2120 final report.pdf - Agra CEAS Consulting

APPENDIX 2: THIRD COUNTRIESfrom domestic producers with negligible imports or exports. By 2002 this situation had changedwith domestic supply contributing 87% of demand with the remainder evenly supplied from withinthe EU and third countries. Importantly, this trade is not restricted to processed egg products, thereis an almost equal contribution being made to the caged shell market (National Statistics, 2004).The inclusion of trade in EDMs, no matter how small the quantity or value of trade, has beenconsidered by Kinnucan (1999). Kinnucan examines the California egg industry with and without theincorporation of intra-US trade. He finds that the structure of the model, even for a commodity inwhich there is very little trade, does have an impact on estimates of producer and consumer surplus.The trade structure in our EDM draws on Kinnucan (1999) and Kinnucan and Myrland (2003) and isincluded because trade is becoming an ever more important feature of the egg market.Finally, the reason for building the EDM is to conduct policy analysis as it relates to Directive1999/74/EC and its impact on caged egg production. In the analysis a set of policy experiments thatcapture key policy changes that might be expected to occur are considered. These experimentsdescribe likely changes that will occur to exogenous variables (e.g., costs of production, trade tariffsand demand for different egg types) that result in changes in the initial equilibrium. In formulatingthese various policy experiments we have considered the most recent research regarding supply anddemand of eggs in the EU. In terms of trade relations, the EC Committee on Agriculture (2003) hasmade various proposals that impact on the egg sector and these are taken into account in thisresearch. In particular it is stated that import tariff reductions should on average be 36% with aminimum of 15%. For exports it is anticipated that subsidies will be cut by an average of 45%. Thesepercentage changes need to be borne in mind when modelling the policy experiments that arerelated to trade.Taking account of the above, Figure A3.1 provides a schematic representation of our EDM.403