Alexandre Gohin

The Decoupling of Farm Programs: Revisiting the Wealth Effect

Recent reforms of agricultural policies in developed countries have introduced direct payments as replacements for traditional production-enhancing instruments. Whereas these new instruments can, in principle, influence production through several channels, current empirical studies show no significant impact on production; direct payments mainly increase land values. In this article, we revisit the evaluation of the coupling effects passing through the wealth of agricultural households. The initial wealth of these agents, while mainly being in the form of land asset holding, is always assumed to be fixed. To the contrary, we show theoretically and through an empirical simulation exercise that once the impact of farm programs on initial wealth is properly accounted for, the measure of the coupling effects is not as negligible as found in previous studies. Copyright 2010, Oxford University Press.

Impact of the 1996 US FAIR Act on the Common Agricultural Policy in the World Trade Organisation context: the decoupling issue

Abstract The United States (US) Federal Agriculture Improvement and Reform (FAIR) Act of 1996 represents a watershed, not only from a domestic point of view but also from the perspective of the next round of international agricultural negotiations. In particular, it will force the European Union (EU) to reform its agricultural policy so that compensatory payments for support price cuts are included in the green box or, at least, are much more decoupled than at present. US exports of several agricultural products, including maize, pork and poultry meat, barring a prolonged global economic downturn, should increase substantially over the 7-year period of the Act and beyond. Accordingly, the US will certainly attempt to ensure that trade barriers with the EU and subsidised competition from the EU in third markets are kept to a minimum. Though the 1999 EU proposals for a new reform of the Common Agricultural Policy (CAP) represent a courageous step in the right direction, they are likely to be insufficient to comply with future World Trade Organisation (WTO) commitments, in particular with regard to the decoupling of direct aid payments. We have made a number of proposals for an internal support policy which explicitly recognises that European farmers have several functions that require specific forms of public intervention and which should comply with future WTO requirements.

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.

Tariff protection elimination and Common Agricultural Policy reform: implications of changes in methods of import demand modelling

The study proposes a way for accommodating the traditional Armington assumption to capture the possibility for a country to import imperfect substitutes as well as perfect substitutes for domestically produced goods. When this possibility is incorporated into a modelling framework, then a Common Agricultural Policy elimination scenario, including the setting to zero of import tariffs, would have starker implications than many studies suggest. To illustrate this point, a Computable General Equilibrium (CGE) model of the French economy is used, highlighting agricultural and food sectors. The study analyses the consequences for the French economy of a complete liberalization scenario in the European sector of cereals.

ON THE OPTIMAL IMPLEMENTATION OF AGRICULTURAL POLICY REFORMS

Economic analyses of farm policies generally focus on the long run, steady state impacts while the transition dynamics are often overlooked. In this paper we develop a determinist dynamic computable general equilibrium analysis allowing agents to form imperfect versus pefect expectations. Using an illustrative CAP reform scenario, we simulate an abrupt versus a gradual implementation of this reform. Our results show that if economic agents are able to perfectly anticipate the impacts of the reform, then delaying its implementation is never optimal. On the other hand, if agents gradually learn from market developments, then we find some cases where a gradual implementation of this reform is welfare improving. Such gradual implementation allows minimizing adjustment costs.

Economic modelling of agricultural production: past advances and new challenges

This paper is a methodological review focusing on the major advances in modelling issues in agricultural production economics that have been made over recent decades. Issues include the role of markets and international trade, structural and dynamic aspects of production, environmental impacts of production decisions and risk issues. We describe the main scientific developments and their implications for policy design and evaluation for each topic. We also provide a short conclusion on emerging issues, data and modelling requirements and perspectives for future research.