TESTING INTERNATIONAL PRICE TRANSMISSION UNDER ...

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International Soft Wheat Markets Under Policy Intervention introduced “fully decoupled” support for most of the CAP payments (this is expected to have a bigger impact in terms of the reduction of the distortionary effects of the CAP than in terms of the reduction in farm support; Anania 2007, p. 4). All sectors untouched by the reform have undergone, or are currently undergoing, similar changes. As far as market regulations for wheat are concerned, intervention prices were not further reduced, but the monthly seasonal adjustments applied to them were halved. Figure 4.7 The Common Market Organization for cereals Variable levy Export subsidy Export tax EU internal price World price Indicative price Entry price Intervention price EU trade policies for soft wheat did elicit responses from other countries. In 1985, the US retaliated to the EU heavy use of export refunds with the Export Enhancement Program (EEP), a targeted export subsidy program for wheat. But the EEP didn’t alter substantially the EU-US price relationship, since, after its introduction, the EU might well have set its export subsidies in relation to US prices 44 (Mohanty et al. 1999, p.27). In practice, the EEP has not been used after August 1995. Tight world supplies and high world prices implied that the EU didn’t use export refunds than to a very limited extent, and the US didn’t reactivate the EEP (Barassi and Ghoshray 2007, p.79). Moving to agricultural trade agreements, the most relevant event in the period examined has been the institution of the World Trade Organization (WTO) in 44 Brooks et al. (1990) show that also the impact of the EEP on other exporters’ wheat trade and importers’ demand has been small relative to the magnitude of total EEP sales: over the period 1986-1989, the displacement of sales ranged from 87% to 92%, while additional exports were only 8% to 13% of the total. e tim 61
International Soft Wheat Markets Under Policy Intervention 1995, and the following implementation of the URAA, the first multilateral agreement explicitly referred to agriculture. The URAA regulates both domestic support and export subsidies. For the first, the EU always kept a safe margin with respect to the maximum ceilings allowed for distorsive support; for the latter, the limits established for wheat were never binding for the EU (Anania 2007b). As far as market access is concerned, the URAA abolished the possibility of keeping threshold prices and variable levies; with the “tariffication”, all border measures were converted into import duties to be lowered in the following six years 45 . The EU has then consolidated the duties for cereals under the General Agreement on Tariffs and Trade (GATT) agreement. However, some modifications were introduced in the so-called Blair House Agreement between the EU and the US. Due to the high levels of protections in the reference period chosen for the tariffication (the years 1986-1988), with regard to the main cereals, the tariff equivalents notified at the WTO were so high that a system for restricting duties was deemed necessary for the EU, in order to put a ceiling on the import entry price. The import entry price was then capped at 155% of the intervention price, if the sum of the duties would make it go above this threshold. The entry price turned out to be almost always capped, thus eliminating any real difference between the old variable levy system and the new one (see table 4.1) 62 Table 4.1 Elements for calculating the duty on cereals Import duty = 155% intervention price – cif reference price cif reference price = average US quotation for the reference variety during the receding two weeks + Gulf premium or Great Lakes premium* + Gulf Rotterdam or Great Lakes-Rotterdam freight premium* Intervention price = price in force including monthly increases at the time the duty is applied. There are five different wheat categories for which import duties are established. For all of these categories a US price is used to calculate the reference price. The duties are set every two weeks. *The first freight premium corresponds to the cost of freight across the United States to the Gulf (“Gulf premium”) if the commodity is quoted in Chicago or Kansas City, or to the Great Lakes (“Great Lakes” premium) if the commodity is quoted in Minneapolis. The second freight premium corresponds to freight from the United States (Gulf or Great Lakes) to the port of Rotterdam in the Netherlands. The day’s exchange rate is used for conversion. Source: Gallezot 2007, p.16 45 The reduction agreed was 36%, with a minimum reduction of 15% for each “8 digit” product of the Harmonized System codification; for agriculture, customs duties are for the most part specific duties, i.e., expressed in euro/t.
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TESTING INTERNATIONAL PRICE TRANSMI
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Associazione “Alessandro Bartola
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Index 1 INTRODUCTION ..............
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1 INTRODUCTION The notion of “pri
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Introduction These recent phenomena
Page 12: Introduction Whereas the Common Agr
Page 15 and 16: Price Transmission and the Law of O
Page 24 and 25: 3 EMPIRICAL TESTS FOR SPATIAL PRICE
Page 26 and 27: Empirical Tests for Spatial Price A
Page 32 and 33: = β 2 i0 Empirical Tests for Spati
Page 48 and 49: ∆p + t ∑ ⎡β⎤ ' ⎡ p t =
Page 54 and 55: 4 INTERNATIONAL SOFT WHEAT MARKETS
Page 56 and 57: International Soft Wheat Markets Un
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Page 70 and 71: 250 200 150 100 50 1978:12 Internat
Page 76 and 77: 5 EMPIRICAL ANALYSIS: COINTEGRATION
Page 78 and 79: Empirical Analysis: Cointegration M
Page 82 and 83: α LM test ARCH(13) Empirical Analy
Page 96 and 97: 6 EMPIRICAL ANALYSIS: COINTEGRATION
Page 110: Empirical Analysis: Cointegration M
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Concluding Remarks These models rep
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REFERENCES Alderman, H., 1992. Inte
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References agricultural policies: s
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References Isard, P., 1977. How far
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References Thompson, S. R., Sul, D.
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Annexes 124 Annex A - Empirical ana
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Annexes METHODOLOGY DATA USED MAJOR
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Annexes Variable swfr 138 Annex B -
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Annexes Variable swfr 140 Table B.3
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Annexes 142 Table B.7 - Unit root t
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Annexes 144 Table C.5 - Cointegrati
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Annexes 146 Table D.4 - Unit root t
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Annexes 148 Annex E - Unit root tes
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Annexes Table E.5 - Unit root tests
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The notion of “price transmission
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