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GTAP Resource #1569

"Developing Countries Faced with Multilateral Agricultural Liberalization: Contrasted Fortunes"
by Bouët, Antoine, Christophe Bureau, Yvan Decreux and Sebastien Jean

Using an adapted version of the MIRAGE model, this paper aims at assessing the impact of a widespread liberalization in agriculture, as proposed in the revised Harbinson proposal. The CGE model includes imperfect competition and increasing returns to scale in industry and services. It assumes land and labor mobility to be imperfect across sectors, and developing countries have a dual labor market.

Special emphasis is put on measuring properly protection and domestic support. Domestic support data is updated to 2001 for the EU and the US, and accounts for the Agenda 2000 reform and the New Farm Bill. Protection data, from the MAcMaps database, describes applied tariffs, taking preferential agreements exhaustively into account. The liberalization hypotheses used in each scenario are applied at the HS-6 level.

The results provide a contrasted picture of the benefits developing countries may draw from agricultural liberalization.
This work intends to shed some lights on the main stakes of the negotiation on agricultural trade liberalization in the Doha Development Agenda (hereafter DDA). It focuses on the so-called three pillars of the negotiation (border protection, domestic support, export subsidies), and on the proposals circulated by Chairman Harbinson. The assessment is made using an adapted version of the MIRAGE Computable General Equilibrium (CGE) model. Compared to similar exercises, this work has a few distinctive features worth mentioning:
- the MIRAGE model includes imperfect competition and increasing returns to scale in industry and services. It assumes land and labour mobility to be imperfect across sectors;
- protection data, from the MAcMaps database, describes applied tariffs at the HS-6 digits level (5,000 products). As opposed to what has been done so far in such exercises, it takes preferential agreements exhaustively into account;
- the proposed modalities for liberalization of border protection are applied at the HS-6 digits level (5,000 products), making it possible to cope with the tariff-harmonizing effect inherent to the non-linear formulas proposed;
- the liberalization resulting in terms of market access is computed based on an application of the formula to consolidated tariffs. Applied duties are changed only as long as the change in consolidated tariffs make it necessary (i.e. when the new consolidated tariffs falls below the initial applied duty);
- an original dataset has been gathered to update the measurement of domestic support. This effort has been focused on the EU and the US, which carried out the most noticeable reforms in this domain since 1997. As a result, our dataset takes into account the new Farm Bill in the US, the Agenda 2000 reform and the enlargement to 25 countries for the EU. There is a distinction between the various form of support regarding their actual impact on output and inputs. In addition, the difference between the actual support level and the level notified to the WTO (e.g. the US support under "de minimis" not notified to the WTO) is taken into account when modeling the proposals. The existing gap between the level of the Aggregate Measure of Support and the WTO commitments is also taken into account.;
- a fairly detailed geographical breakdown (18 regions) is used, grouping countries mainly on the basis of trade specialization and trade policies.
The results make it possible to characterize the main impacts to be expected from each of the three pillars of the negotiation. The differences across developing countries are emphasized, in particular as far as trade and welfare are concerned. These contrasts are related to differences in initial trade specialization patterns, and in initial level of protection. Particular attention is devoted to preferences, and to their erosion as a result of a multilateral liberalization, which explain a large part of these contrasted impacts. Sensitivity analysis is carried out with regards to various aspects, related to the imperfect utilization of preferences, to the use of minimum instead of average cut rate proposed, to the change in applied duties compared to consolidated duties, and to the values of substitution elasticities.

Resource Details (Export Citation) GTAP Keywords
Category: 2004 Conference Paper
Status: Published
By/In: Presented at the 7th Annual Conference on Global Economic Analysis, Washington DC, USA
Date: 2004
Created: Jean, S. (5/10/2004)
Updated: Batta, G. (12/17/2005)
Visits: 4,173
No keywords have been specified.

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