Quantitative assessment of EU-Mediterranean trade liberalization using the CAPRI modelling system Lucie Weissleder Institute for Food and Resource Economics University of Bonn, Germany

Outline of the presentation The CAPRI Model Simulation Scenarios Partial liberalisation Full liberalisation Selected results Conclusions First quick review of the CAPRI model Explain our scenario definition wich we made according to the deliverables Show results and explain End with Conclusion

The CAPRI model CAPRI: Changes in the CAPRI model for the project Developed by the Institute for Food and Resource Economics, University of Bonn and Partners Main features: Agricultural sector model Regionalised optimisation modules for EU25 World-wide trade model Changes in the CAPRI model for the project Short Repetition So that everyone is reminded of what we done

Mediterranean products Supply and market model now features additionally as endogenous products: Tomatoes Apples, pears and peaches Citrus fruits Table grapes Other fruits Potatoes Other vegetables Olive oil Wine In total some 40 products EU Entry Price System We introduced the Med. products in the model

Split up „Med country block“ Own behavioral equations in trade model for: Morocco Tunesia Algeria Egypt Turkey Israel Morocco and Turkey as individual countries (new), Tunesia, Algeria, Egypt and Israel aggregated in a remaining “Med” block

The CAPRI model: Policy World-wide: Tariffs and TRQs For the EU Minimum Entry Price -> NEW Problem: seasonality Export subsidies Intervention purchases Direct payments

Two Scenarios have been defined Simulation Scenarios Two Scenarios have been defined Partial EU-MED liberalisation Full EU-MED liberalisation

Simulation Scenario: Partial EU-MED Morocco EU TRQ (tons) Tariff Reduction Reduction of Trigger price Tomatoes +295 000 Citrus fruits +430 000 Turkey -50% Potatoes -50% (of ad valorem) Table Grapes Apples Citus fruits Morocco: TOMA TRQ alt: 245.000 in 2006 Morocco: CITR TRQ alt: 430.000 Turkey: POTA: NO minimum entry price system, für potatoes also ein simpler preferential Zoll. Turkey hat im Basisjahr keine TRQ. Es handelt sich hier in diesem Fall um Frühkartoffeln, auf die von April bis Mai ein ad valorem Zoll (9.6%) erhoben wird. Dieser wird reduziert.

Simulation Scenario: Partial EU-MED Other Mediterreanean EU TRQ (tons) Tariff Reduction Reduction of trigger price Israel Tomatoes +10 000 Egypt and Israel Potatoes +443 000 Egypt Oranges +61 000 Other vegetables +37 000 Other fruit + 7 800

Simulation Scenarios: Partial EU-MED Turkey TRQ (tons) Tariff Reduction Beef +4 100 100% Skimmed milk powder +1 000 Butter +700 Cheese +1000 Wheat +30 000 Potatoes +6 000 Apples, Pears, Peaches +3500 Rye +20 000 Barley +46 000 Rice +28 000 Soya Oil +60 000 Sunflower Oil +18 000 Rape seed Oil +10 000 Sugar +80 000

Results Trade flows Prices Partial liberalisation Full liberalisation EU imports EU exports Full liberalisation Prices Go through the results by first…

Partial EU-Med liberalisation

Partial Liberalisation: EU imports Main changes in the group „vegetables and permanent crops“ because of the definition of the scenario total EU import change Broken down to the three countries it becomes clear that mainly Morocco benefits from this scenario

EU imports of veg. &perm. crops from Turkey Decrease because of the scenario definition Moroccan tomatoes and citrus fruits substituate because of the higher preferences and therefore more competitive

EU imports of veg. &perm. crops from Morocco Expansion of the TRQs

EU imports of veg. &perm. crops from other MED Citrus substitues with citrus from Morocco imports from the Mercosur countries according to the scenario definition Tomatoes substituted from Morocco tomatoes

Partial liberalisation: EU Exports Changes in Vegetables because of the scenario definition (50% up on TRQs) total EU export changes

Full EU-Med liberalisation

Full liberalisation: EU Imports Changes in the EU cereal imports occur because the general competitiveness of the Mediterranean countries increases disproportionately due to the preferential market access compared to the rest of the EU’s trading partners.

EU imports of veg. & perm. crops from Turkey Scenario defintion makes them more competitive against other trading partners of the EU

EU imports of veg. & perm. crops from Morocco Scenario defintion makes them more competitive against other trading partners of the EU

EU imports of veg. & perm. crops from other MED In baseline 16.510 tons in scenario 282.000 tons (tomatoes)

Full liberalisation: EU Exports Cereals EU gets very competitive

absolute values (€/t) and percentage deviation to baseline Results: EU Prices   Partial EU-Med liberalisation Full EU-Med Liberalisation absolute values (€/t) and percentage deviation to baseline Cereals 105,49 109,77 0,0% 4,1% Oilseeds 211,27 212,34 0,5% Vegetables and Permanent crops 673,55 673,99 -0,1% Meat 1701,31 1706,67 0,3% Compared to the baseline results Partial: not much Full: cereals go up

Conclusions Partial EU-MED liberalisation EU Imports: EU exports Cereals ± 0% Morocco: +1% Other countries unaffected Vegetables and permanent Crops +2.5% Morocco: +20% Turkey -3% Other mediterranean ± 0% Other product groups mainly unchanged EU exports Only very minor changes EU prices Unchanged Short summary of the results Only small effects on EU markets, but notable changes for individual countries from the mediterranean area

Conclusions Full EU-MED liberalisation EU imports Cereals: +11% Turkey +145% Other mediterranean +100% Morocco +30% Vegetables and permanent crops +19% Other mediterranean +300% Turkey +60% Morocco +60%

Conclusions EU exports EU prices Cereals +20% Cereals +4.1% Turkey: +500% Other mediterranean: + 98% Morocco: +70% EU prices Cereals +4.1% Other products only small changes Significant increase of trade for cereals and vegetables and permanent crops

Quantitative assessment of EU-Mediterranean trade liberalization using the CAPRI modelling system Lucie Weissleder Institute for Food and Resource Economics University of Bonn, Germany

Appendix – Additional Slides Partial EU-Med liberalisation combined with the WTO G20 proposal

Simulation Scenario: Partial EU-MED + WTO G20 Developed Countries Developing Countries Thersholds Thersholds (in AVEs) Linear Cuts 0≤20 45% 0≤30 25% >20≤50 55% >30≤80 30% >50≤75 65% >80≤130 35% >75 75% >130 40% The specific and ad valorem in- and out-quota tariffs of TRQs will also be cut according to the applied formula. The quantity of the applied multilateral TRQs will not be expanded. Export subsidies will be eliminated. The LDC countries are exempted from tariff cuts. Export subsidies will be eliminated LDC countries are exempted from tariff cuts

Results EU imports EU exports Price changes Overview Specific countries EU exports Price changes

EU imports

Partial + WTO G20: EU Imports Changes total EU imports

EU imports of veg. & perm. crops from Turkey Very inconsistent picture for all three countries Tomatoes reduction of the preferential situation

EU imports of veg. & perm. crops from Morocco

EU imports of veg. & perm. crops from other MED

EU exports

Partial + WTO G20: EU Exports

Conclusions Inconsistent changes in the imports from Turkey, Morocco and the Med. block Changes depend on the competitiveness of the individual countries Preferential situation decreases visibly The exports of the EU increase in general with a few exceptions