“Assessing economy-wide effects of recent external shocks on Asian developing economies”, presented by David Laborde, IFPRI at the ReSAKSS-Asia Conference, Nov 14-16, 2011, in Kathmandu, Nepal
Incoming and Outgoing Shipments in 3 STEPS Using Odoo 17
Assessing economy-wide effects of recent external shocks on Asian developing economies
1. Economy-wide effects of recent external
shocks such as global economic crisis, rising
global food prices and climate change
David Laborde
2. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Long term challenges: climate change
• LEARNING from the present
• A time of economic turbulences: what is the role
of agriculture?
• Effects of short term price shocks
• Initial exposure
• Unilateral policies and insulations
• More regional integration?
• DEALING with the FUTURE: impact of climate
change
6. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
EXPOSURE TO
AGRICULTURAL PRICES: A
SHIFTING SITUATION
Page 6
7. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Evolution of Asia and Oceania net food trade
-30,000,000
-25,000,000
-20,000,000
-15,000,000
-10,000,000
-5,000,000
0
5,000,000
10,000,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
USD, 1000
Proteins, Tons
Lipids, Tons
Kcal, 10 Mios
8. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Asia and Oceania: net position, 1000 USD
-80,000,000
-60,000,000
-40,000,000
-20,000,000
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Japan
Hong kong
Taiwan
Singapore
Bangladesh
Pakistan
Macau
Azerbaijan
Afghanistan
Brunei darussalam
Cambodia
Turkmenistan
Mongolia
Philippines
Lao people s democratic
Uzbekistan
Kyrgyzstan
Nepal
9. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Net position, Proteins tons
-40,000,000
-35,000,000
-30,000,000
-25,000,000
-20,000,000
-15,000,000
-10,000,000
-5,000,000
0
5,000,000
10,000,000
15,000,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Japan
China
Taiwan
Indonesia
Philippines
Thailand
Bangladesh
Malaysia
Hong kong
Viet nam
Sri lanka
Singapore
Pakistan
Papua new guinea
Azerbaijan
Afghanistan
Brunei darussalam
Uzbekistan
10. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
WHICH TRADE POLICY TO
COPE WITH FOOD PRICE
SHOCK?
Page 10
11. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
The Risk of unilateral policies
• Demand shock on the world market for one
commodity. E.g. wheat
• How different countries can react?
• Exporters Export tax to neutralize effects on
domestic prices
• Importers Reduction in tariffs and, import
subsidies?
• Interaction between exporters and importers policies
• Long term vs Short term effects
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12. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Results on average prices
Wheat
Average
production price
Average trade
price
1 – Exogenous demand increase 9.10% 10.8%
2 – 1 + Implementation/increase of export taxes to
mitigate the shock on domestic prices 1.52% 16.76%
3 – 1+ Elimination/reduction of import duties to
mitigate the shock on domestic prices 9.05% 12.62%
4 – 1+ Elimination/reduction of import duties and
import subsidies to mitigate the shock on domestic
prices 20.12% 27.31%
5 – 2 & 4: Combined non cooperative policies
allowing import subsidies 16.00% 41.10%
6 – 2 & 3: Combined non cooperative policies
without import subsidies 7.05% 20.58%
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13. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Results on real income (welfare, %)
Page 13
-1.00
-0.80
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1 – Exogenous demand increase
2 – 1 + Implementation/increase of export taxes to mitigate the shock on domestic prices
3 – 1+ Elimination/reduction of import duties to mitigate the shock on domestic prices
4 – 1+ Elimination/reduction of import duties and import subsidies to mitigate the shock on domestic prices
5 – 2 & 4: Combined non cooperative policies allowing import subsidies
6 – 2 & 3: Combined non cooperative policies without import subsidies
14. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
China
ASEA
N
AFTA
Afghanistan
Japan
Thailand
Pakistan
Trans-
Pacific
SEP
APT
A
Australi
a
AANZFT
A
EFTA
SCT Taiwan,
Penghu,
Kinmen
and Matsu
Honduras
El Salvador
GCC
Jordan
Switzerland
Mexico
MERCOSU
R
Nicaragua Peru
Panama
Trade Agreements in force in Asia after 2004
Bilateral
Bloc to country
USA
Vietnam
Indonesia
SAFT
A
Cambodia
Malaysia
Lao PDR
Kore
a
Singapore
Brunei
New
Zealan
d
Banglades
h
Myanmar
Chile
India
Sri-Lanka
Maldives
Bhutan
Nepal
Philippines
MORE INTEGRATION?
15. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
ASEA
N + 3
Japan
Korea
Cambodia
Malaysia
Philippines
Vietnam
Pakistan
SAFT
A
New
Zealan
d
Australi
a
EU
SCT Taiwan,
Penghu,
Kinmen
and Matsu
GCC
Jordan
Switzerland
Costa Rica
Trade Agreements in process in Asia
Bilateral
Bloc to country
ASEA
N
Canada
CEPEA
ASEAN
+ 6
Norway Iceland
SACU
Nigeri
aEgypt
Turke
yIran
D-
8
EFTA
Mexico
USA
Fiji
Micronesia
Palau
Samoa
Tonga
Vanuatu
Cook Islands
Kiribati
Marshall Islands
Nauru
Niue
Papua NG
Solomon Islands
Tuvalu
PACE
R
Indonesia
BIMST
EC
China
Sri-Lanka
Maldives
Bhutan
India
Nepal
Lao PDR
Thailan
d
Brunei
Singapore
Myanmar
Banglades
h
Chile
TPP
Peru
17. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Why focusing on South Asia? (I)
Growing demand
Dollars Calories
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0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Oils and Fats Other Agric. Products Pulses
wheat Sugar Fruits & Vegetables
Oth. Processed Foods Dairy & Meat products Oilseeds
Rice cattle Maize
Other Coarse grains Fishing
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Asia & Oceania (none SAFTA) South America North America SAFTA Europe Africa
Exports
Imports
Imports
Exports
-
1,000
2,000
3,000
4,000
5,000
6,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
-
1,000
2,000
3,000
4,000
5,000
6,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Asia & Oceania (none SAFTA) North America SAFTA Europe South America Africa
Proteins
Imports
Exports
18. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Why focusing on South Asia? (II)
Agricultural trade policies are still distorted
Average protection (ref gr weighted)
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100 80 60 40 20 0 20 40 60 80 100
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
SAFTABangladeshBhutanIndia
Tariffs Applied on Imports Tariff faced on exports
100 80 60 40 20 0 20 40 60 80 100
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
MaldivesNepalPakistanSrilanka
Tariffs Applied on Imports Tariff faced on exports
100 80 60 40 20 0 20 40 60 80 100
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
SAFTABangladeshBhutanIndia
Tariffs Applied on Imports Tariff faced on exports
100 80 60 40 20 0 20 40 60 80 100
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
World
SAFTA partners
Asia & Oceania
Africa
Europe
North America
South America
MaldivesNepalPakistanSrilanka
Tariffs Applied on Imports Tariff faced on exports
Average protection (protein contents)
19. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Why focusing on South Asia? (III)
Regional trade and potential
Importer/Expo
rter
Bangladesh Bhutan Sri Lanka Maldives Nepal Pakistan India Total
Bangladesh 7,569 0 127,935 4,518,449 4,653,954
Bhutan 3,097 0 79,462 82,559
Sri Lanka 1,482 216 0 125,539 1,922,600 2,049,837
Maldives 0 19,512 0 8,087 123,563 151,162
Nepal 17 35 2,169 973,839 976,060
Pakistan 1,985 0 47,765 34 2,792 1,857,128 1,909,705
India 97,960 156,229 931,828 9 627,699 541,181 2,354,905
Total 104,541 156,229 1,006,708 259 630,491 804,913 9,475,041 12,178,182
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Bilateral trade of calories
20. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Methodology
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Climate Change
• GCM results [4 models x 3 baselines=12 scenarios]
• IMPACT Hydrology model
• Changes in temperature and rainfall simulated at the disaggregated (grid) level
Exogenous
Yield Response
due to Climage
Change
• IMPACT DSSAT modelling (5 representative crops)
• Changes in Yield due to Climate Change evolution (temperature and rainfall for rainfed
agriculture, temperature for irrigated agriculture)
Economic
results
• MIRAGE simulations: economic and demographic baselines with alternative trade policy
options
• Endogenous economic response of yields
• Results in terms of different economic indicators
21. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Baselines and Scenarios
• Alternative trade policies = different baselines
• Alternative climate change scenarios =
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Label Description
BASE Status quo
SAFTA Implementationof the post 2007 SAFTA commitments
SAFTAFull SAFTA + eliminationof all remainingtariffs on sensitive products
UNISEN SAFTAFull + unilateral liberalizationwith all partners for non
sensitive products in SAFTA
UNIAGR SAFTAFull+ unilateralliberalizationin agriculture
UNIALL Full unilateral liberalizationof all SAFTA countries
FTA Full FTA in Asia and Oceania
MULTI Full multilateralliberalization
Effects on relative
prices
among countries,
among sectors
150 dynamic
simulations…
23. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Subregional heterogeneity
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-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
cnr_a1 cnr_a2 cnr_b1 csi_a1 csi_a2 csi_b1 ech_a1 ech_a2 ech_b1 mir_a1 Simple
Average
Maize
Bangladesh India Pakistan Sri Lanka
24. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Rainfed vs Irrigation:
Illustration Pakistan
Page 24
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
-60% -50% -40% -30% -20% -10% 0%R
a
i
n
f
e
d
Irrigated
GroundNut
Maize
Rice
Wheat
26. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Scenarios matter for Global Trade pattern
Agricultural world trade may increase or decrease due to climate change
-6%
-4%
-2%
0%
2%
4%
6%
cnr_a1 cnr_a2 cnr_b1 csi_a1 csi_a2 csi_b1 ech_a1ech_a2ech_b1 mir_a1 mir_a2 mir_b1
Imports, volume, 2050 compared to the baseline
Developed Countries - Agro-food Developed Countries - Staple
Developing Countries - Agro-food Developing Countries - Staple
27. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Heterogenous consequences on Real Income
Climate Change will lead to winners and losers among countries
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
cnr_a1 cnr_a2 cnr_b1 csi_a1 csi_a2 csi_b1 ech_a1 ech_a2 ech_b1 mir_a1 mir_a2 mir_b1
Real Income, volume, 2050 compared to the baseline
Central Asia
China
Developed Countries
Developing Countries (ex. SAFTA)
SAFTA
Pakistan
Russia & Ukraine
28. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Trade policies less important than productivity shock
at a country level and contrasted effects appear
but may play a more important role for poor (unskilled) workers
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Trade policy scenario
India - Average India - Maximum India - Minimum
Pakistan - Average Pakistan - Maximum Pakistan - Minimum
Real wages for unskilled workers, percent
Real Income, percent
29. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
But economic and demographic situations
will matter
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30. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Preferred trade policies – real income criteria
Bangladesh India Sri Lanka Pakistan Rest of South Asia
BASE Pessimistic,
Average
Average Pessimistic
SAFTA Pessimistic Pessimistic,
Optimistic
Average, Optimistic
SAFTAFULL Pessimistic All cases
UNIAGR Optimistic
UNIALL
UNISEN
FTA Average
MULTI Optimistic
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31. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Research Question and Key results
• Which trade policies to deal with Climate Change?
• Which Climate change effects are we talking about:
• Change in average yield: the topic of this research
• But only for effects driven by rainfall and temperature
• Change in yield volatility: not in this research
different answers
• Answers:
• Large uncertainties: one simulation is not enough.
• How to communicate with policy makers? Are they risk adverse?
• The role of flexibilities
• The world will survive and as usual: winners and losers
• Trade policies will not solve the “average trend” problem. Marginal effects
compared to the Climate change. Optimal policies difficult to define: redistribution vs
efficiency
• Role of economic growth
• Yield in the baseline (and public R&D)
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32. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Preferences of policy makers?
• On key variables (real income…):
• Risk Neutral
• Risk Adverse (mean variance utility)
• Minimizing regret (Minimax)
• Rawlsian (MaxiMin)
• Adjustment costs
• Selection criteria: the illustion of precision
• Sensitivity analysis:
• Climate change (done here)
• But other parameters (elasticities, growth path,
demographics) matters too!
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33. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Concluding remarks
• The Trade policy landscape has limited macroeconomic effects of
Climate Change consequences on average yield
• Larger role on distribution (poor people): needs to investigate the issue
deeper, in particular with better demand modeling: integration of the
MIRAGE-Climate Change and the MIRAGE-Household disaggregation
modele
• Large Uncertainties
• Promote economic growth (endogenous investments) and role of FDI?
• Flexibilities for farmers to change crops
• Flexibilities to relocate production: infrastructure
• Caution with any large sunk costs (R&D in one crop…)
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