xinshen diao, agapi somwaru and terry roe the objective was to provide the “ big picture ”
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A Global Analysis Of Agricultural Reform In WTO Member Countries. Xinshen Diao, Agapi Somwaru and Terry Roe The objective was to provide the “ big picture ”. Computable General Equilibrium (CGE) Model Global Static and Dynamic (DYNAGEM). - PowerPoint PPT PresentationTRANSCRIPT
AGRICULTURALPOLICY REFORM
IN THE WTO
The Road Ahead
Xinshen Diao, Agapi Somwaru and Terry Roe
The objective was to provide the “big picture”
A Global Analysis Of Agricultural Reform In WTO Member Countries
Computable General Equilibrium (CGE) Model
Global Static and Dynamic (DYNAGEM)
Main Attributes of a Computable General Equilibrium (CGE): Basic Specification (Circular Flow)
Goods & Services
FirmsHouseholds
Factors
Demand
Demand
Supply
Expenditure
Income Rents
Final Goods:
Revenue
Final Goods: Supply
Intermediate Goods: SupplyIntermediate
Goods: Revenue
Government
Savings from ROW(Net Capital Inflow)
Govt. Savings(Budget Deficit)
Capital Account
InvestmentPrivate
Savings
Other countries/Rest of the World
ExportsImports
Govt Purchases
Basic CGE Model Structure
Transfers & Business
SubsidiesTaxes
Main Attributes of a Full CGE Model: Additional Institutions
Firms' Intertemporal Decisions
CONSUMPTION
OUTPUT
PRODUCTION INVESTMENT
LABOR, LAND CAPITAL
Consumers' Intertemporal Decisions
World Commodity Market
World Capital Market
IMPORTS &EXPORTS
FOREIGN ASSETS/DEBT
DIVIDENDS INTERESTS
ENDOWMENTINCOME CURRENT PROFIT
Domestic Commodity Market
SAVINGS
DYNAGEM ATTRIBUTES: Intertemporal Structure
CURRENT INCOME
The elliptical box represents exogenousvariables, the rectangular box representsendogenous variables. The dashed lineis for revenue flows and solid line is forcommodity flows.
More Features • Simulates policy changes in counterfactual or “what if”
comparisons
• Easily modified and flexible in the number of sectors and commodities
• Requires PC with high computational capacities
• Written in GAMS
• The model was developed in 1997 and published in the Journal of Economic Integration (2001), the Journal of Policy Modeling (2000), the International Economic Journal (1999)
• Based on the 1997 global economy (GTAP database version 5)
• For more information, contact: Xinshen Diao, IFPRI, or Agapi Somwaru, ERS
Commodity and Country Coveragefor the WTO study
Australia and New Zealand Japan and Korea United States Canada European Union European Free Trade Area China Other Asian countries Mexico Latin America South African countries Rest of the World
Paddy and processed rice, wheat Other grains (including corn) Vegetables, fruits and nuts Oilseeds, vegetable oil Sugar cane, sugar beets, processed sugar Plant-based fibers and other crops
Livestock and livestock products Beverages, tobacco, other processed food products Non-agricultural products Services
Road Map of the Analysis
Static Model• Elimination of import barriers throughout the world• Elimination of export subsidies throughout the world• Elimination of domestic support throughout the world• Combining all of the above
Dynamic Model• Elimination of all trade distortions without TFP growth• Elimination of all trade distortions with TFP growth of
developing countries
(0.02 annually only for the first 10 years of trade reform)
Major Findings
Ag. Policy Distortions Cause World Prices to be 12% Lower Than They Otherwise Would be
Economies Around the World Contribute to Ag. Price Distortions
U.S.15%
EU39%
Rest of world20%
Canada2%
Australia & New Zealand
0%
Japan & Korea13%
Latin America3%
Other Asian8%
Decomposition of Price Effects of Global Agricutlural Liberalization
-- Percentage change in world agricultural price index from the base year in the model
tariffs6.3
DCs all9.1
EU all4.4
DCs tariffs4.0
dom sub3.7
LDCs all2.4
US all1.8
LDCs tariffs2.3
export sub1.6
Japan&Korea all1.5
0
2
4
6
8
10
12
1
Scenarios
Estimated annual gain in purchasing power = $56 billion
Many Countries Would Share Consumer Purchasing Power Gains From Elimination
of Ag. Tariffs and Subsidies
U.S.24%
EU19%
Rest of world11%
Canada2%
Australia & New Zealand
6%
Japan & Korea11%
Latin America14%
Other Asian13%
Effects of Removing Domestic Support in the Developed Countries (with and without Land Based Payments Removal
Remove all domestic subsidies, no direct payment removalWorld ANZ JPK USA Canada EU EFTA
World Agricultural Price 3.55Returns to Farmland 4.11 -1.28 -1.38 1.93 -7.26 -21.43Total social welfare ($billion) 0.24 -3.66 0.97 0.28 6.06 0.82
Remove all domestic subsidies, with direct payment decoupled
World Agricultural Price 3.6Returns to Farmland 3.65 -1.3 -8.71 -1.52 -14.49 -32.58Total social welfare ($billion) 0.25 -3.89 1.04 0.31 5.92 0.83
Remove all domestic subsidies, with direct payment full coupled
World Agricultural Price 4.78Returns to Farmland 5.09 -0.63 -4.31 6.43 -7.2 -22Total social welfare ($billion) 0.37 -6.5 1.23 0.34 5.52 0.81
In sum• Eliminating global ag. policy distortions would:
• raise world welfare $56 billion annually• raise world agricultural prices 12 percent
• Roles of policies in reducing world prices:• Tariffs (52%)• Domestic subsidies (31%)• Export subsidies (13%)
• Developing countries can benefit from further WTO reforms
For more information….www.ers.usda.gov