# ANNEX 2: SIMULATION RESULTS WITH ICAC SUBSIDY SCENARIO

Annex 2 Table 1: Policy parameters used for the base period for the ICAC subsidy scenario 1/

 Applied tariff 2/ percent Domestic subsidies (\$ million) 3/ Ad valorem subsidy rate 4/ percent Brazil 0 47 8.98 China 1 2 027 37.5 Colombia 10 2 4.4 Egypt 0 17 6.0 EU 0 792 129.3 Mexico 0 22 9.1 Turkey 0 175 16.7 United States 1.6 1519 32.4 Weighted average/total 5/ 0.2 4 601 19.8

1/ The table only shows those countries that have one or more positive parameters (tariff or domestic subsidy). For all the rest of the countries in the ATPSM, both import tariffs and domestic subsidies on cotton were zero.

2/ As said in the text, these are actual tariffs that cotton imports face, and are either applied MFN rates or in-quota tariffs where there are tariff quotas (that are assumed - based on a review of recent policies - not to be binding).

3/ The levels of domestic subsides are based on the ICAC estimates and are simple averages for the period 1998-2000 from Table 1 in the text.

4/ These are ad valorem equivalent subsidy rates corresponding to the level of subsidies in column 2 and were computed as the ratio (percent) of per unit subsidy to world market price of cotton (see text for details).

5/ The second column is the sum of the numbers while the first and third columns are weighted averages. The weights used are import volumes (for 28 countries with 65 percent share of global import) for tariffs and cotton production shares for domestic subsidy rates.

Annex 2 Table 2: Impact on world market price of cotton following complete elimination of domestic subsidies and import tariffs, ICAC subsidy scenario

 Base scenario (S=1, D=1) Alternative assumptions about price elasticities of supply and demand 1/ S=3, D=1 S=3, D=0.25 S=1, D=0.25 S=0.5, D=1 Change in world cotton price (percent) 7.0 9.7 11.4 10.0 5.1

1/ The numbers next to S and D indicate multiples of the elasticity values in the base scenario. For example, the elasticities for the base scenario (S=1, D=1) are the same as in Annex 1 Table 2, while in the scenario S=3, D=0.25, the supply and demand elasticities assumed are 3 and 0.25 times their base values, respectively.

Source: ATPSM simulation results.

Annex 2 Table 3: Impact on production of full trade liberalization, ICAC subsidy scenario

 Base production (000 tonnes) Base scenario S=1, D=1 Assumptions on supply and demand elasticities 1/ S=3 D=1 S=3 D=0.25 S=1 D=0.25 S=0.5 D=1 --------------------- percentage change from base ---------------------- Australia 709 5.6 23.4 27.4 8.0 2.0 BBCM 2/ 530 5.6 23.4 27.4 -18.1 2.0 Brazil 421 -0.5 8.4 14.5 767.3 -1.4 China 4 311 -19.1 -47.2 -41.1 -93.4 -10.7 Egypt 275 1.0 9.7 13.8 31.3 -0.3 EU 488 -28.6 -79.0 -74.9 356.7 -15.0 India 1 991 8.4 35.1 41.2 -90.3 3.0 Mexico 190 -1.3 4.4 9.5 887.4 -1.6 Pakistan 1 678 8.4 35.1 41.2 -53.8 3.0 Turkey 834 -10.7 -22.1 -16.0 310.5 -6.5 United States 3 736 -10.9 -25.9 -21.9 -84.7 -6.2 World total 18 813 -4.9 -7.0 -2.2 -1.9 -3.4 Memo item: percentage change in world cotton price 7.0 9.7 11.4 10.0 5.1

1/ See the note in the previous table.
2/ BBCM sub-group includes Benin, Burkina Faso, Chad and Mali.
Source: ATPSM simulation results.

Annex 2 Table 4: Impact on exports of full trade liberalization, ICAC subsidy scenario

 Base exports (000 tonnes) Base scenario S=1, D=1 Assumptions on supply and demand elasticities 1/ S=3 D=1 S=3 D=0.25 S=1 D=0.25 S=0.5 D=1 --------------------- percentage change from base ---------------------- Australia 608 7.2 28.2 32.3 9.6 2.9 BBCM 2/ 384 9.3 34.4 38.5 -98.0 3.9 Brazil 7 -0.5 8.4 14.5 1210.7 -1.4 China 116 -19.1 -47.2 -41.1 -45.4 -10.7 Egypt 61 1.0 41.7 48.9 297.7 -0.3 EU 328 -28.6 -79.0 -74.9 -18.4 -15.0 India 90 196.7 839.8 852.4 -39.4 44.6 Mexico 53 -1.3 4.4 9.5 408.6 -1.6 Pakistan 105 167.9 636.1 625.6 -52.9 53.7 Turkey 53 -10.7 -22.1 -16.0 1982.5 -6.5 United States 1 214 -10.9 -25.9 -21.9 -64.6 -6.2 World total 5 394 6.7 32.4 36.0 8.9 1.1 Memo item: percentage change in world cotton price 7.0 9.7 11.4 10.0 5.1

1/ and 2/ - see previous two tables for explanation.
Source: ATPSM simulation results.

Annex 2 Table 5: Impact of complete liberalization on welfare measures, ICAC subsidy scenario1/ (base scenario and two others with extreme values)

 ----- Base scenario (S=1, D=1) ------- S=3, D=0.25 S=0.5, D=1 DPS DCS DGR DTS DPS DTS DPS DTS ------------------------------------- in million US\$ ------------------------------------------ Australia 64 -9 0 55 116 101 45 39 BBCM 2/ 48 -12 0 35 86 66 34 25 Brazil -5 -69 46 -29 19 -49 -15 -20 China -1108 -341 2021 571 -781 641 -1257 525 Egypt 3 -12 15 5 20 10 -3 4 EU -354 -95 795 346 -241 396 -393 333 India 181 -170 0 11 344 60 128 4 Mexico -5 -37 23 -19 6 -34 -9 -14 Pakistan 153 -139 0 14 290 57 108 6 Turkey -118 -21 148 9 -72 -8 -140 14 United States -837 -217 1520 466 -602 555 -944 418

1/Change in total welfare (DTS) = change in producer surplus (DPS) + change in consumer surplus (DCS) + change in government revenue or savings (DGR), which is savings resulting from the policy reform. Details are shown for the base scenario only because DGR is same for other scenarios also; so, given the DGR, the remaining difference between DTS and DPS is DCS.

2/ BBCM sub-group includes Benin, Burkina Faso, Chad and Mali.

Source: ATPSM simulation results.

Annex 2 Table 6: Impact on export earnings of complete liberalization, ICAC subsidy scenario

 Base values (million \$) Base scenario (S=1, D=1) Assumptions on supply and demand elasticities 1/ S=3 D=1 S=3 D=0.25 S=1 D=0.25 S=0.5 D=1 --------------- percentage change from base period values ----------------- Australia 763 15 41 47 21 8 BBCM 2/ 482 17 48 54 -98 9 Brazil 9 6 19 28 1342 4 China 145 -13 -42 -34 -40 -6 Egypt 76 8 56 66 338 5 EU 412 -24 -77 -72 -10 -11 India 112 217 931 961 -33 52 Mexico 67 6 15 22 460 3 Pakistan 132 187 708 708 -48 61 Turkey 67 -4 -15 -6 2192 -2 United States 1 522 -5 -19 -13 -61 -1 World total 6 763 14 45 52 20 6

Notes 1/ and 2/: See previous tables for explanation.
Source: ATPSM simulation results.