Source: UNIVERSITY OF ARKANSAS submitted to NRP
IMPLICATIONS OF TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP AND TRANS-PACIFIC PARTNERSHIP FOR FOOD PROCESSING SECTOR
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
COMPLETE
Funding Source
AFRI COMPETITIVE GRANT
Reporting Frequency
Annual
Accession No.
1008686
Grant No.
2016-67023-24811
Cumulative Award Amt.
$398,186.00
Proposal No.
2015-07514
Multistate No.
(N/A)
Project Start Date
Feb 1, 2016
Project End Date
Jan 31, 2021
Grant Year
2016
Program Code
[A1641]- Agriculture Economics and Rural Communities: Markets and Trade
Recipient Organization
UNIVERSITY OF ARKANSAS
(N/A)
FAYETTEVILLE,AR 72703
Performing Department
(N/A)
Non Technical Summary
Processed food exports increased from $37 billion in 1998 to $104 billion in 2012. Also, foreign direct investments in food production expanded from $108 billion in 1998 to $475 billion in 2012. Two major markets for U.S. food exports are the EU and East Asian countries, but these countries impose substantial tariff and non-tariff barriers. The United States is actively negotiating the Transatlantic Trade and Investment Partnership (TTIP) with the EU and Trans-Pacific Partnership (TPP) with Pacific Rim countries, which will enhance market access. Food processing firms vary in sizes and engage in monopolistic competition in highly differentiated products.The overall goal of this project is to comprehensively analyze the effects of TTIP and TPP trade liberalization on the processed food sector. The specific objectives are to1) formulate a theoretical model characterizing a) the monopolistic competition and firm-level heterogeneity and b) multinational enterprises to analyze the effects of trade and foreign direct investment in food processing;2) empirically quantify the effects of TTIP and TPP separately and simultaneously on a) the aggregate food processing industry and b) on each of the important segments: dairy products, beverages, meat products, and processed vegetables;3) draw policy implications and provide recommendations to policy makers and food processors.To analyze these trade agreements, we develop multi-country theoretical and empirical trade models consisting of consumers, heterogeneous firms operating in monopolistic competition with endogenous entry, operating, and exit decisions.This project addresses the priority areas: international trade; agricultural market structure and performance; agricultural policy design and impacts.
Animal Health Component
80%
Research Effort Categories
Basic
(N/A)
Applied
80%
Developmental
20%
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6065010301050%
6115010301030%
6095010301020%
Knowledge Area
611 - Foreign Policy and Programs; 609 - Economic Theory and Methods; 606 - International Trade and Development;

Subject Of Investigation
5010 - Food;

Field Of Science
3010 - Economics;
Goals / Objectives
The overall goal of this project is to comprehensively analyze the effects of TTIP and TPP trade liberalization on the value-added food and beverage sector. The specific objectives are to:1.formulate a theoretical model characterizing a.the monopolistic competition and firm-level heterogeneity in the food processing industry to analyze the effects of trade, and b.MNEs to assess the effects of cross-border FDI in the food processing sector;2.implement the theoretical model in objective 1 to empirically quantify the effects of i) TTIP between the United States and the European Union, ii) TPP between the United States and trans-Pacific countries, and iii) TTIP and TPP simultaneously on production, productivity, consumption, trade, and welfare for the a.aggregate food processing industry and b.prominent segments (dairy products, beverages, meat products, and processed vegetables) of this industry;3.draw policy implications from these trade liberalization analyses and provide recommendations for future trade agreements to policy makers and food producers.
Project Methods
The research methods involve development of the theoretical model and empirical model, which are general and flexible enough to accommodate a wide range of analyses of the food processing sector. Specifically, it can be used to analyze the aggregate food processing industry and also the individual segments (dairy products, beverages, meat products, and processed vegetables) of the industry.Once the model is calibrated, we will solve the model empirically for the endogenous variables such as prices, production, imports, exports, affiliate sales, consumption, employment, number of firms, welfare, and sectoral productivity measures. This initial simulation will be the benchmark or baseline scenario with the existing tariff and NTBs. Then we can run alternate scenarios by phasing out tariffs and using harmonized system of NTBs based on the negotiations of TTIP and TPP. The proposed alternate scenarios are * five TTIP trade agreement scenarios: 1. aggregate food processing industry, 2. dairy products, 3. beverages, 4. meat products, and 5. processed vegetables; * five TPP trade agreement scenarios: 1. aggregate food processing industry, 2. dairy products, 3. beverages, 4. meat products, and 5. processed vegetables; * five scenarios for simultaneous implementation of TTIP and TPP agreements: 1. aggregate food processing industry, 2. dairy products, 3. beverages, 4. meat products, and 5. processed vegetables; We will compare the results of each of the counterfactual scenarios to its respective benchmark scenario to analyze the impacts of these trade agreements. For the aggregate food processing sector, we examine industry level impacts of trade liberalization. However, for individual segments, we focus on unique characteristics of these markets.

Progress 02/01/16 to 01/31/21

Outputs
Target Audience:Agricultural economists, policy makers, commodity producers, manufacturing and retail sectors, trade policy negotiators. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?One PhD student obtained a publication. One post-doctoral research associate gained experience, publish one paper, and has one paper in review. How have the results been disseminated to communities of interest?The results have been disseminated through publications and presentations at professional meeting. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? 1. formulate a theoretical model characterizing (a) the monopolistic competition and firm-level heterogeneity in the food processing industry to analyze the effects of trade, and (b) MNEs to assess the effects of cross-border FDI in the food processing sector; 2. implement the theoretical model in objective 1 to empirically quantify the effects of i) TTIP between the United States and the European Union simultaneously on production, productivity, consumption, trade, and welfare for the (a) aggregate food processing industry and (b) prominent segments (dairy products, beverages, meat products, and processed vegetables) of this industry; 4. undertake empirical analysis to quantify the effects of CETA between Canada and the European Union on US processed food industry. 5. analyze the USMCA agreement along with immigration policies to study the effects on US labor-intensive production. 5. draw policy implications from these trade liberalization analyses and provide recommendations for future trade agreements to policy makers and food producers.

Publications

  • Type: Journal Articles Status: Published Year Published: 2016 Citation: " Jeff Luckstead and Stephen Devadoss (2016) Impacts of the Transatlantic Trade and Investment Partnership on Processed Food Trade under Monopolistic Competition and Firm Heterogeneity, American Journal of Agricultural Economics 98 (5): 1389-1402
  • Type: Journal Articles Status: Published Year Published: 2016 Citation: " Mahalingam Dhamodharan, Stephen Devadoss, and Jeff Luckstead (2016) Imperfect Competition, Trade Policies, and Technological Changes in the Orange Juice Market, Journal of Agricultural and Resource Economics, 41(2): 189203.
  • Type: Journal Articles Status: Published Year Published: 2018 Citation: " Stephen Devadoss and Jeff Luckstead (2018) Implications of the Comprehensive Economic and Trade Agreement for Processed Food Markets. Canadian Journal of Agricultural Economics, 66(3), 415-440.
  • Type: Journal Articles Status: Published Year Published: 2018 Citation: " Jeff Luckstead (2018) Asymmetric Exchange Rate Pass-Through in US Imports of Cocoa, Journal of Agricultural and Applied Economics, 50(3): 369-386.
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: " Jeff Luckstead and Stephen Devadoss (2019) Trade and FDI Liberalization in the Processed Food Market Under CETA, Journal of Agricultural and Resource Economics, 44(2): 267-290.
  • Type: Journal Articles Status: Published Year Published: 2020 Citation: " Stephen Devadoss, Jeff Luckstead, and Xin Zhao (2020) Implications of US Immigration Policies for North American Economies, Journal of Agricultural and Resource Economics, 45(1):161-178.
  • Type: Journal Articles Status: Under Review Year Published: 2020 Citation: " Xin Zhao, Jeff Luckstead, and Stephen Devadoss Decomposition of Extensive and Intensive Margin Impacts: An Application of CETA to Processed Food Markets, is under review at the Review of International Economics.


Progress 02/01/19 to 01/31/20

Outputs
Target Audience:Agricultural economists, policy makers, commodity producers, farm labor groups, and non-government agencies. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?One post-doctoral research associate has gained experience and publish a paper. How have the results been disseminated to communities of interest?The results have been disseminated through publications and conference presentations. What do you plan to do during the next reporting period to accomplish the goals?Complete the publication of the paper "Decomposition of Extensive and Intensive Margin Impacts: An Application of CETA to Processed Food Markets" which is under review.

Impacts
What was accomplished under these goals? 1. develop a theoretical model based on (a) firm-level trade theory and foreign direct investment in the food processing industry to analyze the effects of trade, and (b) MNEs to assess the effects of cross-border FDI in the food processing sector. 2. undertake empirical analysis to quantify the effects of CETA between Canada and the European Union on US processed food industry. 3. analyze the USMCA agreement along with immigration policies to study the effects on US labor-intensive production.

Publications

  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Jeff Luckstead and Stephen Devadoss. Trade and FDI Liberalization in the Processed Food Market Under CETA. Journal of Agricultural and Resource Economics, 44(2): 267-290, 2019.
  • Type: Journal Articles Status: Published Year Published: 2020 Citation: Stephen Devadoss, Jeff Luckstead, and Xin Zhao. Implications of US Immigration Policies for North American Economies. Journal of Agricultural and Resource Economics, 45(1):161-178, 2020.


Progress 02/01/18 to 01/31/19

Outputs
Target Audience:Agricultural economists, policy makers, commodity producers, farm labor groups, and non-government agencies. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?One post-doctoral research associate has gained experience and will likely publish a paper. Two undergraduate students gain research knowledge, literature review, and data collection & entry. How have the results been disseminated to communities of interest?The results have been disseminated through publications and presentations. What do you plan to do during the next reporting period to accomplish the goals?Complete the working paper "Decomposition of Extensive and Intensive Margin Impacts: An Application of CETA to Processed Food Markets" and submit it to a high-quality journal.

Impacts
What was accomplished under these goals? 1. formulate a theoretical model characterizing (a) the monopolistic competition and firm-level heterogeneity in the food processing industry to analyze the effects of trade, and (b) MNEs to assess the effects of cross-border FDI in the food processing sector; 2. implement the theoretical model in objective 1 to empirically quantify the effects ofTTIP between the United States and the European Union simultaneously on production, productivity, consumption, trade, and welfare for the (a) aggregate food processing industry and (b) prominent segments (dairy products, beverages, meat products, and processed vegetables) of this industry; 3. draw policy implications from these trade liberalization analyses and provide recommendations for future trade agreements to policy makers and food producers.

Publications

  • Type: Journal Articles Status: Published Year Published: 2018 Citation: Jeff Luckstead and Stephen Devadoss (2018) Trade and FDI Liberalization in the Processed Food Market Under CETA. Journal of Agricultural and Resource Economics, forthcoming.
  • Type: Journal Articles Status: Published Year Published: 2018 Citation: Jeff Luckstead. Asymmetric exchange rate pass-through in U.S. imports of cocoa. Journal of Agricultural and Applied Economics, 50(3):369-386, 2018.
  • Type: Journal Articles Status: Published Year Published: 2018 Citation: Stephen Devadoss and Jeff Luckstead. Implications of the Comprehensive Economic and Trade Agreement for Processed Food Markets. Canadian Journal of Agricultural Economics, 66(3):414-440, 2018.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2018 Citation: Jeff Luckstead Asymmetric Exchange Rate Pass-Through in U.S. Imports of Cocoa" paper presented at the Western Agricultural Economics Association annual meeting, Anchorage, Alaska, 2018.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2018 Citation: Stephen Devadoss and Jeff Luckstead Implications of CETA for Canadian, EU, and US Processed Food Markets" paper presented at the European Association of Agricultural Economists congress, Parma, Italy, 2017.


Progress 02/01/17 to 01/31/18

Outputs
Target Audience:Agricultural economists, policy makers, commodity producers, manufacturing and retail sectors.Agricultural economists, policy makers, commodity producers, manufacturing and retail sectors. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?This project funded graduate students who are trained in economic and trade theory, partial and general equilibrium models. These tools will be are very useful for undertaking research in this field. How have the results been disseminated to communities of interest?We presented papers at ASSA (Allied Social Sciences Association) and the European Association of Agricultural Economics15thCongress. What do you plan to do during the next reporting period to accomplish the goals?We plan to under another study related toMNEs to assess the effects of cross-border FDI in the food processing sector.

Impacts
What was accomplished under these goals? We developed the theoretical model for the Comprehensive Economic Trade Agreement between Canada and the European Union. Then we empirically implemented the model to quantify the effect of this agreement, not only on Canada and the European Union, but also the United States and the rest of the world processed food industry (dairy products, beverages, meat products, and processed vegetables). The results showed that the United States, by not participating in free trade agreements, faces adverse economic effects. We also examined the imperfect competition in U.S. cocoa imports and the implications for the chocolate subsector of the processed food industry.

Publications

  • Type: Journal Articles Status: Awaiting Publication Year Published: 2017 Citation: Stephen Devadoss and Jeff Luckstead, Implications of the Comprehensive Economic and Trade Agreement for Processed Food Markets, Canadian Journal of Agricultural Economics: Forthcoming. Jeff Luckstead, Asymmetric Exchange Rate Pass-Through in US Imports of Cocoa, Journal of Agricultural and Applied Economics, Revised and Resubmitted.


Progress 02/01/16 to 01/31/17

Outputs
Target Audience:Agricultural economists, policy makers, commodity producers, manufacturing and retail sectors. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?One graduate student worked on this project, generated a thesis, and a publication. How have the results been disseminated to communities of interest?We presented two papers at professional meetings and published two journal articles. What do you plan to do during the next reporting period to accomplish the goals?We are under taking two more studies in this project related to MNEs in TPP.

Impacts
What was accomplished under these goals? We developed the theoretical model, empirical analysis, and drew policy implicationsfor TTIP. This study was presented and published in the American Journal of Agricultural Economics. We analyzed imperfect competition and trade in orange juice market between Brazil, the EU, and the United States. This study was published in Journal of Agricultural and Resource Economics.

Publications

  • Type: Journal Articles Status: Published Year Published: 2016 Citation: Jeff Luckstead and Stephen Devadoss (2016) Impacts of the Transatlantic Trade and Investment Partnership on Processed Food Trade under Monopolistic Competition and Firm Heterogeneity, American Journal of Agricultural Economics 98 (5): 1389-1402
  • Type: Journal Articles Status: Published Year Published: 2016 Citation: Mahalingam Dhamodharan, Stephen Devadoss, and Jeff Luckstead (2016) Imperfect Competition, Trade Policies, and Technological Changes in the Orange Juice Market, Journal of Agricultural and Resource Economics, 41(2): 189203.