Projecting agricultural distortions for a 2030 GTAP database

When sectoral and economy-wide modelers seek to analyse the effects of prospective structural and policy changes over coming decades, a common assumption in the baseline scenario is that trade-related policies do not change over the projection period. That may be reasonable for manufacturing protectionism, now that most major countries have liberalized most of their industrial market. Agricultural policies, however, remain highly distortive – and they have been evolving in fairly systematic ways. How different might such farm policy interventions be in, say, 2030 from those in 2004 (the base year of the latest GTAP protection database) in the absense of a Doha agreement to undertake multilateral policy reform? This paper addresses that question by drawing on the World Bank’s agricultural distortions database for 75 countries, political economy theory, a set of political econometric equations for the most important agricultural products, and knowledge of current WTO-bound tariffs. With those equations plus projections of pertinent variables from recent GTAP modeling, a set of agricultural price distortions is generated for the world in 2030. This provides an alternative to the common ‘business-as-usual’ projections approach of assuming the status quo will prevail on the policy front, and thus an opportunity for modelers to explore the extent to which results could differ depending on the chosen counterfactual against which future trade-liberalizing scenarios are compared.