What's the big deal?. Estimates of agricultural trade benefits to the Spanish economy from a potential Doha agreement

Abstract

In the context of the Doha Development Round, the vast majority of computable general equilibrium studies examine agricultural trade led gains to developing countries, whilst European Union based studies are scarce and only one assessment exists in the case of Spain. This study also focuses on Spain, whilst developing the literature in two ways. Firstly, a more realistic representation of the agriculture sector is undertaken through modelling improvements to agricultural factor-, input- and product markets. Secondly, the policy scenarios now account for tariff "binding overhangs", thereby better reflecting the true level of market access from a potential agreement, whilst the trade led impacts are examined from the inclusion of "sensitive" product lines within the harmonised tariff formula. Through careful scenario design, protection and support reforms are implemented in three "Doha" experiments to reflect the current negotiations, each with different levels of tariff reductions (i.e., market access). Spain experiences equivalent variation (EV) losses in all scenarios reflecting shallower tariff reductions from the tariff binding overhangs, whilst EV losses are minimised when agro-food market access is increased due to allocative efficiency improvements. The size of the predicted EV losses are "broadly" in line with the literature, although specified modelling changes to the agricultural sectors result in a different set of conclusions with respect to price, output and trade balance trends. Finally, in our "likely" Doha scenario including sensitive tariff lines, potential global trade gains are severely limited whilst Spanish welfare losses are maximised.