Effects of Barriers to Live-sheep Exports: from a Western Australian Perspective
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1 Effects of Barriers to Live-sheep Exports: from a Western Australian Perspective Nazrul lslam and Chris Piesse The Department of Agriculture Western Australia and University of Western Australia
2 Live animal export issues Is it worth exporting live-sheep? What happens to the State and regional economies if live-sheep export is totally banned? How would different sectors of the economy be affected? What role should government at different levels play?
3 Objective To study the impact of a decline in live-sheep export demand and of an export market enhancement program on the State s economy.
4 Plan Provide brief overview of the sheep industry Highlight the modified WA model Illustrate the simulation design Welcome feedback on model simulations and results
5 Sheep industry Relative importance of live-sheep exports, Australia WA WA as % of $m $m Australia Gross Domestic Product (at factor income) 586,992 66, Agriculture, forestry and fishing (Comp. of GSP) 20,853 2, Value of agricultural production 28,258 4, Value of live sheep production 1, Value of live sheep exports Source: ABS, various issues
6 Sheep industry (contd..) Number and value of Australian live-sheep exports, Source: LiveCrop, 2003.
7 Sheep industry (contd.) Major destination countries for Australian live-sheep exports in Sheep Nos. ('000) Bahrain Egypt Jordan Kuwait Lebanon Oman Qatar Saudi Arabia UAE Source: ABS, various issues
8 300 Sheep industry (contd.) WA s live-sheep export trends to Saudi Arabia and the world, 97/98-03/ World Sheep Nos. ('000) Saudi Arabia 97/98 98/99 99/00 00/01 01/02 02/03 03/04 Source: Department of Agriculture WA
9 The WA Model (WAM) A single-region, multi-sectoral CGE model of the WA economy Theoretical structure is of ORANI Has particular focus on the agriculture sector Takes account of jointness in primary production in terms of capital share/swap by some agricultural industries
10 The WAM (contd.) Input demand and commodity supplies by industries, household and government sector demand and external sectors Has 109 industries, of which 10 are agricultural Each industry produces a single commodity, therefore the WA model has 109 commodities.
11 The WAM (contd.) All producers face competitive markets The production structure is based on the assumption of constant returns to scale Each material input is separable from the others as well as primary inputs
12 The WAM (contd.) Substitution takes place between the primary factors Household consumption demand is based on the preference independence and utility maximisation All goods are distinguished according to their sources of supply - WA and non-wa Locally sourced good is treated as an imperfect substitution for imports.
13 Illustration Price D f Df Sd Pe P e P E B E Market Enhancement Programs O Q e Qe Quantity
14 Simulation design P i e* = α i e* + (1/η i e* ) x i e* World price of exports of goods i P ie = P i e* + t ie + d Internal price of exportable goods i Shock Simulation Simulation Variables 1 2 α e* i t e i +20
15 Capital share assumption Group A Capital Share Sim-1 Sim-2 Sheep (live) Wool Cereals Pulses and oilseeds Total Group B Horticulture New industries Dairy cattle Total
16 Input coefficients (%) Supply Industry Sheep (live) Meat and meat products Sheep (live) Wool Cereals Pulses & oilseeds Beef cattle Pigs Poultry Other goods and services Total intermediate uses Compensation of employees Gross operating surplus Taxes Imports Total
17 Results Changes in export quantities (%) Commodities Sim-1 Sim- 2 Primary Sheep (live) Wool Grains Pulses & oilseeds Beef cattle (live) Processed Meat & meat products
18 Results (contd.) Changes in export quantities (%) Broad industries Sim-1 Sim- 2 Agriculture Forestry, logging & Fishing Mining Agriculture processing Other manufacturing Total
19 Results (contd.) Macroeconomic changes (%) Variables Sim-1 Sim- 2 Real GSP at market price Total consumption (real) Consumers Price Index (CPI) Aggregate employment Total imports Total exports
20 Results (contd.) Direct and indirect impact (%) Live sheep exports is 0.18% of GSP Direct effect (14% in sheep exports 0.18% GSP share of live-sheep exports) 0.025% in GSP Indirect effect Total effect - direct effect i.e. ( (-0.025)) = 0.015% in GSP.
21 Results (contd.) Changes in output quantities (%) Commodities Sim-1 Sim- 2 Primary Sheep (live) Wool Grains Pulses & oilseeds Beef cattle (live) Processed Meat & meat products
22 Results (contd.) Changes in output prices (%) Commodities Sim-1 Sim- 2 Primary Sheep (live) Wool Grains Pulses & oilseeds Beef cattle (live) Processed Meat & meat products
23 Results (contd.) Changes in producer s prices (%) Broad industries Sim-1 Sim- 2 Agriculture Forestry, logging & Fishing Mining Agriculture processing Other manufacturing Trade and transport Construction Services Public Admin. & Defence
24 Results (contd.) Changes in consumer s prices (%) Broad industries Sim-1 Sim- 2 Agriculture Forestry, logging & Fishing Mining Agriculture processing Other manufacturing Trade and transport Construction Services Public Admin. & Defence
25 Results (contd.) Changes in output quantities (%) Broad industries Sim-1 Sim- 2 Agriculture Forestry, logging & Fishing Mining Agriculture processing Other manufacturing Trade and transport Construction Services Public Admin. & Defence Total
26 Concluding comments Overall, decline in export demand for live-sheep has negative impact on key components of the WA economy In terms of broader industry impact, all the sectors decline except the mining and agricultural processing However, with the added incentive program the agricultural sector - the live sheep industry in particular - regains its positive output but the WA economy declines even further.
27 Concluding comments Major exporting sectors such as mining expands under both type of shocks Agricultural processing sector also expands under both the scenarios
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