The methodologies of the studies - Institutional Constraints to Small Farmer Development in Southern Africa - page 307

helped improve the economist's ability to measure the potential costs and benefits of trade
policy interventions.
For a long time, welfare analysis has been largely qualitative with most research merely
focusing on likely effects of liberalisation (Greenaway, 1983). To fill this gap, in 1990,
Isabella Tsakok developed the Partial Equilibrium framework to quantify the welfare effects
of a given liberalisation process (Greenaway, 1983). In the last decade, several empirical
policy analysis models have been developed to analyse the impact of trade policies on
welfare. Most of these modes have the ability to go beyond the traditional border analysis.
Faced with all these diversity in empirical analysis tools, to date, limited research work has
been undertaken to analysis the welfare effects of trade policies in the Swaziland maize
sector, not even the Partial Equilibrium model. It is on this premise that this study will
utilise the Partial Equilibrium model to quantify the welfare effects of the current maize
market regulations in Swaziland. The Partial Equilibrium analysis is preferred for its ability
to analyses single-sector market while assuming that the effects in the other markets are
negligible or remain constant.
In this study we will consider a small importing country case with the assumption that
the country's imports are a small share of the world market, and complete elimination of
imports from the world market have no noticeable effects on product quantity and world
price. Even if a small country restricts trade by implementing a tariff barrier on imports, no
much effects are felt in the world market (Lindert and Kindleberger, 1982; Reed, 2001).
When a small country faces international or world price P w in free trade, then the free trade
equilibrium is depicted in Figure A4.1. P w is the free trade equilibrium price. At that price,
domestic demand is given by D 1, domestic supply by S 1 and imports are the difference D 1 -
S 1 (the line DH in the figure). When a small country implements a specific tariff it will raise
the domestic price by the full value of the tariff. Suppose the price in the importing country
rises to P d because of the tariff In this case the tariff rate would be t = P d - P w , which is
equal to the length of the line segment BF in Figure A4.1. As a result of the implemented
tariff barrier, domestic demand decrease from D 1 to D 2 and supply increase from S 1 to S 2
(Cramer and Jenses, 1994.).
The tariff barrier brings up welfare changes whose direction and magnitude are summarised
in Table A4.1 below. The notations used in Table A4.1 are based on the information already
presented in Figure A4.1. The magnitude of the welfare changes can be calculated using
the formulations in Table A4.2 that is adapted from Tsakok (1990). Both Tables A4.1 and
A4.2 present the aggregated national welfare effects of the tariff to the importing country.