Knowledge Based Bio-Economy

AGFOODTRADE

Quantifying trade liberalisation in a changing world

Project Acronym AGFOODTRADE

Title of project New issues in agricultural, food and bioenergy trade

Research area Agriculture & Forestry (Socio-economic research and support to policies)

Contract No 212036

EU Contribution 2866 000 EURO

Start date May 2008

Duration 36 Months

Objectives:

International trade in food commodities reflects the interaction of complex dynamic processes driven by demographic, socio-economic, technological and political changes. Therefore, future evolution of world markets is highly uncertain. The purpose of this project is to build on existing knowledge, data, and modelling instruments to address issues of relevance to international trade and trade negotiations. It focuses on methodological development in areas that raise problems for modelllers and analysts. This includes, in particular, the linkage between EU agricultural policy and world market; the role of new demands for food, feed and fuel on the agricultural sector. It also addresses other issues that still raise methodological difficulties such as the role of trans-national firms or the impact of trade liberalization on price volatility intending to provide applied analyses helpful to decision makers and trade negotiators.

The project builds on past research but emphasizes issues usually overlooked by standard assessments of trade liberalization. These include the impact of demand from energy markets which could affect agriculture and reverse the decline of real farm product prices; the demographic changes, which in some developing and transition countries modify the demand for food, especially that for industrial food processing; the concentration of firms in many global markets, which could modify the expected size and distribution of gains from trade liberalization among stakeholders; the impact of trade liberalization on price volatility, which is a key concern but remains to be thoroughly evaluated and the the growing importance of sanitary and technical measures and their potential impact on food security, health issues, and trade.

Expected Impact:

The quantitative instruments to be developed will contribute to a forward-looking assessment of future trade agreements in the agricultural sector, including effects on EU27 trade and the CAP, and answer the Commission's need for quantitative simulations. The project will generate information as well as provide expertise and operational instruments to policymakers involved in trade negotiations, and agricultural policy design. The involvement of stakeholders means that the resulting databases and trade methodologies will have a strong foundation in relevant to policy. The quantitative instruments developed will contribute to a forward-looking assessment of future agreements, including their effects on EU27 trade and the CAP, and answer the Commission's need for quantitative simulations, providing a detailed analysis of the potential consequences of various trade liberalization scenarios on the European agricultural system.

The content of this work could impact on a wide range of policy decisions made by both European Legislation, national governments nad bodies such as the World Trade Organisation. The level of this impact will depend on the extent to which the results reach the right audience. The project has outlined a detailed dissemination policy in order to achieve this and organized the work in collaboration with stakeholders, and in particular with the EU Commission directorates general Research, Agriculture and Trade. The partners are expected to draw the attention of the European Commission, national governments, regional authorities and other public and private stakeholder to the results of the researchand generate demand for the developed databases, models and studies. The overall impact will depend on the success of this strategy.

Expected Results:

Results derived from analysis of trends specific indicators and quantified by a large scale general equilibrium model, a spatial trade model and a model of the EU farm sector, will provide an indication of the major factors affecting food trade. The models will be validated against a series of case studies focused on both countries covered by the Common Agricultural Policy (France, Ireland, Poland) non-EU countries with greater levels of poverty (Sengal, Uganda). The results will indicate the current intensity of trade and trade distortions in agriculture in the EU and in its main trading partners. It will consider both at-the-border interventions (shallow integration) and part of the behind-the border interventions (deep integration) and include an evaluation of the importance of traditional tariff barriers and domestic support programs. It will also provide a picture based on liberalization scenarios in agriculture in the EU and in its main trading partners in the near future (10 years). It will cover multilateral trade liberalization as well as predictable regional agreements and preferential schemes. In addition, the current level of distortions will be compared to the one prevailing a few years ago in order to assess the degree to which agricultural systems have been liberalized more recently

It will consider aspects such as full trade liberalization, a multilateral trade agreement, various regional agreements and the simultaneous implementation of both multilateral and regional agreements, examining both the effect of liberalization on European agricultural markets and sector’s income and the impact on the level of production at the world level, providing an understanding of key potential changes in the intensity and composition and direction of trade. A further analysis will cover the effects on income distribution and poverty in selected EU countries as well as on African countries, assessing the coherence of the EU policy between its agricultural, foreign assistance and trade sectors. This analysis will extend to cover the interactions of trade liberalization with market structure, the impact on world price volatility and the impact of technical barriers to trade (TBTs) including sanitary and phytosanitary (SPS) measures. Particular attention will be paid to the impact of growth in the biofuels sector on both the EU’s and developing countries’ agriculture, examining the results of an intensification of domestic programmes supporting the consumption and production of biofuels in rich countries. It will also examine the impact of liberalization in terms of potential changes in agricultural food demand resulting from economic growth, demographic forces, urbanization, and related changing dietary preferences.

Website of projectwww.agfoodtrade.eu

Contacts

Coordinator Jean Christophe BUREAU bureau@grignon.inra.fr

Organisation

National Agricultural Research Institute, France, www.inra.fr

Partners

University of Copenhagen, Institute of Food and resource Economics, Denmark, www.foi.life.ku.dk/English.aspx

University of Molise, Italy, www.unimol.it

Trinity College Dublin, Ireland, www.tcd.ie/

International Food Policy Institute, USA, www.ifpri.org/ourwork

The Bialystock School of Economics, Poland, www.wse.edu.pl/

Senegal Institute of Agricultural Research, Senegal, www.bameinfopol.info/spip.php

Institute for Prospective Technological Studies, Spain, ipts.jrc.ec.europa.eu/

Centre for Research on World Economics, France, www.cepii.fr

Slovak University of Agriculture Nitra, Slovak Republic , www.uniag.sk/

VITAMIB SAS, France, www.vitamib.com/contact-en

University of Calibria, Italy, www.unical.it/portale/index.cfm