AGRO II MODEL AUTOMATIC TOOL FOR LIBERALISATION SCENARIOS SIMULATION

1. AGRO II MODEL AUTOMATIC TOOL FOR LIBERALISATION SCENARIOS SIMULATION Marseille, 4-6 December, 2003

2. STARTING POINT • Agricultural trade between third Mediterranean countries and EU will be liberalized sooner or later. • This process will involve, essentially: • Bilateral trade barriers removal in MPC’s • Domestic support reduction in EU FEMISE, December 2003

3. “AGRO II” MODEL IDEA • Build up a quantitative tool for the simulation of economic consequences (in MPC’s) of an agricultural liberalization process in the framework of its relations with EU. • Implementation of a Visual Basic (Excel) interface for an easy usage of the model to simulate tailored scenarios for every analyst. • Illustration of “how it works” with an example simulation for the case of cereal crops in Egypt. FEMISE, December 2003

4. PRESENTATION SCHEME I.- Global description of “how the model works”: stages of the process, variables involved in each stage and technical links. II.- Global presentation of the Visual Basic Interface usage. III.-Example illustration for the case of cereals crops in Egypt. IV.- Conclusions FEMISE, December 2003

5. MODEL DESCRIPTION VARIABLES & CHAIN EFFECTS TECHNICAL LINKS DOMESTIC SUPPORT REDUCTION IN EU COUNTRIES • Connection between EU Domestic Support and international trade prices • Analysis of tariff structure and level in MPC’s TARIFF CUT IN MPC • Connection between international and EU-MPC bilateral trade prices NET CHANGE IN INTERNATIONAL TRADE PRICES • Price / Import elasticity analysis CHANGE IN MPC IMPORTS FROM EU • Connection between imports and sectoral employment and production ADJUSTMENT IN AGRICULTURAL PRODUCTION AND EMPLOYMENT • Dinamization of employment series • Dinamization of employmentcoefficients • Dinamization of Value Added Prices • Usage of IO for chain effects computation (wage yields, value added, public yields..) ADJUSTMENT IN THE WHOLE ECONOMY (CHAIN EFFECTS) FEMISE, December 2003

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7. VISUAL BASIC INTERFACE WHAT IS THE TEMPORAL DESIGN OF SIMULATION: ACUMULATED, PROPORTIONAL OR PROGRESSIVE ? POLITICAL DECISIONS RESULTS DECIDE FREELY THE IMPACT ON EMPLOYMENT OR LEAVE THE MODEL COMPUTE IT MODEL INDUCED EFFECTS IN DEMAND AND EMPLOYMENT FOR THE WHOLE ECONOMY (I.O. ANALYSIS) ENDOGENOUS EXOGENOUS EMPLOYMENT ADJUSTMENT PERCENT REDUCTION IN CURRENT EU DOMESTIC SUPPORT LEVELS IMPORT CHANGES LEVEL OF TARIFF PROTECTION TO BE REMOVED IN MPC NET TRADE PRICE MOVEMENT FEMISE, December 2003

8. VISUAL BASIC SCREENSPolitical Decisions (first one) The inputs and outputs of the model will be proportional distributed in a basis of a 7 years scenario The inputs and outputs of the model will be aggregated in a single year FEMISE, December 2003

9. VISUAL BASIC SCREENSPolitical Decisions (second one) The analyst decides the initial employment lost following an eventual liberalization scenario, leaving the model to compute the chain - effects in the whole economy OR……. The analyst JUST decides the reduction in Domestic Support and Tariffs, and then leave the model to compute the initial employment lost and the follow-on effects. FEMISE, December 2003

10. VISUAL BASIC SCREENSPolitical Decisions (third one) The analyst decides the percent reduction of current Domestic Support for each class of agricultural good. FEMISE, December 2003

11. VISUAL BASIC SCREENSPolitical Decisions (fourth one) The analyst decides the level of tariff protection to be removed in the MPC for each class of agricultural good. FEMISE, December 2003

12. VISUAL BASIC SCREENSResults (example one) The analyst sees the …….. ……….. FEMISE, December 2003

13. VISUAL BASIC SCREENSResults (example two) The analyst sees the …….. ……….. FEMISE, December 2003

14. EXAMPLE ILLUSTRATION • Country: EGYPT • Time design: PROGRESSIVE • Initial employment adjustment: ENDOGENOUS • Product covered: WHEAT • Domestic Support Reduction: …….% • Tariff Cuts: …. % FEMISE, December 2003