GTAP. Small Group Project EU-South Africa FTA

Transcription

1 GTAP Small Group Project EU-South Africa FTA

2 Outline Introduction EU-SA FTA: Main Simulation Scott McDonald and Terrie Walmsley, Bilateral Free Trade Agreements and Customs Unions: The Impact of the EU- Republic of South Africa Trade Agreement on Botswana Background & Results EU-SA FTA: Extensions Unskilled labor closure effect and fixed real wage Segregating agriculture and industry liberalization Partial agriculture liberalization and EU expansion EU-SADC FTA and fixed real wage NAFTA-SA FTA (post EU-SA FTA) Conclusion

3 EU-SA FTA: main simulation Motivation Model key aspects Version Regions by Traded Commodities 5 Endowment commodities Closure Standard neoclassical GE closure Integration of African and Botswana realities Shocks Asymmetrical

4 EU-SA FTA: main simulation EU-SA FTA: Full Liberalization 75 SA ENDOW EU TOT $US millions 25 SA ALLOC EU ALLOC -25 bwa xsc sad xaf eur naf mer xeu xam xwo BWA TAXPOOL ROW ENDOW AllocEf TechEf PopEf TotEf IS EF PrefEf TaxpoolEf EndowEf

5 EU-SA FTA: main simulation Change in Commodity Exports ($Usm) bwa 2 xsc 3 sad 5 eur crops aag mine food tex hman lman utils cns serv Change in Commodity Imports ($Usm) bwa 2 xsc 3 sad 5 eur crops aag mine food tex hman lman utils cns serv Percent change in endowment price in S.A. pfe[**xsc] crops aag mine food tex hman lman utils cns serv Land SkLab Capital NatRes Percent change in endowment price in bwa pfe[**bwa] crops aag mine food tex hman lman utils cns serv Land SkLab Capital NatRes

6 Outline EU-SA FTA: Extensions Unskilled labor closure effect and fixed real wage Segregating agriculture and industry liberalization Partial agriculture liberalization and EU enlargement EU-SADC FTA and fixed real wage NAFTA-SA FTA (post EU-SA FTA)

7 5 EU-SA FTA: Fixed nominal wage vs Full employment 5 $US millions -5 bwa xsc sad xaf eur naf mer xeu xam xwo - -5 AllocEf TechEf PopEf TotEf IS EF PrefEf TaxpoolEf EndowEf

8 EU-SA FTA: Fixed nominal wage vs Full employment 8 $US millions bwa bwa xsc 2 xsc AllocEf TechEf PopEf TotEf IS EF PrefEf TaxpoolEf EndowEf

9 2 EU-SA FTA: Fixed nominal wage vs fixed real wage 5 $US millions 5-5 bwa xsc sad xaf eur naf mer xeu xam xwo - -5 AllocEf TechEf PopEf TotEf IS EF PrefEf TaxpoolEf EndowEf

10 2 EU-SA FTA: Fixed nominal wage vs fixed real wage 5 $US millions 5-5 bwa bwa xsc 2 xsc AllocEf TechEf PopEf TotEf IS EF PrefEf TaxpoolEf EndowEf

11 EU-SA FTA: Fixed nominal wage ppriv (Sim) bwa -.9 xsc -.94 sad -.3 xaf -.2 eur.2 naf -. mer -.7 xeu xam -.2 xwo -. share of private consumption b bwa 2 xsc crops aag.2 3 mine food tex hman lman utils cns serv.38.5 change in composit import pric bwa 2 xsc crops aag mine food tex hman lman utils cns. serv.

12 Outline EU-SA FTA: Extensions Unskilled labor closure effect and fixed real wage Segregating agriculture and industry liberalization Partial agriculture liberalization and EU enlargement EU-SADC FTA and fixed real wage NAFTA-SA FTA (post EU-SA FTA)

13 EU-SA FTA What is the experiment? - Liberalization of Industry btw. EU and South Africa - Comparison of welfare btw. full lib. and lib. of industry How? Making subsets and subtotals - ind (tex, hman, lman) - nind (crops, aag, food, mine, utils, cns, ser)

14 Wel. effect from full & ind. Lib. 5 full lib ind lib bwa xsc sad xaf eur naf mer xeu xam xwo

15 Welfare decomposition SA EU alleffr cgdsr endwr totr taxpool

16 Lib. of Industry btw. EU & SA Substantial welfare gain in EU - terms of trade effect: substantial component - reason: increase export price Welfare loss in SA - endowment effect - high unemployment

17 Lib. of Industry btw. EU & SA Edw. effect full lib. ind. lib. Tot effect full lib. ind. lib. SA SA EU EU

18 Outline EU-SA FTA: Extensions Unskilled labor closure effect and fixed real wage Segregating agriculture and industry liberalization Partial agriculture liberalization and EU enlargement EU-SADC FTA and fixed real wage NAFTA-SA FTA (post EU-SA FTA)

19 Welfare impacts with Full Liberalization and 25% Ag bwa bwa-25 xsc xsc-25 sad sad-25 xaf xaf-25 eur eur-25 xwo xwo-25 taxpool pref_g IS_F tot_e endw_b alloc_a -8-2

20 Changes in Export Volumes (25.) (35.) lman (65.9) (2.3) hman (3.8) tex (.9) (.7) food. (.2) aag (9.2) (9.) crops ag-25 full ag-25 full ag-25 full Commodity EUR XSC BWA

21 Subtotal - EU+XEU(Switzerland, rest of the EFTA, CEFTA) -Subtotal 2 full liberalization + 25% liberalization EU-XSC AG trade -Subtotal 3 full liberalization + 25% liberalization XEU-XSC AG trade TOTAL EV_ALT EU-XSC 25% EU enl + 25% Subtotal Subtotal 2 Subtotal 3 bwa xsc sad xaf eur naf mer xeu xam xwo total

22 - welfare bwa 2 xsc alloc_a endw_b tot_e IS_F taxpool Total sad xaf eur naf mer xeu xam xwo Total CNTendwr (Sim) Subtotal Subtotal 2 Subtotal 3 bwa xsc sad xaf xwo CNTendwir bwa xsc sad xaf xwo UnSkLab -,84 3,68-79,66-62, ,2

23 ALLOCAT CHANGE CNTalleffir bwa xsc eur xeu crops,4,37 42, 34,77 aag,, 83,58 287,58 food,66 75,29 3, ,5 food tms txs EU BWA -,43 XSC -,43 -,82 XEU -49,66-5,6 XEU BWA -8,85 XSC -8,85 -,76 EU -25,4-7,46 XSC EU -7,27 -,53 XEU -5,65 -,77 FOOD ps[food*] (Sim) Subtotal Subtotal 2 Subtotal 3 xeu -6,63-6,6 -, MSHRS(food, EU, XEU)=.66

24 Outline EU-SA FTA: Extensions Unskilled labor closure effect and fixed real wage Segregating agriculture and industry liberalization Partial agriculture liberalization and EU enlargement EU-SADC FTA and fixed real wage NAFTA-SA FTA (post EU-SA FTA)

25 Summarized welfare report EU SADC FTA alloc_ A 2 endw _B 3 tech_ C 4 pop_ D 5 tot_e 6 IS_F 7 pref_ G 8 taxpo ol Total bwa xsc sad eur Land 2 UnSkLab 3 SkLab 4 Capital 5 NatRes Total Endowment effect bwa xsc sad eur SAD: Demand for unskilled labor increases particularly in crops, food, services

26 Terms of Trade decomposition EU SADC pworld 2 pexport 3 pimport Total pworld 2 pexport 3 pimport Total crops 2 aag crops mine aag food mine tex food hman tex lman hman utils 7 lman cns utils 8 8 serv cns Total serv Total TOT effect reduced dramatically compared to original experiment (455.2); Positive TOT effect (was negative in original experiment); Export contribution has increased (was negative on aggregate in original experiment) Rise in import contribution food, textiles, lman; Fall in total export contribution of food (was positive in original experiment): from CNTtot(r), export contribution positive for BWA, XSC, SADC, but negative elsewhere; Sharp reduction in intra EU trade substitution effect

27 Change in commodity exports (US$m) Change in commodity imports (US$m) Services Construction Utilities LM HM Textiles Food Mining Animal agriculture Crop agriculture EU SADC XSC BWA Services Construction Utilities LM HM Textiles Food Mining Animal agriculture Crop agriculture EU SADC XSC BWA

28 Closure change Real wage of unskilled labor fixed in BWA, XSC, SAD, XAF, XWO welfare alloc_a 2 endw_b 3 tech_c 4 pop_d 5 tot_e 6 IS_F 7 pref_g 8 taxpool Total bwa xsc sad eur pfactreal(i,s) = pm(i,s) - ppriv(s) Ppriv (xsc) = -.2; ppriv (sad) = 5.3 ppriv(r) = sum{i,trad_comm, CONSHR(i,r)*pp(i,r)} pp(i,s) = PMSHR(i,s) * ppm(i,s) + [ - PMSHR(i,s)] * ppd(i,s)

29 Outline EU-SA FTA: Extensions Unskilled labor closure effect and fixed real wage Segregating agriculture and industry liberalization Partial agriculture liberalization and EU enlargement EU-SADC FTA and fixed real wage NAFTA-SA FTA (post EU-SA FTA)

30 Potential impact of SA NAFTA FTA Impact on GDP limited Welfare gains also limited SA: $376m, NAFTA: $48m Decomposition: SA benefits largely in textile NAFTA crops Endowment effect 5% increase in unskilled jobs NAFTA: capital Positive price effect in textiles negative in crops Changes in Real GDP (%) Rest of world. Rest of Americas. Rest of EU. MERCOSUR. NAFTA. EU. Rest of Africa -.4 Rest of SADC -.47 South Africa.246 Botswana

31 Impact on trade Minor changes for NAFTA except crops & food SA: impact in textiles crops and food Crop imports by SA lead to shift of endowments (land & capital) Imports into SA jump in crops & food & textiles NAFTA: mainly textiles Change in commodity exports crops aag mine food tex hman lman utils cns serv SA NAFTA

32 IMPACT OF AGOA AND SA-NAFTA 3 main conclusions: Changes in real GDP (%) I) SA and NAFTA have very little to gain from a FTA xwo xam xeu mer naf eur xaf sad xsc bwa AGOA FTA Source: Model simulations

33 bwa SA sad II) A NAFTA-SA FTA would reduce EV (Mill. US$) EU-SA FTA AGOA+ FTA world welfare AGO A FTA alloc_a SA nafta NAFTA+SA All other Regions Total AGOA+FTA AGOA FTA xaf eur endw_b SA AGOA+FTA 25.5 AGOA 84.6 FTA 66.9 NAFTA mer xeu xam nafta NAFTA+SA All other Regions Total xwo NAFTA+SA All other Regions tot_e SA nafta NAFTA+SA AGOA+FTA AGOA FTA Total All other Regions Total

34 III) Structural adjustment is limited to SA DEMAND FOR ENDOWMENTS SA crops aag food tex Land UnSkLab SkLab Capital NatRes -.