The Impact Of Groundnut Trade Liberalization: Implication For The Doha Round

We use a partial-equilibrium multi-market international model to analyze trade and agricultural policies affecting peanut/groundnut products markets. The model covers four goods (food and crush quality groundnuts, groundnut oil and cake) in 13 countries/regions including a large set of developing countries (Argentina, China, the Gambia, India, Malawi, Mexico, Nigeria, Senegal, and South Africa). Welfare is evaluated by looking at the consumer's equivalent variation, quasi-profits in farming (groundnut farming, livestock), quasi-profit in crushing, and taxpayers' revenues and outlays implied by distortions. We calibrate the model on recent historical data. We analyze several groundnut trade liberalization scenarios. The impact of the reforms is measured in deviation from the recent historical baseline. Trade liberalization in groundnut markets has a strong South-South dimension opposing two large developing countries (India and China) to smaller developing countries mainly located in Africa. Current Chinese and Indian policies substantially depress the world prices of edible groundnuts, groundnut oil and groundnut meal. Following the removal of these distortions, African exporters present in these world markets would gain because they are net sellers of the cash crops. Consumers in China and India would be better off as well with lower consumer prices resulting from the removal of high tariffs more than offsetting the higher world prices of groundnut oil. The cost of adjustment would fall on farmers in India and China who would have to shift to other crops or activities. Crushing in India would also decrease because crushing margins would deteriorate. Net buyers of groundnut products in OECD countries will be worse off. We draw implications for Doha negotiations.