ECONOMIC ANALYSIS OF INTERNATIONAL AGRICULTURAL TRADE

• Sponsoring Institution: National Institute of Food and Agriculture
• Project Status: COMPLETE
• Funding Source: HATCH
• Reporting Frequency: Annual
• Accession No.: 0088058
• Project Start Date: Oct 1, 2012
• Project End Date: Jun 30, 2017
• Program Code: [(N/A)]- (N/A)

Recipient Organization
PURDUE UNIVERSITY
(N/A)
WEST LAFAYETTE,IN 47907

Performing Department
Agricultural Economics

Non Technical Summary
Dramatic increases in international agricultural commodity prices both during the 2007-08 food crisis and again in 2011 brought policy and agricultural production adjustments in key markets for U.S. agricultural exports. In the short run, stabilization policies helped to achieve record U.S. agricultural exports. Countries are now seeking greater self-sufficiency through more rapid agricultural development in the long run, however. Macroeconomic factors influence both the affordability of short run stabilization strategies and incentives to produce or trade agricultural commodities in the long run. This project will examine these issues through the use of new economic models incorporating relevant market imperfections and institutions. Focus is on why world prices increased, how countries responded, and what influence that had on U.S. agricultural trade. This research is influencing debates on both multilateral and bilateral trade negotiations and in policy formation both here and abroad. Issues related to trade and economic policy of developing countries and how those impact markets for U.S. agricultural exports need to be better understood in those debates.

Animal Health Component

70%

Research Effort Categories

Basic

20%

Applied

70%

Developmental

10%

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
606	6110	3010	15%
606	6120	3010	50%
611	6110	3010	10%
611	6120	3010	25%

Knowledge Area
611 - Foreign Policy and Programs; 606 - International Trade and Development;

Subject Of Investigation
6110 - Economy of the United States and sectors thereof; 6120 - International economy and sectors thereof;

Field Of Science
3010 - Economics;

Keywords

agricultural trade

developing countries

wto

stabilization policy

exchange rates

macroeconomic linkages

agricultural development

trade liberalization

market imperfections

Goals / Objectives
The primary objective of this project is to examine issues in international agricultural trade and in agricultural and trade policy through the use of economic models. Focus is now on impacts of commodity booms and spikes in world agricultural commodity prices. Attention is given to why these spikes occurred, how exporters and developing country importers responded in the short and long run, and what role the dramatic changes in macroeconomic factors that occurred at about the same times played in both price run-ups and trade policy responses. Impacts on U.S. agricultural trade, national welfare and farmer income will also be evaluated as well as U.S. agricultural and trade policy responses. Specific objectives are: to understand better the relative importance of various factors believed to lie behind world agricultural price spikes (in 2008 and 2011) and later declines; to examine stabilization policies, including both trade and stockpiling policies, utilized in developing countries as a short run response to world price spikes, as well as other policy tools to respond to domestic supply shocks; to consider long run responses that foster more rapid agricultural development and to achieve greater self-sufficiency; from a methodological perspective, to collect new data and test hypotheses on the conduct of agricultural trade in order to better understand market institutions and imperfections, to develop trade models that capture dynamic elements of economic development, and to incorporate relevant institutions and market imperfections into economic models of international agricultural trade.

Project Methods
The general approach is to collect data from new sources to complement traditional data, and use that data in both estimation of econometric models and in testing of hypotheses on behaviors of market institutions using econometric methods and theoretical trade models; to specify and estimate simulation models of international agricultural trade incorporating institutions and influences previously neglected; and to use simulation modeling to evaluate policy implications drawn from the research. Specific objectives identify key economic issues to be considered as an initial priority for this project. Relevant modeling approaches will be employed in investigating those issues. These will include new data collection from national sources in developing countries, and re-specification of agricultural trade models to incorporate market institutions and imperfections.

Progress 10/01/12 to 06/30/17

Outputs
Target Audience:With increased attention to trade agreements in the recent policy debates, I have been asked to draw on the research from this project to indicate the importance of agricultural trade generally and trade agreements in particular to the fortunes of the U.S. agricultural sector. I have consulted with farm ineterst groupsand journalists, resulting in citations in the press based on my research. Work in Colombia on cocoa as part of a viable rural development stragtegy post conflcithas been presented to funding agencies (USAID and USDA) and to stakeholders in the Colombian cocoa sector.Field work on assessment of the cocoa supply chain also enabled communication of findings to sector stakeholders. Academic researchers and policymakers in the U.S. in foreggn countries and at international organizations remiend important target audiences. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?Two graduate students worked on ongoing projects exploring the nature of past U.S. agricutural trade and prospects for that trade in the future under alternative market assumptions. How have the results been disseminated to communities of interest?Presentations were made to both academic audiences and to meetings of stakeholders. Field work in Colombia enabled direct interaction with key stakeholders. Publications report the findings of the research. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? Work on the Colombian cocoa supply chain has emphasized problems with past donor funded strategies to expand production in and exports from Colombia. While production and exports increased, area expanded dramatically and yields plummeted. Exports increased, but were sold at bulk commodity prices and not at premiums to speicalized markets asemphasized in donor strategy.The missing piece was technical assistance. New farmers needed not only financial support to plant trees but also continuing advice on how to maintain a new crop in a difficult environment. Work on market information explored the poor state of agricultural statistics in Nigeria, a problem likley to also be found eslewhere in Africa as well. We developed a strategy based on remote sensed (sattelite) data and local price information to determine the relibaility of existing regional agricultural production data and proposed ways to improve future data reliability in a cost effective manner utilizing this new information. The long body of work under this project addressing agricultural trade was used to highlight the importance of trade to U.S. agriculture and the important role palyed by trade agreements in ensuring foreign market access to U.S. farmers.lesson from earlier research were drawn on to evaluate past and future specifics in any renegotiated trade agreements.

Publications

• Type: Journal Articles Status: Accepted Year Published: 2017 Citation: Hatzenbuehler, Patrick L., Philip C. Abbott, and Tahirou Abdoulaye, Evaluation of Nigerian Agricultural Production Data, African Journal of Agricultural and Resource Economics (AfJARE), forthcoming 2017.
• Type: Other Status: Awaiting Publication Year Published: 2017 Citation: Abbott, Philip C., Tamara J. Benjamin, Gary R. Burniske, Marcia M. Croft, Marieke C. Fenton, Colleen Kelly, Mark M. Lundy, Fernando Rodriguez-Camayo, Michael D. Wilcox Jr, An Analysis of the Colombian Cacao Supply Chain, CIAT and Purdue University, April, 2017
• Type: Other Status: Published Year Published: 2016 Citation: Abbott, Philip, "Weak Ag Trade Outlook for 2017," Purdue Agricultural Economics Report, December 2016

Progress 10/01/15 to 09/30/16

Outputs
Target Audience:Academic reaserchers at univeristies. Policymakers and researchers at agenices of national governments (U.S> and elsewhere) and at international orgnaizations (e.g. FAO, AMIS, IFPRI, UNU-WIDER). Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?Three graduate students completed thesis research. How have the results been disseminated to communities of interest?Papers and presentations at academic and policymaker conferences What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? A continuing theme of this year's research was agricultural market information, with emphasis on forecasting exports and measuring commodity stocks. Volatile agricultural commodity prices, price transmission within and between countries, stabilization policy and trade policy were also critical issues addressed in this project. Work related to volatile international commodity prices has emphasized the extent to which world price signals are transmitted to domestic markets in developing countries. Case studies looked at Nigeria and Afghanistan. Those studies highlighted the importance of neighbor country prices over global market prices, and the weak links between rural and urban prices, even when regional wholesale markets are tightly linked. Using related methodology, we examined exchange rate effects on US agricultural prices. Follow-up work on related to the price transmission studies investigates stabilization policy in Afghanistan and Nigeria. The Afghan government is considering whether to build food security stocks, based on the findings of our research. Work was supported by NASA, examining remote sensing for agriculture and forestry, and by the FAO, on why and how to collect commodity stocks data. Work on agricultural market information has recently emphasized estimation of the economic value of that information, in order to convince policy makers of the benefit to expending more resources on data collection. The NASA work shifted to support for their Carbon Monitoring System (CMS), evaluating the value derived from remote sensed data on carbon sequestration potential for the implementation of forestry policy initiatives. Work for the FAO focused on the state of worldwide agricultural marketing information systems, with recommendations on the need for data collection on private stockholding developed specifically for developing countries that have now been adopted by AMIS. Those recommendations focused on the need to collect primary stocks data via narrow, focused surveys from both farmers and commercial traders.

Publications

• Type: Journal Articles Status: Published Year Published: 2016 Citation: Hatzenbuehler, Patrick L., Philip C. Abbott, and Tahirou Abdoulaye, Price Transmission in Nigerian Food Security Crop Markets, Journal of Agricultural Economics (JAE), advance online publication June 2016. doi: 10.1111/1477-9552.12169. Presented at 2nd International Conference on Global Food Security, Cornell University, Ithaca, NY, Oct. 11-14, 2015.
• Type: Journal Articles Status: Published Year Published: 2016 Citation: Hatzenbuehler, Patrick L., Philip C. Abbott, and Ken Foster, Agricultural Commodity Prices and Exchange Rates under Structural Change, Journal of Agricultural and Resource Economics (JARE) 41(2):204-224, 2016. Poster presentation at 2015 AAEA & WAEA Joint Annual Meeting, San Francisco, CA, July 26-28, 2015
• Type: Journal Articles Status: Published Year Published: 2016 Citation: Abbott, Philip, Finn Tarp, and Ce Wu, Structural Transformation, Biased Technological Change, and Employment in Vietnam, European Journal of Development Research, 0, 118, advance online publication 29 October 2015.. doi:10.1057/ejdr.2015.64.
• Type: Journal Articles Status: Under Review Year Published: 2016 Citation: Abbott, Philip, David Boussios and Jess Lowenberg-DeBoer, The Value of WASDE Reports to the U.S. Corn Market, 2016 AAEA Annual Meeting, Boston, MA, August 1, 2016. NCCC-134: Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management, April 18-19, 2016, St. Louis, MO. Eighth meeting of the Global Food Market Information Group, Milan, Italy, October 19-20, 2015. Revise and resubmit to American Journal of Agricultural Economics.

Progress 10/01/14 to 09/30/15

Outputs
Target Audience:This research is directed to policymakers at USDA, USAID, NASA and similar agencies of foreign governments. It is also for academics and professional researchers who address trade policy isses of interest to these institutions. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?Three graduate students have collaborated with me on this research. How have the results been disseminated to communities of interest?Papers presenetd at academic and policymaker conferences. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? A continuing theme of this year's research was agricultural market information, with emphasis on forecasting exports and measuring commodity stocks. Volatile agricultural commodity prices, price transmission within and between countries, and trade policy were also critical issues addressed in this project. Work was supported by NASA, examining remote sensing for agriculture and forestry, and by the FAO, on why and how to collect commodity stocks data. The NASA work shifted to support for their Carbon Monitoring System (CMS), evaluating the value derived from remote sensed data on carbon sequestration potential for the implementation of forestry policy initiatives in Maryland. Work for the FAO focused on the state of worldwide agricultural marketing information systems, with recommendations developed specifically for developing countries that have now been adopted by AMIS. Those recommendations focused on the need to collect primary stocks data via narrow, focused surveys from both farmers and commercial traders. A set of pilot surveys are being launched in China, following the model of USDA's NASS surveys. Work related to volatile international commodity prices this year emphasized the extent to which world price signals are transmitted to domestic markets in developing countries. Case studies looked at Nigeria and Afghanistan. Using related methodology, we continued to examine exchange rate effects on US agricultural prices. Those results demonstrate that those impacts are sensitive to underlying market conditions, such as the extent of carry-out stocks. Monetary policy was found to be less important in explaining impacts. Follow-up work on impacts of the 2007-08 food crisis has recently begun examining stabilization policy in Nigeria, where the government is considering reestablishing state trading in grains, and is weighing trade policy versus stockholding as stabilization measures. We are constructing a modeling framework to evaluate these alternatives. The possibility of improved agricultural development through initiating a land grant university in sub-Saharan Africa was also explored. Work on Vietnam examined structural transformation, under which and economy evolves from a largely agricultural and informal, rural based structure to one where urban manufacturing and services become more important. Implications for employment in urban versus rural areas, and the effects of trade policy on this evolution are considered.

Publications

• Type: Journal Articles Status: Published Year Published: 2015 Citation: Abbott, Philip, Finn Tarp, and Ce Wu, Structural Transformation, Biased Technological Change, and Employment in Vietnam, European Journal of Development Research, 0, 118, forthcoming 2015. doi:10.1057/ejdr.2015.64
• Type: Conference Papers and Presentations Status: Published Year Published: 2015 Citation: Hatzenbuehler, Patrick L., Philip C. Abbott, and Tahirou Abdoulaye, Price Transmission in Nigerian Food Security Crop Markets, 2nd International Conference on Global Food Security, Cornell University, Ithaca, NY, Oct. 11-14.
• Type: Conference Papers and Presentations Status: Published Year Published: 2015 Citation: Hatzenbuehler, Patrick L., Philip C. Abbott, and Ken Foster, Agricultural Commodity Prices and Exchange Rates under Structural Change, 2015 AAEA & WAEA Joint Annual Meeting, San Francisco, CA, July 26-28, 2015.
• Type: Conference Papers and Presentations Status: Published Year Published: 2015 Citation: Hettich, Rachel and Philip Abbott, Subsidizing Carbon Sequestration via Forestry in Maryland: A Benefit-Cost Assessment, 2015 AAEA & WAEA Joint Annual Meeting, San Francisco, CA, July 26-28, 2015.
• Type: Conference Papers and Presentations Status: Published Year Published: 2015 Citation: Abbott, Philip and Rachel Hettich, Subsidizing Carbon Sequestration via Forestry in Maryland: A Cost-Benefit Assessment, presented at the Maryland Department of Natural Resources, Annapolis, MD, June, 2015.
• Type: Other Status: Published Year Published: 2015 Citation: Abbott, Philip, Grain Stocks Measurement: By Survey or Model? Summary and Recommendations from the AMIS Expert Meeting on Stocks Measurement, November 21, 2014, London, England. Agricultural Market Information System (AMIS), Rome, January, 2015. Presented to AMIS Rapid Response Forum, London, March, 2015.
• Type: Conference Papers and Presentations Status: Published Year Published: 2015 Citation: Abbott, Philip, Guidelines for Stocks Measurement, Expert Workshop on Stock and Utilization Measurement in China, CAAS and AMIS, Beijing, China, July 6-7, 2015.
• Type: Conference Papers and Presentations Status: Published Year Published: 2015 Citation: Abbott, Philip, David Boussios and Jess Lowenberg-DeBoer, Valuing Public Information in agricultural Commodity Markets: WASDE Corn Reports, Eighth meeting of the Global Food Market Information Group, Milan, Italy, October 19-20, 2015
• Type: Conference Papers and Presentations Status: Published Year Published: 2015 Citation: Abbott, Philip, Report of the Expert Meeting on Stocks Measurement, 4th Session of the AMIS Rapid Response Forum, London, England, 26-27 March 2015.
• Type: Other Status: Published Year Published: 2014 Citation: Lechtenberg, Vic, Jay Akridge, James Lowenberg-DeBoer, Gebisa Ejeta, Philip Abbott, Jules Janick, Gary Burniske, Ismail Ouraich, Patrick Ongom, Patrick Slack, Locating a Land Grant University in Sub-Saharan Africa, Center for Global Food Security, Purdue University, West Lafayette, IN. August, 2014.

Progress 10/01/13 to 09/30/14

Outputs
Target Audience: The target audiences of this research include policymakers involved in agricultural policy formation, natural resources policy and trade negotiations. Counterparts who see this research include representatives of state and national governments, international organizations including AMIS, FAO, OECD, the World Bank and others. The research is also intened for other academics doing research on agricultural and natural resources trade policy. Interest groups who advocate for policy positions, such as farm organizations are also interested in this research. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest? Work on market information has influenced NASA, the broader remote sensing community, and those who are bringing satellite based technologies to agriculture and forestry. The department of natural resources in Maryland was an explicit collaborator in this work. The work with FAO has shaped the approach taken in AMIS, a multi-international organization approach to improving market information initiated by the G8 and G20, and is working with policymakers worldwide. An objective of this research remains to influence agricultural policy debates and trade negotiations. In Vietnam, collaboration with CIEM and GSO resulted in research findings that reach high level policymakers. Moreover, the work on international responses and on stabilization were cited in reports to the G8/G20. A broader goal has been to influence agricultural and trade policy in developing countries, regardless of the outcomes of trade negotiations. What do you plan to do during the next reporting period to accomplish the goals? Work will continue in each of the areas dicsucced above.

Impacts
What was accomplished under these goals? A continuing theme of this year’s research was agricultural market information, with emphasis on forecasting exports and measuring commodity stocks. High agricultural commodity prices and trade policy in the aftermath of WTO accession in Vietnam were also critical issues addressed in this project. Work was supported by NASA, examining remote sensing for agriculture and forestry, and by the FAO, on why and how to collect commodity stocks data. The NASA work shifted to support for their Carbon Monitoring System (CMS), evaluating the value derived from remote sensed data on carbon sequestration potential for the implementation of forestry policy initiatives in Maryland. Work for the FAO focused on the state of worldwide agricultural marketing information systems, with recommendations developed specifically for developing countries that are now being debated by AMIS. Those recommendations focused on the need to collect primary stocks data via narrow, focused surveys from both farmers and commercial traders. Work related to high international commodity prices continued to emphasize the role of biofuels in raising the level and volatility of agricultural prices, and the role played by exchange rates in determining commodity price levels. Constraints on ethanol refiners and gasoline blenders, including production capacity and EPA regulations, continued to be critical to both price levels and their variability. Exchange rate results demonstrate that those impacts are sensitive to underlying market conditions, such as the extent of carry-out stocks. Monetary policy was found to be less important in explaining impacts. Follow-up work on impacts of the 2007-08 food crisis has recently begun examining stabilization policy in Nigeria, where the government is considering reestablishing state trading in grains, and is weighing trade policy versus stockholding as stabilization measures. We are constructing a modeling framework to evaluate these alternatives. The possibility of improved agricultural development through initiating a land grant university in sub-Saharan Africa was also explored. Work on Vietnam examined the role of imperfect market integration as a limiting factor restricting trade policy impacts. It also considered the structural transformation, under which and economy evolves from a largely agricultural and informal, rural based structure to one where urban manufacturing and services become more important, implications for employment in urban versus rural areas, and the effects of trade policy on this evolution are considered.

Publications

• Type: Conference Papers and Presentations Status: Published Year Published: 2014 Citation: Abbott, Philip, Lessons from Recent Stocks Adjustments, and their Measurement, presented at the FAO Expert meeting on Stocks, Markets and Stability, FAO Headquarters, 30-31 January 2014, Rome, Italy.
• Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: Abbott, Philip, Finn Tarp, and Ce Wu, Structural Transformation, Biased Technological Change, and Employment in Vietnam, presented at the Asian Development Review Conference (ADR), Asian Development Bank (ADB), Manila, 1-2 August 2013.
• Type: Journal Articles Status: Accepted Year Published: 2014 Citation: Abbott, Philip, Finn Tarp, and Ce Wu, Transmission of World Prices to the Domestic Market in Vietnam, Journal of Economic Integration, forthcoming 2014
• Type: Book Chapters Status: Published Year Published: 2013 Citation: Abbott, Philip, Cocoa and cotton commodity chains in West Africa: Policy and institutional roles for smallholder market participation, chapter 8 in Rebuilding West Africas food potential: Policies and market incentives for smallholder-inclusive food value chains, Edited by Aziz Elbehri, The Food and Agriculture Organization of the United Nations and The International Fund for Agriculture Development, Rome, 2013.

Progress 10/01/12 to 09/30/13

Outputs
Target Audience: Academics and policymakers in the U.S., in developing countries, and with international organizations such as the FAO, UNU-WIDER, OECD, and the World bank and the primary audience. Extensions and outlook activities relate these results too farmers and agribusiness executives. Work on market information involves collaboration with NASA and FAO. Work in Vietnam involves collaboration with CIEM, GSO, the University of Copenhagen and UNU-WIDER. Work on high commodity prices also involves collaboration with NBER, UNU-WIDER, OECD, FAO and the World Bank. Key individual collaborators included Molly Brown, Carola Fabi, Ce Wu, Finn Tarp, Pham Lan Huong, Per Pinstrup Andersen, Jon Brooks, and Tony Addison. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest? Work on market information has influenced NASA, the broader remote sensing community, and those who are bringing satellite based technologies to agriculture. The work with FAO has shaped the approach taken in AMIS, a multi-organization approach to improving market information initiated by the G8 and G20, and is working with policymakers in the Philippines, Nigeria, India and Bangladesh. An objective of this research remains to influence agricultural policy debates and trade negotiations. In Vietnam, collaboration with CIEM and GSO result in research findings that reach high level policymakers. Work with UNU-WIDER, Cornell and the OECD has been presented to a wide range of development assistance agencies. Moreover, the work on international responses and on stabilization were cited in reports to the G8/G20. A broader goal has been to influence agricultural and trade policy in developing countries, regardless of the outcomes of trade negotiations. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? A new theme of this year’s research was agricultural market information, with emphasis on forecasting exports and measuring commodity stocks. High agricultural commodity prices and the aftermath of WTO accession in Vietnam remained critical issues addressed in this project. Work was supported by NASA, examining remote sensing for agriculture, and by the FAO, on why and how to collect commodity stocks data. A methodology was developed to estimate the value of information generated by USDA’s WASDE market forecasts, decomposing that value into value derived from area, yield and export forecasts. Work continues to explore value generated for both crop forecasting and famine early warning, and on value from remote sensed data to commercial agriculture. Work for the FAO focused on the state of worldwide agricultural marketing information systems, with recommendations developed specifically for developing countries. Those recommendations focused on the need to collect primary stocks data via narrow, focused surveys from both farmers and commercial traders. Work related to high international commodity prices continued to emphasize the role of biofuels in raising the level and volatility of agricultural prices. Constraints on ethanol refiners and gasoline blenders, including production capacity and EPA regulations, continued to be critical to both price levels and their variability. In addition to examination of the role played by foreign assistance in the aftermath of the 2007-08 food crisis, collaboration with a Gates Foundation project at UNU-WIDER and Cornell University has examined case studies of political economy aspects of country responses to the food crisis. Follow-up work has recently examined stabilization policy in Nigeria, where the government is considering reestablishing state trading in grains, and is weighing trade policy versus stockholding as stabilization measures. We are constructing a modeling framework to evaluate these alternatives. This project also continued to consider the mechanisms through which exchange rate movements impact agricultural trade. Results demonstrate that those impacts are sensitive to underlying market conditions, such as the extent of carry-out stocks. Monetary policy was found to be less important in explaining impact variations. Work in Vietnam continued to emphasize impacts of trade policy and agricultural development on labor markets. Papers in submission examine imperfect price transmission across the Vietnamese border, and the role of structural transformation versus technical change on Vietnamese development.

Publications

• Type: Book Chapters Status: Awaiting Publication Year Published: 2013 Citation: Abbott, Philip, Biofuels, Binding Constraints and Agricultural Commodity Price Volatility, in The Economics of Food Price Volatility, edited by Jean-Paul Chavas, David Hummels, and Brian Wright, University of Chicago Press, forthcoming.
• Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: Abbott, Philip, David Boussios and Jess Lowenberg-DeBoer, Commercial Value of Satellite Imagery for Agriculture, report to NASA, June 2013. Earlier version presented at the Joint Agency Commercial Imagery Evaluation (JACIE) Workshop, St. Louis, MO, April 2013.
• Type: Other Status: Accepted Year Published: 2013 Citation: Abbott, Philip, Improved Methodology for Estimation of Food Stocks, Food and Agriculture Organization of the United Nations, November, 2013. To be presented to the Joint National Workshop on rice data for Thailand and the Philippines, Bangkok, Thailand, December16-17, 2013.

Progress 10/01/11 to 09/30/12

Outputs
OUTPUTS: High agricultural commodity prices and the aftermath of WTO accession in Vietnam remained the critical issues addressed in this project. Work related to high international commodity prices focused this year on the role of biofuels in raising the level and volatility of agricultural prices. Constraints on ethanol refiners and gasoline blenders, including production capacity and EPA regulations, were shown to be critical to both price levels and their variability. This work has also continued to consider policy responses by developing countries to mitigate potential harmful impacts from international price shocks. In addition to examination of the role played by foreign assistance in the aftermath of the food crisis, collaboration with a Gates Foundation project at UNU-WIDER and Cornell University has examined case studies of political economy aspects of country responses to the food crisis. Those results emphasized the importance of domestic shortfalls and existing food security regimes. Where problems were most severe, implementation problems hampered effectiveness of food security measures. This work also continued to consider the mechanisms through which exchange rate movements impact agricultural trade. Work in Vietnam continued to emphasize impacts of trade policy and agricultural development on labor markets. That emphasis has led to research on structural transformation more broadly in the Asian miracle and on determinants of technical change. Work also continues to examine imperfect price transmission between the international market and Vietnamese domestic markets, so that more appropriate policy evaluation and assessment of trade policy impacts is done using modified trade models. Research in Vietnam has also assessed macroeconomic management in an open economy following both the Asian financial crisis and great recession. PARTICIPANTS: Work in Vietnam involves collaboration with CIEM, GSO, the University of Copenhagen and UNU-WIDER. Work on high commodity prices also involves collaboration with OECD, FAO and the World Bank. Key individuals included Ce Wu, Finn Tarp, Pham Lan Huong, Per Pinstrup Andersen, Jon Brooks, and Tony Addison. TARGET AUDIENCES: Policymakers at USDA, USTR, USAID in the U.S. and Ministries of Agriculture and development agencies worldwide. Researchers at univeristies and international organizations like the OECD and World Bank. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The objective of this research remains to influence agricultural policy debates and trade negotiations. In Vietnam, collaboration with CIEM and GSO result in research findings that reach high level policymakers. Work with UNU-WIDER, Cornell and the OECD has been presented to a wide range of development assistance agencies. Work for the Farm Foundation also received wide attention in the global agricultural policy debate. Moreover, the work on international responses and on stabilization were cited in reports to the G20, and Abbott was asked to present his work to the French Ministry of Foreign Affairs as input to their initiative to reinvigorate the debate on food security under the French presidency of the G20. A broader goal has been to influence agricultural and trade policy in developing countries, regardless of the outcomes of trade negotiations. This research involves collaboration with researchers at the OECD, the World Bank, FAO, UNU-WIDER and other international institutions.

Publications

• Abbott, Philip, Biofuels, Binding Constraints and Agricultural Commodity Price Volatility, NBER conference on Economics of Food Price Volatility, Seattle, WA, August, 2012
• Abbott, Philip, Foreign Aid and the Food Crisis of 2007-08, UNU- WIDER Working paper 12/019, World Institute for Development Economics Research (WIDER), UN University, Helsinki, Finland, February, 2012.
• Abbott, Philip and Finn Tarp, Globalization Crises, Trade and Development in Vietnam, Journal of International Commerce and Economic Policy, 3(1) 2012,1-23.
• Abbott, Philip, Export Restrictions as Stabilization Reponses to Food Crisis, American Journal of Agricultural Economics, 93(5) December, 2011.
• Abbott, Philip and Adeline Borot de Battisti, Recent Global Food Price Shocks: Causes, Consequences and Lessons for African Governments and Donor, Journal of African Economies, 20(suppl 1), 2011, pp. i12-i62.
• Abbott, Philip, Ce Wu and Finn Tarp, Structural Transformation, Biased Technological Change, and Labor Demand in Vietnam, 7th ASAE Conference, Hanoi, Vietnam, October 14, 2011.

Progress 10/01/10 to 09/30/11

Outputs
OUTPUTS: High agricultural commodity prices and the aftermath of WTO accession in Vietnam remained the critical issues addressed in this project. Work in Vietnam emphasized impacts of trade policy and agricultural development on labor markets. That emphasis has led to research on structural transformation more broadly in the Asian miracle and on determinants of technical change. Research has shown that technical factor productivity (TFP) growth is significant in Vietnam, and likely elsewhere in Asia, once one takes labor biased technical progress into account and utilizes more appropriate but simple functional forms. It also shows that technical progress is as important as structural transformation, even in agriculture, while domestic policy plays a less important role. Work continues to examine imperfect price transmission between the international market and Vietnamese domestic markets, so that more appropriate policy evaluation and assessment of trade policy impacts is done using modified trade models. Research in Vietnam has also assessed macroeconomic management in an open economy following both the Asian financial crisis and great recession. Work on high agricultural commodity prices has examined causes and consequences of the 2011 price spikes, identifying persistent biofuels demand for corn and soybean imports by China as critical factors. Adjustments to these persistent shocks play out in inelastic markets and through reallocation of agricultural land. This work has also continued to consider policy responses by developing countries to mitigate potential harmful impacts from international price shocks. This year that aspect was taken further, examining how foreign assistance played a role in alleviating poverty and hunger in developing countries that might otherwise have resulted from high international prices. That work found the extent of actual assistance offered by donors and international organization to be much smaller than promises made in international forums, and actions implemented were typically very short term in focus. Work on global markets in this context examined export restrictions as stabilization responses to international price shocks, focusing on why Argentina imposed export taxes and rice exporters utilized export bans. This work also continued to consider the mechanisms through which exchange rate movements impact agricultural trade. PARTICIPANTS: Work in Vietnam involves collaboration with CIEM, GSO, the University of Copenhagen and UNU-WIDER. Work on high commodity prices also involves collaboration with OECD, FAO and the World Bank. Key individuals included Ce Wu, Finn Tarp, Pham Lan Huong, Jon Brooks, Per Pinstrup-Andersen and Tony Addison. TARGET AUDIENCES: Trad3e policy econimists. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The objective of this research remains to influence agricultural policy debates and trade negotiations. In Vietnam, collaboration with CIEM and GSO result in research findings that reached high level policymakers. Work with UNU-WIDER and with the OECD has been presented to a wide range of development assistance agencies and funded by the Danish development agency, DANIDA. Work for the Farm Foundation also received wide attention in the U.S. agricultural policy debate. Moreover, the work on international responses was cited in reports to the G20, and Abbott was asked to present his work to the French Ministry of Foreign Affairs as input to their initiative to reinvigorate the debate on food security under the French presidency of the G20. During the last year travel to Europe and Vietnam involved presentation of research results; and interviews with trade negotiators, government officials, private sector interest groups and researchers. A broader goal has been to influence agricultural and trade policy in developing countries, regardless of the outcomes of trade negotiations. This research involves collaboration with researchers at the OECD, the World Bank, FAO, UNU-WIDER and other international institutions.

Publications

• Abbott, Philip, Export Restrictions as Stabilization Reponses to Food Crisis, American Journal of Agricultural Economics, 93(5) December, 2011, doi: 10.1093/ajae/aar092.
• Abbott, Philip and Adeline Borot de Battisti, Recent Global Food Price Shocks: Causes, Consequences and Lessons for African Governments and Donor, Journal of African Economies, 20(suppl 1), 2011, pp. i12-i62.
• Abbott, Philip, Thomas Barnabeck Andersen and Finn Tarp, IMF and Economic Reform in Developing Countries, Quarterly Review of Economics and Finance 50(1), 2010, pp. 17-26.
• Abbott, Philip, Foreign Assistance and the Food Crisis of 2007-08, UNU World Institute for Development Economics Research (UNU-WIDER), Helsinki, Finland, October, 2011.
• Abbott, Philip, Chris Hurt and Wally Tyner, What is Driving Food Prices in 2011 Farm Foundation, Chicago, IL, July, 2011.
• Abbott, Philip, Stabilization Policies in Developing Countries after the 2007-08 Food Crisis, OECD Working Paper TAD/CA/APM/WP(2010)44, OECD, Paris. November 2010.
• Abbott, Philip, Ce Wu and Finn Tarp, Structural Transformation, Biased Technological Change, and Labor Demand in Vietnam, presented to7th ASAE Conference, Hanoi, Vietnam, October 14, 2011 and Central Institute for Economic Management (CIEM), Hanoi, Vietnam, April 16, 2011.
• Abbott, Philip, Ce Wu and Finn Tarp, Transmission of world prices to the domestic market in Vietnam, presented to 8th Midwest International Economic Development Conference, Madison, Wisconsin, April 16, 2011.

Progress 10/01/09 to 09/30/10

Outputs
OUTPUTS: This project continues to examine institutional arrangements critical to agricultural trade policy reform. Key topics this year included consequences of and policy responses to high agricultural commodity prices; impacts of commodity price spikes, recession and financial crisis, particularly on developing countries; aftermath of WTO accession by Vietnam; and structural adjustment reform of cotton and cocoa sectors in West Africa. Work in Vietnam has examined implications of its recent accession to the World Trade Organization. A model was been created in this effort which better predicts the effects of trade liberalization on development by identifying key mechanisms through which those effects work, and so better predicts the consequences of trade agreements, such as WTO accession in the case of Vietnam. Recent work has sought to improve the model and better analyze Vietnamese trade policy by addressing price transmission from world to domestic markets, and by exploring the much slower in labor demand growth than in trade driven GDP growth. Price transmission results suggest Vietnamese markets are often poorly integrated with world markets. Labor market work highlights the importance of structural transformation, with declining contributions of agriculture to GDP, and labor savings technical change in industry and services. Work on international agricultural commodity prices has this year focused on stabilization policy of developing countries after the recent food crisis, and on export taxes as a stabilizing response. The work on stabilization policy highlights better understanding of the distribution of world grain prices, which exhibit long periods of stability but short spikes. It finds that best practice private market recommendations serve well until the world price spikes occur, and then government intervention is needed. The work on export taxes shows that countries follow historical political economy forces when choosing this regime, which also depends on how vulnerable local consumers are to world commodity price increases. The role of the exchange rate has also been explored, finding differential effects on agricultural prices during the recession and financial crisis. Work on cotton and cocoa in West Africa has examined these sectors as examples of value chain strategies for agricultural development. Correction of market failures following privatization of parastatal marketing boards may help to raise small holder incomes, and is needed for more efficient markets, but constraints due to competitive market behaviors limit the extent to which changes in taxes or transactions costs downstream are passed back to farmers. In mature value chains lost institutions, particularly credit and input markets, need to be replaced as the state exits to prevent income losses. PARTICIPANTS: 15 Researchers at the Central Institute for Economic Management (CIEM) in Hanoi, Vietnam were trained in the use of the trade model for Vietnam developed under this project. Collaborators in this research include Ce Wu, graduate student in Agricultural Economics at Purdue, Finn Tarp at the University of Copenhagen, and Jon Brooks at the OECD. TARGET AUDIENCES: Trade policy analysts PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
This research continues to influence trade negotiations, with input made to government officials and researchers here and abroad. The work on consequences of high commodity prices and on cocoa and cotton in West Africa continue to receive attention in the debate on revitalizing foreign assistance to agriculture. During the last year travel to Europe, Africa and Vietnam involved presentation of research results; and interviews with trade negotiators, government officials, private sector interest groups and researchers. A broader goal has been to influence agricultural and trade policy in those developing countries, regardless of the outcomes of trade negotiations. This research involves collaboration with researchers at the OECD, the World Bank, FAO, IFAD, WFP and other international institutions.

Publications

• Abbott, Philip, Exchange Rates and Agricultural Commodity Prices, presented at Exchange Rates, Prices, and Agricultural Trade: What Have We Learned IATRC sponsored International Track session, AAEA Annual Meeting, Denver, CO July 27, 2010.
• Abbott, Philip, Thomas Barnabeck Andersen and Finn Tarp, IMF and Economic Reform in Developing Countries, Quarterly Review of Economics and Finance 50(1), 2010, pp. 17-26.
• Abbott, Philip, Stabilization Policies in Developing Countries after the 2007-08 Food Crisis, OECD Working Paper TAD/CA/APM/WP(2010)44, OECD, Paris. November 2010.
• Abbott, Philip, Cocoa and cotton commodity chains in West Africa: Policy and institutional roles for small holder market participation, FAO Workshop on Institutional innovations and policy interventions in support of smallholder market participation, Rome, June 3, 2010.
• Abbott, Philip, Ce Wu and Finn Tarp, Vietnamese Labor demand: Evidence and Issues, CIEM-Danida Working Paper, Hanoi, July 1, 2010.
• Abbott, Philip, Ce Wu and Finn Tarp, Transmission of world prices to the domestic market in Vietnam, CIEM-Danida Working Paper, Hanoi, June 30, 2010.

Progress 10/01/08 to 09/30/09

Outputs
OUTPUTS: This project has examined institutional arrangements critical to agricultural trade policy reform. Key topics this year included causes and consequences of high agricultural commodity prices; impacts of commodity price spikes, recession and financial crisis, particularly on developing countries; and the aftermath of WTO accession by Vietnam. Work continues on structural adjustment reform of cotton and cocoa sectors in West Africa, food security and trade liberalization, Fair Trade, preferential trade arrangements, cereals market reform in Morocco, and imperfectly competitive international supply chains. Work in Vietnam has examined implications of its recent accession to the World Trade Organization. A model has been created in this effort which better predicts the effects of trade liberalization on development by identifying key mechanisms through which those effects work, and so better predicts the consequences of trade agreements, such as WTO accession in the case of Vietnam. The key linkage identified in this work has been sectoral investment, which is strongly influenced by government intervention in Vietnam. That modeling framework was used to determine after the fact what are the key driving factors from WTO accession, notably foreign investment. Work on international agricultural commodity prices has utilized recent market data to assess the relative importance of numerous factors believed to lie behind the run-up of agricultural commodity prices until July, 2008 and the decline in those prices afterwards. This work has emphasized the role of exchange rates, as the very weak dollar contributed strongly to the high prices in July, and an appreciating dollar until 2009 has contributed significantly to the declines since then. The role of the exchange rate has raised linkages to the macro economy, and to the recession and financial crisis. Special attention has been paid to how developing country importers and competing exporters coped with high world prices, and what were the impacts on agricultural sectors worldwide. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
This research continues to influence trade negotiations, with input made to government officials and researchers here and abroad. The work on consequences of high commodity prices has also gained attention in the debate on revitalizing foreign assistance to agriculture. During the last year travel to Europe, Africa and Vietnam involved presentation of research results; interviews with trade negotiators, government officials, private sector interest groups and researchers. A broader goal has been to influence agricultural and trade policy in those developing countries, regardless of the outcomes of trade negotiations. Work with the OECD resulted in collaboration with researchers there as well as at the World Bank, FAO, IFAD, WFP and other international institutions.

Publications

• Abbott, Philip, Jeanet Bentzen and Finn Tarp, Trade and Development: Lessons from Vietnams Past Trade Agreements, World Development 37(2), February 2009.
• Young, Linda and Philip Abbott, Food Aid Donor Allocation Decisions After 1990, Canadian Journal of Agricultural Economics 56(1), March 2008, pp.27-50.
• Abbott, Philip, Distortions to Agricultural Incentives in Cote d Ivoire, in Distortions to Agricultural Incentives in Africa, Anderson, K. and W.A. Masters (eds.), Washington DC: World Bank, 2009.
• Abbott, Philip, Development Dimensions of High Food Prices, OECD, Paris, March 2009.
• Abbott, Philip, Chris Hurt and Wally Tyner, What s Driving Food Prices March 2009 Update, Farm Foundation, Chicago, IL, March, 2009.
• Abbott, Philip and Ken Foster, Will the Rescue Plan Work What Might it Accomplish Department of Agricultural Economics, Purdue University, October 2008.
• Abbott, Philip, Chris Hurt and Wally Tyner, What s Driving Food Prices Farm Foundation, Chicago, IL, July, 2008.

Progress 10/01/07 to 09/30/08

Outputs
OUTPUTS: This project has examined institutional arrangements critical to agricultural trade policy reform. Key topics this year included effects of structural adjustment reform on cotton and cocoa sectors of West Africa and WTO accession in Vietnam. New work on the causes of high and then falling world agricultural commodity prices was also emphasized. Work continues on food security, Fair Trade, preferential trade arrangements, cereals market reform in Morocco, and imperfectly competitive international supply chains. Work on cocoa and cotton in West Africa shows how structural adjustment left a need for government intervention to replace market institutions. Two aspects have been emphasized this year - the imperfect transmission of world price fluctuations to the farmgate, and the consequences of missing credit markets. Farmgate prices in countries that have reformed have not consistently increased, quality has deteriorated, and problems in input markets and credit provision have hampered development of export opportunities. Monopolies or oligopolies also appear to replace state trading enterprises that are privatized. This research has shown the disconnect between world and farmgate prices, and the importance of functioning credit for cotton and cocoa farmers to thrive. Work in Vietnam has examined implications of its accession to the World Trade Organization. This research looked at impacts of the several major bilateral trade agreements signed by Vietnam in the past and determining factors relevant to Vietnam's success in expanding trade, fostering economic growth, and reducing poverty. Prior trade model predictions had greatly underestimated the impacts of trade agreement. History of bilateral agreement impacts shows a much greater effect of trade reform than do the various traditional methods, but the effects work through institutional reform rather than tariff reductions. A model has been created in this effort which better predicts the effects of trade liberalization on development by identifying key mechanisms through which those effects work, and so better predicts the consequences of trade agreements, such as WTO accession in the case of Vietnam. The key linkage identified in this work has been sectoral investment, which is strongly influenced by government intervention in Vietnam. High investment stimulates rapid growth, and sectoral investment patterns are enabled by trade opportunities. Work on international agricultural commodity prices has utilized recent market data to assess the relative importance of numerous factors believed to lie behind the run-up of commodity prices until July, 2008 and the decline in those prices afterwards. Among supply-utilization influences, the low stocks to use ratios by 2007 were seen as a critical factor amplifying the effects of market shocks. Direct links between corn prices and biofuels demand were emphasized, and potential impacts were quantified that link oil and grain prices. This work has also emphasized the role of exchange rates, as the very weak dollar contributed strongly to the high prices in July, and an appreciating dollar has contributed significantly to the declines since then. PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: Trade policy makers and negotiators in the U.S. and in foreign countries. Agricultural trade researchers worldwide. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
This research continues to influence trade negotiations as well as negotiations of bilateral trade agreements, with input made to government officials and researchers here and abroad. During the last year travel to West Africa and Vietnam involved presentation of research results; interviews with trade negotiators, government officials, private sector interest groups and researchers; and strengthening of negotiating capacities in those countries. A broader goal has been to influence agricultural and trade policy in those developing countries, regardless of the outcomes of trade negotiations. The work on cocoa with IITA continues to assist USAID and IITA in project design. The work on commodity prices help policymakers and researchers worldwide understand better influences behind world agricultural market changes.

Publications

• Abbott, P., J. Bentzen and F. Tarp, Trade and Development: Lessons from Vietnams Past Trade Agreements, World Development 37(2), February 2009.
• Young, L. and P. Abbott, Food Aid Donor Allocation Decisions After 1990, Canadian Journal of Agricultural Economics 56(1), March 2008.
• Zhuang, R. and P. Abbott, 2007. Price Elasticities of Key Agricultural Commodities in China, China Economic Review 18(2).
• Abbott, Philip, Distortions to Agricultural Incentives in Cote d Ivoire, in Distortions to Agricultural Incentives in Africa, Anderson, K. and W.A. Masters (eds.), Washington DC: World Bank, December 2008.
• Abbott, P., C. Hurt and W. Tyner, Whats Driving Food Prices Farm Foundation, Chicago, IL, July, 2008.
• Baquedano, F., P. Abbott and J. Sanders, The West African Cotton Reform Process: What Needs to be Done report to USAID, Purdue University, West Lafayette, IN, December 2008.
• Abbott, P., K. Boys, P.L. Huong and F. Tarp, Trade and Development in Vietnam: Exploring Investment Linkages, presented at the Symposium on Globalization and the Rural-Urban Divide initiated by the International Agricultural Trade Research Consortium (IATRC), Seoul, Korea, June 29-July 1, 2008.

Progress 10/01/06 to 09/30/07

Outputs
OUTPUTS: This project has examined institutional arrangements critical to agricultural trade policy reform. Topics this year included effects of structural adjustment reform on cotton and cocoa sectors of West Africa, WTO accession in Vietnam, and spatial and temporal effects of cereals market reform in Morocco. Work continues on food aid, food security, Fair Trade, preferential trade arrangements, and imperfectly competitive international supply chains. We have looked at how institutions are implemented, how agricultural policy evolves if they are disciplined under trade agreements, and what the implications are for world trade in agricultural commodities. Work on cocoa and cotton in West Africa shows how structural adjustment left a need for government intervention to replace market institutions. Farmgate prices in countries that have reformed have not consistently increased, quality has deteriorated, and problems in input markets and credit provision have hampered development of export opportunities. Monopolies or oligopolies also appear to replace state trading enterprises that are privatized. We examined marketing institutions as well as pricing relationships in cocoa and cotton sectors, and how innovations might improve farmer welfare by bringing more competitive markets. Market power at the border has been investigated by adapting new industrial organization econometric models to trade by intermediaries. Impacts on farmgate prices have been examined in simulation models which include detailed specifications of marketing chains and allow for imperfectly competitive behavior of intermediaries. Work in Morocco resulted in a model to analyze spatial and temporal implications of further liberalization of cereals markets, including trade policy and flour subsidy reform. The significant extent to which poor farmers and consumers in remote areas would be affected by changing trade policies was shown. Work in Vietnam examined implications of its accession to the World Trade Organization. This research has focused on assessing impacts of the several major bilateral trade agreements signed by Vietnam in the past and determining factors relevant to Vietnam's success in expanding trade, fostering economic growth, and reducing poverty. We found that prior trade model predictions had greatly underestimated the impacts of trade agreement. General research looking across countries at linkages between trade and development emphasized the same conclusions as found in Vietnam. History of bilateral agreement impacts shows a much greater effect of trade reform than do the various traditional methods, but the effects work through institutional reform rather than through tariff reductions. The models being created in this effort are intended to better predict the effects of trade liberalization on development, identify mechanisms through which those effects work, and so better predict the consequences of trade agreements, such as WTO accession in the case of Vietnam. TARGET AUDIENCES: International trade researchers and policy makers

Impacts
Research Projects have involved interaction with and input to U.S.D.A., USAID, and USTR in the U.S. government. Policymakers in Vietnam, Mali and Burkina Faso have also been involved in this ongoing research. Researchers at international institutiions, including the International Insitute for Tropical Agriculture and the World Bank have collaborated with and benefited from this research. Presentations have been made in the U.S. and overseas to academics, researchers and policy makers. New methodologies for assessing trade liberalization impacts have been developed in this research, as well.

Publications

• Zhuang, R. and P. Abbott, Price Elasticities of Key Agricultural Commodities in China, China Economic Review 18(2), 2007, pp. 155-69.
• Abbott, P., Monopolistic Competition and Trade: Does Theory Carry Any Weight? Comments, Journal of International Agricultural Trade and Development 2(1), 2006, pp.33-37.
• Wilcox, M. and P. Abbott, Can Cocoa Farmer Organizations Countervail Buyer Market Power? Selected Paper, American Agricultural Economics Association Annual Meeting, Long Beach, California, July 23-26, 2006.
• Abbott, P., J. Bentzen, P. T. L. Huong, and F. Tarp, A Critical Review of Studies on the Social and Economic Impacts of Vietnam's International Economic Integration, prepared for the Central Institute for Economic Management (CIEM), Hanoi, Vietnam and the Development Economics Research Group, University of Copenhagen, Copenhagen, Denmark, November, 2006.
• Abbott, P., J. Bentzen and F. Tarp, Vietnam's Accession to the WTO: Lessons from Past Trade Agreements, presented to GTAP Tenth Annual Conference on Global Economic Analysis, West Lafayette, IN, June, 2007.
• Abbott, P. and M. Wilcox, Market Power and Structural Adjustment: The Case of West African Cocoa Market Liberalization, Nordic Conference in Development Economics 2006, University of Oslo, Oslo, Norway, June, 2006.
• Abbott, P., Food Aid and the Farm Bill, EC-750-W, Overviews of the 2007 USDA Farm Bill, Purdue Extension, Purdue University, West Lafayette, IN., 2007.

Progress 10/01/05 to 09/30/06

Outputs
This project examines institutional arrangements critical to agricultural trade policy reform. Topics this year include effects of structural adjustment reform on agricultural sectors of West Africa and Mozambique, WTO accession in Vietnam, and spatial and temporal effects of cereals market reform in Morocco. Work continues on food security, Fair Trade, preferential trade arrangements, and imperfectly competitive international supply chains. We have looked carefully at how institutions are implemented, how agricultural policy evolves if they are disciplined under trade agreements, and what the implications are for world trade in agricultural commodities. Work on cocoa in West Africa shows how structural adjustment left a need for government intervention to replace market institutions, and has worked with USAID and IITA efforts to build new institutions in a socially responsible manner. We examined marketing and trade institutions in cocoa sectors, and how innovations might improve farmer welfare by bringing more competitive markets. Effects are severely limited by the inelasticity of consumer demand for chocolate, which causes benefits from innovations to be felt more strongly by consumers. Work in Morocco resulted in a model to analyze spatial and temporal implications of further liberalization of cereals markets, including trade policy and flour subsidy reform. The objective was to see what would happen to soft wheat prices over space and time in free, integrated markets that would follow from tariff reductions and market liberalization given existing port facilities, storage capacities, and milling capacities. The significant extent to which poor farmers and consumers in remote areas would be affected by changing trade policies was shown. Work in Mozambique examined export tax policy applied to raw cashews. Some have argued that the export tax that emerged should be a model to be adopted in other sectors, but others argue for a more liberal regime. The purpose of this research was to reexamine this policy regime, identify testable hypotheses among the assumptions invoked in prior analysis, and so gain new insight into how cashew policy might be reformed. Results suggest that this is one case where export subsidies rather than taxes might make sense, if social benefits from increased employment are to be realized from processing. Work in Vietnam examined implications of its accession to the World Trade Organization, expected to occur this November. This research has focused on assessing impacts of the several major bilateral trade agreements signed by Vietnam in the past and determining factors relevant to Vietnam's success in expanding trade, fostering economic growth, and reducing poverty. We found that prior trade model predictions had greatly underestimated the impacts of trade agreement. General research looking across countries at linkages between trade and development emphasized the same conclusions as found in Vietnam. History of bilateral agreement impacts shows a much greater effect of trade reform than do the various traditional methods, but the effects work through institutional reform rather than through tariff reductions.

Impacts
This research continues to influence WTO Doha Round negotiations as well as negotiations of bilateral trade agreements, with input made to government officials and researchers here and abroad. During the last year travel to Morocco, Cameroon, Mozambique and Vietnam involved presentation of research results; interviews with trade negotiators, government officials, private sector interest groups and researchers; and strengthening of negotianing capacities in those countries. A broader goal has been to influence agricultural and trade policy inthose developing countries, regardless of the outcomes of trade negotiations. The work on cocoa with IITA continues to assist USAID and IITA in project design.

Publications

• Zhuang, R. and P. Abbott, Price Elasticities of Key Agricultural Commodities in China, Selected Paper, American Agricultural Economics Association Annual Meeting, Providence, RI, August, 2005.
• Abbott, P., Book Review of Merlinda Ingco and John Nash, eds., Agriculture and the WTO: Creating a Trading System for Development, The World Bank, Washington, DC, in Agricultural Economics 32(2005). Abbott, P. and M. Wilcox, Market Power and Structural Adjustment The Case of West African Cocoa Market Liberalization, Institute of Economics, University of Copenhagen, Copenhagen, Denmark November 2005.

Progress 10/01/04 to 09/30/05

Outputs
This project continues to examine new institutional arrangements critical to both developed and developing country agricultural trade policy, and contentious issues in future agricultural trade negotiations. Topics this year include the relationship between trade liberalization and food security with a focus on food aid, and impacts of fair trade arrangements as well as implications of market power along the cocoa supply chain for West African farm income. Work continues on export subsidies, preferential trade arrangements, and imperfectly competitive marketing supply chains. We have looked carefully at how these institutions are actually implemented, how agricultural policy would evolve if they are reformed or disciplined under trade agreements, and what the implications are for world trade in agricultural commodities. Food aid is being negotiated under the WTO Doha Round export competition pillar of agricultural negotiations, and may well be a bargaining chip given up by the U.S. due to displacement concerns of competing exporters. We have examined the extent to which food aid is targeted to need in recipient countries, and when it displaces commercial imports. We show that food aid donations respond to production shortfalls, and that the World Food program acts as a donor of last resort, insuring that need is met after individual countries have responded to political forces. Meeting need where there is violent conflict has also been particularly important recently. Thus, concern is raised as to the impacts of reforming food aid under WTO disciplines. Work on cocoa in West Africa has considered how structural adjustment left a need for government intervention to replace market institutions, and has worked with USAID efforts to build new institutions in a socially responsible manner. Large margins accruing to cocoa intermediaries and their relationship to market power is being investigated, with evidence placing focus on spatial oligopsony of domestic traders and concentration of multinational processors/exporters. We have simulated policy impacts of fair trade and shortening the marketing chain in West Africa, showing that typical agricultural policy concerns apply. Benefits mostly accrue to consumers and subsidies to producers need to be decoupled from production to benefit farmer welfare. That work is also critical of fair trade initiatives which ignore market realities.

Impacts
This research is influencing the debate in the WTO Doha Round agricultural negotiations on export competition, where disciplines to existing food aid programs are being considered. Particular interest is evident from NGOs in the food aid delivery business, including CARE, World Vision and Oxfam, who see as we do that focusing on commercial displacement is the wrong priority for a devlopment round. The work on cocoa in West Africa has had considerable influence on the design of USAID pilot projects intended to reduce those margins and bring higher prices to poor cocoa farmers and better cocoa in international markets.

Publications

• Abbott, P C, Export Competition Issues in the Doha Round, in G. Anania, M E Bohman, C. A. Carter and A. F. McCalla, eds., Agricultural Policy Reform and the WTO: Where Are We Heading?, Edward Elgar, Cheltenham, UK & Northampton MA, USA, 2004, pp. 252-285.
• Abbott, P C and B A Morse, How Developing Countries are Implementing Tariff rate Quotas, Agriculture and the New Trade Agenda, Merlinda Ingco and L. Alan Winters, eds., Cambridge University Press, Cambridge, 2004, pp. 74-100.
• Abbott, P C, Book Review of Merlinda Ingco and John Nash, eds., Agriculture and the WTO: Creating a Trading System for Development, The World Bank, Washington, DC, 2004 in Agricultural Economics 32(2005).
• Wilcox, M D and PC Abbott, Market Power and Structural Adjustment: The Case of West African Cocoa Market Liberalization, Selected Paper, American Agricultural Economics Association Annual Meeting, Denver, Colorado, August 1-4, 2004
• Zhuang, R and P C Abbott, Price Elasticities of Key Agricultural Commodities in China, Selected Paper, American Agricultural Economics Association Annual Meeting, Providence, RI, July, 2005.

Progress 10/01/03 to 09/29/04

Outputs
This project continues to examine new institutional arrangements critical to both developed and developing country agricultural trade policy, and contentious issues in future agricultural trade negotiations. New topics this year include the relationship between trade liberalization and food security, and impacts of fair trade arrangements as well as implications of market power along the cocoa supply chain for West African farm income. Work continues on export subsidies, preferential trade arrangements, and marketing supply chains. We have looked carefully at how these institutions are actually implemented, how agricultural policy would evolve if they are reformed or disciplined under trade agreements, and what the implications are for world trade in agricultural commodities. Work on export subsidies, shows the extent to which they still are needed to complement EU domestic agricultural policy in spite of their cost, how they may arise indirectly under U.S. export credit and food aid programs as well as Canadian state trading, and why they make US policy initiatives to help farmers less effective given the greater transparency of US programs. Work on preferential trade arrangements has examined the dynamics of investment in textile and clothing production capacity, hence exports, under the Caribbean Basin Initiative. Work on cocoa in West Africa has considered how structural adjustment left a need for government intervention to replace market institutions, and has worked with USAID efforts to build those new institutions in a socially responsible manner. Recent work shows that addressing market power which arose after structural adjustment reforms is needed to design effective institutions, and measures the extent of that market power now. That work is also critical of fair trade initiatives which ignore market realities. Recent work on the link between food security and trade liberalization has shown that long run or chronic food security is more at risk following trade liberalization, while short run food security improves since consumption is less dependent on volatile domestic production. Structural adjustment has been more important than WTO reforms in shaping developing country agricultural trade policy, but that experience has shaped negotiating positions in the Doha Round where developing countries do not want to adopt measures which could further compromise food security.

Impacts
The results from this research are helping to shape the debate on agricultural policy reform and trade liberalization as negotiations on bilateral agreements, such as the Free Trade Agreement in the Americas, and in the WTO (hopefully) continue, and as the U.S. struggles to reform agricultural policy in a WTO compatible manner. Results have been presented to both domestic and international professional meetings, to industry and government forums, to policy makers in developing countries, and through collaboration with USDA, USAID and USTR to U.S. trade negotiators. Collaboration with government officials and private institutions in our trading partners has also taken place under this program, which has contributed directly to the design of USAID and IITA efforts in West Africa.

Publications

• Wilcox, M.D. and P.C. Abbott, 2004 Market Power and Structural Adjustment: The Case of West African Cocoa Market Liberalization, Selected Paper, American Agricultural Economics Association Annual Meeting, Denver, Colorado, August 1-4, 2004
• Abbott, P.C. and S Kipe, 2004, Food Security Following Trade Liberalization, Paper presented at the Organized Symposium on Food Security and Trade, American Agricultural Economics Association Annual Meeting, Denver, Colorado, August 1-4, 2004 http://upload.cos.com/ams/Abstracts/168_1182_118565.pdf
• Abbott, P. C., 2003, Agricultural Trade Liberalization and Adjustment in Developing Countries, Workshop on Agricultural Policy Reform and Adjustment. IATRC, ERS USDA. Wye, England, October 25, 2003.
• Abbott, P.C., 2003, Impact Analysis of TRQs on Wheat and Beef in Morocco, Report to The Moroccan Ministry of Agriculture and the U.S. Embassy, Rabat, Morocco, December.

Progress 10/01/02 to 09/30/03

Outputs
This project is examining three institutional arrangements critical to both developed and developing country agricultural trade policy, and contentious issues in future agricultural trade negotiations: export subsidies, preferential trade arrangements, and marketing supply chains. It has looked carefully at how these institutions are actually implemented, how agricultural policy would evolve if they are reformed or disciplined under trade agreements, and what the implications are for world trade in agricultural commodities. Work on WTO negotiations has focused on export subsidies, showing the extent to which they still are needed to complement EU domestic agricultural policy in spite of their cost, and how they may arise indirectly under U.S. export credit and food aid programs as well as Canadian state trading. Work on preferential trade arrangements has examined the dynamics of investment in textile and clothing production capacity, hence exports, under the Caribbean Basin Initiative, focusing on lags in response to tariff preference margins, and on the success of agricultural commodity exports under that initiative when niche markets with few competitors are found. This latter result highlights the limited extent to which preference erosion will occur with new trade agreements in Latin America, such as the FTAA. Work on cocoa in West Africa has considered how structural adjustment left a need for government intervention to replace market institutions, and has worked with USAID efforts to build those institutions in a socially responsible manner.

Impacts
The results from this research are helping to shape the debate on agricultural policy reform and trade liberalization as negotiations on bilateral agreements, such as the Free Trade Agreement in the Americas, and in the WTO (hopefully) continue, and as the U.S. struggles to reform agricultural policy in a WTO compatible manner. Results have been presented to both domestic and international professional meetings, to industry and government forums, to policy makers in developing countries, and through collaboration with USDA, USAID and USTR to U.S. trade negotiators. Collaboration with government officials and private institutions in our trading partners has also taken place under this program, which has contributed directly to the design of USAID and IITA efforts in West Africa.

Publications

• Abbott, Philip and B. Adair Morse, How are Developing Countries Implementing TRQs? Chapter 5 in Agriculture and the New Trade Agenda from a Development Perspective: Interests and Options in the WTO 2000 Negotiations, M. Ingco, editor, Cambridge University Press, 2003.
• Abbott, Philip and Alex McCalla, Agriculture in the Macroeconomy, Handbook of Agricultural Economics, G. Rausser and B. Gardner, eds. North Holland, Chapter 32, 2002.
• Abbott, Philip, Review of Policy Reform in American Agriculture by David Orden, Robert Paarlberg and Terry Roe, in American Journal of Agricultural Economics 84(3), August 2002, 870-72.
• Abbott, Philip, Toward More Socially Responsible Cocoa Trade, Invited paper presented to the Theme day on Consumer Driven Agriculture and Trade at the Annual Meeting of the International Agricultural Research Consortium (IATRC), Monterrey, CA. IATRC Working Paper 03-3 http://agecon.lib.umn.edu/cgi-bin/pdf_view.pl?paperid=8545&ftype=.pdf December 15, 2002.
• Abbott, Philip and Linda Young, Export Competition Issues in the Doha Round, Invited paper presented at the International Conference Agricultural Policy reform and the WTO: Where are We heading?, Capri, Italy, June 23-26, 2003. http://www.ecostat.unical.it/2003agtradeconf/ June 24, 2003.
• Skripnitchenko, Anatoliy and Philip Abbott, Trade in Apparel to the U.S. under the Caribbean Basin Initiative: A Dynamic Investment Approach, paper presented at the International Conference Agricultural Policy reform and the WTO: Where are We heading?, Capri, Italy, June 23-26, http://www.ecostat.unical.it/2003agtradeconf/ June 26, 2003.
• Loper, Nathan, Philip Abbott and Ken Foster, Preferential Trade of Agricultural Commodities in the Caribbean Basin, Selected paper at the American Agricultural Economics Association 2003 Annual Meeting, July 27-30, 2003, Montreal, Canada. http://agecon.lib.umn.edu/cgi-bin/detailview.pl?paperid=9018 July 28, 2003.
• Skripnitchenko, Anatoliy and Philip Abbott, Preferential Trade Arrangements in Apparel Exports from the Caribbean to the U.S.: A Dynamic Investment Approach, Selected paper at the American Agricultural Economics Association 2003 Annual Meeting, July 27-30, 2003, Montreal, Canada. http://agecon.lib.umn.edu/cgi-bin/detailview.pl?paperid=8980 July 28, 2003.

Progress 10/01/01 to 09/30/02

Outputs
Agricultural trade negotiations under WTO auspices have begun as mandated in 2000, and are part of the new round of WTO negotiations launched at Doha in 2001as well as an important factor shaping U.S. domestic farm legislation. Bilateral negotiations on free trade agreements with individual trading partners (e.g. Jordan, Morocco, Chile) and in the region (FTAA) are also ongoing. Particular emphasis in all negotiations is placed on our trade relationships with developing countries. This project is examining four institutional arrangements critical to both developed and developing country agricultural trade policy, and contentious issues in future agricultural trade negotiations: state trading, tariff rate quotas, export subsidies and preferential trade arrangements. This project has looked carefully at how these institutions are actually implemented, how agricultural policy would evolve if they are reformed or disciplined under the WTO, and what the implications are for world trade in agricultural commodities. Research during the last year has focused on the Caribbean Basin Initiative (CBI) - an important preferential trade arrangement of the U.S. benefiting its neighboring trade partners - and on the demise of state trading in cocoa markets. Demonstrated benefits to agricultural initiatives under CBI are found to be sensitive to U.S. trade policy, and to the erosion of benefits as multilateral (WTO) trade liberalization proceeds. Problems faced by U.S. chocolate manufacturers and processors due to deteriorating quality have been examined by considering alternatives to the prior state trading arrangements, and the consequences of their elimination.

Impacts
The results from this research are helping to shape the debate on agricultural trade liberalization as negotiations in the WTO and on bilateral agreements, such as the Free Trade Agreement in the Americas, continue. Results have been presented to professional meeting, to policy makers in developing countries, and through collaboration with USDA, USAID and USTR to U.S. trade negotiators. Collaboration with government officials and private institutions in our trading partners has also taken place under this program.

Publications

• Abbott, Philip, "Tariff Rate Quotas: Failed Market Access Instruments?" European Review of Agricultural Economics 29(1), 2002, pp.109-130.
• Abbott, Phil, Mike Boehlje and Otto Doering, "Coming to Grips with Globalization," Choices, Winter 2001-2002, pp. 43-46.
• Linda M. Young, Philip C. Abbott and Susan Leetma, Export Competition: Issues and Options in the Agricultural Negotiations, IATRC Commissioned Paper Number 15, University of Minnesota, St. Paul, MN, May, 2001.
• Philip C. Abbott and B. Adair Morse, "Tariff Rate Quota Implementation and Administration by Developing Countries," in IATRC Commissioned Paper Number 13, Issues in Reforming Tariff Rate Import Quotas in the Agreement on Agriculture in the WTO, May 2001.
• Philip Abbott and Linda Young, "State Trading Enterprises and the WTO: Importing versus Exporting STEs," in Globalization and Agricultural Trade Policy, H. Michelmann, J. Rude, J. Stabler and G. Storey, ed., Lynn Reiner Publishers, May 2001.
• Philip Abbott and Alex McCalla, "Agriculture in the Macroeconomy," Handbook of Agricultural Economics, G. Rausser and B. Gardner, eds. North Holland, Chapter 32, 2002.

Progress 10/01/00 to 09/30/01

Outputs
Agricultural trade negotiations under WTO auspices have begun as mandated in 2000, and will be part of any new Round of WTO negotiations as well as an important factor shaping U.S. domestic farm legislation. This project is examining four institutional arrangements critical to both developed and developing country agricultural trade policy, and contentious issues in future WTO negotiations: state trading, tariff rate quotas, export subsidies and preferential trade arrangements. This project has looked carefully at how these institutions are actually implemented, how agricultural policy would evolve if they are reformed or disciplined under the WTO, and what the implications are for world trade in agricultural commodities. Institutional evolution to achieve underlying goals of agricultural policy, especially to stabilize domestic markets, will limit the extent to which changes in these institutional arrangements can truly liberalize agricultural trade. We found that direct export subsidies are now largely limited to the EU, although several developing countries would like to use them. These subsidies are critical to the implementation of CAP in its current form. The U.S. is criticized in the WTO for using export credit and food aid as implicit subsidies, while Canada and importing developing countries are the areas of concern for state trading. This project as examined the extent to which theses arrangements are used and constitute implicit subsidies, as well as their potential impacts. While each has a subsidy element, the extent of subsidization under implicit methods is less than under direct subsidies. In the case of preferential trade arrangements, we found that institutional mechanisms encouraging foreign investment were more important than marginal tariff reductions in encouraging new trade flows.

Impacts
The results from this research are helping to shape the debate on agricultural trade liberalization as the WTO seeks to open a new round of negotiations at the Doha Ministerial, and as agricultural negotiations continue. Results have been presented to professional meeting, to policy makers in developing countries and through collaboration with USDA and USTR to U.S. trade negotiators.

Publications

• ABBOTT, PC and BA MORSE, 'How are Developing Countries Implementing TRQs?' Chapter 5 in Agriculture and the New Trade Agenda from a Development Perspective: Interests and Options in the WTO 2000 Negotiations, M. Ingco, editor, Cambridge University Press, forthcoming 2001.
• ABBOTT, PC and BA MORSE, 'Tariff Rate Quota Implementation and Administration by Developing Countries,' Agricultural and Resource Economics Review 29:1, April, 2000.
• ABBOTT, PC and LM YOUNG, 'State Trading Enterprises and the WTO: Importing versus exporting STEs,' in Globalization and New Trade Rules for the 21st Century, G. Storey, ed., Westview press, May 2001.
• ABBOTT, PC and BA MORSE, 'Tariff Rate Quota Implementation and Administration by Developing Countries,' in IATRC Commissioned Paper Number 13, Issues in Reforming Tariff Rate Import Quotas in the Agreement on Agriculture in the WTO, November 2000.
• YOUNG, LM, PC ABBOTT and S LEETMA, 'Export Competition: Issues and Options in the Agricultural Negotiations,' IATRC Commissioned Paper Number 15, University of Minnesota, St. Paul, MN, May, 2001.
• MASTERS, WA and PC ABBOTT, 'The Impact of New Technology and New Institutions on Cocoa Marketing in West Africa: Bulk Transport and Identity Preservation,' report prepared for USAID, Bureau for Africa, September 2000.
• ABBOTT, PC, T ABDELKHALEK and BL SALINGER, 'Future Outlook for Morocco-U.S. Trade and Investment Relations,' report prepared for the U.S. Embassy, Rabat, Morocco, August 2000.
• ABBOTT, PC P AHO, BA MORSE, BL SALINGER and WE TYNER, Strategy for Expanding Morocco's Poultry Sector,' report prepared for the U.S. Grains Council, September 2000. ABBOTT, PC, Review of Policy Reform in American Agriculture by David Orden, Robert Paarlberg and Terry Roe, in American Journal of Agricultural Economics, forthcoming 2001.
• ABBOTT, PC and AM MCCALLA, 'Agriculture in the Macroeconomy,' Handbook of Agricultural Economics, G. Rausser and B. Gardner, eds. North Holland, forthcoming 2001.

Progress 10/01/99 to 09/30/00

Outputs
One area of conflict leading to failure of the Seattle meeting of the World Trade organization (WTO) concerned the role of the many new developing country members, and in particular how their agricultural trade regimes must be reformed to comply with WTO rules. This project is examining three institutional arrangements critical to developing country agricultural trade policy, and contentious issues in future WTO negotiations: state trading, tariff rate quotas, and preferential trade arrangements. This project has looked carefully at how these institutions are actually implemented in developing countries, how agricultural policy would evolve if they are reformed or disciplined under the WTO, and what the implications are for world trade in agricultural commodities. Institutional evolution to achieve underlying goals of agricultural policy, especially to stabilize domestic markets, will limit the extent to which changes in these institutional arrangements can truly liberalize agricultural trade. In the case of state trading, we found that protection by agricultural importers did not decline following reform or elimination of this institution, but did decline in response to the Uruguay Round agreement, and market shares are now less influenced by political considerations and more by commercial prospects. New state traders who were implementing tariff rate quotas were more likely to meet market access commitments than were other administrative mechanisms, and would often import more than their commitments at reduced tariffs in order to meet domestic market needs. But administrative constraints were seldom the reason for quota underfill. Inadequate market demand was more often the culprit, in spite of the substantial liberalization of agricultural policy regimes by developing countries. In the case of preferential trade arrangements, we found that institutional mechanisms encouraging foreign investment were more important than marginal tariff reductions in encouraging new trade flows.

Impacts
The results from this research are helping to shape the debate on agricultural trade liberalization as the WTO seeks to find its way toward opening a new round of negotiations. Results have been presented to professional meeting, to policy makers in developing countries and through collaboration with USDA to U.S. trade negotiators.

Publications

• Abbott, PC and BA Morse, "Tariff Rate Quota Implementation and Administration by Developing Countries," Agricultural and Resource Economics Review 29:1, April, 2000.
• Abbott, PC LM Young, "Wheat-Importing State Trading Enterprises: Impacts on the World Wheat Market", Canadian Journal of Agricultural Economics 47, 1999, 119-136.
• Abbott, PC, "Agricultural Commodity Production and Trade: A Trade Economists View on Filling U.S. Food Supply Gaps," Food Policy 24, 1999, 181-95.
• Abbott, PC and AM McCall, "Agriculture in the Macroeconomy," Handbook of Agricultural Economics, G. Rausser and B. Gardner, eds. North Holland, forthcoming 2000.
• Abbott, PC and BA Morse, "Tariff Rate Quota Implementation and Administration by Developing Countries," presented to the International Agricultural Trade Research Consortium, New Orleans, December, 1999, to be published as an IATRC Commissioned Paper.

Progress 10/01/98 to 09/30/99

Outputs
Trade outcomes are the consequence of interactions between supply and demand forces, and more importantly trade and domestic agricultural policy. Market outcomes reflect imperfectly competitive behavior by firms and governments, domestic farm policy objectives including stabilization and redistribution, and market and policy institutions. Both the 1994 Uruguay Round GATT Agreement on Agriculture, and the upcoming Millennium Round WTO negotiations seek to limit the extent to which trade policies protect special interests and bestow market power on farm groups, public agencies or intermediaries. This project seeks to incorporate into traditional approaches to trade policy analysis better representations of these public and private institutions, in order to better understand the evolution of world agricultural trade and the impact policy alternatives may have on that outcome. Research has examined stabilization policies, state trading, tariff rate quotas, export subsidies and taxes, and decisions by firms on how they will utilize trade or foreign investment to penetrate world markets. These polices and institutions have been shown to significantly affect market outcomes, and so the extent to which the promise of trade liberalization is realized. Research has also considered the interactions between trade and agricultural policies and macroeconomic policies and events as well as the adequacy of the American diet. While macroeconomic events are important determinants of agricultural sector outcomes, dietary impacts of agricultural policies are very limited.

Impacts
The results of this research are helping to shape the debate on trade liberalization reform in the 199 Millennium Round of World Trade Organization negotiations. Results have been presneted at the OECD, to developing country delegates of the WTO and to other researchers examingin agricultural trade issues.

Publications

• Abbott, PC and BA Morse, TRQ Implementation in Developing Countries, Proceeding of the World Bank/WTO conference on Agriculture and the New Trade Agenda in WTO 2000 Negotiations, Geneva, Switzerland, October 1-2, 1999.
• Abbott, PC Can US Agriculture Produce the Basic Foodstuffs Consistent with the Dietary Guidelines?"\ Agricultural Outlook Forum 1999: Proceedings, USDA, WAOB-Ycon-99,February, 1999, pp. 150-163.
• Abbott, PC, Competition Policy and Agricultural Trade, Proceedings of the OECD Workshop on Emerging Agricultural Trade Issues, Paris, France, October 1998.
• Young. LM and PC Abbott, Wheat Importing State Trading Enterprises: Impacts on the World Wheat Market, American Journal of Agricultural Economics, 80(5), December 1998.
• Abbott, PC, Agricultural Commodity Production and Trade: A Trade Economists View on Filling U.S. Food Supply Gaps, Food Policy 24, April, 1999, 181-95.
• Abbott, PC and PL Paarlberg, Tariff Rate Quotas: Structural and Stability Impacts in Growing Markets,Agricultural Economics 19, 1998, pp. 257-67.
• Solana, JB and PC Abbott, International Entry Mode Decisions by Agribusiness Firms: Distribution and Market Power, American Journal of Agricultural Economics 80, December 1998
• Kallio, P and PC ABbbott, Export Subsidies in International Agricultural Trade with Switching Costs, American Journal of Agricultural Economics, 80(5), December 1998.
• Abbott, PC, P Patterson and LM Young, Plans and Adjustment: A Structural Approach to Modeling Grain Importer Behavior. in World Agricultural Trade: Implications for Turkey, T. Yildirim, A. Schmitz and W.H. Furtan, eds. Westview Press, Boulder, CO, 1998.

Progress 10/01/97 to 09/30/98

Outputs
Trade outcomes are the consequence of interactions between supply and demand forces, and more importantly trade and domestic agricultural policy. Market outcomes reflect imperfectly competitive behavior by firms and governments, domestic farm policy objectives, and market and policy institutions. Both the Uruguay Round GATT Agreement on Agriculture, and any future GATT round seek to limit the extent to which these policies protect special interests and bestow market power on farm groups, public agencies or intermediaries. This project seeks to incorporate into traditional approaches to trade policy analysis better representations of these public and private institutions, in order to better understand the evolution of world agricultural trade. Research has examined stabilization policies, state trading, tariff rate quotas, export subsidies and taxes, and decisions by firms on how they will utilize trade or foreign investment to penetrate world markets. These polices and institutions have been shown to significantly affect market outcomes, and so the extent to which the promise of trade liberalization is realized.

Impacts
(N/A)

Publications

• ABBOTT, PC, "Competition Policy and Agricultural Trade", 1998. Proceedings of the OECD Workshop on Emerging Agricultural Trade Issues, OECD, Paris, France, October 1998.
• KALLIO, PK, 1998. "Export Subsidies in an Imperfectly Competitive Market When Market Share Matters: The Case of International Wheat Trade," PhD Dissertation, Department of Agricultural Economics, Purdue University, West Lafayette, IN, December 1997.
• SOLANA, JB, 1997. "Firm Strategies in International Markets: The Case of International Entry into the US Wine Industry," PhD Dissertation, Department of Agricultural Economics, Purdue University, West Lafayette, IN, December 1997.
• WALKER, JA, 1998. "Price Stability in Cereals Markets and the GATT Agreement on Agriculture," MS Thesis, Department of Agricultural Economics, Purdue University, West Lafayette, IN, August 1998.
• YOUNG, LM and PC ABBOTT, 1998. "Wheat Importing State Trading Enterprises: Impacts on the World Wheat Market,"American Journal of Agricultural Economics 80(5), December 1998 .
• KALLIO, P and PC ABBOTT, 1998. "Export Subsidies in International Agricultural Trade with Switching Costs," American Journal of Agricultural Economics, 80(5), December 1998.
• ABBOTT, PC AND JB SOLANA, 1998. "International Firms in the Manufacture and Distribution of Processed Foods," Global Markets for Processed Foods: Theoretical and Practical Issues, D.H. Pick, D.R. Henderson, J.D. Kinsey and I.M. Sheldon, eds., Westview Press, Boulder, CO, 1998.
• ABBOTT, PC, PL PATTERSON and LM YOUNG, 1998. "Plans and Adjustment: A Structural Approach to Modeling Grain Importer Behavior." World Agricultural Trade: Implications for Turkey, A. Schmitz, ed. Westview Press, Boulder, CO, 1998.

Progress 10/01/96 to 09/30/97

Outputs
Trade outcomes are the consequence of interactions between supply and demand forces, and more importantly trade and domestic agricultural policy. Policy decisions reflect imperfectly competitive behavior by firms and governments, domestic farm policy objectives, and market institutions. This project seeks to incorporate into traditional approaches to trade modeling and analysis better representations of these public and private institutions, in order to better understand the evolution of world agricultural trade. Research has examined state trading, tariff rate quotas, export subsidies when switching costs affect importer decisions, and decisions by firms on how they will utilize trade or foreign investment to penetrate world markets. These policies and institutions have been shown to significantly affect market outcomes, and so the extent to which the promise of trade liberalization is realized.

Impacts
(N/A)

Publications

• ABBOTT, PC and LM YOUNG, "Wheat Importing State Trading Enterprises: Impacts on World Markets," Research Discussion Paper, Trade Research Center, Montana State University, Bozeman, MT, December 1997.
• ABBOTT, PC and PL PAARLBERG, "Tariff Rate Quotas: Structural and Stability Impacts in Growing Markets," Agricultural Economics, forthcoming 1998.
• SOLANA, JB and PC ABBOTT, "International Entry Modes and Spanish Competitiveness in the US Wine Industry," Les Cahiers de l Institut Europeen de Vonjuncture Viti-Vinicole, 1, April 1997.
• ABBOTT, PC and JB SOLANA, "International Firms in the Manufacture and Distribution of Processed Foods," Global Markets for Processed Foods: Theoretical and Practical Issues, D.H. Pick, D.R. Henderson, J.D. Kinsey and I.M. Sheldon, eds., Westview Press, Boulder CO, 1998.
• ABBOTT, PC, T. HERTEL, W. MASTERS, P. PAARLBERG, J. SANDERS and W. TYNER, "International Trade," Chapter 3 in Food System 21, Gearing Up for the New Millenium, EC 710 Cooperative Extension Publication, Purdue University, West Lafayette IN, July 1992, pp. 45-79.
• SOLANA, JB, "Firm Strategies in International Markets: The Case of International Entry into the US Wine Industry," PhD Dissertation, Department of Agricultural Economics, Purdue University, West Lafayette IN, December 1997.
• KALLIO, PK, "Export Subsidies in an Imperfectly Competitive Market When Market Share Matters: The Case of International Wheat Trade," PhD Dissertation, Department of Agricultural Economics, Purdue University, West Lafayette IN, December 1997.

Progress 10/01/95 to 09/30/96

Outputs
New models of international agricultural trade are being developed using concepts and methods which better reflect institutions governing agricultural policy and trade. One focus of this project is on trade by developing countries -- increasingly important markets for US agricultural exports. Recently signed trade agreements such as GATT, NAFTA and MERCOSUR will impact policy and trade regimes in these countries, so models and methods have been developed to forecast the consequences of those changes. Reform of policy in importing countries has been studied in Morocco and Argentina, with emphasis on actual implementation of trade agreement provisions. Those studies have examined preferential trading, tariff rate quotas, and price stability post GATT in world grain markets. The second focus of this project deals with firm-level behavior in international markets, especially for processed food trade, and implications for trade policy. Firm strategies affecting foreign direct investment decisions, transactions costs in trade, market entry mode decisions, and market share determination under imperfect competition have been investigated. Consequences of these institutional features of markets have been used to examine the relative importance of determinants of competitiveness in international food markets.

Impacts
(N/A)

Publications

• PATTERSON, PM, PC ABBOTT and KW STIEGERT, iFirm-Level Competition in International Markets: The Impact of the Export Enhancement Program, Journal of Agricultural and Resource Economics, forthcoming December 1996.
• ABBOTT, PC and PKS KALLIO, Implications of Game Theory for Int'lAgr.Trade, American Journal of Agricultural Economics, 78, August, 1996.
• SOLANA ROSILLO, JB and PC ABBOTT, Estrategias de Internationalizacion de la Industria Alementaria:Revista Espanola de Economic Agraria, 174, Oct-Dec 1995 SHELDON, I and PC ABBOTT, editors. Industrial Organization and Trade in the FoodIndustries, Westview Press, Boulder, CO, 1996 ABBOTT, PC and JB SOLANA, International Firms in the Manufacture and Distribution of Processed Foods, Purdue Agr. Econ Dept Staff Paper 96-12,presented at Symposium on Global Markets for Processed Foods, June 28, 1996 ABBOTT, PC, WE TYNER a ABBOTT, PC and PL PAARLBERG, iTariff Rate Quotas: Structural and Stability Impacts,A submitted to Agricultural Economics.
• RECA, A, iForeign Direct Investment, Regional Integration and Processed Food Trade: The Case of MERCOSUR and ArgentinaA PhD Dissertation, , Department of Agricultural Economics, Supervised by PC Abbott, December 1996.

Progress 10/01/94 to 09/30/95

Outputs
New models of international agricultural trade are being developed using concepts and methods which better reflect the institutions governing agricultural policy and trade. One focus of the project is on trade by less developed countries -- an increasingly important market for US agricultural exports. The recently signed GATT agreement will impact policies and trade regimes in these countries, so models have been developed to forecast the consequences of those changes, Reforms of policy and their consequences in importing countries have been studied in Morocco and the Philippines. Lessons learned from that work have been incorporated into a modeling framework for international agricultural markets, which is based on behavioral assumptions relevant to parastatal marketing boards prevalent in those countries. Those models have been successful at explaining the limited role of world prices and foreign exchange shortages in short run import decisions, and the importance of long range planning by these agencies which is shaped by world market expectations. The second focus of this project deals with firm-level behavior in international markets, especially for processed food trade, and implications for trade policy. Firm strategies affecting investment decisions, transactions costs in trade, market entry decisions, and market share determination under imperfect competition have been investigated.

Impacts
(N/A)

Publications

Progress 10/01/93 to 09/30/94

Outputs
In this project, new models of international agricultural trade are developed using concepts and methods which better reflect the institutions governing agricultural trade. One focus of the project is on trade by less developed countries -- an important market for US agricultural exports. The recently signed GATT agreement will impact policies and trade regimes in these countries, so models have been developed to forecast the consequences of those changes. Lessons learned from that work has been incorporated into a modeling framework for international agricultural markets, which is based on behavioral assumptions relevant to parastatal marketing boards prevalent in those countries. Those models have been successful at explaining the limited role of world prices and foreign exchange shortages in short run import decisions, and the importance of long range planning by these agencies which is shaped by market expectations. The second focus of this research deals with firm behavior in those international markets, especially for processed food trade. Firm strategies affecting investment in sunk transactions costs, entry decisions, and market share determination under imperfect competition have been investigated. The consequences of these institutional features of markets have been used to examine the relative importance of determinants of competitiveness in international agricultural markets in addition to the market price.

Impacts
(N/A)

Publications

Progress 10/01/91 to 09/30/92

Outputs
The objective of this project is to examine issues in international ag trade & ag policy impacted by trade through use of economic models. Emphasis is placed on improving practice of ag trade modeling by specifying, testing, & verifying models which incorporate observed market institutions. Implications of empirical results for trade negotiations & U.S. ag policy are also being considered. One research focused on quantitative restrictions, quality standards in trade, examining inter-community & third country beef trade by the European Community. Results emphasize costs of market access restrictions & the need to look beyond tariffs to structure of non-tariff barriers, such as EC's animal health regulations & bilateral commercial agreements. Models predicting trade patterns under these restrictions are being developed. The 2nd project utilizes firm-level trade data published by Journal of Commerce, Piers Data Set, to analyze impact of market structure & firm-level behavior on international food product trade. Results found price discrimination by grain trading firms along different trade routes, according to degree of concentration (number of firms serving each individual trade route). Busier routes are less concentrated & more competitive, while routes carrying smaller volumes tend to have higher markups over US domestic prices. This work is being extended to higher value agri products, where it is expected the extent of price discrimination & magnitude of markups could be greater.

Impacts
(N/A)

Publications

Progress 10/01/90 to 09/30/91

Outputs
The objective of this research is to investigate relationships between agricultural trade and policy. Emphasis is placed on the use and improvement of modeling techniques and advanced theory in the development of forecasting and policy analysis tools. Implications of empirical results for international trade negotiations and U.S. agricultural policy are also being considered. One research project has focused on a firm level behavior in order to explain for processed agricultural products why market shares are determined as they are, to what extent market power plays a role, and what other institutional factors are critical to modeling international food markets. Subsidiary arrangements, intra-firm trade, long term contractual agreements, information networks, product differentiation, and transportation arrangements are being explored using the PIERS firm level data set published by the Journal of Commerce. Preliminary analysis of this data has shown evidence of high concentration ratios in international food product trade, with single firms often servicing a specific trade route. A second project has been exploring the impact of the European 1992 market unification program on trade patterns. Specific attention is given to intra-Community and third country trade impacts for beef. Results emphasize the costs of market access restrictions and the need to look beyond tariff equivalents to the structure of non-tariff barriers, such as the EC's animal health regulations and bilateral commercial agreements.

Impacts
(N/A)

Publications

Progress 10/01/89 to 09/30/90

Outputs
The objective of this research is to investigate relationships between agricultural trade and economic policy. Emphasis is placed on use and improvement of mathematical modeling techniques and advanced economic theory in development of forecasting and policy analysis tools. Recent research has shown that exporters' shares of agricultural import markets adjust according to mechanisms which differ substantially from a perfectly competitive market. Institutional barriers, product differentiation and systems of market organization affect how price signals are transmitted to domestic markets, and why price differentials exist among suppliers of seemingly homogeneous products. Price responsiveness faced by exporters (i.e. the elasticity of demand for exports), the effectiveness of trade policies, and future market developments are impacted by these rigidities in trade share adjustments. High value and processed agricultural products are especially prone to these effects. One continuing research project is looking at European Unification in 1992 and its impact on agricultural trade patterns. Special attention is given to intra-community and third county trade in beef and other animal products. A second thrust investigates reforms of food agencies in LDCs which maintain monopoly control over agricultural trade. These agencies seek to achieve food security and market stabilization objectives.

Impacts
(N/A)

Publications

Progress 10/01/88 to 09/30/89

Outputs
The objective of this research is to investigate relationships between agricultural trade and economic policy. Emphasis is placed on use and improvement of mathematical modeling techniques and advanced economic theory in development of forecasting and policy analysis tools. Recent research has shown that exporters' shares of agricultural import markets adjust according to mechanisms which differ substantially from a perfectly competitive market. Institutional barriers, product differentiation and systems of market organization affect how price signals are transmitted to domestic markets, and why price differentials exist among suppliers ofseemingly homogeneous products. Price responsiveness faced by exporters (i.e. the elasticity of demand for exports), the effectiveness of trade policies, and future market developments are impacted by these rigidities in trade share adjustments. High value processed agricultural products are especially prone to these effects. One continuing research project is looking at European Unification in 1992 and its impact on agricultural trade patterns. A second thrust investigates reforms of food agencies in LDCs which maintain monopoly control over agricultural trade to achieve food security and market stabilization objectives. Implications for international negotiations, such as the multi-lateral GATT negotiations are also considered.

Impacts
(N/A)

Publications

Progress 01/01/87 to 12/30/87

Outputs
The objective of this research is to investigate relationships between agricultural trade and economic policy. Emphasis is placed on use and improvement of mathematical modeling techniques and advanced economic theory in development of forecasting and policy analysis tools. Export promotion programs have been examined in both competitive and imperfectly competitive settings. While export promotion is seen as a necessary complement to existing agricultural policies in highly competitive international markets, export subsidies are found to be a relatively costly means of expanding U.S. agricultural exports beyond market determined levels. Research on the elasticity of export demand for U.S. agricultural commodities -- a key yet poorly understood parameter crucial to this assessment -- continues. Market structure and conduct of importers was found to be an important determinant of the price responsiveness of U.S. agricultural exports. Armington models have been developed and estimated to capture rigidities in market adjustments by importers. Models of retalliatory behavior based on conjectual variations are being developed to represent imperfectly competitive behavior of exporters. Foreign exchange and budgetary limitations of LDC governments are found to be important factors limiting the realization of comparative advantage in agricultural trade. Investment policy, especially towards agriculture, emerges as a key determinant of agricultural supply growth and so trading.

Impacts
(N/A)

Publications

Progress 01/01/86 to 12/30/86

Outputs
The objective of this research is to investigate relationships between agricultural trade and economic policy. Emphasis is placed on use and improvement of mathematical modeling techniques and advanced economic theory as both forecasting and policy analysis tools. The ultimate purpose is to examine what is likely to happen to international agricultural trade under alternative future scenarios. Both developed and developing countries are considered. Export promotion activities, and especially export subsidies, have been examined in both competitive and imperfectly competitive settings. While export promotion is seen as a necessary complement to existing agricultural policies in highly competitive international markets, export subsidies are found to be a relatively costly means of expanding U.S. agricultural exports beyond market determined levels. Research on the elasticity of export demand for U.S. agricultural commodities -- a key yet poorly understood parameter crucial to this assessment -- continues under this project. Emphasis has also been placed on agricultural comparative advantage, particularly for developing countries. Foreign exchange and budgetary limitations of LDC governments are seen as important factors limiting the realization of comparative advantage in international trade of agricultural commodities. Investment policy, especially towards agriculture, also emerges as a key determinant of agricultural supply growth and so future trading relationships.

Impacts
(N/A)

Publications

Progress 01/01/85 to 12/30/85

Outputs
The objective of this project is to investigate agricultural trade and economic policy. Export promotion activities by the United States have been considered in both competitive and imperfectly competitive settings. That research shows that policies which seek to augment the U.S. market share can be an important complement to the other components of U.S. agricultural policy. Additional research has examined the elasticity of demand for U.S. agricultural exports. This response of U.S. exports to prices is a key parameter both for the export promotion research and for research on other policy impacts when trade matters. Emphasis has also been placed on food security and comparative advantage in developing countries. Research on food security has examined a methodology for evaluating the operation of a public grain agency responsible for providing affordable food supplies to urban areas and to vulnerable groups while at the same time minimizing disincentives to agricultural producers. Foreign exchange considerations and import policy are seen as important dimensions to these problems. Work on comparative advantage argues that investment in agriculture is a key determinant of the pattern of production and trade across countries. Future investments by LDC's will be an important factor determining supply growth and the role of LDC's as markets for U.S. commodities.

Impacts
(N/A)

Publications

Progress 01/01/84 to 12/30/84

Outputs
The objective of this project is investigate the relationships between agricultural trade and economic policy. Emphasis is placed on use and improvement of mathematical modelling and advanced economic theory as both forecasting tools and policy analysis tools. The ultimate purpose is to examine what is likely to happen to levels of international agriculture trade under several possible policy options. Research under this project has focused on two areas. The first is the implications of the imperfectly competitive nature of international markets for policy effectiveness. Work with Paarlberg addressed the international market. Ongoing research is considering the effectiveness of agricultural export promotion by the U.S. government within this framework. The second area is concerned with development policy and agricultural trade. Emphasis has been placed on foregin exchange and debt problems in developing countries and the impact these have had in limiting agricultural markets. Development problems, especially foreign exchange shortages, and retalliation by competitors are found to be important factors affecting international agricultural trade and its impact on U.S. agricultural policy initiatives.

Impacts
(N/A)

Publications

Progress 01/01/83 to 12/30/83

Outputs
After growing rapidly in the l970's, the value of U.S. agricultural exports has declined in recent years. This is the result in part of policies which do not recognize the role of international trade. It is also because competition from other exporters has increased while demand has slackened. The Less Developed Countries and Eastern Europe accounted for much of the growth in U.S. ag trade, and they have been hit particularly hard by foreign debt problems and an inability to find export markets to generate foreign exchange to pay for ag imports. In this project, trends in production, consumption and trade of ag products with LDC's have been investigated, with emphasis on the implications of foreign exchange problems. It was found that protectionism by the U.S. and other developed countries as well as increased interest rates, and reduced foreign aid and lending, have contributed to the decline in U.S. ag exports. The role of the U.S. government and of government agencies in other countries has also been explored using an advance in game theory (conjectural variations) to incorporate the imperfectly competitive nature of international grain markets. This research suggests the U.S. policy-makers have misunderstood the functioning of the world market.

Impacts
(N/A)

Publications