Agapi Somwaru

Agricultural Productivity Revisited

This paper describes production accounts for agriculture. Output is defined as gross production leaving the farm as opposed to real value added. Inputs are not limited to capital and labor but include intermediate inputs as well. We derive index numbers of gross output, capital, labor, and intermediate inputs. These data are used to construct indexes of total factor productivity. We then compare the contributions of input growth and productivity growth to economic growth. The important role of productivity growth in agriculture becomes immediately apparent. Copyright 1997, Oxford University Press.

An Inquiry on General Equilibrium Effects of MERCOSUR--An Intertemporal World Model

Abstract A multiregion dynamic computable general equilibrium model is constructed to analyze effects of the Southern Common Market (MERCOSUR) on the member countries as well as third-party nonmember countries. The model is based on intertemporal optimization behaviors of consumers and firms with eight endogenously specified regions. By taking into account dynamic general equilibrium adjustments, we observe significant shifts of trade diversion away from the nonmember trading partners to the member countries. We also find that, following the MERCOSURs common external tariffication, growth of intraregional trade would likely be accompanied by increases in trade between MERCOSUR and other countries. In this case, not only MERCOSUR member countries gain more, but also the nonmember countries are better off in terms of their production, consumption, and consumer welfare.

The Potential for Revenue Insurance Policies in the South

The 1996 Farm Act and the 1994 Crop Insurance Reform Act are recent examples of policy changes that have increased risks for U.S. farmers. New products are emerging to help farmers manage risks. This article examines some of the policy changes, farmer responses, and new risk-sharing products. The focus turns to the new revenue insurance products and their potential in the South. While there are reasons to believe revenue insurance should be attractive in the South, any revenue products that use existing crop insurance rates will face difficulties since poor actuarial performance in the South has resulted in relatively high rates.

Developing Country Interests in Agricultural Reforms under the World Trade Organization

The gains to developing countries from agricultural reform in developed countries is found to benefit most, even the net food importers, although the gains vary depending on a countrys trade pattern. This results because the agricultural policy of a small number of developed countries cause the major distortions in world markets, and developing countries whose major share of agricultural trade is with the E.U. are impacted quite differently than those trading with the U.S. Even though Japan and Korea maintain high trade barriers, these barriers are found to have small effects on developing countries. The long-run benefits of reform are found to greatly exceed the short-run gains.

Do China's agricultural policies matter for world commodity markets?

Purpose – The purpose of this paper is to quantify the implications of Chinas recently adopted agricultural policies on domestic and international commodity markets. Design/methodology/approach – A systematic, quantitative analysis is applied to address whether Chinas recent trade and production policies distort Chinas domestic and international commodity markets. The paper provides a clear picture of how trade-restricting policies affect markets using a 42-country partial equilibrium global dynamic agricultural simulation model. Findings – The paper shows that recent agricultural policy reforms increase Chinas production slightly, causing imports to decrease while exports decline because of input subsidies, export taxes and the reduction of export value added tax rebates. Domestic prices to consumers decrease in real terms. The effects on world markets are small as the set of policies adopted partially offset each other in the international arena. Research limitations/implications – The paper indicates that the adoption of the policy reforms lower price levels domestically and benefit lower income urban and rural households, whose diets are largely based on rice and wheat as staple foods. Future model enhancements should include measures of producer and consumer welfare in order to capture the total impacts of policies and policy changes in China. Originality/value – The paper quantifies the potential implications of the recent agricultural policy reforms in China. This contributes to the investigation of the effects of these policies implemented by the Chinese Government to achieve the countrys policy objectives. Owing to the dynamics of Chinas policy implementation an in-depth analysis sheds light and contributes to capturing the impacts of policy reforms on the domestic and international markets.

Exchange Rates, Foreign Income, and U.S. Agricultural Exports

While it is generally accepted that change in the real value of the dollar is an important determinant of exports, it has not been rigorously demonstrated that this relationship, derivable from theory, holds empirically for agricultural exports and the components of agricultural exports. Starting with a dynamic maximizing framework, this paper estimates the real trade-weighted exchange rate and trade partner income effects on U. S. agricultural exports. For the period 1970–2006, a one percent annual increase in trade partners’ income is found to increase total agricultural exports by about 0. 75 percent, while a one percent appreciation of the dollar relative to trade partner trade-weighted currencies decreases total agricultural exports by about 0. 5 percent. While these effects carry over to 12 commodity subcategories, they are conditioned by differences between bulk and high value commodities, and differences in the export demand from high compared to low income countries. We use a directed acyclic graphs (DAG) technique to identify the inverted fork causal relationships from vector autoregression (VAR) models. We also find that there is an asymmetric exchange rate effect so that the negative effect of exchange rate appreciation on exports sometimes dominates the positive effect of foreign income growth.

Cap reform: modelling supply response subject to the land set-aside

This paper uses duality theory to develop a model of European Community agriculture. The model is used to investigate the impact of the land set-aside provision of the recent package of reforms of the Common Agricultural Policy. We assume that producers chose output and variable input levels that maximize difference between revenue and variable cost. By including first-order conditions for the allocation of land across its uses, we impose that the observed allocations are profit-maximizing allocations. To overcome the problem of incorporating many outputs into an estimable production structure, we imposed a priori the restriction that the technology was weakly separable in major categories of outputs. With this restriction, it was possible to model production decisions in stages using consistent aggregates in the latter stages.

Country of Origin Labeling: Evaluating the Impacts on U.S. and World Markets

A provision of the Food, Conservation, and Energy Act of 2008 requires country of origin labeling (COOL) for certain agricultural commodities. To comply with the law, producers, processors, and retailers face additional production costs associated with labeling, separating, and tracking commodities. Using estimated costs provided by the U.S. Department of Agricultures Agricultural Marketing Service (AMS), we simulate the impacts of mandatory COOL on U.S. and global agricultural markets using a global static general equilibrium model (STAGEM). The results show resource adjustments that lead to decreases in production, consumption, and trade flows. The results assume no demand premium for labeled commodities relative to unlabeled commodities.

China's role in world cotton and textile markets: a joint computable general equilibrium/partial equilibrium approach

Under the Uruguay Rounds Agreement on Textiles and Clothing (ATC), the quotas inherited from the Multifibre Arrangement were gradually phased-out between January 1995 and 31 December 2004. This study estimates the impact of the ATCs implementation on Chinas textile industry and Chinas cotton sector. The study finds that, assuming equilibrium levels of income and exchange rates, the adoption of ATC are expected to increase Chinas net apparel exports, textile production, cotton consumption, cotton production and cotton imports. However, this study fails to support the hypothesis that the adoption of the ATC results in China supplanting the textile industries of the rest of the developing world. The impacts on cotton are also smaller than indicated by previous studies. These outcomes are somewhat sensitive to estimates of expected efficiency gains around the world.

Implications of Disaster Assistance Reform for Non-insured Crops

With recent crop insurance reform, disaster aid to producers of crops for which federal crop insurance was not available has changed significantly. A newly created Non-insured Assistance Program (NAP) is a standing disaster aid program for non-insured crops including most vegetables and some tree crops. To receive a payment, a farmer has to meet NAPs “area” triggered loss in addition to usual individual loss criteria. In this paper we examine the implications of these two-tiered criteria for NAP payments in the context of California agriculture. Our analysis indicates that the area loss requirement likely results in a sharp reduction in disaster payments for non-insured crops. Copyright 1997, Oxford University Press.