Thomas W. Hertel

Global Trade Analysis: Modeling and applications

This book, drawn from the Global Trade Analysis Project (GTAP), aims to help readers conduct quantitative analysis of international trade issues in an economy-wide framework. In addition to providing a succinct introduction to the GTAP modelling framework and data base, this book contains seven of the most refined GTAP applications undertaken to date, covering topics ranging from trade policy to the global implications of environmental policies, factor accumulation and technological change. The authors of the applications are representative of the broader group of GTAP users. Some are academics, while others are professional economists in national and international agencies. All of their studies can be independently replicated by the reader through accessing software and files via the Internet. Readers can also explore the sensitivity of results to varying assumptions and use the applications to launch independent research projects.

Framing Sustainability in a Telecoupled World

Interactions between distant places are increasingly widespread and influential, often leading to unexpected outcomes with profound implications for sustainability. Numerous sustainability studies have been conducted within a particular place with little attention to the impacts of distant interactions on sustainability in multiple places. Although distant forces have been studied, they are usually treated as exogenous variables and feedbacks have rarely been considered. To understand and integrate various distant interactions better, we propose an integrated framework based on telecoupling, an umbrella concept that refers to socioeconomic and environmental interactions over distances. The concept of telecoupling is a logical extension of research on coupled human and natural systems, in which interactions occur within particular geographic locations. The telecoupling framework contains five major interrelated components, i.e., coupled human and natural systems, flows, agents, causes, and effects. We illustrate the framework using two examples of distant interactions associated with trade of agricultural commodities and invasive species, highlight the implications of the framework, and discuss research needs and approaches to move research on telecouplings forward. The framework can help to analyze system components and their interrelationships, identify research gaps, detect hidden costs and untapped benefits, provide a useful means to incorporate feedbacks as well as trade-offs and synergies across multiple systems (sending, receiving, and spillover systems), and improve the understanding of distant interactions and the effectiveness of policies for socioeconomic and environmental sustainability from local to global levels.

Effects of US Maize Ethanol on Global Land Use and Greenhouse Gas Emissions: Estimating Market-mediated Responses

Releases of greenhouse gases (GHG) from indirect land-use change triggered by crop-based biofuels have taken center stage in the debate over the role of biofuels in climate policy and energy security. This article analyzes these releases for maize ethanol produced in the United States. Factoring market-mediated responses and by-product use into our analysis reduces cropland conversion by 72% from the land used for the ethanol feedstock. Consequently, the associated GHG release estimated in our framework is 800 grams of carbon dioxide per megajoule (MJ); 27 grams per MJ per year, over 30 years of ethanol production, or roughly a quarter of the only other published estimate of releases attributable to changes in indirect land use. Nonetheless, 800 grams are enough to cancel out the benefits that corn ethanol has on global warming, thereby limiting its potential contribution in the context of Californias Low Carbon Fuel Standard.

Systems integration for global sustainability

Seeking systems-based solutions Without sustainable solutions, the worlds most pressing environmental concerns will continue to persist or worsen. Achieving the goal of sustainability involves so many factors—from economics to ecology—that investigating one or even a handful of variables at a time often overlooks major parts of the problem. Liu et al. review systems-based approaches that are beginning to provide tenable ways to assess sustainability. Further integrating coupled human and natural components of a problem across multiple dimensions, including how one solution can create unintended consequences elsewhere, is essential for developing effective policies that seek global sustainability. Science, this issue 10.1126/science.1258832 BACKGROUND Many key global sustainability challenges are closely intertwined (examples are provided in the figure). These challenges include air pollution, biodiversity loss, climate change, energy and food security, disease spread, species invasion, and water shortages and pollution. They are interconnected across three dimensions (organizational levels, space, and time) but are often separately studied and managed. Systems integration—holistic approaches to integrating various components of coupled human and natural systems (for example, social-ecological systems and human-environment systems) across all dimensions—is necessary to address complex interconnections and identify effective solutions to sustainability challenges. ADVANCES One major advance has been recognizing Earth as a large, coupled human and natural system consisting of many smaller coupled systems linked through flows of information, matter, and energy and evolving through time as a set of interconnected complex adaptive systems. A number of influential integrated frameworks (such as ecosystem services, environmental footprints, human-nature nexus, planetary boundaries, and telecoupling) and tools for systems integration have been developed and tested through interdisciplinary and transdisciplinary inquiries. Systems integration has led to fundamental discoveries and sustainability actions that are not possible by using conventional disciplinary, reductionist, and compartmentalized approaches. These include findings on emergent properties and complexity; interconnections among multiple key issues (such as air, climate, energy, food, land, and water); assessment of multiple, often conflicting, objectives; and synergistic interactions in which, for example, economic efficiency can be enhanced while environmental impacts are mitigated. In addition, systems integration allows for clarification and reassignment of environmental responsibilities (for example, among producers, consumers, and traders); mediation of trade-offs and enhancement of synergies; reduction of conflicts; and design of harmonious conservation and development policies and practices. OUTLOOK Although some studies have recognized spillover effects (effects spilling over from interactions among other systems) or spatial externalities, there is a need to simultaneously consider socioeconomic and environmental effects rather than considering them separately. Furthermore, identifying causes, agents, and flows behind the spillover effects can help us to understand better and hence manage the effects across multiple systems and scales. Integrating spillover systems with sending and receiving systems through network analysis and other advanced analytical methods can uncover hidden interrelationships and lead to important insights. Human-nature feedbacks, including spatial feedbacks (such as those among sending, receiving, and spillover systems), are the core elements of coupled systems and thus are likely to play important roles in global sustainability. Systems integration for global sustainability is poised for more rapid development, and transformative changes aimed at connecting disciplinary silos are needed to sustain an increasingly telecoupled world. Illustrative representation of systems integration. Among Brazil, China, the Caribbean, and the Sahara Desert in Africa, there are complex human-nature interactions across space, time, and organizational levels. Deforestation in Brazil due to soybean production provides food for people and livestock in China. Food trade between Brazil and China also contributes to changes in the global food market, which affects other areas around the world, including the Caribbean and Africa, that also engage in trade with China and Brazil. Dust particles from the Sahara Desert in Africa—aggravated by agricultural practices—travel via the air to the Caribbean, where they contribute to the decline in coral reefs and soil fertility and increase asthma rates. These in turn affect China and Brazil, which have both invested heavily in Caribbean tourism, infrastructure, and transportation. Nutrient-rich dust from Africa also reaches Brazil, where it improves forest productivity. [Photo credits clockwise from right top photo: Caitlin Jacobs, Brandon Prince, Rhett Butler, and David Burdick, used with permission] Global sustainability challenges, from maintaining biodiversity to providing clean air and water, are closely interconnected yet often separately studied and managed. Systems integration—holistic approaches to integrating various components of coupled human and natural systems—is critical to understand socioeconomic and environmental interconnections and to create sustainability solutions. Recent advances include the development and quantification of integrated frameworks that incorporate ecosystem services, environmental footprints, planetary boundaries, human-nature nexuses, and telecoupling. Although systems integration has led to fundamental discoveries and practical applications, further efforts are needed to incorporate more human and natural components simultaneously, quantify spillover systems and feedbacks, integrate multiple spatial and temporal scales, develop new tools, and translate findings into policy and practice. Such efforts can help address important knowledge gaps, link seemingly unconnected challenges, and inform policy and management decisions.

The Indirect Land Use Impacts of United States Biofuel Policies: The Importance of Acreage, Yield, and Bilateral Trade Responses

Recent work has highlighted agricultural land conversion as a significant debit in the greenhouse gas accounting of ethanol as an alternative fuel. This work has at the same time sparked considerable debate on the role of crop yield growth as a means of avoiding rapid land conversion. We examine the agricultural land use impacts of mandate driven ethanol demand increases in the United States in a formal economic equilibrium framework which allows us to examine the importance of yield price relationships. We find that the standard assumption of trend yield growth is likely restrictive for analysis of equilibrium response to significant demand increases for fuel feedstocks. Furthermore, we identify both the acreage response and bilateral trade specification of a multi-country model as important sources of variability (in terms of parametric uncertainty) in predicting global land use change from the biofuels boom.

Dynamic Effects of the “New Age” Free Trade Agreement between Japan and Singapore

As manufacturing tariffs have fallen worldwide, the focus of free trade agreements has shifted towards other issues, including: rules governing foreign investment, e-commerce regulations, trade in services, harmonization of technical standards, sanitary and phyto-sanitary regulations, and the streamlining of customs procedures. Japan and Singapore are undertaking negotiations over this kind of “new-age” FTA. The purpose of this paper is to evaluate the impact of the FTA on production, consumption, trade, international investment flows, GDP and welfare. We use a modified version of the dynamic GTAP model, which is well-suited to capturing the impact of this new-age FTA over both the short run and the longer run. In addition to the proposed bilateral tariff cuts, our analysis takes account of the potential gains from implementing uniform standards for e-commerce in Japan and Singapore. The consequences of liberalizing rules governing direct trade in services are also considered. Finally, we seek to quantify the impact of automating customs procedures in Japan, making them compatible with the computer-based standards established by Singapore. This is projected to reduce the administrative costs and lag time in Japan’s exports to, and imports from, all destinations, thereby permitting products to be delivered in a more timely fashion. We find that the impacts of this new-age FTA on bilateral trade and investment flows are significant – with customs automization playing the most important role in driving increases in merchandise trade. The FTA also boosts rates of return in the two economies, thereby increasing both foreign and domestic investment as well as GDP. This causes the trade balance in both Japan and Singapore to deteriorate relative to baseline over the medium run, although it improves in the long run due to higher foreign income payments. The estimated global gains from this FTA are in excess of

Poverty and the WTO: impacts of the Doha development agenda

US 9 billion annually, with the bulk of these gains accruing to Japan – which undertakes most of the reforms. Unlike preferential tariff cuts, the “new age” components of this FTA promote imports from all sources, thereby eliminating the problem of trade diversion.

Climate volatility deepens poverty vulnerability in developing countries.

This study reports on the findings from a major international research project investigating the poverty impacts of a potential Doha Development Agenda (DDA). It combines in a novel way the results from several strands of research. First, it draws on an intensive analysis of the DDA Framework Agreement, with particularly close attention paid to potential reforms in agriculture. The scenarios are built up using newly available tariff line data, and their implications for world markets are established using a global modeling framework. These world trade impacts form the basis for 12 country case studies of the national poverty impacts of these DDA scenarios. The focus countries are Bangladesh, Brazil (2 studies), Cameroon, China (2 studies), Indonesia, Mexico, Mozambique, the Philippines, the Russian Federation, and Zambia. Although the diversity of approaches taken in these studies limits the ability to draw broader conclusions, an additional study that provides a 15-country cross-section analysis is aimed at this objective. Finally, a global analysis provides estimates for the world as a whole.

PROJECTING WORLD FOOD DEMAND USING ALTERNATIVE DEMAND SYSTEMS

Extreme climate events could influence poverty by affecting agricultural productivity and raising prices of staple foods that are important to poor households in developing countries. With the frequency and intensity of extreme climate events predicted to change in the future, informed policy design and analysis requires an understanding of which countries and groups are going to be most vulnerable to increasing poverty. Using a novel economic-climate analysis framework, we assess the poverty impacts of climate volatility for seven socio-economic groups in 16 developing countries. We find that extremes under present climate volatility increase poverty across our developing country sample—particularly in Bangladesh, Mexico, Indonesia, and Africa—with urban wage earners the most vulnerable group. We also find that global warming exacerbates poverty vulnerability in many nations.

Negotiating Reductions in Agricultural Support: Implications of Technology and Factor Mobility

Computable General Equilibrium (CGE) models are increasingly being used to project world food markets in order to support forward-looking policy analysis. Such projections hinge critically on the underlying functional form for representing consumer demand. Simple functional forms can lead to unrealistic projections by failing to capture changes in income elasticities of demand. We adopt as our benchmark the recently introduced AIDADS demand system and compare it with several alternative demand systems currently in widespread use in CGE models. This comparison is conducted in the context of projections for disaggregated global food demand using a global CGE model. We find that AIDADS represents a substantial improvement, particularly for the rapidly growing developing countries. For these economies, the most widely used demand systems tend to over-predict future food demands, and hence overestimate future production and import requirements for agricultural products.