To download ATPSM and for more info:http://192.91.247.38/tab/ATPSMdwnlds.asp

ARTNeT Capacity Building Workshop on Trade Research

UN ESCAP

ATPSMAgricultural Trade Policy Simulation Model

Ralf PetersUNCTAD

United Nations Conference on Trade and DevelopmentUnited Nations Conference on Trade and Development

Bangkok, March 2005

Agenda

• Introduction to ATPSM: General Overview about the Agricultural Trade Policy Simulation Model ATPSM

• Details of ATPSM: Technical description of ATPSM, Assumptions, Equations and Database

• Operating the ATPSM: Installation, Setting up Scenarios, Reading and Interpreting the Results

• Application of ATPSM: Analysing WTO negotiations on agriculture

• Hands-on Training of ATPSM: Participants will use the model and set up their own scenarios

• Outlook: Expanding the database and technical limitations of ATPSM

General Overview: What is ATPSM?

• Agricultural Trade Policy Simulation Model• Computable international trade model• Analyse agricultural trade policy issues• Quantify economic effects

- unilateral changes- multilateral changes

• Comprehensive database

ATPSM developed by UNCTAD* and FAO

• Easy to use for negotiators and researchers• Graphical user interface• On-line help function and

handbook available• Report writer - Export to Excel

* UNCTAD acknowledges funding from the UK DFID

Coverage of ATPSM

• 175 countries• EU-15 one region• Detailed trade policy data for

141 countries• 35 agricultural commodities

Asian Countries in ATPSM•Japan

•Kazakhstan

•Korea DPR

•Korea Rep.

•Laos

•Macao

•Malaysia

•Maldives

•Malta

•Mauritania

•Mauritius

•Mongolia

•Myanmar

•Nepal

•Neth. Antilles

•New Zealand

•Pakistan

•Panama

•Philippines

•Sao Tome

•Seychelles

•Solomon Islands

•Sri Lanka

•St. Lucia

•St. Vincent

•Suriname•Taiwan•Tajikistan•Thailand•Turkmenistan•Uzbekistan•Vanuatu•Viet Nam

• Australia• Bahamas• Bangladesh• Barbados• Belize• Brunei• Cambodia• Cape Verde• China• Comoros• Fiji• French

Polynesia• Guyana• Hong Kong• India• Indonesia

ATPSM Commodity Aggregation (1)

• Maize • Sorghum • Barley• Rice• Sugar, raw• Sugar, refined• Oilseeds, temp.• Oilseeds, trop.• Vegetable oils• Pulses• Roots, tubers

• Livestock• Bovine meat• Sheepmeat• Pigmeat• Poultry• Milk, fresh• Milk, conc. • Butter • Cheese• Wheat

ATPSM Commodity Aggregation (2)

• Tomatoes • Non-tropical fruits• Citrus fruits• Bananas• Other tropical fruits• Coffee green • Coffee processed• Cocoa beans

• Cocoa, processed• Tea• Tobacco leaves• Tobacco, processed• Cotton linters• Hides & Skines

Features of ATPSM (1): Trade Policies Specified

• Global import quota• Bound in-quota tariff rates• Bound out-of-quota tariff rates• Distribution of quota rents• Applied tariff rates

Two tier tariffstructure

Features of ATPSM (2):Trade Policies Specified

• Export subsidies• Domestic support• Two-way trade

Trade Policy Questions

• Impact of reductions in bound out-of-quota tariff rates in all developed countries on- trade flows- export revenues - tariff revenues

• Impact of reductions in export subsidies on- world market prices - net food importers

• Impact of possible WTO agreements on developing countries

More questions

• How long to run the model?• Can we change the data?• Can we change the equations?• Do we need expensive software?• Who updates the model?

Operating the ATPSM

Limitations

• Data quality• Allocation of quota rents• Bilateral quotas• Preferential tariffs• Fill rates?

Details of ATPSM

What does it cost?

• Available free on CDATPSM Project CoordinatorUNCTAD / DITCPalais des NationsCH-1211 Geneva

• Available from UNCTAD websitewww.unctad.org/tab

• Support fromatpsm@unctad.org

Details of ATPSM

Outline• Tariff rate quotas and quota rents• Two-way trade• Equations and assumptions• Domestic support• Database

ImportsM

PW

Price

t1

Inquota tariff revenue

Quota rent Over quota tariff

revenue

Quota rents

PD

t2

Q

Quota rents: Assumptions

• Quotas are always filled• Total rents add up to $10 billion• Default assumption: Producers in exporting

countries receive all quota rents if allocationis on historical bases

• No supply response if quotas are changed, e.g. through change of in-quota tariffs

Two-way trade: Volume determination

• Demand D is determined by the demand elasticity and cross-price demand elasticities

• Supply S is determined by the supply elasticity and cross-price supply elasticities

• Two versions to determine imports M and exports X : “Standard” and “Armington”

• Global market clearing (change of imports = change of exports)

M

PW

Price

t1 Tariff revenue

Exports=f(S)

Two-way trade

PD

Domestic Supply

Demand

M=D-S+X

Total supply

QuantityS D

Determination of Imports and Exports• “Standard”: Percentage change of exports

equals percentage change of supply / production• Imports are the residual (in each country:

production+imports=consumption+exports)• “Armington”: Consumers first decide how much

to consume and in a second step how much to buy from abroad and from domestic producers

• Exports are the residual

m d

d m

PMD M P

σαα⎛ ⎞

= ⎜ ⎟− ⎝ ⎠

Model equations “Standard”

;1ˆ1ˆˆ)11

,,,,,,, ∑≠=

∧∧

⎥⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛+++⎥⎦

⎤⎢⎣

⎡⎟⎠⎞

⎜⎝⎛ ++=

J

jij

rjcjwrjiriciwriiri tPtPD ηη

;1ˆ1ˆˆ)21

,,,,,,, ∑≠=

∧∧

⎥⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛+++⎥

⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛++=

J

jij

rjsjwrjirisiwriiri tPtPS εε

;ˆ)3 ,,, ririri SXX =∆

;ˆˆ)4 ,,,,,, riririririri XSSDDM ∆+−=∆

;0)()51

=∆−∆∑=

N

nnn MX

Model equations “Armington”

, , , ,

,

ˆ4) , where ;1 1 1

new init new m di r i r i r i r y

new init new d m y i r

A A A PM D D D AA A A P

σ

αα

⎛ ⎞⎛ ⎞ ⎛ ⎞⎜ ⎟∆ = − − =⎜ ⎟ ⎜ ⎟⎜ ⎟+ + +⎝ ⎠ ⎝ ⎠⎝ ⎠

;1ˆ1ˆˆ)11

,,,,,,, ∑≠=

∧∧

⎥⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛+++⎥⎦

⎤⎢⎣

⎡⎟⎠⎞

⎜⎝⎛ ++=

J

jij

rjcjwrjiriciwriiri tPtPD ηη

;1ˆ1ˆˆ)21

,,,,,,, ∑≠=

∧∧

⎥⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛+++⎥

⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛++=

J

jij

rjsjwrjirisiwriiri tPtPS εε

, , , , , ,ˆˆ3) ;i r i r i r i r i r i rX M D D S S∆ = ∆ − +

;0)()51

=∆−∆∑=

N

nnn MX

Two-way trade: Price determination• Heterogeneous products• Domestic price is weighted average of import

and export prices:td= (M tm +X tx )/(M+X)

• Consumer price is weighted average of import and domestic prices:tc= (M tm +S td )/D

• Producer price is weighted average of import and domestic prices plus domestic support:ts = (Xtx +Sdtd )/S + td

Domestic support

• What are the production effects of changes in domestic support?

• Decoupling of domestic support• Complex issue: method of administration,

effects of direct payments, …• Assumption here: AMS support is included

(most of the domestic support is decoupled)

Welfare

• Consumer surplus• Producer surplus (inc. quota rent)• Net government revenue

- Tariff revenue- Domestic support expenditure- Export subsidy expenditure- Quota rent

M

PW

Price

t1 Tariff revenue

Welfare

PD

Supply

Demand

Dead weight losses

Consumer surplus

Producer surplus

W=CS+PS+TR(-DS-ES)

QuantityS D

Data Sources

• Applied tariffs: UNCTAD TRAINS• Production, elasticities, prices: FAO• Trade flows: UN Comtrade• Bound tariff rates, export subsidies: WTO • Bound tariff rates, quotas, within-quota tarrifs: AMAD

(Agricultural Market Access Database)

• Domestic support: Country notifications to WTO

Operating the ATPSM• Installation

- A self installing .exe-file is downloadable- Manual installation possible

• Programme comes with documentation • Graphical user interface• Running a scenario• Change the data• Enlarge the possibilities

- The equations- Read data from outside

Installing ATPSM

• Computer requirement– PC with + 64MB RAM– Any operating system– Free disk space of at least 40MB

• Program installs itself (Administrator rights necessary!)

• Introduction available on how to install it manually

Documentation andgraphical user interface

• Documents delivered with the programme:- Introduction on the ATPSM (Installation, interface)- Handbook on ATPSM (Economic backgroud)- 4 Papers about simulating agriculture policy reformswith ATPSM

• A context-specific online help is available• Running a scenario using the menue driven interface

Change the Data

• Data file:C: Program Files / UNCTAD / ATPSM / atpsm.mdb

• Which data are in which sub-file is documented in theHandbook, Part E

• Open atpsm.mdb with MS Access and change the data while ATPSM is closed

• Next ATPSM session uses the new data

Likely Data Changes

• Policies • Volumes• Prices• Elasticities• Updates from UNCTAD• Model recalibrates itself (so M=X, S=D)

Enlarge the possibilities• Problem: Negotiators are faster than model development• Harbinson proposal: Reduction depends on initial tariff rates

(bands)• Cancun proposal: Combination of linear cut and Swiss formula• Select different types of formulas under

“Formula”• Users can specify their own formulas using parameters P1, P2,

P3 which will be taken from the interface• Write formula with any text editor in

C: Program Files / UNCTAD / ATPSM / script / formulaclass.ods

Application of ATPSM: Analysing WTO

negotiations on agriculture

Ralf Peters and David VanzettiUnited Nations

Conference on Trade and Development

United Nations Conference on Trade and DevelopmentUnited Nations Conference on Trade and Development

State of Play: Doha Negotiations on Agriculture

… have been a difficult & complex process:

Agriculture is a politically sensitive sector in both developed & developing countries.

Countries (developed or developing) have widely divergent views on the optimal speed and/or the extent of agricultural liberalization.

Deadlines to agree on “modalities” were already missed twice (March 2003 and at the Cancun Ministerial Conference, September 2003).

The Framework Agreement brought the negotiation back on track, but the “modalities” are still left for further negotiations.

Three pillars of the Agreement on Agriculture

• Market AccessReduction of tariffs

• Export competitionReduction / elimination of export subsidies

• Domestic SupportCapping and reducing

• (Non-trade issuesFood security, Rural development)

Alliances and interests

EUEU

JapanJapanSwitzerlandSwitzerland

Norway Norway KoreaKorea

Level of ambition

Eliminateexport

subsidies

“Multi-functionality”

Cuts in domestic support

Reduceexport credits

Developing Developing countriescountries

Deg

ree

of sp

ecia

l and

diff

eren

tial t

reat

men

t

USAUSA

Special and differential treatment

Substantial tariff cutsModerate, flexible

tariff cuts andflexible domestic support

Four proposalsEU US

•From bound rate •average cut 36% (24%) •minimum cut 15% (10)%

•From applied rate •Swissformula [max = 25]

AMS reduced to 5% of GVPTotal elimination

AMS cut by 55%Cut by 45%

Cancun (1st rev) Harbinson• From bound rate • 40%: average cut (36%, 15%)• 40%: Swiss 25 • 20%: duty free• DC: Special P.linear cut (24,10)

• From bound rate• average cut 40-

60% (25-40%) • minimum cut 25-

45% (15-30%)• Special products?

AMS cut by 60% (20%)

AMS cut by 60% (20%)

Cut by 80% (70%), eventual elimination

Cut by 80% (70%), eventual elimination

Exp

ort

Subs

idie

sD

omes

ticSu

ppor

tM

arke

tA

cces

s

Comparison of Proposals

0

10

20

30

40

50

60

70

80

90

0 20 40 60 80 100 120 140

Old Rate (%)

New

Rat

e (%

)

EU Harbinson

USA

Change in world prices Cancun and Harbinson

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

%

Cancun Harbinson

Change in world prices of temperate goods, Harbinson proposal

02468

1012141618

%

Bov

ine

mea

t

Shee

pmea

t

Pigm

eat

Poul

try

Milk

, con

c.

But

ter

Che

ese

Whe

at

Ric

e

Bar

ley

Mai

ze

Sorg

hum

Puls

es

Tom

atoe

s

Roo

ts &

tube

rs

App

les

Citr

us fr

uits

Change in world prices of tropical goods, Harbinson proposal

012345678

%

Ban

anas

Oth

er tr

opic

al fr

uits

Suga

rC

offe

e gr

een

Cof

fee

roas

ted

Cof

fee

extr

acts

Coc

oa b

eans

Coc

oa p

owde

rC

ocoa

but

ter

Cho

cola

teT

eaT

obac

co le

aves

Cig

ars

Cig

aret

tes

Oth

er m

fr to

bacc

o

Oils

eeds

Cot

ton

linte

rsV

eget

able

oils

Change in producer surplusCancun and Harbinson

-25'000-20'000-15'000-10'000

-5'0000

5'00010'00015'00020'000

$m

Develo

ped

Develo

pingLDC

Wor

ldSSA

CancunHarbinson

Change in consumer surplusCancun and Harbinson

-20'000

-10'000

0

10'000

20'000

30'000

40'000

$m

Develo

ped

Develo

pingLDC

Wor

ldSSA

CancunHarbinson

Change in welfare: Cancun and Harbinson

-2'0000

2'0004'0006'0008'000

10'00012'00014'000

$m

Develo

ped

Develo

pingLDC

Wor

ldSSA

CancunHarbinson

Cancun and Harbinson proposal• Average tariff cuts smaller with EC-US formula• Price increase: Cancun scenario 2.2%

Harbinson scenario 3.1%• Higher for temperate products than for tropical

products• Distributional effects:

between countries: exporters gain, importers loseamong different groups: producers gain, consumers lose

Preference Erosion:Quota rents before and after liberalization

in selected SSA countries

0

20

40

60

80

100

120

$m

Mauritius

Zimbabwe

Botswan

aNamibia

Ivory C

oast

South Africa

Cameroon

Swaziland

MalawiCongo

Tanza

nia

InitialFinal

Change in welfare relative to base

-5000

0

5000

10000

15000

20000

25000

$m

Welfare World Welfare DC Prod.S. DC

EUCancunHarbinsonUS

Special and differential tratment

Developing countries' benefits

-60-40-20

0204060

1 2 3 4

Level of ambition in developing countries

Producer Surplus

Consumer Surplus

Welfare

Developed countries' benefits

-10

-5

0

5

10

15

1 2 3 4

Level of ambition in developing countries

Producer Surplus

Consumer Surplus

Welfare

Developing countries' benefits

-60-40-20

0204060

1 2 3 4

Level of ambition in developed countries

Producer Surplus

Consumer Surplus

Welfare

Developed countries' benefits

-30-20-10

010203040

1 2 3 4

Level of ambition in developed countries

Producer Surplus

Consumer Surplus

Welfare

Developing countries' benefits

-30000-20000

-100000

10000

2000030000

1 2 3 4

Conservative, Cancun, Harbinson, Ambitious

Producer Surplus

Consumer Surplus

Welfare

Developed countries' benefits

-40'000

-20'000

0

20'000

40'000

60'000

1 2 3 4

Conservative, Cancun, Harbinson, Ambitious

Producer Surplus

Consumer Surplus

Welfare

Limitations

• Complex proposals• Based on assumptions• Initial allocation of quota rents• Aggregated to the 4 digit level• Data quality

The graphical user interface

• Title (note version, link to website)

• Scenarios (arbitrary)

• Country groups (user defined, for scenario definition and reporting)

• Commodity groups (user defined, for scenario definition and reporting)

• Results • Help (context specific)

Scenarios

• Load (load previous simulation)

• Save (save current simulation)

• Name (arbitrary)

• Insert (new row)

• Coverage (countries, commodities)

• Parameters (See next slide)

Parameters

• Outquota (outquota bound tariff, on which negotiations are based)

• Inquota (inquota bound tariff)

• Export subsidy (export subsidy equivalent)

• Domestic support (amber box)

• Import quota (imports attracting inquota tariff)

• Swiss cut {t1=t0*a/(t0+a)}

• Applied/bound (option. Generally, use bound)

• Capture rate (share of quota rent to exporters)

Country/Commodity Groups

• User defined• Code (3 letters)

• Name (arbitrary)

• Insert (new group)

• Delete (old group)

• Countries (select/deselect members)

• Commodities (select/deselect members)

Results (1)

• Scenario (name)• Description (as previously defined)• Report (variable)• Formula (of variable)• Commodities (by row, column, summed or individual)• Countries (by row, column, summed or individual)• Decimal places (default=2)• Export As (specify arbitrary filename)• Full screen (expand table)

Results (2)

• Group commodities (check box)

• Group countries (check box)

• Can alter formula, e.g. divide by 1000000.0

Warning

• Don’t aggregate across groups, not mutually exclusive

• Don’t aggregate percentage changes• Don’t aggregate prices• Red is negative (be careful when pasting to

Excel)