Mark J. Gehlhar

Understanding the Determinants of Structural Change in World Food Markets

American Journal of Agricultural Economics, 80(December):1052-1062. This study assesses the interaction between climate change and agricultural trade policies. We distinguish between two dimensions of agricultural trade policy: market insulation and subsidy levels. Building on the previous work of Tsigas, Frisvold and Kuhn (1997) we find that, in the presence of current levels of agricultural subsidies, increased price transmission --as called for under the Uruguay Round Agreement on Agriculture-- reduces global welfare in the wake of climate change. This is due to the positive correlation between productivity changes and current levels of agricultural support. Increases in subsidized output under climate change tend to exacerbate inefficiencies in the global agricultural economy in the absence of market insulation. However, once agricultural subsidies have also been eliminated, price transmission via the global trading system contributes positively to economic adaptation under climate change. products. This may partially explain the relatively slow growth of world grain import demand in recent years. In addition, bilateral agreements with East Asia, NAFTA, and the evolution of the CAP, have all had important impacts on the structure of world food and agricultural trade. The objective of this paper is to assess the relative role of each of the major forces-- consumer demand, factor accumulation, transport costs, and policy change--in driving changes in the composition of world food trade in 1980-1995. To do so, we employ a modified version of the Global Trade Analysis Project (GTAP) model of world trade which permits us to isolate the contribution of each of these related factors to the changing composition of world food trade in a general equilibrium context. We evaluate the relative role of each of these factors by simulating the model backwards in time, from 1995 to 1980 under different assumptions. This general approach, termed “backcasting” (i.e. backwards forecasting), takes as exogenous the basic drivers of change and attempts to explain the resulting change in food trade composition. The model-produced changes in the composition of agricultural and food trade are compared with historical trade data, to determine the relative importance of each factor on the changing composition of food trade. Given limited space, our focus will be on explaining the changes in the global composition of food and agriculture trade. A natural follow-on effort would target specific markets in more detail. This type of backcasting approach was first employed by Gehlhar (1997) who sought to explain the shift in exports of primary commodities to manufactures in East Asia in the 1980s. He calibrated the GTAP Model to 1992 data, then implemented shocks to factor endowments and economywide total factor productivity (TFP) in order to force each economy back to its 1982 levels of population, land, labor, human capital, physical capital and technology. By comparing actual and predicted changes in export shares in this period, he found human capital accumulation played a key role in explaining the change in the aggregate composition of East Asian exports. Gehlhar, Hertel and Martin (1994) built on this work in an effort to predict future changes in the pattern of agricultural trade from 1992-2002. They also emphasized the importance of supply-side determinants of agricultural trade. In this paper, we go beyond this earlier work in a number of ways. First, we focus on the composition of agricultural exports, rather than simply looking at the share of agriculture in total trade. Secondly, we incorporate the Cranfield et al. estimates of Rimmer and Powell’s recently developed, implicitly directly additive demand system (nicknamed AIDADS) into the GTAP Model. This permits us to better capture the impact of demand-side changes on the pattern of global tr

Economic Growth and the Changing Structure of Trade and Production in the Pacific Rim

growth have been in the range of 6-7% (Young). During this period, production and trade patterns in the Pacific Basin have undergone profound structural changes. In the last two decades, South Korea has moved from the production of labor-intensive manufactures to more capital and skill-intensive sectors. Thailand, traditionally an exporter of natural resource-based commodities, showed a sharp fall in its export share of agriculture and a sharp rise in the share of manufactures such as textiles and simple electronics (Gehlhar). In contrast, while the importance of agriculture in total North American output has fallen, its share in exports has remained stable in recent years, as export volumes continue to increase. The growth of total East Asian exports naturally coincides with rapid import growth. In order to expand their manufacturing capacity, East Asian countries have imported massive amounts of capital equipment. But expansion of the manufacturing sector also pulls labor away from agriculture, at the very time income growth is leading to increased per capita food demands. Therefore, we have seen a strong rise in the demand for farm and food imports in East Asia. Indeed, during the 1980s, this region emerged as the fastest growing market for agricultural commodities, accounting for the bulk of the increase in U.S. exports (USDA 1993a).

Brand leadership and product innovation as firm strategies in global food markets

Purpose – This paper aims to understand the motivations for product innovation and brand leadership using a series of case studies focusing on firms with leading market positions of different types.Design/methodology/approach – A qualitative study is presented of three leading food sector firms of different types (large/public, medium/private, and international/cooperative). An analysis of brand leadership is undertaken in the context of a conceptual framework linking process innovation, product innovation, and the firms resource base and market orientation.Findings – The cases suggest that process innovation supports product innovation as firms implement strategies to differentiate their products. Response to changing demand is a disciplined reaction where firms exploit their specialized resources using superior product knowledge and branding power. Leadership positions are maintained not only by responding to changing demand but by steering the market using innovative products and consumer education.Re...

Regionalism in the Western Hemisphere and Its Impact on U.S. Agricultural Exports: A Gravity-Model Analysis

The last fifteen years of the twentieth century were marked by important achievements in the area of agricultural trade liberalization in the Western Hemisphere. In North America, Canada, Mexico, and the United States forged the North American Free Trade Agreement (NAFTA). This accord, which took effect on 1 January 1994, is dismantling most tariff and non-tariff barriers for trading between its members. NAFTA also incorporates the Canada-U.S. Free Trade Agreement (CFTA), an accord similar to NAFTA that took effect

Economic growth and world food insecurity: a parametric approach.

Abstract This paper focuses on the feasibility of reducing the number of individuals that are food insecure to about 700 million by 2015. A sufficient statistic to characterize the level and distribution of income in 134 countries is developed and regressed on variables hypothesized to be its major determinants. A global general equilibrium model is then calibrated to data and experiments performed that change the levels of these variables. The results show that attaining the 700 million target is feasible, but unlikely. Growth in economy-wide total factor productivity, agricultural factor productivity and labor productivity is analyzed.

Locating seasonal cycles in demand models

An approach is offered that lets data determine the exact location of seasonal cycles. Rather than use deterministic variables that define the season, it allows seasonal cycles to be identified and modelled as dictated by the data in demand modelling framework.

Effects of Increased Biofuels on the U.S. Economy in 2022

Achieving greater energy security by reducing dependence on foreign petroleum is a goal of U.S. energy policy. The Energy Independence and Security Act of 2007 (EISA) calls for a Renewable Fuel Standard (RFS-2), which mandates that the United States increase the volume of biofuel that is blended into transportation fuel from 9 billion gallons in 2008 to 36 billion gallons by 2022. Long-term technological advances are needed to meet this mandate. This report examines how meeting the RFS-2 would affect various key components of the U.S. economy. If biofuel production advances with cost-reducing technology and petroleum prices continue to rise as projected, the RFS-2 could provide economywide benefits. However, the actual level of benefits (or costs) to the U.S. economy depends importantly on future oil prices and whether tax credits are retained in 2022. If oil prices stabilize or decline from current levels and tax credits are retained, then benefits to the economy would diminish.