I Workshop Prin PUE&PIEC29-30 gennaio 2009, Roma

AgFoodTradeAgFoodTrade

New Issues in Agricultural, New Issues in Agricultural, Food & Bioenergy TradeFood & Bioenergy Trade

AgFoodTradeAgFoodTrade

New Issues in Agricultural, New Issues in Agricultural, Food & Bioenergy TradeFood & Bioenergy Trade

AgFoodTradeAgFoodTrade

New Issues in Agricultural, New Issues in Agricultural, Food & Bioenergy TradeFood & Bioenergy Trade

Economic Partnership Agreements, Economic Partnership Agreements, WTO negotiations and the seeminglyWTO negotiations and the seeminglyWTO negotiations and the seemingly WTO negotiations and the seemingly never ending “banana war”never ending “banana war”gg

Gi i A iGiovanni AnaniaDepartment of Economics and Statistics University of Calabria Italy

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University of Calabria, Italy

the presentation

the policy issuep ythe modelthe results of the simulationsconclusions

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conclusions

the 2006 EU import regime for bananas

on 1 January 2006 the EU introduced a new import regime for bananas:new import regime for bananas:

MFN imports were subject to a 176 €/tp jtariff, with no quantitative restrictionsACP i t b fiti fACP imports were benefiting from aduty-free TRQ of 775,000 tin addition, from 1 January 2006 EBAhas been fully implemented for bananashas been fully implemented for bananas (duty-free, quota-free access for LDC)

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the policy issue: the 2007 EPA

on 1 January 2008 the EU implemented the (full and “interim”) Economic Partnership(full and interim ) Economic Partnership Agreements it negotiated in 2007 with many ACP countriesmany ACP countries

bananas from ACP countries now enter thebananas from ACP countries now enter the EU quota- and duty-free

bananas, rice and sugar are indicated as the three single agricultural commoditiesthe three single agricultural commodities where most of the export benefits for ACP

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countries from the EPA are to be gained

the policy issue: on-going negotiations on bananas

bil t l/ ltil t l ti tibilateral/multilateral negotiations- EU, MFN exporters and the US are looking

for a mutually acceptable solution to endWTO disputes on bananas (the “banana war”)

- the WTO Doha Development AgendaRound

a tentative bilateral agreement reached in July 2008 in Geneva within the WTO DDAJuly 2008 in Geneva within the WTO DDA round negotiationsth t t t h ld t id ththe agreement cannot not hold outside the “single undertaking” agreement (if any)

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concluding the DDA round

the paper

the paper provides a quantitative assessment of

(a) the expected benefits from EPA for ACP b t i f thbanana exporters, i.e. from the elimination of the EU preferential import quota in place until December 2007, and

(b) the reduction of these benefits as a result(b) the reduction of these benefits as a result of the erosion of preferential margins deriving from the conclusion of either the multilateral or bilateral WTO negotiations

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gwhich are currently taking place

the modela revised updated and expanded versiona revised, updated and expanded version of the model used in Anania (ERAE 2006, JIATD 2008)mathematical programming modelJIATD 2008)mathematical programming modelpartial equilibriumspatial

dit lone commodity onlybanana as a homogeneous productbanana as a homogeneous product

perfect competition is assumed, both in

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domestic and international markets

the modelbased on country/region importbased on country/region import demand/export supply, or domestic d d/ l f tilinear functions (at least in the relevantdemand/supply functionslinear functions (at least in the relevant intervals) time reference for base model: 2005time reference for base model: 2005explicit modeling of domestic and trade policies, including:

the EU import regime in 2005 (3 regimes;the EU import regime in 2005 (3 regimes;preferential tariffs, 2 TRQs)

the EU domestic policy regime in 2005

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the EU domestic policy regime in 2005(deficiency payments)

base model calibration (2005)

“ b d” “ di d” d“observed” vs. “predicted” country net trade positions:p

simple average % difference (in absolute l ) “ t ” 3 1%value), “exports”: 3.1%

export weighted average % difference (inexport weighted average % difference (in absolute value), “exports”: 1.9%

simple average % difference (in absolute value), “imports”: 1.2%value), imports : 1.2%import weighted average % difference (in

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absolute value), “imports”: 0.4%

PMP base model calibration (2005)“observed” vs “predicted” trade flows:“observed” vs. “predicted” trade flows:less satisfactory, as expected:

- overspecialization: 26 non zero predicted trade flows, 40 observed)

- 23 pairs of observed and predicted non zero trade flows; 57 trade flows both equal to zero

- 20 trade flows: either observed or predicted is equal to zero, while the other is positive

PMP used to perfectly calibrate trade flows (and net trade positions), under the(and net trade positions), under the assumption that the only ill-measured information in the model are bilateral

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information in the model are bilateral international transaction costs

the modeling

Base model 2005

20162005

demand and supplydemand and supplyshifts in all countries

(yields per capita(yields, per capita income, population)

EU enlargement (27)EU enlargement (27)new EU import regime

new EU domesticnew EU domestic policy regimeEBA initiative

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EBA initiative€/$ ex rate = 1.5

the reform of the EU CMO for bananas

the pre 2007 regime pro ided genero sthe pre-2007 regime provided generous,fully coupled support (deficiency payments)the 2006 reform canceled the previous regime byregime by

adding support (278.8 million €) forbananaproducers in the “outermost regions”producers in the outermost regions(Canary Islands, Guadalupe, Martinique,A d M d i ) t th fi i lAzores and Madeira) to the financialallocation for the “POSEI programmes”decoupling support (4.6 million €) forbanana producers in Greece, Cyprus and

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p , ypcontinental Portugal

the policy choices in France, Spain and Portugal

(a) in France and Spain financial resources gointo decoupled payments, but in order toreceive their entitlement in full, producerspare required to produce at least 80% (inFrance) and 70% (in Spain) of what) ( p )they produced, on average, in 2000-2004

(b) in Portugal financial resources are used to provide banana producers withto provide banana producers witha fixed, fully coupled, production subsidy

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the EPA

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the July 2008 bilateral agreement

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a different bilateral agreement

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a DDA agreement which includes the bilateral one

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free trade

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DDA agreement, bananas as a tropical product, EU bound tariff 176 euro/t EU MFN t 35.2 €/t

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…limitations of the modeling exercise

some of the issues associated with thesome of the issues associated with the assumptions made:

quality of data availableperfectly competitive marketsperfectly competitive marketsbananas being a homogeneous product

f tl l ti t t ti iperfectly elastic transportation servicesnon stochastic production / risk neutrality of

supply response to policy and price changes agents

in each countrydemand response to changes in incomes and

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p gprices in each country

sensitivity analyses

€/$ exchange rate: 1.80 and 1.20 (1.50)per year yield increases not to exceed 2%production in France and Spain equal 115%production in France and Spain equal 115%of minimum needed in order for farms to have access to the full amount of support they areaccess to the full amount of support they are entitled toexport supply elasticities in the main ACP exporters, Ivory Coast and Cameroon: 1 (1.5)exporters, Ivory Coast and Cameroon: 1 (1.5)all per unit international transaction costs i d b 30%

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increased by 30%

conclusions

the Economic Partnership Agreements will not significantly effect EU production, g y p ,consumption and imports of bananas

th t th f EPA ton the contrary, the preference EPA grants to ACP countries will significantly affect the relative competitiveness of their exports to the EU vs. those of MFNexports to the EU vs. those of MFN countriest t l ACP t t d t itotal ACP exports are expected to increase by 84%, MFN exports to the EU to decline

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by 24%

conclusions

a successful conclusion of the negotiationswould imply an erosion of the tradewould imply an erosion of the tradepreferences associated to the EPA which would significantly reduce their positivewould significantly reduce their positive effects on the relative competitiveness of ACP MFN tACP vs. MFN exports

the implementation of the agreementthe implementation of the agreement reached in July 2008 in Geneva would imply the erosion of 1/3 of the benefits resultingthe erosion of 1/3 of the benefits resulting from the preferences granted by the EU to ACP t i ith th EPA

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ACP countries with the EPA

conclusions

results appear to be relatively sensitive to t d h i i ldexpected changes in yields

this suggests that that negative effects ofthis suggests that that negative effects of preference erosion can be offset by providing preferred countries with theproviding preferred countries with the financial and in-kind resources needed to i th l ti k t titiimprove the relative market competitiveness of their bananas by enhancing technical efficiency in production

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Grazie!Grazie!25

Grazie!Grazie!

EU b i t f ACP t i (2002 2007 t)EU banana imports from ACP countries (2002-2007; t)

1000Thousands

600

800

400

600

2002 2003 2004 2005 2006 20070

200

2002 2003 2004 2005 2006 2007

Surinam e 6,548 0 19,447 35,258 45,148 54,342Other ACP 143,717 107,093 109,856 72,824 121,528 103,312Total ACP 739,491 798,76 782,924 763,618 891,133 837,353

Cam eroon 236,477 298,493 261,232 252,912 252,702 222,292Ivory Coast 216,718 207,42 210,76 183,752 221,791 190,068Dom in Rep 97,322 111,948 101,337 144,683 176,757 206,164

Belize 38,709 73,806 80,292 74,189 73,207 61,175

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Cameroon Ivory Coast Domin Rep Belize Suriname Other ACP

EU b i t f ACP t i (2002 2007 2002 100)EU banana imports from ACP countries (2002-2007; 2002=100)

1000Cameroon Ivory Coast Dominican Rep Belize

600

800

Cameroon Ivory Coast Dominican Rep BelizeSuriname Other ACP Total ACP

400

600

0

200

2002 2003 2004 2005 2006 20070

Cameroon 100 126 110 107 107 94Ivory Coast 100 96 97 85 102 88

Dominican Rep 100 115 104 149 182 212Belize 100 191 207 192 189 158

Suriname 100 0 297 538 689 830Other ACP 100 75 76 51 85 72

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Other ACP 100 75 76 51 85 72Total ACP 100 108 106 103 121 113

EU b i t f ACP t i (2002 2007 2002 100)EU banana imports from ACP countries (2002-2007; 2002=100)

250

150

200

50

100

2002 2003 2004 2005 2006 20070

Cameroon 100 126 110 107 107 94Ivory Coast 100 96 97 85 102 88

Dominican Rep 100 115 104 149 182 212Belize 100 191 207 192 189 158

Suriname 100 0 297 538 689 830

Cameroon Ivory Coast Dominican Rep Belize Other ACP Total ACP

Suriname 100 0 297 538 689 830Other ACP 100 75 76 51 85 72Total ACP 100 108 106 103 121 113

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Cameroon Ivory Coast Dominican Rep Belize Other ACP Total ACP

C t / ithe model

Country/regions

Importers (5): EU-15EU 10EU-10BULGARIA and ROMANIAUSAOTHER NET IMPORTERS

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the model

Exporters (20): SPAIN, FRANCE, PORTUGAL, GREECE CYPRUSGREECE, CYPRUSIVORY COAST, CAMEROON,DOMENICAN REP BELIZEDOMENICAN REP, BELIZE +SURINAME, OTHERACP non-LDC, ACP LDCECUADOR, COLOMBIA,, ,COSTA RICA, PANAMA,HONDURAS, BRAZIL,HONDURAS, BRAZIL,GUATEMALA, OTHER MFNnon-LDC non-ACP LDC

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non-LDC, non-ACP LDC