The Doha round of multilateral tradenegotiations stalled in 2008 owing in no small degree to alack of agreement on the terms of substantially reducingtrade-distorting support for agricultural products and towhat extent this will be beneficial to developing countries.Nicaragua presents an interesting case in point, being oneof the poorest economies in Latin America with still arelatively large agricultural sector and high degrees ofrural poverty. In 2005, the country signed a free tradeagreement with the United States. This chapter provides aquantitative analysis addressing that question. It does sousing a computable general equilibrium (CGE) model forNicaragua coupled with a micro-simulation methodology. Thefirst section provides background information on tradereform policies and macroeconomic trends in Nicaragua, withspecial reference to the agricultural sector and ruralpoverty. The section that follows describes the mainfeatures of the CGE model and the micro-simulationmethodology used to assess the impact on poverty andinequality. The author then lay out the model scenariosconsidered, which include liberalizations of agriculturaland all merchandise goods trade by the rest of the world andby Nicaragua itself. That is followed by a summary analysisof results. This analysis includes tests for the sensitivityof the results with respect to assumptions regarding theresponsiveness of trade to price liberalization, asidentified through the relevant trade elasticities. Thefinal section provides conclusions and possible policy implications.
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