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New Challenges in Modeling EU Agriculture and Agricultural Policy

On November 15-16, 2001, in Washington, D.C., USDA's Economic Research Service (ERS) and Farm Foundation organized a workshop inspired by a number of new issues that have arisen in the EU and present new challenges to economists analyzing EU policies.

The EU had recently implemented an important set of policy reforms, known as Agenda 2000, and the impacts of those reforms on EU production and trade were just becoming evident. The EU was also engaged in accession negotiations with its neighbors in Eastern Europe and could absorb as many as 12 new members in the coming decade. The EU was under pressure to undertake further reform in order to comply with its commitments to the WTO.  At the same time EU agriculture was being shaped increasingly by intensified consumer demand for a high quality and safe food supply.

The workshop was organized into four sessions on the following topics:

  • Agricultural Trade Liberalization in the EU
  • EU Enlargement
  • Supply Response in the EU in the post-CAP Reform Agenda 2000 ERA
  • Consumer Demand and other New Topics

It concluded with a wrap-up session that summarized the key points emerging from the discussions. Participants there are still some issues to be addressed, including:

  • The extent to which EU direct payments to farmers are truly decoupled from production decisions
  • There is no clear consensus on the level of policy detail that should be included in models
  • There is a need to estimate new parameters, and data availability becomes an issue
  • Current models do not sufficiently account for quality differences within products.

New Challenges in Modeling EU Agriculture and Agricultural Policy

Click these links for an  agenda and  list of participants. Papers, presentations, and summaries of each session are linked below.

Session 1:  Modeling Agricultural Trade Liberalization in the EU

What were/are the major challenges in developing our models? How were they met? What are areas for additional work? How are policies represented? What should we be looking at for the upcoming trade round?

Moderator: Mary Bohman

Part a: Policy Analysis Models

 The ERS Dynamic Global CGE Model--Mary Burfisher and Agapi Somwaru: ERS

 CGE models—Sylvia Weyerbrock

 ERSS/Penn State WTO Model—Jim Stout, ERS

 CAMINA (Spatial partial equilibrium model) Giovanni Anania, University of Calabria, Italy ( paper)

Part b: Models Developed to Address the "3 Pillars" of the Uruguay Round Agreement on Agriculture

 The Impact of EU Export Subsidy Elimination on World Markets—Susan Leetmaa and Aziz Elbehri

Discussion of Export Credits—led by David Skully, ERS

 Incorporating TRQs into AgLink—Peter Liapis, OECD

 Analysis of AMS Reduction using GTAP (Global Trade Analysis Project applied general equilibrium model)—Mary Burfisher and Mark Gehlhar, ERS ( paper)

Session 2— EU Enlargement

How has EU enlargement been handled in models to date? How well are they working? What are they missing? What assumptions should we be making about enlargement (quotas, phase-in of agricultural policies, compensatory payments, etc.)?

Moderator: Nancy Cochrane, ERS

Part a: Modeling Commodity Impacts of Enlargement

Overview of Issues—Nancy Cochrane, ERS

 Eastern Enlargement of the European Union—a General and Partial Equilibrium Analysis—Martin Banse, University of Gottingen

 Agricultural Modeling Issues in Transition Nations Under EU Enlargement Using Complementary Models—Philip Paarlberg, Purdue University

Using a CGE Model to analyze EU Enlargement—Sylvia Weyerbrock

Part b: the Direct Payments Question

Overview of issues—Nancy Cochrane

 Introducing Direct Payments in Central European Economies—Martin Banse

Session 3--  Supply Response in the EU in the post-CAP Reform Agenda 2000 era--What have we learned?

Most of the models currently used by researchers were developed prior to the Agenda 2000 reforms, and many around the time of the MacSharry reforms. How have supply specifications and parameters changed in the models? How might they change with final Agenda 2000 implementation? Also, what are the production impacts of green box policies?

Moderator: Jason Bernstein, ERS

Part a: Modeling Supply Response as a Result of CAP Reform

 Overview of Issues—Jason Bernstein, ERS

 Using Aglink and Positive Mathematical Programming to Assess the Effect of the CAP—Piero Conforti, National Institute of Agricultural Economics, Italy

Part b: Impacts of Price versus Technology on EU Production

 Estimating Supply Response in the EU—Carlos Arnade and David Kelch, ERS

Part c: Impacts of Green Box Policies on Production

 Production Impact of Green and Near Green Policies--James Rude, University of Saskatchewan

Session 4— Modeling Consumer Demand and Related New Topics

Demand for differentiated products (including organics), non-GMO goods, animal welfare issues, and diseases (BSE and FMD).

Moderator: Lorraine Mitchell, ERS

Overview of Issues—Lorraine Mitchell, ERS

 An Example of Consumer Demand Issues: Modeling BSE in the EU—Wyatt Thompson, OECD

Choosing an Appropriate Demand Specification—Estelle Gozlan, National Institute for Agricultural Research, France

Final Session:  Wrap-up and Conclusions

 Synthesis-David Abler, Pennsylvania State University






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