Modeling the EU-US Cereal Trade - The Post 'Agenda 2000' Analysis

• Main Author: Chintawar, Sachin
• Other Authors: P. Lynn Kennedy
• Format: Others
• Language: en
• Published: LSU 2007
• Subjects: Agricultural Economics & Agribusiness
• Online Access: http://etd.lsu.edu/docs/available/etd-06192007-181425/

Significant changes in attitudes toward farm policy and trade have occurred within the European Union and the United States in the past decade. Trade negotiations under the General Agreement on Tariff and Trade (GATT) specifically the Agreement on Agriculture (AoA) and later under the Doha Round of the World Trade Organization (WTO) have bought about considerable changes in the market structure in the cereals trade. Bilateral trade has further been impacted by the cessation of concession treaties like the Blair House Accord that expired at the end of the 2004 marketing year (WTO). Domestic budget pressures in the United States have lead to decreased support to farmers, making them more oriented to world market needs based on prevailing world prices (Daryll E. Ray). The European Union has introduced reforms in the Common Agricultural Policy as a consequence of high budgetary expenditure and the accession of the ten new central European nations into the European Union in the form of the Mac Sharry Reforms and the Agenda 2000 Reforms. These reforms are now aimed at decreasing the distortions caused due to the high amount of protection for farm income thus moving towards more targeted farm programs. These economy wise changes internal to each of these major players in agricultural trade in the world, coupled with transformed bilateral trade relations under the auspices of the WTO have had vital effects on bilateral transactions and world markets. These reforms may have had compelling economy wise effects on consumption, production, trade and world prices and could subsequently provoke trade liberalization in other sectors based on the quantification and prediction of welfare effects of such measures by the two trading partners. This study is aimed at reviewing policy changes in the European Union's Common Agricultural Policy and their effects on the cereal trade with the United States. The study contributes to estimating whether changes in the cereal policies of the EU have had a significant impact on the trade between the EU and the US. Further a forecast for the domestic prices for wheat in a free trade scenario is documented with an estimated trend for the exogenous variables. Results obtained from the suggest that the re-instrumentation of the Common Agricultural Policy (CAP) by the Mac Sharry Reforms of 1992 and the Agenda 2000 Reforms have had significant effects on trade between the U.S. and the fifteen member countries. The forecast for domestic prices in wheat for the EU suggest a period of decreased prices followed by an increased amount of imports of wheat.