Modeling Distribution Services and Assessing Their Welfare Effects in a General Equilibrium Framework

Most international trade models fail to account for the fact that almost all goods must pass through the distribution sector. The authors compare different approaches to modeling distribution within an Applied General Equilibrium framework and find that such modeling may significantly affect trade opening simulations. They also predict large potential gains from streamlining distribution. For instance, a 10% reduction in Japan's final goods distribution margins would benefit it as much as worldwide free trade would. They also find that, compared to trade opening, reducing margins leads to smaller inter‐sectoral production shifts and thus may engender less political opposition.     

Dynamic modelling of agricultural policies: The role of expectation schemes

The highly disputed effects of agricultural trade liberalisation are mostly simulated with static models. Our main objective in this paper is to evaluate the robustness of the static simulation results to the consistent modelling of dynamic behaviours and to the linked specification of price/return expectations. Focusing on the scenario of a complete trade liberalisation of arable crop markets by developed countries, we find that available static results are quite robust compared to dynamic specifications and to most expectation schemes. Endogenous market fluctuations due to expectation errors may appear following trade liberalisation. These fluctuations are nevertheless limited by the many feedback effects revealed by our general equilibrium framework.     

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.     

On the European Responsibility in the Agricultural Multilateral Trade Negotiations: Modelling the Impacts of the Common Agricultural Policy

The present round of multilateral trade negotiations is still deadlocked over agricultural trade. The European Union (EU) is urged by its trading partners to open its agricultural markets. Economic evaluations of trade liberalisation scenarios unanimously conclude that a substantial opening of agricultural markets is required for a successful (welfare‐improving) Doha Round. In this paper, we perform new evaluations to identify precisely the contributions of the European farm policy and to examine the robustness of these evaluations in the representation of this complex policy. Using the same specifications as in major previous studies, our first simulations show that the EU has a major responsibility in delivering significant gains to the developing countries. On the other hand, when we conduct the same experiments with a more relevant calibration and modelling of the European farm policy instruments, the gains that these developing countries may reap from the EU liberalisation are considerably reduced. Accordingly the current charge against the EU is simply inopportune.     

Measuring Market Power for Food Retail Activities: French Evidence

In this paper we develop and estimate an empirical model of pricing behaviour for food retail firms in both a quantity‐setting oligopoly engaged in the joint production of demand‐related final goods and a quantity‐setting oligopsony for supply‐unrelated wholesale goods. The procedure consists of estimating an inverse demand system for the final goods, single supply functions for the wholesale goods and the retail industry first‐order profit‐maximisation conditions, from which an estimate of the degree of imperfect competition and of oligopoly‐oligopsony power for the different commodities can be retrieved. The model is applied to the French food retail industry and three commodities are distinguished: dairy products, meat products and other food products. We strongly reject the hypothesis that French food retail firms behave competitively, and more than 20 and 17 per cent of the wholesale‐to‐retail price margins for dairy products and meat products, respectively, can be attributed to oligopoly‐oligopsony distortions.     

Estimating Price Elasticities of Food Trade Functions: How Relevant is the CES‐based Gravity Approach?

The main objective of this article is to examine econometric estimates of price elasticities of food trade functions. We investigate the relevance of the prominent gravity approach. This approach is based on the assumptions of symmetric, monotone, homothetic, Constant Elasticity of Substitution (CES) preferences. We test all these assumptions using intra‐European trade in cheese. In general, the assumptions made on preferences by the gravity approach are not supported by our dataset. The bias induced in the estimated price elasticities is ambiguous.     

The Luxembourg Common Agricultural Policy Reform and the European Food Industries: What's at Stake?

On June 26, 2003, the European Union (EU) adopted a new reform of its Common Agricultural Policy (CAP). Its boldest measure is the creation of a Single Farm Payment that will replace most of the present direct payments. We address quantitatively three issues raised by this new reform, using a computable general equilibrium model that allows us to measure the impacts on the food industries as well as their role in the transmission of impacts along the food chain. The first issue examined is whether this reform helps the EU15 to remove the controversial export subsidies. Our numerical results show that this reform effectively reduces the amount of export subsidies but without removing them. Our second concern lies with the production and trade distortion impacts of CAP direct payments. We investigate this issue in the case of full decoupling, as well as partial decoupling as chosen by EU15 Member States. We find that they have rather similar effects on production and trade. Finally, we explore the employment effects, and findings indicate that this reform leads to a significant decline of farm labor and, by contrast, to a very modest impact on the employment level by food processors. Generally, food industries are only marginally affected by this CAP reform. L'Union européenne (UE) a adopté une nouvelle réforme de sa Politique agricole commune (PAC) en juin 2003. La mesure la plus audacieuse a été la création d'un paiement unique par exploitation pour remplacer la plupart des aides directes actuelles. Dans le présent article, nous avons examiné trois questions soulevées par cette réforme à l'aide d'un modèle d'équilibre général calculable qui nous a permis de mesurer les répercussions sur les industries alimentaires de même que le rôle de ces industries dans la transmission des répercussions dans la chaîne alimentaire. La première question visait à déterminer si cette réforme permettait à l'UE‐15 d'éliminer les subventions à l'exportation controversées. Nos résultats numériques ont montré que la réforme diminuait effectivement ces subventions sans toutefois les éliminer. La deuxième question portait sur les répercussions des paiements uniques de la PAC sur la production et la distorsion des échanges. Nous avons examiné cette question en utilisant le découplage total et le découplage partiel retenu par les États membres de l'UE. Nous avons trouvé que les effets sur la production et les échanges étaient plutôt similaires entre les deux options de découplage. Enfin, nous avons évalué les répercussions sur l'emploi et nos résultats ont indiqué que cette réforme entraînait une baisse significative de la main‐d'?uvre agricole contrairement à de très faibles répercussions pour les entreprises de transformation des aliments. En général, les industries agroalimentaires ne sont que légèrement touchées par cette réforme.     

The Land Use Impacts of the EU Biodiesel Policy: Assessing the Direct,Indirect and Induced Effects

This paper deals with the controversial measure of indirect land use changes of the European biodiesel policy. Two studies sponsored by the European Commission find significant, but contrasted, land use impacts for the different vegetable oils used for biodiesel production. The first study uses an aggregate computable general equilibrium model capturing direct, indirect and induced effects. The second more recent study uses a biotechnical partial equilibrium model providing a detailed representation of the indirect effects occurring through the livestock sectors. We develop an original economic emulator to understand the diverging key results of these studies and test their sensitivity. We find that the direct and indirect effects on vegetable oil and land markets explain most of the differences. We also find that indirect effects on the feed markets and the induced effects have less influence on the biodiesel results. We finally argue that the development of emulators as done here can help to understand complex policy assessments.     

Evaluating the Market and Welfare Impacts of Agricultural Policies in Developed Countries: Comparison of Partial and General Equilibrium Measures

We revisit the question of choosing partial equilibrium or general equilibrium modeling in applied policy analysis in the context of evaluating the effects of a complete phase-out of the Common Agricultural Policy (CAP) of the European Union. We compare the results of three models—two three-sector general equilibrium models (one with an additional major distortion in the nonagricultural sector) and a two-sector partial equilibrium model. We find that the market effects of a complete phase-out of the CAP are quite comparable across these models. On the other hand, the measured welfare impacts may depend on the modeling choice.