impact on eu agriculture of falconer’s draft modalities dg for agriculture and rural development...

Impact on EU agriculture of Falconer’s draft modalitiesImpact on EU agriculture of Falconer’s draft modalities

DG for Agriculture and Rural Development

European Commission

13 March 2008 2

Measuring the impact of Falconer’s proposal…Measuring the impact of Falconer’s proposal…

… by using of the OECD Aglink model…– Partial equilibrium, large country and product coverage – Model available to co-operators– But weak for trade simulations

… and improved its EU trade component

– Replacing exogenous imports with import equations– Developing import equations for high and low quality for beef

and poultry

13 March 2008 3

The OECD AGLINK model…– Partial equilibrium– Models explicitly 14 countries/regions, mainly in the OECD area– Covers the majority of products of temperate climate Country coverage OECD Australia, New Zealand, EU25, South Korea, Japan,

Canada, USA, Mexico

non-OECD Argentina, Brazil, Russia, China, India, South Africa

Product coverage Cereals, Oilseeds beans, meal and oil, Meats, Dairy products, Rice

Policy coverage For the EU: all main policy instruments of the current CAP are modelled (including the single farm payment, remaining coupled payments, intervention prices, set aside rate, limits on export refund, etc.)

For the US: all main policy instruments of the 2002 US farm bill are modelled (including loan rates, fixed payments, counter-cyclical payments, etc.)

Description of the model usedDescription of the model used

13 March 2008 4

… and the FAO COSIMO component…– Adding 32 developing countries– Planning to cover more products, mainly tropical

... result in a large model of world agriculture– 7380 equations provide results for production, consumption,

imports , exports, domestic and world market prices– Results are provided for each year of the projection period (2005-

2014), allowing for adjustment path

Description of the model usedDescription of the model used

13 March 2008 5

Scenario 1: The EU’s offer of October 2005Scenario 1: The EU’s offer of October 2005

Export competition– export subsidies to be phased-out

Domestic support– 70 % cuts for EU, 60 % cuts for US in AMS and total support– 80 % cut in de minimis– new blue box disciplines to come from disciplines in support price gap– 5% ceiling part of the framework agreement as recognition of reform

Market access– thresholds at 30/60/90, cuts at 35/45/50/60 – flexibility in lower band, formula for TRQ expansion, Deviation for

SePs: 50% (mid-point of EU sliding scale)

13 March 2008 6

Scenario 2: Falconer’s proposal of 8 February Scenario 2: Falconer’s proposal of 8 February 20082008


Domestic support– 70 % AMS cuts for EU, 60 % cuts for US– 80% OTDS cut for EU, 70% cut for the US– 50 % cut in de minimis– new blue box disciplines and cap

Market access– thresholds at 20/50/75, middle range cuts at 50/57.5/63.5/69.5 – SePs: deviation of 2/3rd, 4% of partially allocated DC

13 March 2008 7

Scenario 3: G20 full proposalScenario 3: G20 full proposal


Domestic support (not included)– 80 % AMS cuts for EU, 70 % cuts for US– 80% OTDS cut for EU, 75% cut for the US– D.m.: same as overall– new blue box disciplines, cap and reduction

Market access– thresholds at 20/50/75, cuts at 45/55/65/75 – SePs: deviation of 30%, 6% of DC of full sector

13 March 2008 8

Caveats of analysisCaveats of analysis

Domestic support– positive impact from US domestic support

commitments on cereals, cotton and oilseeds missing

Export subsidies– positive impact from STE, export credit and food aid

disciplines on cereals and dairy missing

Market access– full tariff cut scenario will affect all players and markets,

which means substantial potential gains for EU exports

13 March 2008 9

Impact on EU importsImpact on EU imports

(mio mt - in 2014)

0

2

4

6

8

Beef Poultry Wheat Coarse Grains

Baseline EU offer 10/2005 Falconer mid range G20 proposal

13 March 2008 10

Impact on EU importsImpact on EU imports

(000 mt - in 2014)

0

100

200

300

400

500

600

700

Pork Butter Cheese SMP


13 March 2008 11

Impact on EU exports (cereals)Impact on EU exports (cereals)

(mio mt - in 2014)

0

5

10

15

20

25

Wheat Coarse Grains


13 March 2008 12

Impact on EU exports (meats)Impact on EU exports (meats)

(mio mt - in 2014)

0

0.4

0.8

1.2

1.6

2

Beef Poultry Pork


13 March 2008 13

Impact on EU exportsImpact on EU exports

(000 mt - in 2014)

0

150

300

450

600

750

Butter Cheese SMP


13 March 2008 14

Impact on EU prices (cereals) Impact on EU prices (cereals)

(€/mt - in 2014)

0

30

60

90

120

150

Wheat Coarse Grains

Baseline EU offer 10/2005 Faconer Mid-range G20 proposal

13 March 2008 15

Impact on EU prices (meats) Impact on EU prices (meats) (€/100 kg - in 2014)

0

50

100

150

200

250

300

350

Beef Pork Poultry


13 March 2008 16

Impact on EU prices (dairy)Impact on EU prices (dairy)

(€/100 kg - in 2014)

0

50

100

150

200

250

300

350

400

450

500

Butter Cheese SMP


13 March 2008 17

Impact on EU production (cereals) Impact on EU production (cereals) (mio mt - in 2014)

0

30

60

90

120

150

180

Wheat Coarse Grains


13 March 2008 18

Impact on EU production (meats)Impact on EU production (meats)(mio mt - in 2014)

0

5

10

15

20

25

Beef Pork Poultry


13 March 2008 19

Impact on EU production (dairy)Impact on EU production (dairy)(mio mt - in 2014)

0

2

4

6

8

10

Butter Cheese SMP


13 March 2008 20

ConclusionsConclusions

– Overall impact of Falconer’s proposal not significantly different from EU’s offer;

– New medium-term projections for prices and exchange rate will play a key role;

– Impact underestimates EU’s potential gains stemming from increased MA for EU products.

impact on eu agriculture of falconer’s draft modalities dg for agriculture and rural development...

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