The Tariff-Only Import Regime for Bananas in the European Union: Impacts on ACP and Non-ACP Suppliers

The European Union is bound by World Trade Organisation agreements to move to a tariff-only import regime for bananas no later than 1 January 2006. What should change at that date is the trade regime, not the level of protection offered to African, Caribbean and Pacific (ACP) countries. This article provides an assessment of the trade impact of this tariff-only regime on the basis of simulations carried out with a dynamic partial equilibrium model of the world banana market using 2002–03 as the base year. Simulation results show that the tariff levied on imports from non-ACP countries should be set at around €250 per tonne in order to maintain in 2008 the EU import structure that prevailed in 2003. A lower tariff would increase EU total imports, to the benefit of non-ACP countries and to the detriment of the group of ACP countries. Conversely, a higher tariff would decrease EU imports from non-ACP countries and increase imports from ACP suppliers. Under this assumption, the increase in ACP exports to the EU would mainly benefit the two West African suppliers, Cameroon and Ivory Coast, who are more competitive and have a more price elastic supply than the ACP suppliers of the Caribbean islands.     

Measuring the Trade Restrictiveness of Domestic Support using the EU Common Agricultural Policy as an Example

We develop an index that measures the overall trade effects of domestic support payments. Our index is based on the Mercantilist Trade Restrictiveness Index (MTRI) and is capable of analysing the development of the trade restrictiveness of domestic support payments over time and across countries. It facilitates the evaluation of agricultural policy reforms introducing changes in the composition of domestic support payments. We conduct this analysis with a computable general equilibrium model that is extended to depict detailed agricultural policies using the Common Agricultural Policy of the European Union (EU) as an example. For the representation of agricultural policies, we updated the underlying database by incorporating detailed EU domestic support payments taken from the OECD Producer Support Estimate (PSE) tables and reconcile PSE data with the WTO classification scheme. Our index confirms a decrease in trade distortion stemming from the implementation of decoupled support in the EU. In addition, the trade-equivalent protection rate shows that the trade restrictiveness of domestic support payments depends on the assumptions made with regard to the degree of decoupling of those payments.     

Alternative U.S. and EU Sugar Trade Liberalization Policies and Their Implications

This study analyzes the impacts of alternative trade liberalization policies in the United States and the European Union (EU) on the U.S. sugar industry. A global sugar policy simulation model was used for this analysis. The study results indicate that the U.S. sugar industry may be able to survive if both the United States and the EU liberalize their sugar trade. However, if only the United States eliminates its sugar programs, all U.S. sugar-producing regions would be threatened.     

Prevalence of key developments in trade of agro-food producers in the new member states of the European Union

The ten new member states (NMS-10) of the European Union (EU) have contributed to an enhancement in the agro-food trade among the EU-25 members. Intra-industry trade (IIT) represents only a minor part of NMS-10 trade in agro-food products. Their trade in agro-food products is specialized to different countries in terms of economic distance, factor endowments and/or degree of competitiveness of their agro-food sectors. The borderless EU markets are likely to influence the increase of IIT with implications for the EU trade policy, since more than one-third of agro-food trade in the EU-25 members is represented by NMS-10.     

Brexit,Trade Agreements and CAP Reform

Although a number of reforms have significantly changed the Common Agricultural Policy (CAP ) over the past two decades, a defining characteristic of the policy is its prohibitively high import tariffs on a number of key commodities as tariff cuts have not formed part of CAP reform. These high tariffs, whilst protecting EU producers, complicate the EU 's attempts to negotiate Free Trade Area (FTA ) agreements around the world, and will likewise be problematic for agri‐food trade with a post‐Brexit UK , particularly over the politically sensitive border between the EU ‐27 and the UK on the island of Ireland. An open border could be more easily secured if the UK 's tariff barriers on CAP products matched those of the EU ‐27. This, however, implies either that the UK will have to abandon its plans to pursue ‘free‐trade’ policies with other countries around the world, or that the EU ‐27 needs to complete its reform of the CAP by unilaterally reducing its tariff barriers. It seems highly unlikely that the challenges posed by Brexit would prompt the EU to unilaterally reduce its excessively high CAP tariffs.     

Trade and agroindustrialization in developing countries: trends and policy impacts

There have been important changes in the international trade of processed and high-value added food products from developing countries over the past several decades. One of them has been the emergence of oilseeds and fruits and vegetables, replacing traditional products such as sugar, coffee, and cocoa as the main exports from developing countries. Another trend has been the collapse of African agroindustrial exports and the increase of exports from Asia. The paper highlights key trends, and explores possible reasons for the trends, focusing on trade policies in less-developed countries (LDCs) and developed countries (DCs). The paper argues that national trade policies and other economic policies appear to have been relatively supportive of agroindustrial production and exports in Asia. In contrast, policies have had more mixed effects in Latin America and the Caribbean (LAC), and seem to have been just one component in a larger array of forces inhibiting economic development in Africa. The performance of agroindustrial production and exports from LDCs may be now more dependent than ever on the completion of reforms in the agricultural trade policies of DCs. For Africa, however, a more supportive international environment and better macroeconomic and trade policies will not be enough to ensure a thriving agroindustrial sector within a broader process of economic development until military confrontations stop.     

Comparative Advantage in Demand: Experimental Evidence of Preferences for Genetically Modified Food in the United States and European Union

The United States (US) exports more than US$6 billion in agricultural commodities to the European Union(EU) each year, but one issue carries the potential to diminish this trade: use of biotechnology in food production. The EU has adopted more stringent policies towards biotechnology than the US. Understanding differences in European and American policies towards genetically modified (GM) foods requires a greater understanding of consumers’ attitudes and preferences. This paper reports results from the first large‐scale, cross‐Atlantic study to analyse consumer demand for genetically modified food in a non‐hypothetical market environment. We strongly reject the frequent if convenient assumption in trade theory that consumer preferences are identical across countries: the median level of compensation demanded by English and French consumers to consume a GM food is found to be more than twice that in any of the US locations. Results have important implications for trade theory, which typically focuses on differences in specialization, comparative advantage and factor endowments across countries, and for on‐going trade disputes at the World Trade Organization.     

Trade liberalisation and greenhouse gas emissions: the case of dairying in the European Union and New Zealand*

The link between trade and the environment has aroused considerable interest both in terms of the impact of trade liberalisation on the environment, and also the impact of environmental policy on production and trade. Of key environmental concern at present is global warming and its association with greenhouse gas emissions. Agriculture is a sector of the economy that both contributes to, and will be affected by, climate change. This paper models the impact of agricultural trade liberalisation on greenhouse gas emissions from agriculture around the world, focusing particularly on the effects on New Zealand, a small economy highly dependent on agricultural trade. A partial equilibrium agricultural multicountry, multicommodity trade model is used for the analysis, extended to include physical production systems and their greenhouse gas emissions. Two simulations are performed: removal of agricultural policies in the EU and in all OECD countries. The results indicate that although producer returns in New Zealand increase, greenhouse gas emissions also increase significantly. EU producers face lower returns but also lower greenhouse gas emissions.     

The Impact of an EU–US Transatlantic Trade and Investment Partnership Agreement on Biofuel and Feedstock Markets

We assess the impact of a potential TTIP bilateral free trade agreement on the EU and US bio‐economies (feedstock, biofuels, by‐products, and related competing crops) and major trade partners in these markets. The analysis develops a multi‐market model that incorporates bilateral trade flows (US to EU, EU to US, and similarly with third countries) and is calibrated to the OECD‐FAO baseline for 2013–2022 to account for recent policy decisions. The major policy reforms from a TTIP involve tariff and TRQ liberalisation and their direct contractionary impact on US sugar supply, EU biofuel production, and indirect negative effect on US high fructose corn syrup (HFCS) production. EU sugar and isoglucose production expand along with US ethanol and biodiesel and oilseed crushing. EU sugar would flow to the US, US biofuels and vegetable oil to the EU. We further quantify non‐tariff measures (NTM) affecting these trade flows between the EU and the US. EU oilseed production contracts, and EU crushing expands with improving crushing margins following reduced NTM frictions. Our analysis reveals limited net welfare gains with most net benefits reaped by Brazil and not the two trading partners of the TTIP.     

IS FOREIGN TRADE (IM)PERFECTLY COMPETITIVE?: AN ANALYSIS OF THE GERMAN MARKET FOR BANANA IMPORTS

Many studies have been carried out that measure welfare effects of the newly adoped common policy on banana imports by the European Union. All these studies assume that foreign trade in bananas is characterised by perfectly competitive behaviour. However, if foreign trade in bananas is imperfectly competitive, then the welfare predictions about the common banana policy may turn out to be incorrect. It is necessary, therefore, to empirically estimate the degree of market imperfection in the banana market. In this paper, we estimate the degree of market imperfection in the German market for banana imports using a structural econometric model. Based on the bootstrap procedure, we reject the hypothesis that firms in this market behave perfectly competitively, but cannot reject the hypothesis that firms are engaged in Cournot-Nash behaviour.     

Nontariff measures and product differentiation: Hormone-treated beef trade from the United States and Canada to the European Union

We investigate how a combination of the sanitary and phytosanitary (SPS) measure and product differentiation affects beef trade and the consequences for the United States (US)–European Union (EU) hormone-treated beef trade dispute. We develop a partial equilibrium model to represent the global beef markets and product differentiation between non-hormone-treated beef, hormone-treated beef, and other beef. The results show that removing the SPS measure increases EU hormone-treated beef imports from the US and Canada and decrease beef consumption. In addition, EU hormone-treated beef consumption and imports can be related to a few key indicators of product differentiation. The framework we develop can estimate EU hormone-treated beef consumption and imports based on a minimum of parameters relating to product differentiation, thereby providing useful applied economic analysis of a key trade measure.     

The War in Ukraine,Food Security and the Role for Europe

Food-security implications of the war in Ukraine are exacerbated by adverse weather events, spillover effects from the distortion of energy and fertiliser markets, and domestic policies that countries around the world have implemented in pursuit of food security. Estimates suggest that the cumulative effect of these channels in terms of restricting agricultural and food trade is in the order of over 10 times larger, and their cumulative effect on global food supply is on average three times more substantial than the direct agricultural supply disruptions in Ukraine. The latter, however, disproportionally impacts low-income countries that are particularly vulnerable to food supply shortages and price increases. In the case of the EU, although overall food availability is not at stake, food affordability for low-income households is a concern, especially when combined with rising prices of other essential goods, such as energy and transportation. To ensure the resilience of domestic and global food systems, the EU and its Member States should extend a set of already implemented policies, including better-targeted support for the low-income households in the region, implementation of trade facilitation measures via international cooperation, and support for agricultural production in the most vulnerable countries, and should also facilitate the restoration of Ukraine's lost agricultural assets.     

Country‐Specific Determinants of Horizontal and Vertical Intra‐industry Agri‐food Trade: The Case of the EU New Member States

Intra‐industry trade (IIT) has become a widespread phenomenon with a growing role in international trade, though agricultural trade is usually neglected in empirical works. This article identifies the determinants of horizontal and vertical intra‐industry agri‐food trade between New Member States (NMS) and the EU‐27 in 1999–2010, by applying static and dynamic models with different specifications to panel data. Results show that IIT is mainly of a vertical nature in the NMS, though the majority of NMS export low quality agri‐food products to EU‐27 markets. Factor endowments are negatively related to agri‐food horizontal intra‐industry trade (HIIT), but positively to vertical intra‐industry trade (VIIT). Economic size is positively and significantly related to both types of IIT, while distance and IIT are found to be negatively related in both cases. Results also suggest that HIIT and VIIT are greater if a New Member State exports agri‐food products to another NMS while EU accession has had positive and significant impacts on both HIIT and VIIT, suggesting that economic integration fosters IIT.     

International trade and agricultural development in developing countries: Significance of the Uruguay Round of GATT negotiations

Liberalization of world trade in agricultural products ranks high on the agenda of the Uruguay Round. After a period of more than six years, however, the negotiations have not been concluded. Nevertheless, an outcome seems to be in sight. The agreement will most likely not result in a move to freer trade. It seems that domestic policies will become even more regulative than in the past in an attempt to cut exportable surpluses and to ease trade tensions among the main exporting nations. This paper explores possible impacts of the GATT Round on agricultural development in developing countries. Agricultural development is more than only growth in agricultural production or productivity. However, it is argued in the paper that other variables which also indicate agricultural development are often closely correlated with growth in production and productivity. Trade in agricultural products is not always an engine for agricultural development. If internal divergences are not accounted for by appropriate domestic policies, trade may be even harmful to agricultural development. Hence, empirical research based on cross-country analysis does not provide a clear answer about the role of trade for development. Past policies in industrialized countries have most likely had a negative effect on developing countries as a group; however, the effects differ widely across countries. Liberalization policies in industrialized countries would not just reverse these negative effects for developing countries. Price reduction in industrialized countries may not result in the often-cited production decline in the short term. Present X-inefficiency in agriculture will be reduced by liberalization, leading to an outward shift of the supply curve. Hence, liberalization may not lead to higher world market prices for temperate-zone products in the short and medium term. Apart from this, empirical models differ widely in the price effects they predict. The expected outcome of the Uruguay Round – increased regulation of domestic policies – is likely both more negative for developing countries than past protectionist policies and worse than an overall liberalization. World market prices will increase, uncertainty and instability can be expected to grow, and food aid may become less available. There will be a need to react to these challenges with measures on the international and national level. Initiatives to deal with food crises in developing countries and to stimulate liberalization in developing countries should be considered. Finally, developing countries should be made aware that their own domestic policies have a much greater economic impact than policies in other countries, even if the latter are as protectionist as current agricultural policies in the industrialized world.     

Implications of the Comprehensive Economic and Trade Agreement for Processed Food Markets

Canada and the European Union (EU) recently completed the Comprehensive Economic and Trade Agreement (CETA) to liberalize bilateral trade. Processed food trade between Canada and the EU is one of the fastest growing markets, in spite of large trade restrictions due to high tariffs and egregious nontariff barriers (NTB). The processed food sector is characterized by firms which differ in size, productivity, produce differentiated products, and engage in monopolistic competition. We implement a four‐region (Canada, the EU, the United States, and the Rest of the World) model of the processed food industry, incorporating these firm characteristics to study the effects of CETA. The results show Canadian and EU bilateral trade flows expand, the number of exporting firms rises, and net welfare in both these countries increases. Though CETA does not liberalize NTBs, we examine the impacts of a 40% cut in NTBs to highlight the benefits that would have accrued had CETA also covered NTBs. Under this scenario, the trade flows would have expanded significantly, and, more importantly, Canadian and EU welfare would have risen by 11.8‐ and 39.4‐fold, respectively. Since CETA excludes the United States, the U.S. processed food industry loses due to greater competition in Canadian and the EU markets, and the net U.S. welfare declines.     

Policy–making in the EU: the bananarama story, the WTO and policy transparency

The EU banana policy is manifestly bad. But despite a healthy policy transparency process and comprehensive public criticisms of its extreme inefficiencies, its costs have been growing progressively worse and more disruptive of international commerce. This raises serious doubts about the WTO process, and the policy transparency process itself. At the very least, the EU bananarama story told here means we should not be complacent about either.     

Drivers of vertical intra‐industry trade: the case of the Hungarian agri‐food sector

This article investigates the drivers of vertical intra‐industry trade (VIIT) in Hungarian agri‐food trade with the European Union (EU). It identifies three possible ways to measure intra‐industry trade (IIT) flows (GHM, FF, and N methods) and defines six hypotheses to test for the drivers of VIIT with three panel data models (static, dynamic, and FEVD). The results suggest that factor endowments are negatively, while economic size is positively and significantly related to VIIT. Distance and VIIT were found to be negatively related as is commonly the case in the standard gravity model. It was also found that VIIT is greater if a New Member State (NMS) is exporting agri‐food produce to an NMS, while EU accession has ambiguously influenced the share of VIIT. In general, it seems that our results are independent from model estimations and interestingly they do not differ considerably as we a priori expected. Moreover, our results seem surprisingly robust across various measurements of ITT.     

The War on Terroir: Geographical Indications as a Transatlantic Trade Conflict

Terroir, the concept of an essential link between location of production and a specific quality attribute, is emerging as a contentious issue in trade negotiations and disputes. This issue is manifest through disputes and disagreements about appropriate protection of ‘geographical indications’ (GIs). This paper explores the differences in approach taken by the EU and the US towards GI protection, and illustrates the nature of the legal and economic arguments. The transatlantic dispute is spreading to other countries through the inclusion of GI protection in regional and bilateral trade pacts. It also has implications for the eventual conclusion of the WTO Doha Round negotiations, as the terroir issue arises in both the agricultural and the Trade‐Related Intellectual Property (TRIPS) agendas, once again pitting the US and EU as protagonists. But there are signs of change in these positions as the GI system in the EU comes under review and producers in the US reconsider the possible advantages of location‐based identifiers. These issues are important in a number of food sectors, and are likely to be persistent. They deserve more attention from practising applied economists than they have yet received.     

Directions in Rural Development Policy – Lessons from Both Sides of the AtlanticRichtlinien für die ländliche Entwicklungspolitik – Beispiele von diesseits und jenseits des AtlantiksLes orientations de la politique de développement rural – Enseignements en provenance des deux côtés de l’Atlantique

Directions in Rural Development Policy – Lessons from Both Sides of the Atlantic A workshop comparing rural development policies in Europe and the US found differences in the social values that shape them. These include different attachments to place, concerns with lagging regions, and interests in the assessment of public interventions. There is also a difference in coverage. In the EU environmental and landscape issues form part of the CAP’s Rural Development Pillar, using agriculture as an instrument, whereas in the US these are handled by other policies, some of which can claim deeper historical roots. In the context of rural development policy, the EU attaches intrinsic value to the environment, while in the US the focus is more on economic spin-offs from environmental quality. There are also differences in governance; a complete US view requires taking in Federal, State and local initiatives whereas in the EU a more organised framework is apparent. Nevertheless, when policy is viewed from a bottom-up perspective many common features are found. Improving human and social capital and infrastructure are key factors to stimulating economic development on both sides of the Atlantic, though only some of these drivers form part of the CAP’s Pillar II. While in the EU the role of rural development is set to expand, this is far less certain in the US where the emphasis on agricultural support is likely to continue to dominate the political agenda.     

Neither State nor Market: The Influence of Farmers' Organizations on Agricultural Policies in Costa Rica

In recent decades, policies in many countries have been shaped by the implementation of economic liberalization, characterized by state withdrawal from marketing operations and control of trade. In this era of liberalization, policies regulating commodity marketing and trade were expected to disappear, but, in fact, this has hardly occurred. A comparative study is carried out of three farm sectors in Costa Rica, based on a dynamic analysis of behaviour in the context of the institutional change brought about by liberalization. The capacity of farmers' organizations to adapt and contribute to institutional change through their control over economic activity and their participation in policymaking processes is highlighted. In so doing, it is shown that, even in a liberalized era, policies regulating marketing and trade still exist and affect the functioning of agricultural markets. These policies differ according to the farm sector and can be linked directly to the influence of farmers' organizations within these sectors. It is shown that organizations play a key role in the regulation of farm sectors, and that their success depends on the institutional and organizational “thickness” to which they have contributed in each sector. Differences in historical trajectories can explain differences in the capacity of organizations to influence policymaking and to gain market share.