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Aus dem Institut für Marktanalyse und Agrarhandelspolitik Martina Brockmeier Petra Salamon Agricultural market at the advent of the next WTO round - focus on dairy Paper presented at IFCN Dairy Conference, Braunschweig 8th of June 2004 Braunschweig Bundesforschungsanstalt für Landwirtschaft (FAL) 2004
1Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
M. BROCKMEIER and P. SALAMON
Federal Agricultural Research Centre (FAL) Institute of Market Analysis and Agricultural Trade Policy
IFCN Dairy Conference 2004 Braunschweig, 8th of June
Agricultural Market at the Advent of the next WTO Round – Focus on Dairy Agricultural Market at the Advent of the next WTO Round – Focus on Dairy
2Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
OutlineOutline
Introduction
Approach: Global Trade Analysis Project (GTAP)– Extensions– Data base
Simulations
Results– Focus on dairy products and trade– Decomposition of results– Variation of simulations (H1, H2, H3)
Summary and concluding remarks
3Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
IntroductionIntroduction
WTO negotiations are still an ongoing topic with agriculture as a key action (single undertaking)The so-called Harbinson paper was the last one presenting quantitative figures What would have been the impact of the Harbinson proposal?And what are effects of single components of the proposal?Simulations are conducted for all agri-food products, but here the focus is on milk and dairy products
4Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Agri-culture
Down-streamingindustries
Upstream-ing
industries
Global Trade Analysis Project (GTAP) - ModelGlobal Trade Analysis Project (GTAP) - Model
Interaction between agriculture and factor markets
Integration of agriculture into intersectoral division of labour
Factor markets
5Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Representation of EU, developed countries (IC) and developing countries (DC)
Global Trade Analysis Project (GTAP) - ModelGlobal Trade Analysis Project (GTAP) - Model
Agri-culture
Factor markets
Down-streamingindustries
Upstream-ing
industries
EUEU
Agri-culture
Factor markets
Down-streamingindustries
Upstream-ing
industries
ICIC
Agri-culture
Factor markets
Down-streamingindustries
Upstream-ing
industries
DCDC
Interaction between agriculture and factor markets
Integration of agriculture into intersectoral division of labour
Starting point of the analysis is the standard multi-regional general equilibrium model GTAP
Representation of bilateral trade flows
6Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
GTAP - DatabaseGTAP - Database
Base year 1997Sources of the GTAP - database: – national input-output-tables: users– bilateral trade flows: COMTRADE (UN)– Protection data: notifications of the WTO, PSE-values of the OECD,
AMAD-database
Database: 57 sectors, 76 countries, 5 factorsAggregation of WTO simulations– 23 regions: Germany, France, Ireland, CEECs, EU-12, USA, EBA-
countries, ACP-countries, etc.– 19 sectors: detailed dis-aggregation of agri-food sectors, higher
aggregation in non-agricultural sectors (other primaries, manufactures and services)
7Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
GTAP – Regional aggregation – part 1 GTAP – Regional aggregation – part 1
Germany GERFrance FRAIreland IreEU-12 EU12Belgium, Denmark, Finland, Greece, UK, Italy, Luxemburg, Netherlands, Austria, Portugal, Sweden, Spain Accession countries CEECsPoland, Hungary, Bulgaria, Czech Republic, Malta, Rumania,Slovakia, Slovenia, Estonia, Latvia, Lithuania, CyrusUSA USACanada CANOceania OCEAustralia, New ZealandIndonesia INDOMalaysia MALBrazil BRAIndia INDIAChina CHINA
8Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
GTAP – Regional aggregation – part 2 GTAP – Regional aggregation – part 2
EBA EBABangladesh, Rest of South Asia, Malawi, Mozambique, Tanzania, Zambia,Rest of Southern Africa, Uganda, Rest of Sub-Saharan Africa Other ACP countries OACPCentral America, Caribbean countries, Botswana, ZimbabweHigh Income Asia HICASHong Kong, Korea, Taiwan, SingaporeJapan JAPRest of Former Soviet Union FSUOther Europe OEuropSwiss, other EFTAOther Asia OASIAPhilippines, Thailand, Vietnam, Sri Lanka Northern Africa, Near East MEDNETurkey, Rest of Middle East, Morocco, Rest of North AfricaOther Latin America OLAMexico, Columbia, Peru, Venezuela, Rest of the Andean Pacts, Argentina,Chile, Uruguay, Rest of South AmericaRest of the World ROWCroatia, Rest of SACU, Rest of the World
9Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
GTAP – Sectoral aggregation – part 2 GTAP – Sectoral aggregation – part 2
Wheat WHEATOther Cereals OCEROilseeds OSEEDSSugar beets, sugar cane RSUGPaddy rice RICEFruit, vegetables, other crops FRVEOCCattle, sheep, goats, horses CATTLEOther animals OTHANMRaw milk MILK Other primaries PRIMABeef BEEFOther meat OTHMEATOils and Fats OILSDairy products DAIRYOther Food OFOODSugar SUGARDrinks, Tobacco DRTOBManufactures MANUServices SVCS
10Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Extensions of the GTAP modelExtensions of the GTAP model
Instruments of the CAP (Common Agricultural Policy)– Milk- and sugar quotas ("complementarity approach")– Set-aside (adjustment of productivity)– Direct payments (animal and area premiums modelled as factor subsidies of
land and capital)
EU – Budget– Components of the European Agricultural Guidance and Guarantee Fund
(EAGGF - section: guarantee)– Representation of endogenous net transfer payments
Projection-module for adjustments within the economic environment
No explicit representation of non-EU policies
11Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
SimulationsSimulations
ScenarioScenario
19971997 20022002 20052005 20072007 20142014
BaselineBaseline
19971997 20022002 20052005 20072007 20142014
ProjectionsProjections Projections,Agenda 2000
Projections,Agenda 2000
Projections,EU-EnlargementEBA
Projections,EU-EnlargementEBA
ProjectionsDecoupling
ProjectionsDecoupling
ProjektionsProjektionsProjections,Agenda 2000
Projections,Agenda 2000
Projections,EU-EnlargementEBA
Projections,EU-EnlargementEBA
Projections, DecouplingW T O: Doha Round
Projections, DecouplingW T O: Doha Round
Comparison of results
12Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Simulations of the Doha-Round concerning agri-food tradeSimulations of the Doha-Round concerning agri-food trade
H1
Market access margins
ExportSubsidies -100%
Domestic -60% ICSupport -40% DC
IC = Developed countries; DC = Developing countries
13Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
HARBINSON-Proposal for Market Access: Reduction of notified tariffsHARBINSON-Proposal for Market Access: Reduction of notified tariffs
Developed countries (5 years)
010203040506070
> 90% 15% < 90% <15%Tariff rate
Reduction (%)
Average reduction Minimum reduction
14Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Developing countries (10 years)
01020304050
> 120% 120% <60%
60% < 20% < 20%
Tariff rate
Reduction (%)
Average reduction Minimum reduction
HARBINSON-Proposal for Market Access: Reduction of notified tariffsHARBINSON-Proposal for Market Access: Reduction of notified tariffs
15Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Changes in global exports – scenario H1 vs. base (Mio. €)Changes in global exports – scenario H1 vs. base (Mio. €)
-2000
0
2000
4000
6000
8000
10000EU-27 USA Canada Oceania Indonesia Malaysia Brazil India China
H1: Harbinson
-2000
0
2000
4000
6000
8000
10000EBA Other ACP
High Inc.Asia Japan FSU
Non-EUEurope Other Asia
NAfricaNEast
Oth.LAmerica ROW
16Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Changes in global exports – scenario H1 vs. base (%)Changes in global exports – scenario H1 vs. base (%)
-6
-4
-2
0
2
4
6
8
10
12W
heat
Oth
er c
erea
ls
Oils
eeds
Frui
ts a
ndve
geta
bles
Bee
f, sh
eep,
goat
s
Pig
mea
t,po
ultry
Fats
and
oils
Dai
ry p
rodu
cts
Sug
ar
Oth
er fo
od
Oth
er p
rimar
ies
Man
ufac
ture
s
Ser
vice
s
17Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Changes in exports and imports of dairy products – scenario H1 vs. base (Mio. €)Changes in exports and imports of dairy products – scenario H1 vs. base (Mio. €)
-400
0
400
800
1200
1600EU-27 USA Canada Oceania Indonesia Malaysia Brazil India China
Exports
-400
0
400
800
1200
1600EU-27 USA Canada Oceania Indonesia Malaysia Brazil India China
Imports
18Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Changes in exports and imports of dairy products – scenario H1 vs. base (Mio. €)Changes in exports and imports of dairy products – scenario H1 vs. base (Mio. €)
-400
-200
0
200
400
600
800EBA Other ACP
High Inc.Asia Japan FSU
Non-EUEurope Other Asia
NAfricaNEast
Oth.LAmerica ROW
Imports
-400
-200
0
200
400
600
800EBA Other ACP
High Inc.Asia Japan FSU
Non-EUEurope Other Asia
NAfricaNEast
Oth.LAmerica ROW
Exports
19Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Changes in trade balances of dairy products – scenario H1 vs. base (Mio. €)Changes in trade balances of dairy products – scenario H1 vs. base (Mio. €)
-750-500-250
0250500750
100012501500
EU-27 USA Canada Oceania Indonesia Malaysia Brazil India China
H1: Harbinson
-750-500-250
0250500750
100012501500
EBA Other ACPHigh Inc.
Asia Japan FSUNon-EUEurope Other Asia
NAfricaNEast
Oth.LAmerica ROW
changes in trade balance = changes in FOB export valuesminus changes in CIF import values
20Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition of total resultsDecomposition of total results
Simulation results (e. g. implementation of the Harbinson proposal H1) will be decomposed in partial effects
– Identification of important contributions to the total results
– Support for comprehension and interpretation of results
Important: partial effects can cancel out each other!
21Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition - EU-27:change in total balance of dairy productsDecomposition - EU-27:change in total balance of dairy products
-1000 -750 -500 -250 0 250 500 750 1000 1250 1500 1750 2000
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
total effect
negative effect of tariff cuts concerning imports from third countries to
third countries on trade balance of the EU
22Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition - EU-27:change in total balance of dairy productsDecomposition - EU-27:change in total balance of dairy products
-1000 -750 -500 -250 0 250 500 750 1000 1250 1500 1750 2000
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
negative effect of tariff cuts concerning imports
from third countries to the EU on trade balance of
the EU
23Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition - EU-27:change in total balance of dairy productsDecomposition - EU-27:change in total balance of dairy products
-1000 -750 -500 -250 0 250 500 750 1000 1250 1500 1750 2000
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
positive effect of tariff cuts concerning imports
from the EU to third countries on trade balance of the EU
24Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition - EU-27:change in total balance of dairy productsDecomposition - EU-27:change in total balance of dairy products
-1000 -750 -500 -250 0 250 500 750 1000 1250 1500 1750 2000
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
positive effect of export subsidy cuts concerning
exports from third countries to third countries on trade
balance of the EU
25Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition - EU-27:change in total balance of dairy productsDecomposition - EU-27:change in total balance of dairy products
-1000 -750 -500 -250 0 250 500 750 1000 1250 1500 1750 2000
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
positive effect of export subsidy cuts concerning
exports from third countries to the EU on trade balance
of the EU
26Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition - EU-27:change in total balance of dairy productsDecomposition - EU-27:change in total balance of dairy products
-1000 -750 -500 -250 0 250 500 750 1000 1250 1500 1750 2000
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
negative effect of export subsidy cuts concerning exports from the EU to third countries on trade
balance of the EU
27Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition – Oceania (OCE):change in total balance of dairy productsDecomposition – Oceania (OCE):change in total balance of dairy products
-1000 -750 -500 -250 0 250 500 750 1000 1250 1500 1750 2000
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
the only negative effect is tariff cuts concerning
imports from the EU to third countries on trade
balance of Oceania
28Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition – USA:change in total balance of dairy productsDecomposition – USA:change in total balance of dairy products
-1000 -750 -500 -250 0 250 500 750 1000
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
negative effect are tariff cuts concerning imports
from the EU to third countries and cuts of
export subsidies between third countries
on trade balance of USA
29Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition - Japan:change in total balance of dairy productsDecomposition - Japan:change in total balance of dairy products
-1000 -750 -500 -250 0 250 500 750 1000
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
negative effects are tariff cuts concerning
imports between third countries and
tariff cuts concerning imports from the EU to third countries on
trade balance of Japan
30Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition – North Africa and Near East (MEDNE):change in total balance of dairy products
Decomposition – North Africa and Near East (MEDNE):change in total balance of dairy products
-1000 -750 -500 -250 0 250 500 750 1000
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
negative effects are tariff cuts concerning
imports between third countries and
tariff cuts concerning imports from the EU to third countries on
trade balance of North Africa and
Near East
31Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition – Everything But Arms region (EBA):change in total balance of dairy products
Decomposition – Everything But Arms region (EBA):change in total balance of dairy products
-50 -40 -30 -20 -10 0 10 20 30 40 50
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
negative effects are tariff cuts concerning imports between third countries, tariff cuts concerning imports from the EU to third countries and export
subsidy cuts concerning exports
from EU to third countries
32Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition – Other ACP countries (OACP):change in total balance of dairy products
Decomposition – Other ACP countries (OACP):change in total balance of dairy products
-50 -40 -30 -20 -10 0 10 20 30 40 50
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
negative effects are tariff cuts and export
subsidy cuts concerning exports
between third countries
positive effect is export subsidy cuts concerning exports
from EU to third countries
33Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition – Brazil (BRA):change in total balance of dairy productsDecomposition – Brazil (BRA):change in total balance of dairy products
-100 -80 -60 -40 -20 0 20 40 60 80 100
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
positive effect is export subsidy cuts concerning exports
from EU to third countries
34Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition – Other Latin America (OLA):change in total balance of dairy productsDecomposition – Other Latin America (OLA):change in total balance of dairy products
-100 -50 0 50 100
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
positive effects are export subsidy cuts
negative effects are tariffs cuts
35Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition – High Income Asia (HICAS):change in total balance of dairy productsDecomposition – High Income Asia (HICAS):change in total balance of dairy products
-100 -50 0 50 100
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
positive effects are export subsidy cuts
negative effects are tariffs cuts
36Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Decomposition – Indonesia:change in total balance of dairy productsDecomposition – Indonesia:change in total balance of dairy products
-100 -50 0 50 100
export subsidies (EU, third country)export subsidies (third country, third country)tariffs (third country, EU)
export subsidies (third country, EU)tariffs (EU, third country)tariffs (third country, third country)
37Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Changes in quantities and prices – scenario H1 vs. base (%)Changes in quantities and prices – scenario H1 vs. base (%)
-16-12
-8-4048
1216
EU-27 USA Canada Oceania Indonesia Malaysia Brazil India China
Output quantities
Producer price milk
-16-12
-8-4048
1216
EBA Other ACPHigh Inc.
Asia Japan FSUNon-EUEurope Other Asia
NAfricaNEast
Oth.LAmerica ROW
38Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Changes in income (%) *Changes in income (%) *
-1
0
1
2
3
4EU-27 USA Canada Oceania Indonesia Malaysia Brazil India China
H1: Harbinson
-4
-3
-2
-1
0
1EBA Other ACP
High Inc.Asia Japan FSU
Non-EUEurope Other Asia
NAfricaNEast
Oth.LAmerica ROW
39Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
QualificationQualification
Intervention prices, TRQs and exogenous export subsidies
political “update" in third countries
– Representation of RTAs
– Differences between bound and applied rates, “water" in tariffs
– Explicit modelling of agricultural policies in third countries
Changes in availability of factor endowments
Sensitivity analysis
40Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
SummarySummary
The Harbinson proposal would have the following impacts: World trade increases in all regions and in most agri-food products including dairy productsPositive net trade effects in trade balance of dairy products are expected in Oceania, EU-27, high income Asia, Malaysia, other Latin America, FSU and China. When the trade balance effects of dairy products are decomposed:– In the EU-27, positive effects of the tariff cuts concerning imports from EU
to third countries are dominating negative impacts of tariff cuts concerning imports from third countries to the EU and to third countries as well as cuts of export subsidies concerning exports from the EU to third countries. Production quotas are binding, but producer prices will decline.
– In Oceania, nearly all effects are positive. Production and prices will in crease.
41Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
SummarySummary
further:– In the USA, dominating negative effects are tariff cuts concerning imports
from the EU to third countries and cuts of export subsidies between third countries. Due to production increases in other areas, milk production declines and prices increase.
– In Japan and North Africa and Near East, tariff cuts on imports are the most important effects. Prices and production decline.
– In the EBA region, preference erosion takes place. Prices and production decline.
– In Brazil, nearly all effects are negative, but high production increases in other agri-food sectors lead to higher prices. Nevertheless, production of milk declines.
– In other Latin America, positive effects of export subsidy cuts are dominating. Prices and production increase.
An overall positive income effect is expected in Brazil, Oceania, other ACP countries, other Latin America, Indonesia, the USA and Canada.
42Institute of Market Analysis and Agricultural Trade Policy, BROCKMEIER and SALAMON, Braunschweig, 8. June 2004
Thank you for your attentionThank you for your attention