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Daneswar Poonyth and Ramesh Sharma[60]

This paper assesses the likely impact of the draft Harbinson modalities, along with the EU and US proposals, for the ongoing agricultural negotiations. The impact is assessed on three country groups: developed, least-developed (LDCs) and rest of the developing countries. A number of indicators are used for the assessment, notably welfare and trade outcomes. Many of the results, simulated with the ATPSM model, are standard and relatively straightforward to explain, e.g. further trade liberalization raises world prices of farm products, lowers producer surpluses in developed countries while consumers gain. The impact on the two developing country groups is mixed, particularly on the LDCs. The US proposal appeared to be most attractive for all three country groups in terms of total welfare, dominated by consumer surpluses. However, the ranking of the modalities varies according to impact indicator, with other modalities appearing more attractive for other indicators. The key result of the study - that total welfare is high due to consumer surplus and not because of producer gains - raises some important questions about the choice of the right impact indicator, and of the trade-offs involved, especially for low-income agrarian economies like the LDCs that must first develop their agricultural sector. For them, agricultural development is the need of the day and this requires sustained gains in producer surpluses. A different ranking of the modalities flows when producer gain is the main impact indicator. The paper presents a range of results and discusses the trade-offs, with the hope that trade negotiators and policy makers find these to be useful as they negotiate for the final form of the modalities.

[59] ATPSM: Agricultural Trade Policy Simulation Model.
[60] Daneswar Poonyth and Ramesh Sharma are Economist and Senior Economist, Commodity Policy and Projections Service, Commodities and Trade Division, FAO. The authors would like to thank Alexander Sarris, Director, Commodities and Trade Division, FAO for his support, and Hansdeep Khaira of the Commodity Policy and Projections Service for his contribution to this paper.

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