Distortions to Agricultural Policy Incentives in Tunisia: A Preliminary Analysis

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Since the early 1990s, Tunisia has implemented far-reaching reforms in the agricultural sector consisting in abolishing border protection, cutting input subsidies and allowing market forces to determine the price of goods. However, these reforms are incomplete and the intervention of public authorities in markets and agricultural entities remains significant.

While the measures in place are necessary for protecting local products against foreign competition to guarantee food security and support farmers’ income, they are often understood as the source of distortion for production and trade with the potential of diminishing the agricultural sectors efficiency and competitiveness thus jeopardizing its development prospects.

Distortions to Agricultural Policy Incentives in Tunisia seeks to shed light on the distortive impact of such measures by evaluating Tunisia’s agricultural price support policy and quantifying the distortions caused by various measures.

The article concludes that at the national level, agricultural protection and support measures affect strategic production choices which, from a resource allocation perspective, are more costly than beneficial. Tariff barriers prevent resources from being allocated to other sectors even if they can be used in a more productive manner elsewhere. Also, the tariff regime may be harmful to activities competing with imports. Finally, customs tariffs create an export bias where investors channel capital towards the production of highly protected importable goods to the detriment of exportable products. Progression from a support-based and protectionist agricultural policy to a new market environment requires the improvement of the conditions, framework and regulation of the agricultural sector.