Europe will be reduced by 80 percent while tariffs in the European market on imports from Tunisia will be mitigated by 95 percent (Ecorys 2013).
Simulations indicate that the expected effect is that Tunisian exports will increase and enhance trade balance. This will have a positive effect on wages in general and on agricultural revenue in particular, leading to considerable increase in the purchasing power of producers (Ecorys 2013). The national income of both the EU and Tunisia is likely to increase in the long term as a result of this agreement. Given the size of the economies, Tunisian benefit in GDP is expected to be bigger than the European one. As a result, such an agreement would be in favor of Tunisia and consolidate its privileged partnership with Europe (Ecorys 2013).
In spite of the importance of expected benefits of the DCFTA to Tunisian economy, it is worth noting several negative effects that it can have. On the one hand, Tunisian producers might face high competition in exporting agri-food staples to Europe given the similarity of products produced in the Mediterranean area. Thus, producers may lose their comparative advantage due to aggression from the other EU providers.
As a dynamic effect, the new trade environment may lead small Tunisian producers to adapt not only to a new type of competition with European products and neighbors such as Morocco and Turkey, but also to the European food safety standards and rules (Compes Lopez et al. 2013).
In the domestic arena, another shortcoming of the DCFTA is the additional drop in the levels of protection (Ecorys 2013) and the subsequent increase in competition caused by the availability of foreign agri-food products in the Tunisian market. In turn, this may result in the impoverishment of small domestic producers. Currently, most agricultural programs in Tunisia include subsidies to increase production level and protect the family farm model (see next section).
It is worth mentioning that the integration of agriculture in DCFTA negotiations is complicated even on the European side. One reason is that agriculture, especially the fruit and vegetables subsector, is considered to be one of the main sources of conflict in the relation between the EU and the MPC (Jordan et al. 2011; Garcia Alvarez-Coque et al. 2008) due to the increased competition that EU producers face from the MPC.