Automatic Tool for Policy Simulation Scenarios in Agricultural

Automatic Tool for Policy Simulation Scenarios in Agricultural products liberalization Dr. Rafael de Arce and Dr. Ramón Mahía Professors in Econometrics UAM July, 28 th 2005

Project Objectives ü Political and entrepreneurships decisions: building a benchmark simulator for more efficient alternatives ü Academical robustness and Automatic tool for the evaluation of policy alternatives ü Studies to be used in a real context: • One product • Quantitative and Qualitative considerations ü Bilateral outlook (“two sea-lands view”) ü Equivalent Tariff: key issue in political negotiations

World tomato market: production Area 1996 - 2003 Percentage China 23. 081. 655 21, 8% European Union 15 15. 198. 796 14, 4% USA 11. 304. 290 10, 7% Turkey 8. 545. 125 8, 1% India 7. 347. 500 6, 9% Italy 6. 469. 163 6, 1% Egypt 6. 419. 090 6, 1% Spain 3. 770. 043 3, 6% Islamic Rep of Iran 3. 213. 261 3, 0% Brazil 3. 204. 336 3, 0% Mexico 2. 192. 353 2, 1% Morocco 1. 006. 540 1, 0% Others 13. 290. 452 12, 6% European Union 25 15. 894. 145 15, 0% 105. 737. 952 100, 0% Total § 100 Mt per year § China: 21, 8% § Spain, Netherlands, Belgium, Italy and Greece: 14% § Morocco: 1%

Yield of Tomato Harvested Area Country Position Over mean Netherlands 1 11, 23 Canada 16 2, 20 Belgium 2 9, 43 Cyprus 17 1, 84 Sweden 3 7, 94 Palestine 18 1, 81 Norway 4 6, 79 Ireland 19 1, 74 Finland 5 6, 49 USA 20 1, 67 Iceland 6 5, 66 Kuwait 21 1, 51 Denmark 7 4, 98 Chile 22 1, 49 Austria 8 4, 74 Korea Rep 23 1, 49 United Kingdom 9 4, 02 Spain 24 1, 40 New Zealand 10 3, 13 Brazil 25 1, 34 Germany 11 3, 11 Japan 26 1, 34 France 12 3, 08 Portugal 27 1, 31 Switzerland 13 2, 94 Lebanon 28 1, 30 Israel 14 2, 70 Morocco 29 1, 25 United Arab Emir. 15 2, 36 Italy 30 1, 25

World tomato market analysis: prices Country 1996 1997 1998 1999 2000 2001 2002 Brazil 555, 7 474, 2 544, 1 585, 8 572, 3 536, 3 460, 4 China 496, 5 462, 2 447, 7 420, 3 455, 8 469, 2 451, 9 Egypt 284, 5 285, 0 277, 9 275, 8 265, 3 267, 9 269, 0 India 664, 2 667, 9 815, 5 792, 6 822, 2 805, 3 866, 0 Iran 266, 2 439, 0 585, 7 201, 5 261, 8 366, 3 260, 3 Italy 530, 3 588, 5 609, 1 578, 9 590, 7 535, 1 546, 7 Mexico 591, 6 840, 2 683, 9 600, 0 489, 6 444, 4 447, 1 Spain 426, 8 554, 7 598, 6 544, 4 635, 3 469, 4 483, 5 Turkey 687, 6 733, 2 701, 7 548, 5 633, 4 488, 8 463, 8 Morocco 451, 1 435, 8 458, 8 551, 0 485, 9 437, 2 482, 4

World tomato market: international flows Exporter Dollars Percentage Importer Dollars Percentage Netherlands 916. 291. 676 24, 7% USA 980. 555. 547 26, 0% Spain 792. 627. 632 21, 4% Germany 904. 640. 296 24, 0% Mexico 714. 838. 569 19, 3% UK 440. 479. 678 11, 7% Belgium 223. 254. 931 6, 0% France 312. 018. 431 8, 3% Canada 204. 746. 463 5, 5% Netherlands 192. 883. 271 5, 1% USA 167. 862. 220 4, 5% Canada 168. 540. 625 4, 5% France 157. 125. 408 4, 2% Italy 78. 361. 132 2, 1% Italy 145. 199. 584 3, 9% Sweden 74. 721. 682 2, 0% Morocco 105. 602. 902 2, 8% Belgium 69. 125. 854 1, 8% Turkey 54. 567. 380 1, 5% Russian Feder. 66. 882. 811 1, 8% Israel 44. 644. 000 1, 2% Austria 49. 655. 479 1, 3% Jordan 21. 603. 631 0, 6% Switzerland 49. 395. 814 1, 3%

World tomato market: distribution • Integrated chain: 60% – 60 -85% Germany, France, Switzerland – 45% Spain, Italy, Greece • Market changes: – – Market power Asymmetrical relationship Prices down-pressure Few demanders for a lot of suppliers

Price implications in international trade between EU and Morocco i. ii. Exports-price elasticity estimation: 0. 78 Equivalent tariff-only estimation: price gap method

Tomato exports increase in Morocco: i. Evidence about production output gap ii. Market substitution of EU suppliers iii. Effects in revenues and employment in Morocco

Substitution and output gap With a proper investment effort, the Moroccan production could be three times the current one. The seasonal market share of Spain and Morocco implies a potential friction of both suppliers.

Effects in revenues and employment 2006 2007 2008 2009 2010 SUM Tariff Reduction 1, 21 2, 41 3, 62 4, 83 6, 03 18 Tomato Exports Increase 12, 6 25, 2 37, 7 50, 3 62, 9 189 New Added Value 13 27 40 53 67 200 New Employment 291 577 855 1. 135 1. 410 4. 267

Some policy considerations • • • Poverty reduction in agricultural population Migration policies implications Compensation measures in “losers countries” Quality requirements in EU Distribution Chains ownership: added value benefits