Xinshen Diao, Agapi Somwaru and Terry Roe The objective was to provide the “ big picture ” A Global Analysis Of Agricultural Reform In WTO Member Countries

Computable General Equilibrium (CGE) Model Global Static and Dynamic (DYNAGEM)

Main Attributes of a Computable General Equilibrium (CGE): Basic Specification ( Circular Flow) Goods & Services FirmsHouseholds Factors Demand Supply Expenditure Income Rents Final Goods: Revenue Final Goods: Supply Intermediate Goods: Supply Intermediate Goods: Revenue

Government Savings from ROW (Net Capital Inflow) Govt. Savings (Budget Deficit) Capital Account Investment Private Savings Other countries/ Rest of the World Exports Imports Govt Purchases Basic CGE Model Structure Transfers & Business Subsidies Taxes Main Attributes of a Full CGE Model: Additional Institutions

Firms' Intertemporal Decisions CONSUMPTION OUTPUT PRODUCTION INVESTMENT LABOR, LAND CAPITAL Consumers' Intertemporal Decisions World Commodity Market World Capital Market IMPORTS & EXPORTS FOREIGN ASSETS/DEBT DIVIDENDS INTERESTS ENDOWMENT INCOME CURRENT PROFIT Domestic Commodity Market SAVINGS DYNAGEM ATTRIBUTES: Intertemporal Structure CURRENT INCOME The elliptical box represents exogenous variables, the rectangular box represents endogenous variables. The dashed line is for revenue flows and solid line is for commodity flows.

More Features Simulates policy changes in counterfactual or “what if” comparisons Easily modified and flexible in the number of sectors and commodities Requires PC with high computational capacities Written in GAMS The model was developed in 1997 and published in the Journal of Economic Integration (2001), the Journal of Policy Modeling (2000), the International Economic Journal (1999) Based on the 1997 global economy (GTAP database version 5) For more information, contact: Xinshen Diao, IFPRI, or Agapi Somwaru, ERS

Commodity and Country Coverage for the WTO study Australia and New Zealand Japan and Korea United States Canada European Union European Free Trade Area China Other Asian countries Mexico Latin America South African countries Rest of the World Paddy and processed rice, wheat Other grains (including corn) Vegetables, fruits and nuts Oilseeds, vegetable oil Sugar cane, sugar beets, processed sugar Plant-based fibers and other crops Livestock and livestock products Beverages, tobacco, other processed food products Non-agricultural products Services

Road Map of the Analysis Static Model Elimination of import barriers throughout the world Elimination of export subsidies throughout the world Elimination of domestic support throughout the world Combining all of the above Dynamic Model Elimination of all trade distortions without TFP growth Elimination of all trade distortions with TFP growth of developing countries (0.02 annually only for the first 10 years of trade reform)

Major Findings

Ag. Policy Distortions Cause World Prices to be 12% Lower Than They Otherwise Would be

Estimated annual gain in purchasing power = $56 billion

In sum Eliminating global ag. policy distortions would: raise world welfare $56 billion annually raise world agricultural prices 12 percent Roles of policies in reducing world prices: Tariffs (52%) Domestic subsidies (31%) Export subsidies (13%) Developing countries can benefit from further WTO reforms