Do Price Uncertainties Affect the Use of Policy Flexibilities? The Selection of Sensitive Products in WTO Agricultural Negotiations

In a context in which price uncertainty is likely to increase, expected market trends need to be taken carefully into account while negotiating international trade policy rules. This paper aims at analyzing what is their influence on the use of policy flexibilities in the context of WTO agricultural negotiations. In particular, within the market access pillar, we focus on the selection of sensitive products. Our model, TRIMAG (Tariff Reduction Impact Model for Agriculture), defined at the 8-digit level, optimizes the domestic agricultural value added subject to a maximum number of sensitive tariff lines, accounting for various future international price scenarios. Furthermore, we test the use of alternative options for the implementation of “tariff simplification”. Findings confirm that the future expected development of world and domestic prices plays an important role in the selection of sensitive products, and that tariff simplification doesn’t affect the results, if provisions to ensure the neutrality of the exercise are put in place. Furthermore, TRIMAG can be considered as a tariff aggregation tool that can be linked to agricultural simulation models that operate at a higher level of aggregation.