A quantitative analysis of trade policy responses to higher world agricultural commodity prices

The worldwide spike in prices of agricultural commodities in 2007–2008 elevated food security and social stability issues to the forefront, especially in many food-deficit countries. In order to mitigate the global food commodity price pressure on domestic markets, several major exporting and importing countries, mostly developing economies, adopted trade policy changes such as export bans (or raising export restrictions) or reducing import tariffs during the same period. This paper estimates the potential impacts of these policies on the world prices and trade of major agricultural commodities using a set of multi-country, multi-commodity, and partial-equilibrium models. Our findings suggest that over all, the trade policy responses in various countries increased the prices of all agricultural commodities, although the impact on the total net trade varies by commodity. The simulation results show that the overall impact of trade policy distortions on the world rice price is most significant at 24%, followed by wheat (14%) and barley (9%). In general, the poorer food-deficit countries/regions, which have limited power to manipulate their trade policies, experienced higher price increases compared to those major trading countries that adopted policy interventions. Also, the developing countries that are net importers which did not implement trade policy interventions experienced significant welfare losses resulting from interventions implemented by other major trading countries.     

REDD policy impacts on the agri-food sector and food security

Recent research shows that the combined contributions of deforestation, forest degradation and peat land emissions account for about 15% of greenhouse gas emissions. The REDD policy which preserves forests and values standing forests, enables substantial emission reductions. Since agricultural production and area expansion is a primary driver of tropical deforestation, REDD policies might limit the expansion possibilities of agricultural land use and therefore influence competitiveness of the agricultural sector, agricultural prices, trade patterns, agricultural production and therefore food security in the world. This paper studies the impact of REDD policies on the agri-food sector and food security with a global CGE model called MAGNET using a scenario approach. It focuses on the restrictions on agricultural land expansion within the REDD policy package. Simulation results show that REDD policies start to affect the agri-food sector in some lower developed countries if more than 15% of potentially available agricultural areas are protected from deforestation. A stringent REDD policy that protects 90% of land reserves that could potentially be used for agriculture production results in a global real agricultural price increase of almost 7.6%, and a worldwide agricultural production decrease of 1.7%. Regional differences are large, with real agricultural price changes ranging from 4% in North America to about 24% in Sub-Saharan Africa and South-East Asia. Food access rapidly deteriorates for low-income population in these regions in the case of high forest protection levels. Compensatory payments are necessary from a food security point of view if the level of forest protection increases. Our results indicate that from a food security perspective REDD policy should stop short of trying to protect more than 40% of global carbon if the compensation mechanism is not effectively implemented within REDD.     

The new US farm policies

This article is an early assessment of the agricultural policies of the Carter administration, particularly as they relate to Western Europe. The author examines emerging US farm policy with regard to: price and production, grain reserves, attitude toward the Common Agricultural Policy of the EEC, trade in agricultural products, and commodity agreements.     

国际粮食价格危机的农业政策根源

2007～2008年世界粮食作物价格的急剧上涨的原因很大程度上要归结于各国长期的农业政策。从农业贸易看,农业贸易限制程度远远高于工业贸易,这不利于粮食作物产量在全球的分配;从农业生产看,发达国家和发展中国家完全不同的政策导向,导致了全球农业生产的低效率。应对世界粮食价格飙升最有效的长远机制是全球粮食贸易自由化,减少甚至取消贸易扭曲的农业生产和贸易政策。     

Farm subsidies and obesity in the United States: National evidence and international comparisons

Many commentators have claimed that farm subsidies have contributed significantly to the “obesity epidemic” by making fattening foods relatively cheap and abundant. But U.S. farm policies have generally small and mixed effects on farm commodity prices, which in turn have even smaller and still mixed effects on the relative prices of more- and less-fattening foods. Other factors have had much more influence on reducing the farm prices of food commodities and the consumer prices of food such that any effects of U.S. farm policies on U.S. obesity patterns must have been negligible. Moreover, while many arguments can be made for changing U.S. farm subsidies, even entirely eliminating the current programs could not be expected to have a significant influence on obesity rates. International evidence reinforces this finding. The countries that support their farmers most strongly tend to have relatively low obesity rates. In these countries the main support for farmers comes through trade barriers and higher consumer prices, which—like U.S. policies for sugar, dairy, orange juice, and beef—discourage consumption and reduce obesity. In contrast with agricultural subsidies, agricultural R&D has had a significant effect in the past on the relative price of food commodities and food, and has the potential to influence obesity patterns in the future, but R&D policy is a very blunt instrument for pursuing public health policy objectives.     

Food policy research for improving the reform of agricultural input and output markets in Central Asia

Agriculture is a significant component of the Central Asian economies. Since independence, the republics have implemented agricultural reforms in varying measure, yet production has fallen sharply across the region. The more ambitious agricultural reform programs have included measures aimed at liberalizing agricultural marketing, trade and prices. However, so far the expected supply response has yet to emerge. The objective of this paper is to highlight key policy and research issues surrounding reform of agricultural markets. It summarizes the main features of agricultural performance since the reforms, highlighting trends in grain and cotton, livestock, input use, and trade and analyzes key constraints to improvement of the sector, emphasizing price policy, sequencing problems, and institutional weakness. It presents a research agenda by identifying the main research needs for better agricultural policy design. It calls for more research on input and output market efficiency, private sector development, the effects of reform on farmers, sequencing issues, comparative advantage, water management, land tenure and farm size.     

Who are the producers and consumers? Value chains and food policy effects in the wheat sector in Pakistan

We develop a disaggregated Nominal Rate of Assistance (NRA) methodology to disentangle the welfare impacts of policies for various interest groups along the value chain (to disaggregate effects within the “producer” and “consumer” umbrellas). We apply our value chain NRA methodology to the case of Pakistan’s wheat price and trade policy. We analyze the welfare implications for various agents in the wheat-flour value chain from 2000 to 2013, a period characterized by major global price volatility and by regular adjustments of domestic policies. We find that the wheat policy has generally benefitted flour consumers and wheat traders at the expense of wheat farmers, with limited effects on flour millers. Our findings illustrate that the welfare implications of policies can be quite different within the “producer” and “consumer” umbrellas, which has potentially important implications for economic and political economy analyses and for the design of policies that aim to target the poorest groups along value chains.     

Consequences of further opening of the Korean dairy market

This paper develops a simulation of Korean dairy policy that is tailored to the data, institutions, and policies in South Korea. It compares potential effects of changes in trade and domestic policy to baseline projections to 2015. Beverage milk continues to be supplied from domestic sources, implying imports compete in the manufacture of tradable products. We model manufactured dairy product supply, demand, and trade on a milk fat and non-fat-solid component basis reflecting product fungibility over the 10-year horizon used for our trade policy analysis. We find that if the domestic price support is removed with no change in trade policy, the market price of raw milk falls by about 2% and raw milk production declines by 4.5%. Under substantial tariff cuts of 30–40% with no effective change in domestic dairy policy, Korean fat and non-fat-solid prices fall by 7% and 11%, fat and non-fat-solid imports rise by 9% and 7% and Korea raw milk production falls by about 2% relative to the baseline. Prices of Korean farmer-owned dairy inputs, labor, and capital fall by about 1%.     

Hungary's meat price and trade policies : Conforming to some economic constraints of a socialist country

This paper analyses Hungary's price and trade policies for meat and livestock. Three policy constraints are discussed — the need to control consumer discontent, to provide employment, and to maintain close ties with the Council for Mutual Economic Assistance (CMEA) and the Soviet Union. Of particular interest are Hungary's exports of meat rather than grain, and the impact of policies on large and small producers and on Hungary's dependence on the Soviet market.     

The effects of government policies on agricultural input markets

Agricultural policies in most developed countries involve elements of price support. The primary objective appears to be the support of farm incomes, but effects of the policies are more wide ranging than this. The impact of price support on agricultural input markets in the UK is highlighted in this article and it is shown that the main effects of raising farm prices are to increase the wealth of landowners, increase capital intensity and reduce employment and wages of hired labour. These are not generally recognized as primary goals of the CAP. It is suggested that the British government might offset some of these effects through judicious reduction of capital grant rates.     

National grain policies: The international dimension

Government intervention in the pricing and marketing of grains has led to increased use of restrictive trade practices to preserve domestic price levels and ensure orderly marketing of domestically produced and imported grain. The author examines this relationship between domestic agricultural and trade policies of a selected group of grain importing and exporting countries. The article suggests that, because of the strong link between domestic and trade policies, it will be difficult to reduce trade restrictions in international grain markets in future trade negotiations.     

Food sovereignty and agricultural trade policy commitments: How much leeway do West African nations have?

The 2008 food crisis has challenged the political legitimacy and economic efficiency of the liberalization of international agricultural trade. An alternative vision defended by the food sovereignty movement is that long-term food security cannot rely on dependency on food imports, but must be built on the development of domestic production with enough barrier protection to shelter it from world price fluctuations and unfair trading.The purpose of this paper is to look into whether the West African nations can achieve food sovereignty given their various trade commitments and other external constraints. The particularity of our approach is to combine a historical economic analysis with a political approach to food sovereignty and trade commitments.Our results suggest that external brakes on the development of food sovereignty policies are marginal, as the countries still have unused room for manoeuvre to protect their smallholder agriculture under the terms of draft World Trade Organization agreements and Economic Partnership Agreements and under the international financial institutions’ recommendations. Rather the international environment seems to be instrumented by West African states that do not manage to secure a national political consensus to drive structural reforms deemed vital and further the food security of the urban populations over the marginalized rural populations. Recently, the regional integration process has made headway with a common agricultural support and protection policy project that could herald an internal political balance more conducive to food-producing agriculture.     

Changes in trade and domestic distortions affecting China’s agriculture

This paper assesses the implications of China’s trade and domestic policies for incentives to producers in China. It uses a price comparison methodology (nominal rates of assistance—at the border and the farmgate), with adjustments for exchange rate distortions in the first part of the sample period (1981–1994). On average, distortions to agricultural incentives have been reduced. In the early 1980s, on average, China’s domestic prices were far below international prices. There were substantial variations, however, between imported (which were being protected) and exported goods. During the 1980s and 1990s the gap between domestic and international prices for both imports and exports narrowed initially mainly due to the elimination of domestic policy distortions. Between the mid-1990s and 2004, trade liberalization policy furthered narrowed the gap between world and China farmgate prices. By the mid-2000s, China’s agriculture was operating with only small price distortions.     

Pharmaceutical innovation and parallel trade

This paper proposes a North–South model to study the interaction between price regulation policies and parallel trade, with a particular focus on the pharmaceutical sector. We show that, under parallel trade, R&D investment can rise only when the South government takes into full account its impact both on investment and on the firm's decision to supply the regulated country. This arises because of a complete withdrawal from price regulation. When policy choices are endogenized, indeed the South wants to achieve this level of full commitment when it is large in size. When instead it is smaller in size, the South chooses an intermediate form of commitment whereby it anticipates its effect only on local distribution and delivery, but not on global R&D investment. As a response to these credible levels of price control commitments, the North reacts by allowing parallel imports from the South.     

Rice market integration and food security in Nepal: The role of cross-border trade with India

Coarse rice market integration between Nepal and India is analyzed applying a threshold autoregressive model. The price response behaviour of traders is found to be consistent with an asymmetric price adjustment mechanism, indicating coarse rice prices in Nepal respond to shocks originating in India. The results show that adjustments to negative price deviations from long-run stable equilibrium are faster than adjustments to the positive ones given a null threshold. Given that trade flows mainly from India to Nepal, Nepali traders would adjust their prices upward to align with the long-run equilibrium value relatively more quickly in the case of negative price deviations, than if the price deviations were positive. Such a high speed of adjustment to negative price deviations could be detrimental to net food buyers’ food security status in the absence of a price stabilization mechanism. However, a price stabilization policy in Nepal, a food deficit and import dependent country, would hardly have any effect on prices unless further effort is made to build up the level of national food reserves for short-term food security interventions. In the current context of structurally low levels of national food reserves, an alternative short-term policy such as foreign aid, in the form of food or income transfers, targeting the most vulnerable households to price increases is necessary through social safety net programmes. In the long-run, an improvement of transportation infrastructure between market hubs (other than the Biratnagar trade basin) in the Terai (Nepal) and India would contribute to the reduction of transaction costs and create incentives for more competition in formal cross-border trade with India. In times of negative shocks such as the high food price crisis in 2008, restrictive food trade policies in India will continue to undermine household food security in Nepal.     

Incentive policy in Chinese collective agriculture

The author explains the provisions of China's agricultural incentive policy for rural collectives and details its mechanisms of taxes and fiscal incentives, price policies, subsidies, loans and technical assistance. The role of this policy in agricultural development and the issues of motivation and mobilization in collective agriculture are discussed, as well as certain technical and operational difficulties Chinese planners have encountered.     

US and EEC agricultural trade policies: A long-run view of the present conflict

This paper traces post-war agricultural policy in the USA and compares it with the developing policies of the EEC. It examines the reasons for, and the results of, the protectionist policies which have been adopted in each case, and how the present conflict between the two trading blocs were inevitable, due to the foundations laid in the 1950s. The grain sector is used to illustrate the dominant tendencies in US agricultural policies, which include a programme of food aid used as an outlet for US agricultural capacity. The conclusion outlines how the EEC, with its potential for further growth in grain exports, can learn from the US experience in this, and other, aspects of agricultural trade.     

Effects of agricultural market policy on crop production in China

This paper investigates the effects of Chinese market policy on crop production in the reform process. After a brief review of the policy changes due to the reform, the theoretical significance of Chinese market policies for crop production is demonstrated diagrammatically. It is shown that under the current market system the production of main crops is significantly influenced by both market and quota prices. While relatively high quota reduces the influence of market prices on production, relative price changes between competing crops will lead to shifting farmers’ cultivation preferences if inputs are constant. Empirical analysis, based on cross-section data for the period 1985–1997 from the province of Zhejiang, confirms these hypotheses. The effects of policy variables, however, prove to be crop-specific. If the potential of crop production in China is to be better used, an even more market-oriented agricultural policy is required.     

Einfluss der CO2-Zertifikatspreise auf die Stromgestehungskosten im deutschen Energiemix

In the past, electricity generation costs in Germany’s energy mix depended for the most part on the development of fossil fuel prices. Despite the strongly increasing share of renewable energies in the energy mix, the generation of electricity from fossil fuel power plants, especially brown and bituminous coal power plants, still dominates in Germany today. Alongside fossil fuels as an increasing cost factor, the price of CO₂ is also gaining importance as a price factor in the production of electricity from fossil fuel power plants. The establishment of the European Emission Trading Scheme (EU ETS) in 2005 formed the basis of CO₂ emissions pricing, and was oriented on the emission reduction targets of the European Union. Although the price of CO₂-certificates in free trade is shown on several stock exchanges, the CO₂ price is still policy driven. The amount of free allocated and traded CO₂-certificates is set on a European policy level. Current decisions on temporary limitations of the trade volume have corresponding effects on exchange prices. This article aims to investigate the impact of CO₂-certificate prices on electricity generation costs in the German energy mix. Comparing real CO₂ prices to forecasts for 2013 provides findings on the effects that the political decisions of the European Parliament with regard to the limitation of the trade volume of available CO₂-certificates have on electricity generation costs in the German energy mix.