Periodic Reporting for period 2 - BATModel (Better Agri-food Trade Modelling for Policy Analysis)
Berichtszeitraum: 2022-03-01 bis 2023-08-31
What is the problem/issue addressed by BATModel?
Economy-wide assessments of regional trade agreements often fall short of capturing the complexity of agri-food trade policies especially in the case of major structural changes (as market concentration and global value chain issues). “New generation” trade agreements include many aspects beyond traditional trade policies.
Why is it important for society?
Consumer concerns are increasing about food quality and safety, environmental implications, as well as ethical concerns about the way food is produced and its impact on poverty, job destruction and increasing inequality.
What are the overall objectives of BATModel?
BATModel will improve agri-food trade modelling. In particular, BATModel will advance assessments of agri-food trade policies as follows: (1) by improving the theoretical underpinning and methodologies of partial and general equilibrium models in ex-ante trade assessments; (2) based on micro-level evidence, by improving our understanding and modelling of value chains to enable more precise impact assessments (gains and losses, between and within Member States, between and within groups of agents); and (3) by integrating econometric estimations into existing simulation models at micro- and macro-level, which will allow the analysis of extended welfare effects, like inclusiveness and sustainable development goals.
Economy-wide assessments of regional trade agreements often fall short of capturing the complexity of agri-food trade policies especially in the case of major structural changes (as market concentration and global value chain issues). “New generation” trade agreements include many aspects beyond traditional trade policies.
Why is it important for society?
Consumer concerns are increasing about food quality and safety, environmental implications, as well as ethical concerns about the way food is produced and its impact on poverty, job destruction and increasing inequality.
What are the overall objectives of BATModel?
BATModel will improve agri-food trade modelling. In particular, BATModel will advance assessments of agri-food trade policies as follows: (1) by improving the theoretical underpinning and methodologies of partial and general equilibrium models in ex-ante trade assessments; (2) based on micro-level evidence, by improving our understanding and modelling of value chains to enable more precise impact assessments (gains and losses, between and within Member States, between and within groups of agents); and (3) by integrating econometric estimations into existing simulation models at micro- and macro-level, which will allow the analysis of extended welfare effects, like inclusiveness and sustainable development goals.
What are the main results achieved so far?
Several results have been achieved so far on different topics.
First we provided methodological advancements. We developed an original modelling framework to study the regional impacts of the EU-Canadian trade deal CETA. Main results show limited regional environmental impacts of that trade deal but demonstrate that the module works as intended. Moreover, we improved trade flow modelling at disaggregated level, including information about the Tariff Line Module (GTAP-AGROFOOD database) and the Spatial Price Equilibrium Model.
Second, we accounted for quality differentiation into Computable General Equilibrium (CGE) Models. We provided an extension that allows firms to produce distinct product qualities and to serve markets in which the willingness of consumers to pay for quality is sufficiently high for their profitability. This is consistent with the recent literature emphasizing the supply-side aspects of quality differentiation (that is product quality across firms differ), and/or the demand-side aspects of quality differentiation (that is the willingness of consumers across markets for product qualities offered by firms differs and may vary). Empirical analyses confirm the impact of several demand and supply side factors that affect firms' pricing and export sales behaviour. These analyses are based on firm-level data on the food-processing sector in Italy, France, and Hungary, as case studies.
Third, we provided an assessment of the consistency of Micro- and Macro-level data on Global Value Chains. We computed micro-based indicators of GVC participation and positioning for agriculture and food exports.
Forth, we provided results regarding Non Tariff Measures (NTMs). For instance, we investigated how to classify NTMs using very disaggregated information, which type of costs were associated as well as their trade effects. We also performed econometric estimations – relying on a gravity framework – of the reductions of the NTMs trade costs induced by preferential trade agreements and their provisions on NTMs and regulatory cooperation (transparency, harmonization, mutual recognition, etc.) have been performed.
Fifth, regarding geographical indications, we deepened our understanding of the role of GIs as a driver of socio-economic development and international competitiveness at the territorial level. We empirically test the impacts of GIs on local socio-economic development at the municipality level. We also investigate the international territorial competitiveness of GIs from two new perspectives, never addressed by the literature so far: the agri-food Foreign Direct Investment (FDI) attractiveness and the export specialization of Italian municipalities.
Finally, we provided concrete guidance on how to implement modules developed in BATModel both in GAMS and GEMPACK. This is an important step to ensure that all improvements provided in BATModel will be implemented in a relevant way to be made available to end-users and all people interested in.
What is the work in progress to achieve future?
Besides these results, the work is in progress to achieve the other objectives of BATModel. Theoretical, empirical and simulation works are ongoing and will be available at the end of the project. Moreover, we work on the creation of an open access BATModule repository at GitHub, which is among the most popular platforms for sharing software and provides versioning control to keep track of code developments and fixes over time.
The ultimate proof of concept foreseen towards the end of BATModel will be the analysis of a Free Trade Agreement (FTA) in all improved models in a policy relevant test case. In the first period, the analysis was first conducted with the model as they stand now, to allow for a later comparison with the improved models. The CETA trade agreement between the EU and Canada was selected as this test case, all modelling teams in BATModel developed a business-as-usual baseline until 2030 without CETA, using harmonized assumptions, and performed subsequently a policy impact assessment of CETA. Results were discussed with stakeholders. The objective of the last period will be to test the success of the developments provided in BATModel by applying the modular extended models. This testing also supports the development of the operational backbone by clarifying where needed the applicability of BATmodules. This is key information for users that have not been involved in the development of the module and may not be aware of restrictions on its applicability.
Several results have been achieved so far on different topics.
First we provided methodological advancements. We developed an original modelling framework to study the regional impacts of the EU-Canadian trade deal CETA. Main results show limited regional environmental impacts of that trade deal but demonstrate that the module works as intended. Moreover, we improved trade flow modelling at disaggregated level, including information about the Tariff Line Module (GTAP-AGROFOOD database) and the Spatial Price Equilibrium Model.
Second, we accounted for quality differentiation into Computable General Equilibrium (CGE) Models. We provided an extension that allows firms to produce distinct product qualities and to serve markets in which the willingness of consumers to pay for quality is sufficiently high for their profitability. This is consistent with the recent literature emphasizing the supply-side aspects of quality differentiation (that is product quality across firms differ), and/or the demand-side aspects of quality differentiation (that is the willingness of consumers across markets for product qualities offered by firms differs and may vary). Empirical analyses confirm the impact of several demand and supply side factors that affect firms' pricing and export sales behaviour. These analyses are based on firm-level data on the food-processing sector in Italy, France, and Hungary, as case studies.
Third, we provided an assessment of the consistency of Micro- and Macro-level data on Global Value Chains. We computed micro-based indicators of GVC participation and positioning for agriculture and food exports.
Forth, we provided results regarding Non Tariff Measures (NTMs). For instance, we investigated how to classify NTMs using very disaggregated information, which type of costs were associated as well as their trade effects. We also performed econometric estimations – relying on a gravity framework – of the reductions of the NTMs trade costs induced by preferential trade agreements and their provisions on NTMs and regulatory cooperation (transparency, harmonization, mutual recognition, etc.) have been performed.
Fifth, regarding geographical indications, we deepened our understanding of the role of GIs as a driver of socio-economic development and international competitiveness at the territorial level. We empirically test the impacts of GIs on local socio-economic development at the municipality level. We also investigate the international territorial competitiveness of GIs from two new perspectives, never addressed by the literature so far: the agri-food Foreign Direct Investment (FDI) attractiveness and the export specialization of Italian municipalities.
Finally, we provided concrete guidance on how to implement modules developed in BATModel both in GAMS and GEMPACK. This is an important step to ensure that all improvements provided in BATModel will be implemented in a relevant way to be made available to end-users and all people interested in.
What is the work in progress to achieve future?
Besides these results, the work is in progress to achieve the other objectives of BATModel. Theoretical, empirical and simulation works are ongoing and will be available at the end of the project. Moreover, we work on the creation of an open access BATModule repository at GitHub, which is among the most popular platforms for sharing software and provides versioning control to keep track of code developments and fixes over time.
The ultimate proof of concept foreseen towards the end of BATModel will be the analysis of a Free Trade Agreement (FTA) in all improved models in a policy relevant test case. In the first period, the analysis was first conducted with the model as they stand now, to allow for a later comparison with the improved models. The CETA trade agreement between the EU and Canada was selected as this test case, all modelling teams in BATModel developed a business-as-usual baseline until 2030 without CETA, using harmonized assumptions, and performed subsequently a policy impact assessment of CETA. Results were discussed with stakeholders. The objective of the last period will be to test the success of the developments provided in BATModel by applying the modular extended models. This testing also supports the development of the operational backbone by clarifying where needed the applicability of BATmodules. This is key information for users that have not been involved in the development of the module and may not be aware of restrictions on its applicability.
BATModel will provide a new modular generation of trade models to support the EC, policy-makers and other stakeholders to better account for specific issues such as zero trade flows, quality differentiation, global value chains, non-tariff measures, geographical indications. For policy-makers, it is important to better understand the impacts of trade policies at different scales – globally, for the EU as a whole, as well as for its member states and regions, and to better understand who will lose and gain not only ‘horizontally’, i.e. across sectors, but also ‘vertically’, i.e. by measuring the vertical distribution of impacts of trade policies along the (global) value chains. The distribution of these impacts includes well-being implications of trade policies that go beyond standard welfare effects and that we will link to the Sustainable Development Goals. With negotiations of several bilateral or regional trade agreements on the agenda, this topic is important for governments, producers and consumers in the EU and in partner countries as well as for EU citizens in general.