Order of Presentation

1. Domestic Support in GTAP and AMS reductionMark GehlharMary BurfisherEU Modeling WorkshopNew challenges in Modeling EU Agriculture November 15-16, Economic Research Service

2. Order of Presentation • How the PSE data is mapped to GTAP policy variables • Classification of programs and OECD PSE measure • Issues debated within the GTAP Consortium • Examples of scenarios for AMS support reductions for WTO • An overall assessment of GTAP for modeling

3. GTAP model/database • Public documentation available on web(http://www.gtap.agecon.purdue.edu/) • Multi-commodity, multi-region • Multipurpose model: policy (multilateral, regional trade) economic growth, climate, environment change

4. GTAP model/database continued • Version 5 released in 2001 has 66 country/regions • 57 sectors, 12 primary agriculture and 8 agricultural processing • New extension is more detailed domestic support

6. Domestic support • Previously the output subsidy contained all domestic support • Adopt new PSE classification • More variables in GTAP model used to represent domestic policy • Subsidies/payments to primary factors: land, labor, capital • Tax/subsidies to intermediates inputs

7. Classification of Policy Measures Included in the OECD Producer Support Estimate

8. Who decides how support is mapped to policy variables ? • How payment are mapped to policy variables in model is controversial • Each consortium member can make recommendations • In the end a compromise must be reached

9. USDA’s Approach(The Economic Research Service) • How support is administered and under what conditions matters • Treat countries on individual basis • Treat programs individually • And give consideration to how programs are notified to WTO

10. EU’s Approach (Danish Institute for Agricultural and Fisheries Economics) • Use a generic formula for all countries • Account for the entire PSE as support to agriculture • Achieve transparency for all users

11. Mapping formula

12. U.S category C in the PSE

13. EU category C in the PSE

14. U.S category F in the PSE

15. EU category F in the PSE

16. What the compromise means for model users • The domestic support database serves as starting point for all users • Applications requiring changes to the database should be documented by users • Replications of results still possible after alterations

19. An alternative to current domestic support version of GTAP • Alter subsidy rates such that they are uniform across all land uses • Conduct identical experiments with current and altered database

22. Implications • Generic treatment of agricultural support for all countries can be misleading • Potential for creating distortions in the database that do not exist in reality • Users should be aware of implications for reductions of land-based payments

23. How ERS uses the PSE data for AMS support reduction scenarios • AMS data not used in modelNotifications are sporadicPSE is more up to date Available only for OECD • PSE different concept than AMS • We calculate a PSE-based AMS • PSE data broken into green, amber, blue • Identify commodities with administered price • Calculate cuts based a reduction rule

24. Support Reduction Scenarios • Reduce ceiling by additional 20% from Uruguay ceiling • Leveling support by commodity: no commodity receives more that 30% of value of production

26. AMS Support (1997)

28. Assessment of GTAP modeling Framework • Needs careful scrutiny of data prior to running scenarios • GTAP services as an accounting framework for the PSE but does not model specific policies • Other comment see “Assessment of the GTAP modelling framework for Policy Analyses from a European Perspective” 2000 editors S.Frandsen and M.Staehr