Hans Grinsted Jensen

The Impacts of Redesigning European Agricultural Support

The objective of this paper is to assess the impact of decoupling at the individual member state level in the European Union and in non†member regions of liberalizing domestic support in the EU. Three scenarios are analysed to illustrate the impacts of eliminating or decoupling the European agricultural support. We found that the existing domestic support payments in the EU are indeed coupled to production and hence affect production decisions and distort international trade with adverse effects on the export potential of developing countries as a consequence. Further, the value of this support is capitalised in significant higher land prices in Europe than would otherwise prevail. The scenarios illustrate the economic implications of transforming all domestic support payments (as well as other distorting policies) into a nationally homogenous and fully decoupled payment to all agricultural land, irrespective of a farmers decision to crop or not. The analysis suggests that it is possible to convert the existing agricultural support into a fully decoupled payment which would not distort international trade and it indicates a way forward to offset the negative impact on land prices. Such a policy would also comply with the WTO rules (i.e. fall within the green box as decoupled income support). The analysis also suggests that such a policy reform could be achieved at somewhat lower budgetary costs as compared with the existing costs of the Common Agricultural Policy.

Trade policy responses to food price crisis and implications for existing domestic support measures: the case of China in 2008

Many national governments around the world applied export restrictions in order to achieve domestic market stabilization during the 2007/8 world food price crisis. However, current literature says little about how these export restrictions interact with existing domestic support measures in jointly determining domestic market outcomes. This paper analyzes this interaction by providing a quantitative assessment on how increased spending on agricultural domestic support in China offset the negative effects on grain production caused by the countrys export restrictions and how these two types of measures jointly moderated rises of domestic grain prices. In particular, domestic and trade measures on key agricultural inputs such as fertilizers are shown to contribute significantly to expand grain outputs and reduce domestic market prices. While the short-term goal in stabilizing domestic grain prices was achieved through these measures, large fiscal and efficiency costs were incurred, especially considering how the short-term export restrictions seemingly necessitated the extra spending on input-based domestic subsidies. We also demonstrate that the costs to China and the rest of the world of these complicated policy interventions may be partially avoidable with a simpler and less distorting instrument.

Grain Price Spikes and Beggar-thy-Neighbor Policy Responses: A Global Economywide Analysis

When prices spike in international grain markets, national governments often reduce the extent to which that spike affects their domestic food markets. Those actions exacerbate the price spike and international welfare transfer associated with the terms of trade change. Several recent analyses have assessed the extent to which those policies contributed to the 2006-08 international price rise, but only by focusing on one commodity or using a back-of-the-envelope method. This paper provides a more comprehensive analysis that uses a global economywide model that is able to take account of the interactions between markets for farm products that are closely related in production or consumption. The model is able to estimate the impacts of those insulating policies on grain prices and on the grain trade and economic welfare of various countries. The results support the conclusion from earlier studies that there is a need for stronger World Trade Organization disciplines on export restrictions.

Impact of EU agricultural policy on developing countries: A Uganda case study

Despite substantial reforms, the European Union (EU)s Common Agricultural Policy (CAP) is still criticised for its detrimental effects on developing countries. This paper provides updated evidence on the impact of the CAP on one developing country, Uganda. It goes beyond estimating macrolevel economic effects by analysing the impacts on poverty. The policy simulation results show that eliminating EU agricultural support would have marginal but nonetheless positive impacts on the Ugandan economy and its poverty indicators. From the perspective of the EUs commitment to policy coherence for development, this supports the view that further reducing EU agricultural support would be positive for development.

Sector- and economy-wide effects of terminating the use of anti-microbial growth promoters in Denmark

Abstract In Denmark the poultry industry and the National Committee for Pig Production, together with the feedstuff industry, decided to voluntarily abolish the use of all Anti-microbial Growth Promoters (AGP). The poultry industry abolished the use of AGP from 15 February 1998 and the pig industry followed on 1 March 1998 (for pigs over 35 kg) and 1 January 2000 (for pigs under 35 kg). To evaluate the effects of the removal of AGP, data from both the poultry and pig industries were collected prior to and after the removal of AGP from animal feed. Utilizing these production data, this paper calculates economy-wide effects of the removal of AGP using the Agricultural Applied General Equilibrium (AAGE) model of the Danish economy. The results show that the long-term effects are a moderate decline in the production and export of pig meat, and a positive indirect effect on other industries including poultry due to lower rental rates for primary factor inputs. The overall implication is a small decline in real GDP of 0.03%, reducing public and private consumption by 68 DKK per capita per year in Denmark.

What is the Appropriate Counterfactual When Estimating Effects of Multilateral Trade Policy Reform

Multilateral trade reforms, such as may emerge from the WTO’s Doha Development Agenda (DDA), tend to be phased in over a decade or so after agreement is reached. Given the DDA’s slow progress, that implementation may not be completed before the end of the next decade. Ex ante analysis of the DDA’s possible effects requires first modelling the world economy to 2030 and, in that process, projecting what trade-related policies would be by then if the DDA failed. Typically, modelers assume the counterfactual policy regime to be the status quo. Yet we know developing country governments tend to switch from taxing to assisting farmers in the course of economic development. This paper reveals how much difference it can make to include political economy-determined agricultural protection growth in the baseline projection. We reveal that difference by projecting the world economy to 2030 using the GTAP global economywide model with those two alternative policy regimes and then simulating a move to free trade in each of those two cases. To implement the alternative policy regimes, a series of national political econometric equations is used to project the policy changes for the most important agricultural crop and livestock products in a sample of 82 countries. With these equations and the projections of such variables as GDP and population to 2030, potential agricultural protection rates in 2030 are estimated. A prior step is involved in the analysis though. The GTAP model’s 2007 protection database has poor coverage of non-tariff barriers to agricultural imports and of export taxes. We therefore draw on the World Bank’s Distortions to Agricultural Incentives (DAI) database for 82 countries and use an Altertax procedure to recalibrate the version 8.1 GTAP 2007 database with those additional price-distortion data. The effects of removing the counterfactual price distortions in 2030 are shown to be much larger in the case where agricultural protection grows endoge...

Vaccination of poultry against Campylobacter in the EU: what are the economic benefits?

Abstract Campylobacter is the most commonly reported gastrointestinal bacterial pathogen in the European Union (EU) since 2005. Reportedly, 212,064 humans have been confirmed ill in 2010 due to a Campylobacter infection in the EU. The major source of infection, among sporadic human cases is to be found in the food chain, from farm-to-fork, where poultry meat is considered to be one of the major vehicles of Campylobacter infections in humans, accounting for 50–80% of reported cases. One way to reduce this economic loss to society is perhaps the introduction of a new Campylobacter vaccine, which could be administered to one-day old chicks. This would effectively reduce the outbreak of illness among the general population, enhancing general well-being, and increase the efficiency of the employed labor force. In the present paper, we assess the potential economic benefits of a mandatory vaccination program at the EU27 level. In this study, benefits are mainly assumed to comprise lower risk of illness due to Campylobacter infections, and hence increased labor productivity. In the modeled analysis presented in this paper, the possible price of the vaccine is estimated when it is assumed that: (i) the number of reported human campylobacteriosis cases in the EU is reduced by 65%, (ii) an import ban on non-vaccinated chicken meat into the EU is implemented, (iii) an increased preference for EU chicken meat outside the EU increases exports marginally, and (iv) that the aggregate EU welfare has to remain unchanged as measured by the equivalent variation in income. The analysis shows that the benefits to society of such a vaccination program amount to 1.24 eurocents per dose, and about 50% higher, if no import ban is implemented.

The welfare impact of a free trade agreement between SACU and Mercosur

Abstract A free trade agreement (FTA) between SACU and Mercosur would be significant globally, as it would be a truly “south-south” relationship between three of the developing worlds emerging agricultural powers, namely Argentina, Brazil and South Africa. In this article, the GTAP database and the associated general equilibrium model is used to assess the potential welfare and trade gains from such an agreement. The results show that there are comfortable welfare gains for South Africa derived from a better use of land, labour and capital (enhanced allocative efficiency); increased net investment increasing the amount of capital employed in the economy; and a small contribution from increased labour employment. These gains are negated somewhat by terms of trade that go against South Africa. However, an FTA with Mercosur is not good for the South African agriculture sector. Imports of agricultural products increase dramatically, mostly in terms of increased imports of secondary (processed) agricultural products. Export gains are modest, but are largely from trade creation rather than trade diversion. Furthermore, there are marginal reductions in the prices of all agricultural products, which benefits consumers but harm producers. Overall, the FTA is bad news for South Africas commercial farmers. Whether small-scale and emerging farmers benefit depends on whether they are food deficit or food surplus producers.

The rise of Brazilian agriculture: some lessons for South Africa

ABSTRACT The purpose of this article is to explore some of the possible lessons for South African agriculture from the Brazilian experience. To this end, the article discusses the performance of Brazilian agriculture in terms of land and labour use, production, and exports. This is followed by aspects of Brazilian agricultural policies, namely farmer support, the research and technology transfer system and land issues. The implications for South African agriculture can be summarized as the recognition that history, geography, the development path and agricultural policies all matter. The article then identifies five important lessons for agricultural development in South Africa.