Morocco's free trade agreement with the EU: A quantitative assessment

Using an applied general equilibrium model, we find that the EU–Morocco free trade area (FTA) will increase Moroccan welfare by about 1.5% of its GDP, showing that trade diversion is not dominant. The gains increase to about 2.5% of GDP if Morocco adds trade liberalization with the rest of the world while adjustment costs are only slightly higher, partly reflecting the absence of trade diversion with global liberalization. We show what are the key modeling assumptions and parameter choices that affect the estimates in models of this type, employing systematic sensitivity analysis as well as graphical exposition.