A Need for Caution in Applying the Volume-Based Special Safeguard Mechanism

The proximate cause of the collapse of the Doha Agenda negotiations in 2008 was disagreement over the volume-based Special Safeguard Mechanism (SSM). This measure would provide a right, but not an obligation, for developing countries to impose a duty when imports increase. While many simulations of its impact on domestic prices are available, there appear to be no analyses of its potential impacts on the welfare of poor households. Whether such a safeguard will increase or reduce poverty can only be determined empirically—if there are enough small, poor farmers who are net sellers of the commodity when the duty is imposed, then imposition of a safeguard duty may reduce poverty. If, by contrast, most small, poor farmers are net buyers of the products subject to the duty, then it is likely that poverty will rise. Empirical analysis for twenty-eight countries finds that poverty is generally increased following the imposition of a safeguard-type measure. The adverse poverty impact of the safeguard-induced increase in prices is typically larger when the safeguard can be triggered, because the adverse output shocks typically giving rise to import surges when import prices have not declined reduce the benefit to poor producing households from higher prices.International Relations/Trade,

Promoting global agricultural growth and poverty reduction

Constraints on resources, growth in demand, and a slowdown in agricultural productivity raise concerns that food prices may rise substantially over the next decades. The impacts of such higher prices on the poor and the required mitigating policy responses to this problem remain unclear. This paper uses a global general equilibrium model, projections of global growth and microeconomic household models, to project potential implications for incomes, food production and poverty. We find that higher agricultural productivity would generally lower poverty, with different impacts depending where the productivity growth occurs, while protection policies that reduce imports would generally raise poverty.poverty, growth, projections, Agricultural and Food Policy, Farm Management, Land Economics/Use,

Estimating the short-run poverty impacts of the 2010-11 surge in food prices

Global food prices have increased substantially since mid-2010, as have prices in many developing countries. In this study we assess the poverty impact of the price changes between June and December 2010 in twenty-eight low and middle income countries. This is done by gathering detailed information on individual households'food production and consumption levels for thirty-eight agricultural and food commodities to assess the impacts on household welfare. This study estimates that this sudden food price surge increased the number of poor people globally, but with considerably different impacts in different countries. The heterogeneity of these impacts is partly related to the wide variation in the transmission of global prices to local prices and partly to differences in households'patterns of production and consumption. On balance, the adverse welfare impact on net buyers outweighs the benefits to net sellers resulting in an increase in the number of poor and in the depth of poverty. We estimate that the average poverty change was 1.1 percentage points in low income countries and 0.7 percentage points in middle income countries with a net increase of 44 million people falling below the $1.25 per day extreme poverty line.Food&Beverage Industry,Rural Poverty Reduction,Markets and Market Access,Regional Economic Development

Implications of the growth of China and India for the other Asian giant : Russia

Continuing rapid growth of China and India can be expected to raise incomes in Russia, but also to put adjustment pressure on Russian firms. The impacts of the rapid growth of China and India on the Russian economy are explored by examining a baseline projection using a global general equilibrium model, and then assessing the implications of higher-than-expected growth in China and India. The authors find that a major source of benefits to Russia is likely to be terms-of-trade improvements associated with higher energy prices - a quite different channel of effect from that for many developing countries that benefit primarily through expanded opportunities to trade directly with these emerging giants. Taking into account the likely improvements in the quality and variety of exports from China and India, the gains to Russia increase substantially. The expansion of the energy sector and the contraction of manufacturing and services are a sign of a Dutch disease effect that will increase the importance of policies to encourage adaptation to the changing world environment.Economic Theory&Research,Emerging Markets,Markets and Market Access,Trade Policy,Free Trade

How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?

Computable General Equilibrium models, widely used for the analysis of Free Trade Agreements (FTAs) are often criticized for having poor econometric foundations. This paper improves the linkage between econometric estimates of key parameters and their usage in CGE analysis in order to better evaluate the likely outcome of a FTA for the Americas. Our econometric work focuses on estimation of the elasticity of substitution among imports from different countries, which is especially critical for evaluating the positive and normative outcomes of FTAs. We match the data in the econometric exercise to the policy experiment at hand. Then we sample from the distribution of parameter values given by our econometric estimates in order to generate a distribution of model results, from which we can construct confidence intervals. We conclude that there is great potential for combining econometric work with CGE-based policy analysis in order to produce a richer set of results that are likely to prove more satisfying to the sophisticated policy maker.

Distributional effects of WTO agricultural reforms in rich and poor countries

Rich countries'agricultural trade policies are the battleground on which the future of the WTO's troubled Doha Round will be determined. Subject to widespread criticism, they nonetheless appear to be almost immune to serious reform, and one of their most common defenses is that they protect poor farmers. The authors'findings reject this claim. The analysis uses detailed data on farm incomes to show that major commodity programs are highly regressive in the United States, and that theonly serious losses under trade reform are among large, wealthy farmers in a few heavily protected subsectors. In contrast, analysis using household data from 15 developing countries indicates that reforming rich countries'agricultural trade policies would lift large numbers of developing country farm households out of poverty. In the majority of cases these gains are not outweighed by the poverty-increasing effects of higher food prices among other households. Agricultural reforms that appear feasible, even under an ambitious Doha Round, achieve only a fraction of the benefits for developing countries that full liberalization promises, but protect U.S. large farms from most of the rigors of adjustment. Finally, the analysis indicates that maximal trade-led poverty reductions occur when developing countries participate more fully in agricultural trade liberalization.Rural Poverty Reduction,Economic Theory&Research,Population Policies,Achieving Shared Growth

Agriculture Productivity Growth: Is the Current Trend on the Track to Poverty Reduction?

In this study we evaluate the effect of annual productivity growth in agriculture over the 1991-2001 period on poverty in eleven developing countries. We compare this with the optimal pattern of productivity growth of comparable cost with the sole goal of maximizing poverty reduction. This comparison reveals that regional agricultural development is a viable option in the fight for poverty reduction.Food Security and Poverty,

How appropriate are global models for long-run poverty assessment?

The major shift in global food and fuel prices in the past several years has left the world with a significantly higher level of consumer prices and especially food prices, which raises an important question of the long-run impacts of high prices on global poverty. While short runimpacts of the most important consumer prices have been assessed satisfactorily by a number of researchers, the long-run impacts are less clear due to our current lack of understanding how households respond to change in relative prices and incomes by changing their consumption and household production over extended periods of time. Many of the difficulties in assessing long-run price impacts on households have been approximated by a global or national CGE models, however, is currently not clear how well the use of a representative agent and the imperfectly estimated behavioral parameters approximate the behavior of actual households and what are the implications of the discrepancies between the representative and actual household on poverty assessment. In this paper we address some of the key issues of household behavior by contrasting the predictions of the representative agent and the household and measuring the impact of any discrepancies on poverty assessment. We find, that even though the representative agent of the GTAP model performs poorly in predicting household consumption mainly due to inflexibly specified preferences, it nevertheless improves our estimates of poverty impacts

Global poverty assessment in GTAP: Improving the data and the model

The goal of this dissertation is to enable poverty assessment of trade liberalization at the global level. This objective is achieved by the development of innovative methods, both on the data and modeling fronts, that expand the scope of poverty assessment to respond to global questions. The dissertation concludes with the application of these new methods in a comprehensive exercise that accentuates the contribution to global poverty assessment made possible by this work. The dissertation begins by introducing a method of estimating the relevant distributional household data for those countries where no current household surveys are available. The dissertation shows that the level of national per capita income is a powerful predictor of the main characteristics of national income distribution and is sufficient to draw credible estimates for any given country. This dissertation further includes a method for ex post sampling error correction. The proposed method smoothes the household survey data in a way which mimics the effect of adding more observations. Based on the Hodrick-Prescott filter, it provides a meaningful method for data smoothing and the reduction of sampling error. The dissertation also deals with replacing the representative consumer in the GTAP model with a set of disaggregated households, and bridging of household income and expenditure through household saving. This work is motivated by the problems caused when survey-based household income and expenditure are not properly reconciled. The thesis shows that the inclusion of saving in the household-level final demand structure is particularly important for the poorest households who often dissave. As a final step and to stress the practical nature of its propositions, the dissertation performs a sample poverty assessment exercise, in which the expanded data are used to estimate the level of poverty in forty-six GTAP regions. The success of the exercise in recovering the distribution of poverty around the world validates the introduced innovations as well as the global poverty assessment based on them. This enhanced data set is then combined with the revised model to provide an assessment of the global poverty impacts of multilateral trade reform

The GTAP model in R: The benefits of involving the community in the development of general equilibrium tools for the future

The purpose of this paper is threefold: first, we introduce a translator for the TABLO language into R and we demonstrate it by bringing the standard GTAP model into the R platform. Second, we compare the performance of GTAP in R to the performance using the standard GEMPACK implementation for a sample of common general-equilibrium questions, involving changes in output taxes, productivity and trade policy, and for different sizes of aggregation. Finally, we describe the additional benefits for GTAP modeling stemming from the tools that are available in the R framework for general use. We conclude that while the speed of solving GTAP models using the existing solvers available in R is lagging, especially for larger models, the improvements that are needed to bring it to the level of GEMPACK are well-defined, and could be addressed by the community by building on the existing volume of work in sparse matrix algebra. The benefits to performing GTAP analysis in R are also found to be immense—first of all, the R framework would expand the availability of GTAP by allowing it to run on nearly any operating system without having to pay for any commercial solver; second, by existing in the R framework, the GTAP model could integrate effortlessly with the existing tools, enabling a wide range of data connections for processing inputs and outputs, including advanced technologies for reporting the model results