The welfare effect of the new wave of protectionism: The case of Argentina

This paper studies the welfare impact of alternative scenarios of trade protectionism and liberalization in Argentina. The impact of the different trade policies is assessed in two different ways. We first use the multi-sectoral and multi-regional computable general equilibrium MIRAGE model to assess the effects of trade policy on GDP, exports, imports, terms of trade, real wages, and welfare. The second approach is to follow the trade and poverty literature and use the price and factor remuneration changes from each simulation to feed them into household survey data and assess the welfare effect on Argentine households. The simulations show that an increase in protectionism in a unilateral way has only short term benefits while the long run effects are negative. On the other hand liberalization scenarios tend to have short term negative effects but positive effects in the long run in particular when NTBs are considered. The analysis using household survey data shows that protectionism has negative long term effects across the entire income distribution and the effect is particularly severe for the poorest households. Liberalization scenarios improve households' welfare in the long run with a slight pro rich bias.