Background Economic models are indispensable instruments to support policy-making by DG AGRI.

1. Customer DG AGRI Agriculture Farm/ Household Rest of Economy World markets WTO EU27 markets CAP reform Farm income & structure Factor markets Trade Investment GLOBE GTAP ESIM CAPRI -20 -10 5 20 30 51 AGLINK AGMEMOD CAPSIM region world world DG RTD: FP6 & FP7 Academia Support to Agricultural Policy Making with Economic Modelling Tools • Background • Economic models are indispensable instruments to support policy-making by DG AGRI. • Key topics for DG AGRI: reform of the Common Agriculture Policy (CAP), markets (food prices, biofuels), trade policy negotiations (bilateral, WTO), rural development. • DG AGRI (customer) requests and co-finances support with model analysis by IPTS. • Advantages of IPTS Modelling Platform: cluster of excellence, synergy across models, EC internal (work partly sensitive). • IPTS provides ad-hoc model results, in-depth studies, policy recommendations. • Example for customer support • DG AGRI requests an outlook of agricultural markets and rural development indicators in a medium-term baseline (2013). • IPTS selects the appropriate modelling tools: to perform agricultural market prospects ESIM and AGLINK, to break down the results on regional level and incorporate environmental and labour indicators CAPRI. • As an illustration of results for the outlook on agricultural markets, Fig. 2 shows a map on income changes derived from CAPRI: • EU-27 agricultural income would grow by 23.2 % between 2005 and 2013 in real terms and per labour unit. • However, this overall gain would mask marked differences between EU-15, EU-10 and EU-2 as well as between individual regions. • Moderate development of agricultural income in the EU15 (+ 9.3 %) over the period 2005-2013. • In the EU12 more pronounced picture (+ 37.1 %). Fig. 1: Agro-Economic Modelling Platform at IPTS Fig. 2: Medium term change in regional value added per hectare as compared to the EU-27 average (%) • Current state of Modelling Platform • Seven highly complex modelling tools established (Fig. 1): • Agricultural Sector Models: CAPRI, AGMEMOD, CAPSIM, AGLINK, ESIM • General Equilibrium Models: GLOBE, GTAP • Different policy issues covered: reform of CAP, world markets, rural development • Modelling on different regional scales (countries, NUTS-2 regions) • Excellent links to academic modelling community Agriculture Income = Revenues minus Costs plus Premiums (i.e. income available to farmers to pay for land, labour and capital, plus profits) Source: CAPRI Modelling System, Baseline Update December 2006) • In Fig. 3 a map of an environmental indicator (nitrogene balance) resulting from CAPRI is provided: • In vast majority of the regions change in surplus is rather small (between 0 and +4 kg/ha). • Projected surplus in parts of the Netherlands, Belgium, Germany, Brittany or the Po valley is still at rather high levels. Fig. 3: Projected change in gross Nitrogene balance (kg N/ha) in % from 2002 to 2013 • Customer support (DG AGRI) by means of the • Agro-Economic Modelling Platform • (1) Processing of the request • IPTS translation of the policy-makers’ request into applicable research questions and preparation of internal project planning • Scenario construction and decision on assumptions on macro-economic factors in collaboration with the customer • (2) Selection of tools • Close collaboration with the customer and research institutions (original developers of the models) is crucial. • Out of the available tools in the Modelling Platform the appropriate ones are selected. • (3) Output / Dissemination • Analysis and interpretation of results in the broad context of the policy and interactions with the overall economy. • Reports for policy makers (policy briefings), technical reports, scientific publications (peer reviewed journals), contribution to EC publications. Source: European Commission (2007) Rural Development in the European Union - Statistical and Economic Information - Report 2007 • Contribution to EC publications: • European Commission (2007): Prospects for agricultural Markets and Income in the EU 2006-2013 • Chapter contribution to European Commission (2007) Rural Development in the European Union - Statistical and Economic Information - Report 2007 Contact Dr. Robert M’barek and Dr. Ignacio Perez Dominguez European Commission • Joint Research Centre Institute for Prospective Technological Studies Tel. +34 954488489 • Fax +34 954488434 E-mail: Robert.M’barek@ec.europa.eu Ignacio.Perez-Dominguez@ec.europa.eu