Linking DefraTAP and Aglink models

Our modelling team uses both partial and general equilibrium models to investigate trade and policy reforms scenarios, e.g. CAP reform, FTAs, WTO, and their impact on the agricultural sector, with particular emphasis in the UK. General Equilibrium (GE) models are used in areas where a complicated set of policy adjustments is taking place as in Trade Agreements, when the repercussions extend beyond the agricultural sector. They capture the implications of international trade for the economy as a whole, covering the circular flow of income and expenditure and taking care of inter-industry relations, they are however limited in their detail of agricultural commodities coverage. In Partial Equilibrium (PE) models only one part of the economy is considered, neglecting what is happening in other markets and/or the rest of the economy. These models are used in areas where detailed analysis of specific products is required. We find, however, that each approach has both pros and cons. Unfortunately, we can’t have a model that does everything and as we are interested in using the pros from both models, one solution is to ‘link’ the models. Our GE model, DefraTAP, is built on the GTAP-AGR model with added specificity for EU agricultural policies. Our PE model (Aglink-Cosimo) is the product of collaboration between the OECD and FAO looking only at agriculture. We want to be able to use both models to answer policy related questions. We are following the approach of a sequential implementation of scenarios, where the outcome from one model serves as the input for the other. For CAP reform related work we are using the PE model, which better represents EU agricultural policy, to get the first round of results to then feed into the GE model and analyse the trade impacts. For FTA and WTO related work we run the GE model and use the results to feed into the PE and investigate the impact on EU agriculture. We have run the first round of scenarios with each model, i.e. PE for covering CAP reform and GE for covering FTAs and will now feed those into the other models. Results from the first round of scenarios are robust. We expect that once we feed in these results into the respective models we will get a better set of answers to our policy questions. This is because each model is used for what it was built for.