1. Domestic Support in GTAP and AMS reduction Mark Gehlhar Mary Burfisher EU Modeling Workshop New challenges in Modeling EU Agriculture November 15-16, Economic Research Service

2. Order of Presentation How the PSE data is mapped to GTAP policy variables Classification of programs and OECD PSE measure Issues debated within the GTAP Consortium Examples of scenarios for AMS support reductions for WTO An overall assessment of GTAP for modeling

3. GTAP model/database Public documentation available on web( http://www.gtap.agecon.purdue.edu/) Multi-commodity, multi-region Multipurpose model: policy (multilateral, regional trade) economic growth, climate, environment change

4. GTAP model/database continued Version 5 released in 2001 has 66 country/regions 57 sectors, 12 primary agriculture and 8 agricultural processing New extension is more detailed domestic support

6. Domestic support Previously the output subsidy contained all domestic support Adopt new PSE classification More variables in GTAP model used to represent domestic policy Subsidies/payments to primary factors: land, labor, capital Tax/subsidies to intermediates inputs

7. Classification of Policy Measures Included in the OECD Producer Support Estimate

8. Who decides how support is mapped to policy variables ? How payment are mapped to policy variables in model is controversial Each consortium member can make recommendations In the end a compromise must be reached

9. USDA’s Approach (The Economic Research Service) How support is administered and under what conditions matters Treat countries on individual basis Treat programs individually And give consideration to how programs are notified to WTO

10. EU’s Approach (Danish Institute for Agricultural and Fisheries Economics) Use a generic formula for all countries Account for the entire PSE as support to agriculture Achieve transparency for all users

11. Mapping formula

12. U.S category C in the PSE

13. EU category C in the PSE

14. U.S category F in the PSE

15. EU category F in the PSE

16. What the compromise means for model users The domestic support database serves as starting point for all users Applications requiring changes to the database should be documented by users Replications of results still possible after alterations

19. An alternative to current domestic support version of GTAP Alter subsidy rates such that they are uniform across all land uses Conduct identical experiments with current and altered database

22. Implications Generic treatment of agricultural support for all countries can be misleading Potential for creating distortions in the database that do not exist in reality Users should be aware of implications for reductions of land-based payments

23. How ERS uses the PSE data for AMS support reduction scenarios AMS data not used in model Notifications are sporadic PSE is more up to date Available only for OECD PSE different concept than AMS We calculate a PSE-based AMS PSE data broken into green, amber, blue Identify commodities with administered price Calculate cuts based a reduction rule

24. Support Reduction Scenarios Reduce ceiling by additional 20% from Uruguay ceiling Leveling support by commodity: no commodity receives more that 30% of value of production

26. AMS Support (1997)

28. Assessment of GTAP modeling Framework Needs careful scrutiny of data prior to running scenarios GTAP services as an accounting framework for the PSE but does not model specific policies Other comment see “Assessment of the GTAP modelling framework for Policy Analyses from a European Perspective” 2000 editors S.Frandsen and M.Staehr