This document provides an overview of a simulation training on trade policy implementation for coffee in Timor-Leste using the Agricultural Trade Policy Simulation Model (ATPSM). The training syllabus covers coffee world trade, trade policy and liberalization, and simulations of different trade policy scenarios for coffee in Timor-Leste. Coffee is an important crop for Timor-Leste that is currently facing issues like quality variability and market constraints. The training will use the ATPSM model to simulate scenarios based on proposals from the US, EU, and alternatives to analyze impacts on the coffee sector and trade. The model has limitations but can provide analysis of policies on supply, demand, prices, and welfare.

1. © PT SUCOFINDO (PERSERO)
Simulation on Trade Policy
Implementation for Coffee in Timor-
Leste
ATPSM (Agricultural Trade Policy
Simulation Models)

2. Training Syllabus :
1. Coffee World Trade
- coffee production and consumption
- coffee price
2. Trade Policy And Trade Liberalization
3. Simulation On Trade Policy
Implementation For Coffee in Timor-
Leste using ATPSM

3.  Coffee is an important primary commodity. With
over 500 billion cups consumed every year, coffee is
one of the world's most popular beverages.
Worldwide, 25 million small producers rely on coffee
for a living. For instance, in Brazil alone, where
almost a third of all the world's coffee is produced,
over 5 million people are employed in the cultivation
and harvesting of over 3 billion coffee plants; it is a
much more labour-intensive culture than alternative
cultures of the same regions as sugar cane or cattle,
as it is not subject to automation and requires
constant attention.

4. Culture and History of Coffee
 The fact that the coffee cherry is represented on the country’s
new 50 cent coin gives some indication of the importance of
coffee in Timor-Leste.
 Coffee is grown throughout the republic, concentrated in Ermera,
Liquica, Ainaro, and Aileu districts. The majority of the crop is
grown for export trade, although it is a popular local drink.
 Growers sell coffee either as the red cherry, parchment, or final
green bean, as little roasting is undertaken within Timor-Leste.
 In the complex and wrenching reconstruction process on the
scale of Timor-Leste, there is enormous variation in how aid and
development projects are enacted.
 In the coffee industry, some NGO-style organisations work with
East Timorese communities while other ventures are purely
commercial in nature.

5. COFFEE MARKET AND DEVELOPMENT
 The National Cooperative Business Association of the USA
(NCBA) is the current implementing agency for a USAID project
to develop coffee in Timor-Leste, a project established well
before the 1999 independence vote.
 NCBA is, as it boasts, the largest private sector enterprise in
Timor-Leste: by 2003 there were 16 primary rural organic
cooperatives, more than 500 farmer groups and 19,584 farm
family participants on 25,858 registered blocks of land
 NCBA operations do not cover all of the estimated 200,000
people estimated to be partially dependent on coffee (Pomeroy
2001).
 Nevertheless, NCBA’s ambition is to expand throughout the
nation (NCBA 2003).

6. MAJOR ISSUE FACING THE COFFEE SECTOR
 Poor plantation management
 Variable quality of coffee produced
 Poor industry coordination and development
 Marketing constraints and fluctuation coffee
prices.
 Inadequate training, extension and
information services.

7. r : cultivation of Coffee robusta
m : cultivation of Coffee robusta and Coffee arabica.
a : cultivation of Coffee arabica.
Production of Coffee

9. Production in
exporting countries

10. World
Consumption

11. Per capita consumption in
selected importing countries
Retail prices of roasted coffee in
selected importing countries

12. WORLD PRICE (US cent/lb)
Annual
ICO
Composite
Price
Colombian Mild
Arabicas
Other Mild
Arabicas
Brazilian
Naturals
Robustas
1998 108.95 142.83 135.23 121.81 82.67
1999 85.71 116.45 103.90 88.84 67.53
2000 64.24 102.60 87.07 79.86 41.41
2001 45.59 72.05 62.28 50.70 27.54
2002 47.74 64.90 61.52 45.23 30.01
2003 51.90 65.33 64.20 50.31 36.95
2004 62.15 81.44 80.47 68.97 35.99
2005 89.36 115.73 114.86 102.29 50.55
2006 95.75 116.80 114.40 103.92 67.55
2007 107.68 125.57 123.55 111.79 86.60
2008 126.76 143.60 141.95 129.52 108.88

13. WORLD PRICE (US cent/lb)
-
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
ICO composite price
Colombian Mild
Arabicas
Other Mild Arabicas
Brazilian Naturals
Robustas

14. WORLD PRICE (US cent/lb)

15. INDICATOR PRICES
 Procedures to be followed on the New York
Market
 Procedures to be followed on the German
Market
 Procedures to be followed on the French
Market
 Procedures for the calculation of daily group
and composite indicator prices

16. TRADE POLICY
 Tariff
 Tariff Rate Quota
Non Tariff Barrier
 Quota
 Domestic Support
 Export Subsidy
 TBT-SPs

17. TRADE LIBERALIZATION
 MFN – Most Favoured Nation
 NT - National Treatment
 Tpr - Transparency
Agreement on Agriculture (AoA)
 Market Acces
 Domestic support
 Export subsidy

18. Trade Negotiation Rounds
Year Place/name Main Subject Countries
1947 Geneva Tariff 12
1949 Annecy Tariff 13
1951 Torquay Tariff 38
1956 Geneva Tariff 26
1960-1961 Geneva (Dillon Rounds) Tariff 26
1964-1967 Geneva (Kennedy Rounds) Tariff and antidumping measures 62
1973-1979 Geneva (Tokyo Rounds) Tariff, Non Tariff Measures Frameworks
Agreements (NTBs)
102
1986-1994 Geneva ( Uruguay Rounds) Tariff, Non Tariff Measures, rules, services, IPR,
dispute, settlements, textiles, agriculture, creations
of WTO
123
2001-2008 Doha Developments
Agenda
Agriculture and services 144

19. TRADE LIBERALIZATION
The Uruguay Round Agreement on
Agriculture Led to Tariffication of
many Non-tariff Barriers & Reduction
Tarrifs
• Reductions of 36 per cent
from bound tariff rates (with a
minimum of 15 per cent on
each tariff line),
• Additional reduction
commitments on domestic
support (20 per cent)
• Export subsidies (21 per cent
in export volumes and 36 per
cent in expenditure) to be
implemented over six years.
DEVELOVED COUNTRY
IMPLEMENTED OVER
6 YEARS
DEVELOPING COUNTRIES
AGREED TO COMMITMENTS AT
TWO THIRDS OF THESE LEVELS
IMPLEMENTED OVER
10 YEARS

20. WTO NEGOTIATIONS ON AGRICULTURE
MARKET ACCESS,
DOMESTIC SUPPORT,
EXPORT SUBSIDY,
SPECIAL AND DIFFERENTIAL TREATMENT FOR DC
NON-TRADE CONCERNS.
• The post-UR tariff profile of many developed countries in particular is
characterized by relatively high tariffs
• Bound tariffs are also high in many developing country markets which will
affect negatively other developing countries as intra-developing country
trade is high and growing.
• The UR did not reduce tariffs significantly
• Tariff Rate Quotas (TRQs) including access to quotas and rules of
administration.
DOHA ROUND DEVELOPMENT
TRADE LIBERALIZATION

21. Modalities are being debated in order to
reach a negotiated agreement
Trade policy instruments and it is often not
a simple task to quantify their impacts
Model results are often criticized for not
being accurate to the extent desired
DOHA ROUND
DEVELOPMENT
TRADE LIBERALIZATION
SCENARIO LIBERALIZATION
JOINT PAPER
US – EU PROPOSAL
ALTERNATIVE

22. INTERNAL EKSTERNAL
• Capital
• Agro-input
• On Farm Technology
• Post harvest Technology
• Distribution
• Labor
• Supply Chains Management
COMPETITIVENESS
Non Trade Concern
Food Security
Food Soveiregnity
Rural Development
TRADE LIBERALIZATION
GATTS – UR - AoA
Free trade MFN,NT,Tpr
- Market Acces
- R. Domestic Support
- R. Export Subsidies
FREE TRADE
VS
FAIR TRADE
URAA
US PROPOSAL
EU PROPOSAL
Agricultural Trade Policy
Scenario
Production &
Productivity
QUANTITIY
QUALITY
CONTINUITY
IMPROVEMENT
Developing Country
SP , SSM

23. ECONOMICS IMPACT :
- VOLUME CHANGES IN C, M, X
- TRADE VALUE CHANGES
- WELFARE CHANGES- PRODUCER & CONSUMER
SURPLUS & NET GOV REVENUE
- PRICE CHANGES- WORLD MARKET, CONSUMER
AND FARM
QUANTITATIVE ASSESSMENTS
MODALITIES
- JOINT PAPER US - EU
PROPOSALS
- ALTERNATIVE PROPOSALS
TRADE LIBERALIZATION

24. TRADE
LIBERALIZATIONS
Data Processing
ATPSM
WTO - AoA
Market Acces
Domestic Support
Export Subsidies
COFFEE
Scenario 1 Scenario 2 Scenario 3
Analiysis Study
TRADE POLICY
RECOMENDATIONS
Analysis 3
Supply
Demand
Commodity Price
Analysis 2
Supply
Demand
Commodity Price
Analysis 1
Supply
Demand
Commodity Price

25. A T P S M
Agricultural Trade Policy Simulation Model
 Comparative-Static
 Deterministic
 Partial equilibrium for agriculture product
 Multi commodity  36 commodities
 160 countries plus EU25 plus RoW.
(42 are LDCs, 99 RDCs and 20 DDs)

26. A T P S M
 Reduction of out-of-quota tariffs
 Reduction of in-quota tariffs
 Expansion of TRQ volumes
 Reduction of domestic subsidies
 Reduction of export subsidies.

27. Limitations
- No independent behaviour for domestic prices
- No other domestic policies besides the Amber
Box subsidies.
- Agricultural commodities are assumed to be
homogeneous and so there is perfect
substitution among goods produced in
different countries
- Model does not account for the possibility of
countries exerting market power
- Comparative static model
- No income variable in the model.
ALL COMMODITIES ARE ASSUMED
TO BE TRADABLE
(1)

28. Limitations
TARIFF LINE LEVEL CUTS
ATPSM DOES NOT ACCOUNT FOR PREFERENTIAL
ACCESS AND TRADE DIVERSION
QUOTA RENTS ARE DISTRIBUTED IN
PROPORTION TO TRADE FLOWS.
BILATERAL TRADE ISSUES (NON-SPATIAL)
(2)
(3)
(4)

29. NEGOTIATING MODALITIES AND
SIMULATION SCENARIOS
THE MODALITIES
SCENARIO SIMULATED
MARKET ACCESS
DOMESTIC SUPPORT
EXPORT SUBSIDIES
US PROPOSAL
EU PROPOSAL
ALTERNATIVE PROPOSAL

30. DATA SOURCES
 FAOSTAT (Supply and Utilization Accounts and
Trade Domain data) The quantities of
production, consumption, export and imports
 AMAD (Agricultural Market Access Data Base)
In-quota Tariffs, Out Quota Tariffs and Global
Quotas
 UNCTAD COMTRADE  Source for Bilateral Trade
Flows

31. ATPSM OUTPUT
COMMODITY PRICES
PRODUCTION
CONSUMER
SURPLUS
PRODUCER
SURPLUS
WELFARE
TARIFF
REVENUE
QUOTA RENTS
CONSUMPTION EXPORTIMPORT
MODALITIES
SCENARIO ATPSM

33. Terima Kasih
© 2007 All Rights Reserved SUCOFINDO