Work Package 7

EU impact assessment of free trade

Objectives

Perform ex-ante impact analysis from a EU-Mercosur trade liberalisation scenario, on EU key variables effecting markets, budgets, environment, rural development and social issues.

Description of work

• Define free-trade scenarios (tariff reduction over time, possible exemption etc., restrictions on domestic policies, social and environmental standards etc.) in close feed-back with the DGs involved. [2 person months]
• Translate scenarios into appropriate parameters and sub-models. In many cases, the scenarios are defined in a level of detail not suitable for the model. Typical examples are the multitude of tariff lines where a “representative” tariff and its reductions must be defined for the model. [2 person months]
• Perform impact analysis of scenarios. Based on the scenario definition provided by step 3 of the work package, the impact analysis will be performed based on the CAPRI modelling system. That includes at the one hand running the system, but more importantly to check and analyse carefully the results. Eventually, scenario definition and translation in the modelling systems needs to be modified in some points if the results hint at mutually incompatible assumptions. The results will be discussed in a report, which will feature tables, diagram and maps. The following impacts will be included: (1) welfare analysis at Member State, EU level and Mercosur country level (agricultural profits, profits of certain processing industries, effect on consumer welfare as well as effects on the FEOGA budget), as well as (2) impact on environmental indicators (nutrient balances, output of climate relevant gases, water balances, landscape indicator), farm income and employment in the agricultural sector at EU Nuts II level, (3) impact on production, consumption and trade at EU level for important agricultural products.[6 person months]
• Perform sensitivity analysis for different Mercosur commodity competitiveness levels. For selected scenarios, the analysis will be repeated for different assumption regarding production costs and production potential for certain product/country combinations.

Deliverables

D18 Free-trade scenarios defined and implemented into CAPRI model [24,O,RE]
D19 Model runs [30,O,RE]
D20 Sensitivity analysis [32,O,RE]
D21 Report on impact analysis [34,R,RE]

Milestones and expected results

M18 Free trade scenarios defined [24]
M19 Impact analysis performed [33]