Global Competitiveness - RIRDC Completed Projects in 2005--2006 & Research in Progress as at June 2006

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RIRDC Completed Projects in 2005-2006 & Research in Progress as at June 2006
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Global Competitiveness - Completed Projects

New market opportunities for the food sector

PROJECT No PROJECT TITLE RESEARCHER PHONE ORGANISATION

ANU-51A Global demographic and income trends: Their impact on food consumption Dr Rod Tyers (02) 6125 3364 Australian National University

Domestic impediments to industry performance

PROJECT No PROJECT TITLE RESEARCHER PHONE ORGANISATION

AEC-4A Farm to port logistics chain: road and rail neutrality and efficiency Mr Stephen Corcoran (02) 6273 1222 Access Economics Pty Ltd

Trade policy reform

PROJECT No PROJECT TITLE RESEARCHER PHONE ORGANISATION

CIE-13A Preferential access, trade reform, the US farm bill and Presidential briefing paper on trade policy for incoming US President Dr Andrew Stoeckel (02) 6245 7800 Centre for International Economics

CIE-23A Structural adjustment options for agriculture in protected markets Dr Andrew Stoeckel (02) 6245 7800 Centre for International Economics

CIE-28A Role of transparency in liberalising agricultural trade Dr Andrew Stoeckel (02) 6245 7800 Centre for International Economics

DAH-1A Industry adjustment to agricultural trade liberalisation Mr David Harris (03) 9889 9879 DN Harris & Associates

DAH-2A The effect of technical requirements on trade in agricultural products Mr David Harris (03) 9889 9879 DN Harris & Associates

New market opportunities for the food sector

Project Title Global demographic and income trends: Their impact on food consumption

RIRDC Project No.: ANU-51A

Researcher: Ron Duncan, Rod Tyers, Chris Wilson, Qun Shi and Ming Ming Chan

Organisation: School of Economics
Faculty of Economics and Commerce, Bldg 26
Australian National University
Canberra, ACT 0200

Phone: (02) 6125 3364

Fax: (02) 6125 5124

Email: rod.tyers@anu.edu.au

Objectives ·1 To examine the implications of slower global population growth for economic performance in general and the growth of the food sector in particular.

Background The fertility declines associated with the concluding global demographic transition have been surprisingly rapid, leading to accelerated ageing of populations in developed countries and in several advanced developing countries and to frequent downward revisions in population projections. Reduced population growth, combined with ageing, affects labour force size and composition, saving rates and the composition of consumption. Demographic change therefore has important implications for the scale and future performance of the economy as a whole and the food sector in particular.

Research 1. Errors in previous projections of the global population are examined using new demographic forecasting techniques.
2. These errors are evaluated for their for global growth and Australian food export performance using the standard global economic model, GTAP-Dynamic.
3. A new global demographic model is introduced for the analysis of changes in population sizes, age distributions and gender compositions. The implications for economic performance and food sector growth are then examined using a specially constructed version of the GTAP-Dynamic global economic model that represents age and gender distributions of populations in each region.

Outcomes 1. Global population projections, including those by the United Nations, are found to have overestimated current and projected population levels.
2. Corrections for population forecast errors are found to justify modest but significant reductions in Australia’s forecast food exports.
3. When the full demographic structures of regional populations are accounted for, the combination of ageing with slower population growth is found to cause declines in saving and in food demand in advanced countries. While the tendency to retard overall economic growth and the performance of the food sector is larger when changes in demographic structure are accounted for, it is partially offset by the opposing tendency, for ageing to raise very young populations in developing regions into fertile and high saving age groups and hence to raise saving and food demand in those regions.

Implications The recognition that slower global population growth and ageing are here to stay should reduce the tendency by some to use alarmist overpopulation claims to justify new but low-returning investments in "appropriate" agricultural technology in developing countries. Nonetheless, substantial new investment and factor productivity growth in the food sector, generally but particularly in food exporting countries, will be required to meet projected global demands that are only modestly offset by slower global population growth.

Publications Duncan, R. and C. Wilson (2004), Global Population Projections: is the UN getting it wrong? RIRDC Report No 04/041.
Duncan, R., Q. Shi and R. Tyers (2005), Global Demographic Change and Demand for Food in Australia, RIRDC Report No 05/014.
Tyers, R., Q. Shi and M.M. Chan (2005), Global Demographic Change and Economic Performance: Implications for the Food Sector, to be published by RIRDC.

Domestic Impediments to Industry Performance

Project Title Farm to port logistics chain: Road and rail neutrality and efficiency

RIRDC Project No.: AEC-4A

Researcher: Mr Stephen Corcoran

Organisation: Access Economics Pty Ltd
PO Box 6248
KINGSTON ACT 2604

Phone: (02) 6273 1222

Fax: (02) 6273 1223

Email: Stephen.Corcoran@AccessEconomics.com.au

Objectives ·1 The hypothesis Access Economics intends to test is whether the cumulative impact of various local, state, federal and private sector interventions in the rural export logistics chain have caused a wedge between the true economic cost and actual price of road-based logistics relative to rail-based logistics, and, for both, absolutely.
·2 The strategy for testing this hypothesis is to prepare a detailed line-by-line breakdown of the various components of the logistics chain and the various taxes, subsidies, regulations, funding and other imposts which distort the cost of each component.

Background The project was a response to concerns raised by the Project Steering Group (PSG) during a previous RIRDC-sponsored project Evaluating Logistics Chain Technology: Australian Farmgate to Port. During that project, PSG members noted several situations where a decision was taken about one link in the logistics chain (based on narrow criteria) without considering the upstream and downstream impacts of that decision on the entire logistics chain.
In the past there has been considerable research into comparing road and rail transport, including relative costs, funding and emissions. However, the logistics of delivering goods from farmgate to port involves a broader range of activities than just hauling goods via road or rail, such as procurement, packaging, consolidation, storage, handling, intermodal transfers, empty container repositioning, backloading, and inventory management. In a supply chain sense road and rail are also often both involved to vary degrees and are often not mutually exclusive modal choices. Furthermore, most previous research has paid little (or ad hoc) attention to other non-monetary regulations such as speed and mass limits, travel times and travel route restrictions. Consequently the project aimed to make a holistic comparison of road-based and rail-based rural export logistics chains.
Underlying the project is the question of whether any distortions in taxation, funding, subsidies and regulations are resulting in an allocation of resources that does not achieve an efficient allocation of resources and hence may be inconsistent with maximising the overall living standards of Australians.
The rural export logistics chain is not the planning responsibility of one organisation – rather Federal, State & Local governments and the private sector all make decisions impacting on multiple parts of the rural export logistics chain. The incentives driving these decision makers often differ considerably from costs and benefits of these decisions to the rural export logistics chain as a whole. Poor, fragmented and inconsistent decision making, cost shifting, short-term planning, and misdirected resources cause actual prices faced by exporter to diverge from the true economic costs, ultimately resulting in a sub-optimal and inefficient rural exports logistics chain decisions.

Research The research for the project comprised five components: 1. A detailed literature review of similar studies, the development of complex, inter-relating cost models for speed/accidents and fuel/road maintenance/mass, and the identification of a broad range of cost parameters.
2. The identification of any Federal, State and Local Government and private sector interventions in the logistics chain, including any subsidy, funding, excise, rebate, regulation, tax or other non-financial impost (such as access regimes, operating standards or safety standards) which distort transport prices from the true economic cost of provision.
3. The development of a user-friendly Excel model, which combines all available data on the private monetary and non-monetary costs, and the social costs of transporting a good from the farmgate to port.
4. Calibration of the model based on the general freight rates of four theoretical farm-to-port logistics chains to ensure that the model results align to the real world as much as possible.
5. Development of two case studies to illustrate how the tool can be used to help guide decision making.

Outcomes The main output of this project was the development of a user-friendly Excel spreadsheet model, which applies economic theory to estimate the monetary, market and socioeconomic costs of alternative road-based and rail-based logistics chains.
The model enables the user to determine:
·1 where various Federal, State and Local Government interventions may have (or may potentially) distort decisions away from a socially optimal level;
·2 whether these interventions under- or over-recover for externalities;
·3 the impact of non-monetary government interventions; and
·4 whether any new government charges and interventions across transport modes achieve efficient outcomes and competitive neutrality.
The model displays the results in both spreadsheet and chart form. An options page allows the user to change key parameters in order to simulate different scenarios. Because the model was built using an Excel platform, future modification and refinement by users is facilitated, as well as ensuring portability. A brief user manual has also been developed.

Implications By providing detailed data on the overall net impact of government interventions on the rural export logistics chain and demonstrating the consequences of these decisions on distorting modal choice, the project aimed to increase awareness among decision makers of the implications of their decisions on rural exporters and ultimately reduce the economic resources required to move exports from farmgate to port and increase Australia’s global competitiveness.

Publications A report, user guide and Excel-based modelling tool have been created as the outputs of the research project.

Trade policy reform

Project Title Preferential access, trade reform, the US farm bill and Presidential briefing paper on trade policy for incoming US President

RIRDC Project No.: CIE-13A

Researcher: Dr Andrew Stoeckel

Organisation: Centre for International Economics

Phone: 02 6245 7800

Fax: 02 6245 7888

Email: astoeckel@thecie.com.au

Objectives To foster an improved global trading environment for agriculture that gives greater access to Australian agricultural exports. The project had five sub-objectives 1. To appraise the dangers to the world trading system if more preferential access is granted to developing countries.
2. How the US Farm Bill will affect world agricultural access.
3. How to break the impasse in the WTO Doha round of trade talks.
4. Advice to Cairns Group Farm leaders on the formulae based access proposals debated by negotiators.
5. To have the United States adopt an effective strategy to make the Doha Round of trade talks a success.

Background Australian agricultural is highly dependent on access to world markets for its success. Agriculture remains one of the most protected sectors in the world. There is no one single cause or solution to this problem so several aspects have to be evaluated. The five components above address separate aspects of this same problem of high protection for agriculture. They target the problems of preferential access, the US Farm Bill, the failings in the WTO itself, the problems with the current approaches by negotiators to reduce protection and development of a strategy to shape US policy for the better.

Research A series of studies were produced addressing each of the above aspects and seminars presented where relevant. The studies showed that preferential trade was harmful to world agricultural trade reform, that a strategy was required for the US to move off its farm protection path and that proposals advanced by the EU and others for reducing tariffs would not in fact achieve anything substantial.

Outcomes Several RIRDC publications and seminars were produced (see below). Parts of these studies have been quoted and used by the World Bank including copyright approval to reproduce one complete chapter for a study of their own. A major workshop was held near Washington in conjunction with the Cordell Hull Institute on the US Farm Bill that included leading thinkers and former US Trade Ambassadors. Another seminar was held with the Cairns Group Farm Leaders in Washington and the pressure from the group helped kill off the negotiating proposals at the time that would have resulted in little trade reform. Finally, new thinking on a better strategy by the US to pursue more open farm trade has begun by influential people associated with the Washington-based Cordell Hull Institute.

Implications On-going efforts are required on several fronts to keep pushing for a better deal on access for world agricultural products. Some two thirds of the value of Australian agriculture is exported so access to those markets remains a vital issue for farm prosperity. The US remains the world’s superpower so changing thinking in US policy circles including the Cordell Hull think-tank as well as influencing US based institutions such as the World Bank remain important.

Publications Publications have been Preferential Trade and Developing Countries: Bad Aid, Bad Trade; Opportunity of a Century to Liberalise Farm Trade; Termites in the Basement: To Free Up Trade, Fix the WTO Foundations and an internal paper on the US Presidential briefing was submitted to RIRDC.

Project Title Structural adjustment options for agriculture in protected markets

RIRDC Project No.: CIE-23A

Researcher: Dr Andrew Stoeckel

Organisation: Centre for International Economics
GPO Box 2203
CANBERRA ACT 2601

Phone: 02 6245 7800

Fax: 02 6245 7888

Email: astoeckel@thecie.com.au

Objectives ·1 To focus the debate on world agricultural trade liberalisation by emphasising the structural adjustment issue

Background Farmers in protected markets do not want to liberalise agriculture for fear of the painful adjustment that will follow. But the experience with Japanese beef liberalisation in 1991 and removal of subsidies for New Zealand agriculture in the 1980s shows this fear is overstated. Japanese domestic beef production has expanded since liberalisation! And New Zealand agriculture continues to prosper. This study builds on RIRDC project DAH-1A on Industry Adjustment to Support Agricultural Trade Liberalisation.

Research A series of international case studies of agricultural adjustment in industries where protection has been removed (or lowered) will be described to show that ‘Armageddon’ has not arrived when protection is removed. It will show that in fact, the industries have survived and prospered— albeit with considerable adjustment. Some modelling with GTAP has shown that, when everybody reforms across industries and countries the adjustment costs are far fewer.

Outcomes The study has highlighted the adjustment policies that are best used when protection is removed and has shifted the world agricultural trade debate from ‘should we use protection’ to ‘how do we go about removing it’. It helps allay unnecessary fears about adjustment, and has moved the debate forward thereby enhancing the prospects for trade liberalisation.

Implications The implications from this research are that the logic behind a bold multilateral reduction in trade barriers needs to be articulated. Countries, and industries within countries, analyse the implications of a reduction in protection through their own eyes and do not consider the broader offsetting changes that occur when all countries and all industries remove protection. When everyone acts boldly together and removes protection the adjustment costs are far smaller and the gains far bigger.

Publications A draft publication: Structural adjustment needs and options for farmers after the Doha Round has been prepared.

Project Title Role of transparency in liberalising agricultural trade

RIRDC Project No.: CIE-28A

Researcher: Dr Andrew Stoeckel

Organisation: Centre for International Economics
GPO Box 2203
CANBERRA ACT 2601

Phone: (02) 6245 7800

Fax: (02) 6245 7888

Email: astoeckel@thecie.com.au

Objectives ·1 The objective of this project is to advance trade liberalisation for world agriculture by highlighting and explaining the valuable role transparency can play in leading to better policy outcomes.

Background This paper is listed on the 26^th Conference of the International Association of Agricultural Economists (IAAE): Contributions of Agricultural Economics to Critical Policy program, on Wednesday, 16 August 2006.

Research The paper demonstrated the potential for better transparency of trade policy to liberalise world agricultural markets.

Outcomes The paper was well received and noted by some of the senior officials and academics dealing with trade policy and agriculture today.

Implications If countries adopted better transparency processes of their trade policies, protection would fall, trade would expand and incomes would rise, including those of Australian farmers. The ideas need promulgating widely and developing the specifics behind transparency of trade policy. A follow-up RIRDC project (CIE-30A, Pursuing trade liberalisation by enhancing the WTO’s transparency of trade policy) does this.

Publications CIE report, Transparency, Australian Policy Processes and International Trade, prepared for the 26^th Conference of the IAAE: Contributions of Agricultural Economics to Critical Policy Program, Gold Coast, Australia, 16 August 2006.

Project Title Industry adjustment to agricultural trade liberalisation

RIRDC Project No.: DAH-1A

Researcher: Mr David Harris

Organisation: D. N Harris & Associates
8 Irvine Street
GLEN IRIS VIC 3146

Phone: (03) 9889 9879

Fax:

Email: dnharris@hotkey.net.au

Objectives Evaluate the policy options for managing industry adjustment pressures created by trade policy reform. Describe the principles of adjustment policy that facilitates change and promotes industry competitiveness. Influence the development of adjustment policy for industries with import protection and those competing on the export markets.

Background Agricultural trade negotiations require governments to implement policy reforms. But there is often a reluctance to lower trade barriers and reduce industry support because of concerns about the ability of farmers to adjust. Resistance to reform has been evident in discussions on the current WTO trade negotiations.

Research The standard arguments against agricultural policy reform take a static view of farmer responses to changes in net returns. Four industry case studies were examined—dairy, citrus, pigs and rock lobsters. Each involved a different type of reform and a different approach to implementation.

Outcomes The case studies show farmers adjusted to the change in market conditions. Some older farmers retired and others moved into vocations outside agriculture. Those that remained improved the physical and financial performance of their farm by diversifying, increasing output or making efficiency gains. In each case the impact of the reform was not as severe as expected. After a period of adjustment the industry’s performance improved.

Implications Removing price-support programs does not automatically lead to an industry contraction. In three cases transitional assistance were provided to help farmers adjust. The key principles were assistance was provided for a limited period and market prices directed the adjustment. It shows that long term income supplements are not required to sustain an industry after the removal of industry support measures.

Publications Harris, D. 2003, Agricultural policy reform and industry adjustment: Some recent experiences in Australia, Paper for IAPRP workshop on Policy Reform and Adjustment, Imperial College London, Wye Campus, UK, 23-25 October.
––– 2004a, Producer adjustment to policy reform: A case study on the Australian dairy industry, Paper for annual AARES conference, Melbourne, 11-13 February.
––– 2004b, Adjustment assistance for policy reform: A case study on the Australian dairy industry restructuring package, in Moreddu, C. and Poppe, K. J. (eds.), Proceedings of the OECD/PACIOLI workshop on information needs for the analysis of farm household income issues, LEI Report no. 8.04.04, Den Haag.
––– and Rae, A. 2004, Agricultural policy reform and industry adjustment in Australia & New Zealand, Paper for IATRC symposium, Adjusting to Domestic and International Agricultural Policy Reform in Industrial Countries, Philadelphia, USA, 6-7 June.
––– 2005a, Adjustment assistance as an element of policy reform: A case study on the Australian dairy industry, Paper for AARES conference workshop, Trade Policy Reform and Agriculture: Prospects, Strategies, Implications, Coffs Harbour, 8 February.
––– 2005b, Industry adjustment to policy reform: A case study on the Australian dairy industry, Report prepared for RIRDC, publication no. 05/110, Canberra.

Project Title The effect of technical requirements on trade in agricultural products

RIRDC Project No.: DAH-2A

Researcher: Mr David Harris

Organisation: D. N Harris & Associates
8 Irvine Street
GLEN IRIS VIC 3146

Phone: (03) 9889 9879

Fax:

Email: dnharris@hotkey.net.au

Objectives Provide an overview of the non-tariff measures (NTMs) that affect global trade in some of the major agricultural commodities of interest to Australia. Identify the more significant technical issues that act as barriers to trade with the major developed economies. Investigate the technical requirements that can affect trade through tariff-rate quotas (TRQs). Consider the potential for Australia’s domestic technical requirements to affect the ability of Australian products to compete with imports.

Background SPS requirements are a well known NTM that can affect trade in agricultural products. But Australian exporters have concerns about a number of other NTMs that appear to be trade impediments. Many of the concerns involve product specific technical requirements in particular markets which are addressed through bilateral representations. The Doha trade negotiations also provide an opportunity to address some of the more important generic issues. Some NTMs appear to have a greater trade restricting affect and it is important to focus attention on the issues that will deliver the biggest trade benefits.

Research Technical requirements imposed by importing countries can reduce the competitiveness of imports and in some cases limit the opportunities for trade. The requirements for import approval were examined against the NTMs attached to TRQ access for highly protected commodities in the major developed economies. TRQ fill rates were assessed for the effect of market conditions and technical requirements. The investigation was limited to selected commodities of interest to Australia – meat, cereal and dairy products.

Outcomes The investigation revealed a number of TRQs had utilisation rates that were inconsistent with prevailing market conditions. Some TRQs had low fill rates despite a large gap between the world price and the domestic price of a competing product. In-quota tariffs may be a contributing factor in some cases. But the way the access is provided and the rules on product specifications, eligibility and TRQ allocations can have a significant impact on the utilisation rate. Limited competition to use the TRQ and the lack of a mechanism to facilitate with-in year reallocations can reduce the value of concessionary access for highly protected commodities. Some import approval conditions can be short term trade impediments. Efforts to remove arbitrary requirements could yield smaller but important trade benefits.

Implications If the Doha negotiations provide an opportunity to address the effects of NTMs on trade efforts should focus on liberalising the technical conditions attached to TRQs. This could provide greater trade benefits that lower in-quota tariff rates. If new TRQ access is provided as part of a ’special products’ designation the technical conditions attached to the access will be an important issue.

Publications Harris, D. 2006, Technical issues affecting trade in agricultural products, forthcoming report prepared for RIRDC, Canberra.

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PROJECT No	PROJECT TITLE	RESEARCHER	PHONE	ORGANISATION
ANU-51A	Global demographic and income trends: Their impact on food consumption	Dr Rod Tyers	(02) 6125 3364	Australian National University

Project Title	Global demographic and income trends: Their impact on food consumption
RIRDC Project No.:	ANU-51A
Researcher:	Ron Duncan, Rod Tyers, Chris Wilson, Qun Shi and Ming Ming Chan
Organisation:	School of Economics Faculty of Economics and Commerce, Bldg 26 Australian National University Canberra, ACT 0200
Phone:	(02) 6125 3364
Fax:	(02) 6125 5124
Email:	rod.tyers@anu.edu.au
Objectives	·1 To examine the implications of slower global population growth for economic performance in general and the growth of the food sector in particular.
Background	The fertility declines associated with the concluding global demographic transition have been surprisingly rapid, leading to accelerated ageing of populations in developed countries and in several advanced developing countries and to frequent downward revisions in population projections. Reduced population growth, combined with ageing, affects labour force size and composition, saving rates and the composition of consumption. Demographic change therefore has important implications for the scale and future performance of the economy as a whole and the food sector in particular.
Research	1. Errors in previous projections of the global population are examined using new demographic forecasting techniques. 2. These errors are evaluated for their for global growth and Australian food export performance using the standard global economic model, GTAP-Dynamic. 3. A new global demographic model is introduced for the analysis of changes in population sizes, age distributions and gender compositions. The implications for economic performance and food sector growth are then examined using a specially constructed version of the GTAP-Dynamic global economic model that represents age and gender distributions of populations in each region.
Outcomes	1. Global population projections, including those by the United Nations, are found to have overestimated current and projected population levels. 2. Corrections for population forecast errors are found to justify modest but significant reductions in Australia’s forecast food exports. 3. When the full demographic structures of regional populations are accounted for, the combination of ageing with slower population growth is found to cause declines in saving and in food demand in advanced countries. While the tendency to retard overall economic growth and the performance of the food sector is larger when changes in demographic structure are accounted for, it is partially offset by the opposing tendency, for ageing to raise very young populations in developing regions into fertile and high saving age groups and hence to raise saving and food demand in those regions.
Implications	The recognition that slower global population growth and ageing are here to stay should reduce the tendency by some to use alarmist overpopulation claims to justify new but low-returning investments in "appropriate" agricultural technology in developing countries. Nonetheless, substantial new investment and factor productivity growth in the food sector, generally but particularly in food exporting countries, will be required to meet projected global demands that are only modestly offset by slower global population growth.
Publications	Duncan, R. and C. Wilson (2004), Global Population Projections: is the UN getting it wrong? RIRDC Report No 04/041. Duncan, R., Q. Shi and R. Tyers (2005), Global Demographic Change and Demand for Food in Australia, RIRDC Report No 05/014. Tyers, R., Q. Shi and M.M. Chan (2005), Global Demographic Change and Economic Performance: Implications for the Food Sector, to be published by RIRDC.

Project Title	Farm to port logistics chain: Road and rail neutrality and efficiency
RIRDC Project No.:	AEC-4A
Researcher:	Mr Stephen Corcoran
Organisation:	Access Economics Pty Ltd PO Box 6248 KINGSTON ACT 2604
Phone:	(02) 6273 1222
Fax:	(02) 6273 1223
Email:	Stephen.Corcoran@AccessEconomics.com.au
Objectives	·1 The hypothesis Access Economics intends to test is whether the cumulative impact of various local, state, federal and private sector interventions in the rural export logistics chain have caused a wedge between the true economic cost and actual price of road-based logistics relative to rail-based logistics, and, for both, absolutely. ·2 The strategy for testing this hypothesis is to prepare a detailed line-by-line breakdown of the various components of the logistics chain and the various taxes, subsidies, regulations, funding and other imposts which distort the cost of each component.
Background	The project was a response to concerns raised by the Project Steering Group (PSG) during a previous RIRDC-sponsored project Evaluating Logistics Chain Technology: Australian Farmgate to Port. During that project, PSG members noted several situations where a decision was taken about one link in the logistics chain (based on narrow criteria) without considering the upstream and downstream impacts of that decision on the entire logistics chain. In the past there has been considerable research into comparing road and rail transport, including relative costs, funding and emissions. However, the logistics of delivering goods from farmgate to port involves a broader range of activities than just hauling goods via road or rail, such as procurement, packaging, consolidation, storage, handling, intermodal transfers, empty container repositioning, backloading, and inventory management. In a supply chain sense road and rail are also often both involved to vary degrees and are often not mutually exclusive modal choices. Furthermore, most previous research has paid little (or ad hoc) attention to other non-monetary regulations such as speed and mass limits, travel times and travel route restrictions. Consequently the project aimed to make a holistic comparison of road-based and rail-based rural export logistics chains. Underlying the project is the question of whether any distortions in taxation, funding, subsidies and regulations are resulting in an allocation of resources that does not achieve an efficient allocation of resources and hence may be inconsistent with maximising the overall living standards of Australians. The rural export logistics chain is not the planning responsibility of one organisation – rather Federal, State & Local governments and the private sector all make decisions impacting on multiple parts of the rural export logistics chain. The incentives driving these decision makers often differ considerably from costs and benefits of these decisions to the rural export logistics chain as a whole. Poor, fragmented and inconsistent decision making, cost shifting, short-term planning, and misdirected resources cause actual prices faced by exporter to diverge from the true economic costs, ultimately resulting in a sub-optimal and inefficient rural exports logistics chain decisions.
Research	The research for the project comprised five components: 1. A detailed literature review of similar studies, the development of complex, inter-relating cost models for speed/accidents and fuel/road maintenance/mass, and the identification of a broad range of cost parameters. 2. The identification of any Federal, State and Local Government and private sector interventions in the logistics chain, including any subsidy, funding, excise, rebate, regulation, tax or other non-financial impost (such as access regimes, operating standards or safety standards) which distort transport prices from the true economic cost of provision. 3. The development of a user-friendly Excel model, which combines all available data on the private monetary and non-monetary costs, and the social costs of transporting a good from the farmgate to port. 4. Calibration of the model based on the general freight rates of four theoretical farm-to-port logistics chains to ensure that the model results align to the real world as much as possible. 5. Development of two case studies to illustrate how the tool can be used to help guide decision making.
Outcomes	The main output of this project was the development of a user-friendly Excel spreadsheet model, which applies economic theory to estimate the monetary, market and socioeconomic costs of alternative road-based and rail-based logistics chains. The model enables the user to determine: ·1 where various Federal, State and Local Government interventions may have (or may potentially) distort decisions away from a socially optimal level; ·2 whether these interventions under- or over-recover for externalities; ·3 the impact of non-monetary government interventions; and ·4 whether any new government charges and interventions across transport modes achieve efficient outcomes and competitive neutrality. The model displays the results in both spreadsheet and chart form. An options page allows the user to change key parameters in order to simulate different scenarios. Because the model was built using an Excel platform, future modification and refinement by users is facilitated, as well as ensuring portability. A brief user manual has also been developed.
Implications	By providing detailed data on the overall net impact of government interventions on the rural export logistics chain and demonstrating the consequences of these decisions on distorting modal choice, the project aimed to increase awareness among decision makers of the implications of their decisions on rural exporters and ultimately reduce the economic resources required to move exports from farmgate to port and increase Australia’s global competitiveness.
Publications	A report, user guide and Excel-based modelling tool have been created as the outputs of the research project.

Project Title	Preferential access, trade reform, the US farm bill and Presidential briefing paper on trade policy for incoming US President
RIRDC Project No.:	CIE-13A
Researcher:	Dr Andrew Stoeckel
Organisation:	Centre for International Economics
Phone:	02 6245 7800
Fax:	02 6245 7888
Email:	astoeckel@thecie.com.au
Objectives	To foster an improved global trading environment for agriculture that gives greater access to Australian agricultural exports. The project had five sub-objectives 1. To appraise the dangers to the world trading system if more preferential access is granted to developing countries. 2. How the US Farm Bill will affect world agricultural access. 3. How to break the impasse in the WTO Doha round of trade talks. 4. Advice to Cairns Group Farm leaders on the formulae based access proposals debated by negotiators. 5. To have the United States adopt an effective strategy to make the Doha Round of trade talks a success.
Background	Australian agricultural is highly dependent on access to world markets for its success. Agriculture remains one of the most protected sectors in the world. There is no one single cause or solution to this problem so several aspects have to be evaluated. The five components above address separate aspects of this same problem of high protection for agriculture. They target the problems of preferential access, the US Farm Bill, the failings in the WTO itself, the problems with the current approaches by negotiators to reduce protection and development of a strategy to shape US policy for the better.
Research	A series of studies were produced addressing each of the above aspects and seminars presented where relevant. The studies showed that preferential trade was harmful to world agricultural trade reform, that a strategy was required for the US to move off its farm protection path and that proposals advanced by the EU and others for reducing tariffs would not in fact achieve anything substantial.
Outcomes	Several RIRDC publications and seminars were produced (see below). Parts of these studies have been quoted and used by the World Bank including copyright approval to reproduce one complete chapter for a study of their own. A major workshop was held near Washington in conjunction with the Cordell Hull Institute on the US Farm Bill that included leading thinkers and former US Trade Ambassadors. Another seminar was held with the Cairns Group Farm Leaders in Washington and the pressure from the group helped kill off the negotiating proposals at the time that would have resulted in little trade reform. Finally, new thinking on a better strategy by the US to pursue more open farm trade has begun by influential people associated with the Washington-based Cordell Hull Institute.
Implications	On-going efforts are required on several fronts to keep pushing for a better deal on access for world agricultural products. Some two thirds of the value of Australian agriculture is exported so access to those markets remains a vital issue for farm prosperity. The US remains the world’s superpower so changing thinking in US policy circles including the Cordell Hull think-tank as well as influencing US based institutions such as the World Bank remain important.
Publications	Publications have been Preferential Trade and Developing Countries: Bad Aid, Bad Trade; Opportunity of a Century to Liberalise Farm Trade; Termites in the Basement: To Free Up Trade, Fix the WTO Foundations and an internal paper on the US Presidential briefing was submitted to RIRDC.

Project Title	Structural adjustment options for agriculture in protected markets
RIRDC Project No.:	CIE-23A
Researcher:	Dr Andrew Stoeckel
Organisation:	Centre for International Economics GPO Box 2203 CANBERRA ACT 2601
Phone:	02 6245 7800
Fax:	02 6245 7888
Email:	astoeckel@thecie.com.au
Objectives	·1 To focus the debate on world agricultural trade liberalisation by emphasising the structural adjustment issue
Background	Farmers in protected markets do not want to liberalise agriculture for fear of the painful adjustment that will follow. But the experience with Japanese beef liberalisation in 1991 and removal of subsidies for New Zealand agriculture in the 1980s shows this fear is overstated. Japanese domestic beef production has expanded since liberalisation! And New Zealand agriculture continues to prosper. This study builds on RIRDC project DAH-1A on Industry Adjustment to Support Agricultural Trade Liberalisation.
Research	A series of international case studies of agricultural adjustment in industries where protection has been removed (or lowered) will be described to show that ‘Armageddon’ has not arrived when protection is removed. It will show that in fact, the industries have survived and prospered— albeit with considerable adjustment. Some modelling with GTAP has shown that, when everybody reforms across industries and countries the adjustment costs are far fewer.
Outcomes	The study has highlighted the adjustment policies that are best used when protection is removed and has shifted the world agricultural trade debate from ‘should we use protection’ to ‘how do we go about removing it’. It helps allay unnecessary fears about adjustment, and has moved the debate forward thereby enhancing the prospects for trade liberalisation.
Implications	The implications from this research are that the logic behind a bold multilateral reduction in trade barriers needs to be articulated. Countries, and industries within countries, analyse the implications of a reduction in protection through their own eyes and do not consider the broader offsetting changes that occur when all countries and all industries remove protection. When everyone acts boldly together and removes protection the adjustment costs are far smaller and the gains far bigger.
Publications	A draft publication: Structural adjustment needs and options for farmers after the Doha Round has been prepared.

Project Title	Role of transparency in liberalising agricultural trade
RIRDC Project No.:	CIE-28A
Researcher:	Dr Andrew Stoeckel
Organisation:	Centre for International Economics GPO Box 2203 CANBERRA ACT 2601
Phone:	(02) 6245 7800
Fax:	(02) 6245 7888
Email:	astoeckel@thecie.com.au
Objectives	·1 The objective of this project is to advance trade liberalisation for world agriculture by highlighting and explaining the valuable role transparency can play in leading to better policy outcomes.
Background	This paper is listed on the 26^th Conference of the International Association of Agricultural Economists (IAAE): Contributions of Agricultural Economics to Critical Policy program, on Wednesday, 16 August 2006.
Research	The paper demonstrated the potential for better transparency of trade policy to liberalise world agricultural markets.
Outcomes	The paper was well received and noted by some of the senior officials and academics dealing with trade policy and agriculture today.
Implications	If countries adopted better transparency processes of their trade policies, protection would fall, trade would expand and incomes would rise, including those of Australian farmers. The ideas need promulgating widely and developing the specifics behind transparency of trade policy. A follow-up RIRDC project (CIE-30A, Pursuing trade liberalisation by enhancing the WTO’s transparency of trade policy) does this.
Publications	CIE report, Transparency, Australian Policy Processes and International Trade, prepared for the 26^th Conference of the IAAE: Contributions of Agricultural Economics to Critical Policy Program, Gold Coast, Australia, 16 August 2006.

Project Title	Industry adjustment to agricultural trade liberalisation
RIRDC Project No.:	DAH-1A
Researcher:	Mr David Harris
Organisation:	D. N Harris & Associates 8 Irvine Street GLEN IRIS VIC 3146
Phone:	(03) 9889 9879
Fax:
Email:	dnharris@hotkey.net.au
Objectives	Evaluate the policy options for managing industry adjustment pressures created by trade policy reform. Describe the principles of adjustment policy that facilitates change and promotes industry competitiveness. Influence the development of adjustment policy for industries with import protection and those competing on the export markets.
Background	Agricultural trade negotiations require governments to implement policy reforms. But there is often a reluctance to lower trade barriers and reduce industry support because of concerns about the ability of farmers to adjust. Resistance to reform has been evident in discussions on the current WTO trade negotiations.
Research	The standard arguments against agricultural policy reform take a static view of farmer responses to changes in net returns. Four industry case studies were examined—dairy, citrus, pigs and rock lobsters. Each involved a different type of reform and a different approach to implementation.
Outcomes	The case studies show farmers adjusted to the change in market conditions. Some older farmers retired and others moved into vocations outside agriculture. Those that remained improved the physical and financial performance of their farm by diversifying, increasing output or making efficiency gains. In each case the impact of the reform was not as severe as expected. After a period of adjustment the industry’s performance improved.
Implications	Removing price-support programs does not automatically lead to an industry contraction. In three cases transitional assistance were provided to help farmers adjust. The key principles were assistance was provided for a limited period and market prices directed the adjustment. It shows that long term income supplements are not required to sustain an industry after the removal of industry support measures.
Publications	Harris, D. 2003, Agricultural policy reform and industry adjustment: Some recent experiences in Australia, Paper for IAPRP workshop on Policy Reform and Adjustment, Imperial College London, Wye Campus, UK, 23-25 October. ––– 2004a, Producer adjustment to policy reform: A case study on the Australian dairy industry, Paper for annual AARES conference, Melbourne, 11-13 February. ––– 2004b, Adjustment assistance for policy reform: A case study on the Australian dairy industry restructuring package, in Moreddu, C. and Poppe, K. J. (eds.), Proceedings of the OECD/PACIOLI workshop on information needs for the analysis of farm household income issues, LEI Report no. 8.04.04, Den Haag. ––– and Rae, A. 2004, Agricultural policy reform and industry adjustment in Australia & New Zealand, Paper for IATRC symposium, Adjusting to Domestic and International Agricultural Policy Reform in Industrial Countries, Philadelphia, USA, 6-7 June. ––– 2005a, Adjustment assistance as an element of policy reform: A case study on the Australian dairy industry, Paper for AARES conference workshop, Trade Policy Reform and Agriculture: Prospects, Strategies, Implications, Coffs Harbour, 8 February. ––– 2005b, Industry adjustment to policy reform: A case study on the Australian dairy industry, Report prepared for RIRDC, publication no. 05/110, Canberra.

Project Title	The effect of technical requirements on trade in agricultural products
RIRDC Project No.:	DAH-2A
Researcher:	Mr David Harris
Organisation:	D. N Harris & Associates 8 Irvine Street GLEN IRIS VIC 3146
Phone:	(03) 9889 9879
Fax:
Email:	dnharris@hotkey.net.au
Objectives	Provide an overview of the non-tariff measures (NTMs) that affect global trade in some of the major agricultural commodities of interest to Australia. Identify the more significant technical issues that act as barriers to trade with the major developed economies. Investigate the technical requirements that can affect trade through tariff-rate quotas (TRQs). Consider the potential for Australia’s domestic technical requirements to affect the ability of Australian products to compete with imports.
Background	SPS requirements are a well known NTM that can affect trade in agricultural products. But Australian exporters have concerns about a number of other NTMs that appear to be trade impediments. Many of the concerns involve product specific technical requirements in particular markets which are addressed through bilateral representations. The Doha trade negotiations also provide an opportunity to address some of the more important generic issues. Some NTMs appear to have a greater trade restricting affect and it is important to focus attention on the issues that will deliver the biggest trade benefits.
Research	Technical requirements imposed by importing countries can reduce the competitiveness of imports and in some cases limit the opportunities for trade. The requirements for import approval were examined against the NTMs attached to TRQ access for highly protected commodities in the major developed economies. TRQ fill rates were assessed for the effect of market conditions and technical requirements. The investigation was limited to selected commodities of interest to Australia – meat, cereal and dairy products.
Outcomes	The investigation revealed a number of TRQs had utilisation rates that were inconsistent with prevailing market conditions. Some TRQs had low fill rates despite a large gap between the world price and the domestic price of a competing product. In-quota tariffs may be a contributing factor in some cases. But the way the access is provided and the rules on product specifications, eligibility and TRQ allocations can have a significant impact on the utilisation rate. Limited competition to use the TRQ and the lack of a mechanism to facilitate with-in year reallocations can reduce the value of concessionary access for highly protected commodities. Some import approval conditions can be short term trade impediments. Efforts to remove arbitrary requirements could yield smaller but important trade benefits.
Implications	If the Doha negotiations provide an opportunity to address the effects of NTMs on trade efforts should focus on liberalising the technical conditions attached to TRQs. This could provide greater trade benefits that lower in-quota tariff rates. If new TRQ access is provided as part of a ’special products’ designation the technical conditions attached to the access will be an important issue.
Publications	Harris, D. 2006, Technical issues affecting trade in agricultural products, forthcoming report prepared for RIRDC, Canberra.