U.S. Proposal for WTO Agriculture Negotiations: Its Impact on U.S. and World Agriculture

Senator Chambliss asked FAPRI to analyze the latest U.S. proposal for WTO agriculture negotiations. This proposal includes changes in export competition, market access, and domestic support. The analysis covers the first seven years of policy changes implied by the proposal, during which the most significant reductions in tariffs and trade-distorting domestic support and elimination of export subsidies would be phased in starting in 2007/08. The proposal reduces the permitted current U.S. aggregate measures of support to $7.64 billion and limits blue box support to$4.77 billion. These limits imply lower loan rates and support prices and reduced counter-cyclical payments. The proposal lowers EU domestic support to 11.4 billion, implying large reductions in actual domestic support for sugar, dairy, cereals, fruits, and vegetables. The proposal includes significant tariff reductions or tariff rate quota (TRQ) expansions. These market access reforms would open the protected rice, sugar, and dairy markets

Multilateral Trade and Agricultural Policy Reforms in Sugar Markets

We analyse the impact of trade liberalisation, removal of production subsidies and elimination of consumption distortions in world sugar markets using a partial-equilibrium international sugar model calibrated on 2002 market data and current policies. The removal of trade distortions alone induces a 27% price increase while the removal of all trade and production distortions induces a 48% increase in 2011/2012 relative to the baseline. Aggregate trade expands moderately, but location of production and trade patterns change substantially. Protectionist Organisation for Economic Co-operation and Development (OECD) countries (the EU, Japan, the US) experience an import expansion or export reduction and a significant contraction of production in unfettered markets. Competitive producers in both OECD countries (Australia) and non-OECD countries (Brazil, Cuba), and even some protected producers (Indonesia, Turkey), expand production when all distortions are removed. Consumption distortions have marginal impacts on world markets and the location of production. We discuss the significance of these results in the context of mounting pressures to increase market access in highly protected OECD countries and the impact on non-OECD countries. Copyright 2006 Blackwell Publishing Ltd.

Evaluating class I differentials in the new federal milk marketing order system

In this article, a spatial equilibrium model that allows for the inclusion of any degree of market structure from perfect competition to monopoly is developed and applied to the U.S. dairy industry. This model is used to simulate possible Class I premiums, which could be negotiated by U.S. dairy cooperatives in the absence of FMMOs, under alternative assumed market structures. These premiums are then compared with the newly adopted Class I differentials to determine what degree of market competitiveness is equivalent to the new Class I differential structure. The results suggest the new FMMO Class I differentials are equivalent to a small degree of imperfect competition. In addition, because Class I differentials virtually disappear in the perfect competition case, our findings indicate it is difficult to justify the existence of Class I differentials solely on the basis of transportation costs from surplus to deficit areas [EconLit citations: Q11, Q13, Q18]. © 2001 John Wiley & Sons, Inc.

Agricultural Land Elasticities in the United States and Brazil

The elasticity of aggregate supply of cropland is one key to understanding the degree to which policy-induced increases in demand for biofuel feedstocks or agricultural CO 2 offsets will result in higher prices or expanded crop production. We report land supply elasticities for the United States and Brazil estimated directly from recent changes in planted crop acreage and estimated changes in expected returns. The resulting aggregate implied land-use elasticities with respect to price are quite inelastic in the United States and Brazil elasticities have declined sharply in recent years. The estimated elasticities imply that current estimates of land-based CO 2 emissions from biofuels expansion may be overstated Copyright 2011, Oxford University Press.