TRADE FLOWS IN THE
GRAIN-«LIVESTOCK
ECONOMYOF THE

; EURGPEAN ECONOMIC
COMMUNITY

TM: kw the Mm of PhD.
MECMQAN STATE UNIVERSE”
kaAM ELWDGE KOST
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thesis entitled

TRADE FLOWS IN THE GRAIN-LIVESTOCK
ECONOMY OF THE EUROPEAN ECONOMIC COMMUNITY

presented by

WILLIAM ELVIDGE KOST

has been accepted towards fulfillment
of the requirements for

PhoDo degree inflric. Econ.

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Major professor

DateMQZ/77/

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ABSTRACT

TRADE FLOWS IN THE GRAIN-LIVESTOCK
ECONOMY OF THE EUROPEAN ECONOMIC COMMUNITY

by
William Elvidge Kost

This study develops an international trade model that represents
the grain-livestock economy of the European Economic Community. Since
its emphasis is trade patterns it employs a spatial equilibrium model
with four types of activities-~production, transfer, purchase and sale.

Before this model could be used to predict future trade patterns
it had to adequately represent the grain-livestock economy. At this
point, the relevant question became how can we know when a model
adequately represents reality. The thesis discusses the problem of the
overall 'goodness of fit' of Spatial models, suggesting some measures and
tests of 'goodness of fit.‘ The 1964 and 1968 grain-livestock economy
of the European Economic Community is then simulated. On the basis of
the suggested tests and measures the model was accepted as being a 'good'
short run predictive model.

Input data for 1970 were compiled. On the basis of this data and
the structure of the model, production and trade patterns for grain and
livestock products were predicted for 1970. The model shows France
becoming not only the major grain producer but also the major livestock
producer. To utilize their excess grain production, France produces
beef which was formerly produced in Italy and Germany-Benelux. This
increased beef production necessitated increased feeder calf imports by
France (primarily from Italy and Germany-Benelux) and a shift from food
grain to feed grain production in France. This shift to France becoming

the major agricultural center of the European Economic Community will

William Elvidge Kost
result in the Community achieving more self-sufficiency in the future.
Thus, the United States cannot expect their grain exports to Europe
to expand. In fact, this model shows United States grain exports to
the Community declining.

The intent of this study was to develop a simple, short run
predictive model for grain-livestock trade patterns. Within the rather
severe limitations imposed on the model the results show that it has the
ability to predict. As important as this model's ability to predict,
and possibly more so, is its ability to highlight areas where we lack
knowledge of the system we are trying to first simulate, then predict
from. This model provides added insight into two areas causing
prediction errors--the quality of the data and the underlying structure

of the model.

TRADE FLOWS IN THE GRAIN-LIVESTOCK
ECONOMY OF THE EUROPEAN ECONOMIC COMMUNITY

by

William Elvidge Kost

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of Agricultural Economics

1971

Acknowledgments
I want to thank all in my granfalloon for their assistance

in this project.

ii

TABLE OF CONTENTS

Page
List of Tables .................................................. v
List of Figures ............. . ......................... . ......... x
CHAPTER
I. Introduction .... .......................................... 1
Objectives ....... . ........ . ...... ...... ........... ...... 2
II. Grain-Livestock Trade Policy in the EurOpean
Economic Community ............................... . ...... 3
The European Agricultural Guidance
and Guarantee Fund ......... . .......................... 4
Institutional Structure ................................. 11
The Common Agriculture Policy ........................... 15
III. Theoretical Framework ..................................... 29
Formulation of the Model ................................ 32
The Model ............................................... 40
IV. Testing the Model ......................................... 52
'Goodness of Fit' Criteria for Spatial
Models ... .................... . ........................ 58
The European Economic Community Trade
Mode1--A Test .......... ......... .............. . ....... 64
A Further Test--l968 .............................. . ..... 86
Conclusions ........ . .................................... 105
V. Short Run Predictions--l970 ...... ........ ...... .... ....... 109
The 1970 Model ............. . . ....................... 109
A Second 1970 Model .................... ......... . ..... .. 123
Production Predictions--A Comparison .................... 135

iii

Page

CHAPTER

VI. Summary and Conclusions ................ . ................... 138
Bibliography ..................................................... 148
Appendix A .............................................. . ........ 155

iv

LIST OF TABLES

Page

Table
II- 1. European Agricultural Guidance and Guarantee Fund

Expenditures ........................................... 7
II- 2. Member country's percentage contribution to the

European Agricultural Guidance and Guarantee Fund ...... 9
II- 3. Total contributions to and receipts from the European

Agricultural Guidance and Guarantee Fund, 1962-1963

to 1968 ................................ . ............... 12
II- 4. The European Economic Community's Common Agriculture

Policy arrangements for grain and livestock products ... 27
IV- 1. Data adjustments required for overall 'goodness of fit'

criteria ............................................... 65
IV- 2. 1964 production levels ..... . ............................. 66
IV- 3. 1964 transfer levels: total grain ................. . ..... 67
IV- 4. 1964 transfer levels: beef and veal ..................... 69
IV- 5. 1964 transfer levels: pork .. ............................ 70
IV- 6. 1964 transfer levels: eggs ........... . .................. 70
IV- 7. 1964 transfer levels: poultry ....... . ............... ..... 71
IV- 8. 1964 detailed beef and veal production levels ............ 73
IV- 9. 1964 transfer levels: feeder calves .... ........ . ........ 74
IV-lO. 1964 transfer levels: beef .............................. 75
IV‘ll. 1964 transfer levels: veal .......................... .... 76
IV-12. 1964 detailed grain production levels .................... 77
IV-l3. 1964 transfer levels: food grain ........................ 78
IV-14. 1964 transfer levels: feed grain ........................ 79

Page

Table
IV-15. 'Goodness of fit' criteria--the 1964 model ............... 83
IV-l6. Average world prices: 1960-1968 ... ...................... 84
IV-17. 1968 production levels ................................... 87
IV-l8. 1968 transfer levels: total grain .... ......... . . 88
IV-19. 1968 transfer levels: beef and veal ..................... 9O
IV-20. 1968 transfer levels: pork .............................. 91
IV-21. 1968 transfer levels: eggs .............................. 91
IV-22. 1968 transfer levels: poultry ............ . .............. 92
IV-23. 1968 detailed beef and veal production levels ............ 94
IV-24. 1968 transfer levels: feeder calves ................ . 95
IV-25. 1968 transfer levels: beef .............................. 96
IV-26. 1968 transfer levels: veal ............... . ........... 97
IV-27. 1968 detailed grain production levels .................... 98
IV-28. 1968 transfer levels: food grain ........................ 99
IV-29. 1968 transfer levels: feed grain .. ........... . ......... 100
IV-30. 'Goodness of fit' criteria--the 1968 model ...... ..... .... 103
V- 1. 1970(L) and 1970(H) production levels .......... . ......... 110
V- 2 1970(L) and 1970(H) transfer levels: total grain ........ 112
V- 3 1970(L) and 1970(H) transfer levels: food grain ......... 113
V- 4. 1970(L) and 1970(H) transfer levels: feed grain ......... 114
V“ 5 1970(L) and 1970(H) transfer levels: feeder calves ...... 115
'V4 6 1970(L) transfer levels: beef and veal .................. 115
‘V-7 1970(H) transfer levels: beef and veal .................. 116
\7- 8 1970(L) transfer levels: beef .............. . ..... .. ..... 116
V5- 9 1970(H) transfer levels: beef .................. . ........ 117

Table
V-lO.
V-ll.

V-12.

V-17.

V-18.

V-19.
V-20.
V-21.
V-22.

V-23.

V-24.

V-25.

V-26.

Page

1970(L) and 1970(H) transfer levels: veal ............... 117
1970(L) and 1970(H) transfer levels: pork ............... 118
1970(L) and 1970(H) transfer levels: eggs ............... 118
1970(L) and 1970(H) transfer levels: poultry ............ 118
1970(L) update and 1970(H) update production levels ...... 124

1970(L) update and 1970(H) update transfer levels:
total grain ............................................ 126

1970(L) update and 1970(H) update transfer levels:

food grain ............................................. 127
1970(L) update and 1970(H) update transfer levels:

feed grain ................... ...... .................... 128
1970(L) update and 1970(H) update transfer levels:

feeder calves .......................................... 129
1970(L) update transfer levels: beef and veal ........... 129
1970(H) update transfer levels: beef and veal ........... 130
1970(L) update transfer levels: beef .................... 130
1970(H) update transfer levels: beef .................... 131

1970(L) update and 1970(H) update transfer levels:
veal ........ ...... ..................................... 131

1970(L) update and 1970(H) update transfer levels:
pork .... ....... . .................... ...... ............. 132

1970(L) update and 1970(H) update transfer levels:
eggs ..... ................ ...... ..................... ... 132

1970(L) update and 1970(H) update transfer levels:

poultry .. .......... . ......... . ......................... 132
1970 predicted production levels--a comparison ........... 136
Food grain prices ($/100 kg.) ..................... . ...... 158
Feed grain prices ($/100 kg.) ............................ 160
Milk-beef-feeder calf prices ($/head) .................... 162

vii

A-lO.
A-ll.
A-12.
A-13.
A-l4.
A-15.
A-l6.
A-l7.
A-18.

A-19.
A-20.
A-21.
.A-22.

A-23.
A-24.
A-25.

A-26.

Feeder calf prices ($/head) ..............................
Beef prices ($/100 kg.) ..................................
Veal prices ($/100 kg.) ......... ...... .................. .
Pork prices (3/100 kg.) ..................................
Egg prices ($/100 kg.) ...................................
Poultry prices ($/100 kg.) ................ .... ...........
Denaturing costs ($/100 kg.) .................... . ........
Food grain transportation costs ($/100 kg.) ..............
Feed grain tranSportation costs ($/100 kg.) ..............
Feeder calf transportation costs ($/head) ................
Beef transportation costs ($/100 kg.) ....................
Veal transportation costs ($/100 kg.) ....................
Pork tranSportation costs ($/100 kg.) ................. ...
Egg transportation costs ($/100 kg.) ............. . .......
Poultry transportation costs ($/100 kg.) .................

Food grain variable import levies (+) and variable
export subsidies (-) ($/100 kg.) ........ . ..............

Feed grain variable import levies (+) and variable
export subsidies (-) ($/100 kg.) .......... . ............

Feeder calf variable import levies (+) and variable
export subsidies (-) ($/head) .... ..... ........ ...... ...

Beef variable import levies (+) and variable eXport
subsidies (-) ($/100 kg.) ....... ...... .................

Pork variable import levies ($/100 kg.) ..................
Egg variable import levies ($/100 kg.) ............ .......
Poultry variable import levies ($/100 kg.) ............. ..

Feeder calf import duties ($/head) .......................

viii

Page

163
164
166
167
168
169
170
171
173
175
176
177
178
179

180

181

183

185

187
189
189
190

190

Table
A-27.
A-28.
A-29.
A-30.
A-3l.
A-32.

A-33.

A-34.
A-35.
A-36.
A-37.
A-38.
A-39.
A-40.
A-41.
A-42.
A-43.
A-44.
A-45.
A-46.

A-47.

Beef import duties ($/100 kg.) ...........................
Veal import duties ($/100 kg.) ...........................
Food grain dummy costs ($, all years) ....................
Feed grain dummy costs ($, all years) ....................
Feeder calf dummy costs ($, all years) ...................
Beef dummy costs ($, all years) ..........................

Veal, pork, eggs and poultry dummy
costs ($, all years) ...................................

Land area (ha.) .................................. . .......

Land conversion factors

Percent of farm fed food grain ...........................

Production restrictions

Consumption levels .......................................

Livestock conversion factors

Minimum

Minimum

Minimum

Minimum

Minimum

Minimum

Minimum

Minimum

percent
percent
percent
percent
percent
percent
percent

percent

of

of

of

of

of

of

of

of

food grain transferred ................
feed grain transferred ............. ...
feeder calves transferred .............
beef transferred

veal transferred ......................
pork transferred ......................

eggs transferred .................. ....

poultry transferred ...................

ix

Page

192

194

195

196

197

198

199

199

200

203

204

205

207

211

213

215

216

217

218

219

220

Figure

II-l.

II-2.

III-1.

III-2.

III-3.

LIST OF FIGURES

Schematic diagram representing the institutional

structure of the Common Agriculture Policy .............

The European Economic Community variable import

levy system for grain ... ...... ...... ...................

Schematic diagram for transfer cost models with

no commodity interrelationships ... ........... . .........

Schematic diagram for transfer cost model with

commodity interrelationships ............... ........ ....

A schematic diagram for the European Economic Community

trade model .. ........ . .............. ...... .............

Page

13

18

35

35

41

CHAPTER I

Introduction
A recent Michigan State University-United States Department of

Agriculture research project focused on the effects of the imple-
mentation of the EurOpean Economic Community's Common Agriculture Policy
upon the grain-livestock economy of the EurOpean Economic Community.1
The major emphasis of this study was to estimate levels of production
and consumption of grain and livestock products for 1970 and 1975.

Since Eur0pean markets are important outlets for United States agricul-

tural commodities these production and consumption estimates have an

 

1George E. Rossmiller, "The Grain-Livestock Economy of West Germany
With Projections to 1970 and 1975." Institute of International Agricul-
ture, Research Report No. 1, Michigan State University, March 1968.

Fred A. Mangum, Jr., "The Grain-Livestock Economy of Italy With
Projections to 1970 and 1975." Institute of International Agriculture,
Research Report No. 2, Michigan State University, April 1968.

Michel J. Petit and Jean-Baptiste Viallon, "The Grain-Livestock
Economy of France With Projections to 1970 and 1975." Institute of
International Agriculture, Research Report No. 3, Michigan State Univer-
sity, June 1968.

Donald J. Epp, "Changes in Regional Grain and Livestock Prices
Under the European Economic Community Policies." Institute of Inter-
national Agriculture, Research Report No. 4, Michigan State University,
June 1968.

Vernon L. Sorenson and Dale E. Hathaway, "The Grain-Livestock
Economy and Trade Patterns of the EurOpean Economic Community With
Projections to 1970 and 1975." Institute of International Agriculture,
Research Report No. 5, Michigan State University, August 1968.

2
important impact on United States exporters and farmers. Their analysis
is summarized in the form of supply-demand balances for the EurOpean
Economic Community member countries. While this tells what the overall
supply-demand balance for the EurOpean Economic Community is, it does
not specify the ensuing trade patterns. By utilizing the data and
projections presented in their study as a foundation, I propose to arrive
at projected trade flows within the EurOpean Economic Community and
between it and its major trading partners. Thus, we will have a more
exact estimate of the magnitude of this market for United States agricul-
tural commodities, as well as a more complete analysis of intracountry

Eur0pean Economic Community trade.

Objectives

The objectives of this study are:

1. To develop a working international trade model that
will represent the grain-livestock trade sector of the
European Economic Community and

2. To utilize this model to project grain-livestock trade
patterns between the member countries of the EurOpean
Economic Community and between these countries and their

major external trading partners.

CHAPTER II

Grain-Livestock Trade Policy
in the European Economic Community

The core of the European Economic Community's trade policy for grain
and livestock products depends on a system of variable import levies and
export subsidies designed to offset the consequences of the price
differentials between the European Economic Community and world markets.
The variable import levy brings the price of the imported product up to
the price level of the same product produced domestically. Conversely,
the variable export subsidy brings the export price of a product down to
the world price level. Since these variable import levies and export
subsidies depend on domestic prices, trade policy becomes an integral
part of the European Economic Community's Common Agriculture Policy.

The basic objectives of the Common Agriculture Policy are to
(1) balance European Economic Community supply and demand, both internally
and externally, by actions on supply and demand, (2) provide an adequate
income to farmers by structural and regional improvements, (3) stabilize
markets by protecting farmers from Speculative price movements, while at
the same time not isolating the domestic market from the long run influ-
ences of the world market and (4) assure a fair treatment of consumers
by enabling the agricultural industries to find external markets at
reasonable and competitive prices.

To obtain these objectives a three point policy was initiated.
Trade in agricultural products was gradually freed from restrictions
among the European Economic Community member countries. A common
external trade policy was developed by the European Economic Community,
with variable import levies and variable export subsidies, to replace

3

4

all national protection policies. And the EurOpean Economic Community
members jointly financed the costs of market support for agricultural
products, the subsidizing of exports to non-member countries and expendi-
tures on structural and regional improvement in agriculture.

Common agricultural prices are the key component in the European
Economic Community's Common Agriculture Policy. These price levels
determine the need for support purchasing of agricultural products and
the size of the variable levies and subsidies, which in turn determine
agricultural trade policy toward non-member countries.

In order to free internal trade in agricultural products a transition
period was ad0pted during which the national policies and price support
levels were gradually harmonized.1 To achieve this price harmonization
with minimum disruption a variable levy and subsidy system was used for
trade in agricultural products among member countries. Unlike the
external levies, these internal levies were gradually lowered until they
disappeared by the end of the transition period. These internal levies
were lower than the external levies in order to insure a preference for
the agricultural products produced in the EurOpean Economic Community.
Subsequent sections will describe the Specific policies adapted for the

various grain and livestock products important in this work.

The EurOpean Agricultural Guidance and Guarantee Fund
The financing of the Common Agriculture Policy is executed through
the European Agricultural Guidance and Guarantee Fund.
About one-fourth of the expenditures of the Fund have been made

urnder the Guidance Section. Expenditures under this Section are aimed

 

1Ju1y 1, 1962 to December 31, 1969.

5

at structural reform in agriculture. The Fund's goal here is to improve
both production and marketing efficiency, particularly the optimum
utilization of labor. Assistance under this Section involves capital
subsidies for specific projects. In order to receive assistance from the
Fund the project must (1) be designed to help agriculture adjust to the
Common Agriculture Policy, (2) be a project having long run, lasting
economic effects and (3) be a part of a European Economic Community
program. Projects devised as an integral part of a regional economic
development plan within the European Economic Community will be given
priority. Before any project can be funded by the Fund the application
must have been submitted through and approved by the member country
concerned. When a project is approved the Fund can finance no more than
twenty-five percent of the total investment of any one project. The
recipient of the subsidy (be it a public, semipublic or private group)
must provide at least thirty percent of the total investment. The member
country in which the project is to be carried out must also contribute to
the financing of the project.

The remaining three-fourths of the Fund's expenditures fall under
the Guarantee Section. Expenditure under this Section covers two types
of activities. First, funds are used to support internal European
Economic Community market prices through market intervention. This is
accomplished by withdrawing any excess supply which a market cannot
absorb and either carrying this excess supply over to the next time
period and/or finding an alternative outlet for this excess supply on
the internal market. Guarantee Section funds are also used to provide
export subsidies. Since the European Economic Community support prices

for exportable commodities are higher than world price levels, export

6
subsidies are necessary in order to maintain exports and eliminate
the buildup of surpluses.

Table II-l shows the total expenditures of the European Agriculture
Guidance and Guarantee Fund by sections for the 1962-1963 to 1968-1969
period. The substantial increase over the period stems from two
sources. More and more commodities fell under Common Agriculture Policy
regulations during this transition period and, therefore, the Fund
became accountable for the financing of programs for these added commod-
ities. Also, throughout the transition period the Fund took over from
the member countries an ever increasing share of the Common Agriculture
Policy expenditures. Member countries were reimbursed for Guarantee
Section expenditures on eligible commodity programs in the following

percentages:

1962-1963 16.67%
1963-1964 33.33
1964-1965 50.00
1965-1966 60.00
1966-1967 70.00
1967-1968 100.00

After 1967-1968 only commodities in the unified market stage are quali-
fied for one hundred percent financing. If a commodity has not reached
the unified market stage by 1967-1968 only seventy percent of eligible
program expenditures for that commodity are to be reimbursed.

During the 1962-1963 to 1966-1967 period, expenditures from the
Guidance Section of the Fund could not exceed one-third of total

Guarantee Section expenditures. However, since Guarantee Section

Table II-l.--European Agricultural Guidance
and Guarantee Fund expenditures

 

Special : Total

 

 

Year Guidance Guarantee
section section section :
: ---------------- Million Dollars --------------------
1962-1963 ........ i 9.1 28.7 37.8
1963-1964 ........ : 17.1 50.7 67.8
1964-1965 ........ E 54.6 170.9 225.5
1965-1966 ........: 80.0 240.1 320.2
1966-1967 ........2 123.5 370.5 494.0
1967-1968 ........ 1 285.0 1,312.9 206.3 1,804.2
1968-1969 ........; 285.0 2,009.7 138.3 2,433.0
Source: B. L. Berntson, O. H. Goolsby and C. 0. Nohre, "The European

Community's Common Agricultural Policy:

Implications for U.S.

Trade," Foreign Agricultural Economic Report No. 55, Foreign
Development and Trade Division, Economic Research Service,
United States Department of Agriculture, Washington, D.C.,

October 1969, p. 102.

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expenditures were expected to increase rapidly after 1966-1967, a $285
million ceiling was placed on Guidance Section expenditures beginning
in 1967-1968.

Special payments were paid to Italian, German and Luxembourg grain
producers from a Special Section of the Fund, in addition to those paid
under the Guarantee Section during the 1967-1968 to 1969-1970 period.
This partial income compensation for the grain producers in these three
countries resulted from the abrupt drop in grain prices when the unified
grain market went into effect.

A variety of systems have been used to determine the size of each
member country's contribution to the Fund. For the 1962-1963 to
1964-1965 period, two systems determined member country contributions.
The first, providing one hundred, ninety and eighty percent of the
contribution, respectively, in 1962-1963, 1963-1964 and 1964-1965, was
based on a percentage scale defined in Article 200 of the Treaty of
Rome. This country scale is shown in the first column of Table II-2.
The second, providing the remainder of the contributions, was propor-
tionate to the member country's net imports of commodities included in
the Common Agriculture Policy from external countries. This part was
included because the variable levy proceeds accrued to the member
country's treasury during the transition period. For this period a
ceiling also existed on any member country's total contribution to the
Fund (see the second column of Table II-2).

For 1965-1966 and 1966-1967, the member countries switched to the
fixed percentage scale of contributions to the Fund shown in Table II-2.

A different system was initiated in 1967-1968. The member countries

contributed ninety percent of their receipts from the variable import

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levies on agricultural commodities to the Fund. The remaining portion
required to finance Guidance and Guarantee Sections of the Fund was
allocated on the fixed percentage scale shown in column five of
Table II-2. Contributions to the Special Section were based on the
percentage scale defined in Article 200 of the Treaty of Rome.

Contributions for Common Agriculture Policy expenditures by the
Fund was again alloted on a fixed percentage scale for the member
countries in 1970 (Table II-2, column six). Expenditures for purposes
other than those under the Common Agriculture Policy were based on the
percentage scale defined in Article 200 of the Treaty of Rome.

For the 1971-1974 period, European Economic Community expenditures
will be financed by member countries contributing their variable levy
receipts from commodities covered by the Common Agriculture Policy or
fifty percent of their total variable levy and customs receipts, which-
ever is larger. Ten percent of this will be refunded to the member
countries to cover collection costs. Any shortages will be made up on
the basis of the percentage scale shown in column seven of Table II-2.
Regardless of the source of contributions, the percent of total contri-
butions from any one member country will not be less than 98.5 percent
nor more than 101.0 percent of that contributed in the previous year.
Any deficits caused by this ceiling on contributions will be divided
among the member countries that have not already reached their ceiling.

From 1975 on, European Economic Community expenditures will be
financed by member countries contributing all of their variable levies
from Common Agriculture Policy commodities and all their customs
receipts. Ten percent of these contributions will be refunded to cover

the costs of collection. To make up any deficits, member countries will

ll
contribute up to one percent of their value-added tax collections
(presumably the same percent for each member country). For the 1975-
1977 period, the percent of total contributions paid by any one member
country will be no less than 98 percent nor more than 102 percent of
the percent of the total contributed in the previous year. Again, any
deficit caused by this ceiling will be allocated among the member
countries which are still below their ceiling. After 1977, there will
be no limit on any one member country's percentage contribution. There
is, however, an effective ceiling on the total revenue provided the
European Economic Community by the member countries. No more than all
the variable levy and customs receipts plus one percent of total value-
added tax collections can be used for Community expenditures.

A summary of the member country's contributions to and receipts from
the European Agricultural Guidance and Guarantee Fund is presented in
Table II-3. This imbalance between receipts and contributions has been
one of the most difficult political problems facing the European
Economic Community during the transition period. This is evidenced by

the multiplicity of financing schemes used since 1962.

Institutional Structure

 

The institutional setting for the Common Agriculture Policy is
outlined in Figure II-l. The European Commission has the sole responsi-
bility for drafting policy proposals. When the Commission reaches
agreement on a policy proposal, they submit it to the Council of

IMinisters. The Council sends the proposal to first, the Economic and

12

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14
Social Committee and then the European Parliament for an opinion.2
Before the proposal is debated in the Council, it is sent to the
Special Committee on Agriculture where the technical features are
clarified and put in an Operational form. Then during the debate in the
Council of Ministers, the European Commission can submit amendments to
its original proposal in order for the member countries to reach a
compromise policy. As soon as a decision is reached by the Council, the

provisions of the new policy are published in the Official Gazette of

 

the European Communities and are then in effect throughout the European
Economic Community.

While the Council of Ministers is the decision making body at the
policy level, the European Commission is charged with the responsibility
of the everday implementation of the Common Agriculture Policy. To
assist it in implementing policy, the Commission is aided by three sets
of committees. For every major commodity or group of commodities, a
Management Committee exists which must be consulted on all measures
affecting the commodities under their jurisdiction. A Fund Committee
must also be consulted on all activities involving European Agricultural
Guidance and Guarantee Fund expenditures. The Permanent Committee on
Agricultural Structures must be consulted on project selection and policy
coordination for any activity coming under the auspicies of the Guidance
Section of the Fund.

The policy decisions of the European Commission are final in order
for effective day-to-day operation to take place. However, if any of

these committees reject any of the European Commission's policies by a

 

2Employers, trade unions, farmers, merchants and consumers are
represented on the Economic and Social Committee.

15
qualified majority vote and the Commission abides by the original deci-
sion, the issue comes before the Council of Ministers.3 The Council of
Ministers then has one month in which to revise or reject the Commission's
decision, again by a qualified majority vote. The Council of Ministers
decision is a final decision.

The European Commission has also set up a series of commodity
oriented Consultative Committees, composed of representatives of all
groups affected by the Common Agriculture Policy, to confer with on pro-
blems originating over the development and execution of the Common
Agriculture Policy. The Special Committee on Agriculture also assists the
Commission by providing market information and research studies.

Finally, any dispute arising from the Common Agriculture Policy in
the Council of Ministers that cannot be settled can be submitted to the

European Economic Community's Court of Justice for a final ruling.

The Common Agriculture Policy
93211
The common organization of the grain market came into effect in
August, 1962. A11 national trade policies, particularly quantitative
import restrictions, were eliminated and replaced by a system of variable
import levies. This levy system is the only protection against imports
from outside. It prevents cheaper grain imports from disrupting internal

grain price levels, which are substantially above the world price level.

 

3A qualified majority vote requires twelve votes out of seventeen.
The votes are allocated as follows: France, Italy and West Germany, four
votes each; Belgium and Netherlands, two votes each; and Luxembourg, one
vote,

l6
4

For every marketing year, the Council of Ministers sets a target

price for each grain. The target price ". . . is fixed to enable farmers
to plan production and to give economic guidance to all market users.

The common agricultural policy aims at keeping the market price as close
as possible to the target price."5 This price is specified for a grain

of standard quality for the marketing center of the major grain deficit
region in the European Economic Community--Duisburg, West Germany.

Related to these target prices are threshold prices. These threshold
prices are the basis for calculating the variable import levies on grain.
They are established for Rotterdam, Netherlands as the minimum import
price allowable. The threshold price at Rotterdam plus the transport

cost of moving the grain from Rotterdam to Duisburg equals the target
price in Duisburg. The variable import levy is calculated as the differ-
ence between the threshold price and the most favorable c.i.f. world price
at Rotterdam. This variable import levy is then applied to all grain
imports regardless of the actual offer price, the port of entry or the
final destination. The variable import levy is adjusted day-to-day to
account for changes in the c.i.f. world prices. Threshold prices are also
specified for cereal grains that are imported but not normally produced in
the Community. These threshold prices are set at levels such that imports
will not undersell competing domestic grains. Import levies on products
produced from grain are calculated on the basis of the input grain import

levies, plus a margin of protection for the domestic processing industry.

 

4August 1 to the following July 31.

5European Community Information Service, "The Common Agricultural
Policy, " p. 2.

17

During the transition period, August, 1962 to July, 1967, a similar
variable import levy system was in existence between member countries for
grains. Until the end of the transition period, member countries set
national target prices which were gradually brought together to achieve
a common target price by the end of the transition period. Since target
prices differed between member countries, variable import levies were
charged on internal grain trade moving from one member country to another
with a higher target price. With one exception, this intra-Community
variable import levy was calculated in the same manner as in the case of
imports from non-member countries. The gross intra-Community import levy
equaled the difference between the threshold price in the importing
member country and the c.i.f. free-at-frontier price from the exporting
member country (rather than the most favorable c.i.f. world price). In
order to ensure a margin of preference for European Economic Community
grain producers over non-Community producers, the gross variable import
levy was reduced by a "lump sum preference." This "lump sum preference"
was initially $1.00 per metric ton for whole grains, then $1.10 per metric
ton for the remainder of the transition period. This variable import levy
system for grains is depicted in Figure II-2.

Even with the variable import levy system, grain prices could fall
below their target price. To avert this, the Commission establishes a
guaranteed intervention price--usua11y about seven percent below the target
price--at which the official intervention agency in each country is obli-
gated to purchase any domestically produced grain that the producers cannot
sell for a higher price in the marketplace. A basic intervention price is
established for each grain at Duisburg. Regional intervention prices for

other marketing centers are computed on the basis of the Duisburg

 

18

transport cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Figure II-2.--The European Economic Community variable
import levy system for grain

1

May be below national target price if producer is located near the
border and/or when intervention price plus transport cost is the domes-
tic price.

Source: Adapted from Finn B. Jensen and Ingo Walter, The Common Market,
Economic Integration In Europe, J. B. Lippincott Company,
Philadelphia, Pennsylvania, 1965, p. 68.

 

 

 

 

 

 

 

 

 

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19
intervention price adjusted for transport and other marketing costs. An
exception is the intervention price for corn which is the same through-
out the Community when the domestically marketed corn is less than forty-
five percent of consumption.

An additional subsidy may be paid to producers of durum wheat. A
guaranteed minimum price of durum wheat is established for the marketing
center of the major producing area. If this guaranteed minimum price for
durum wheat exceeds the intervention price, a subsidy equal to the
difference is paid on all durum wheat production. This subsidy is uniform
throughout the Community.

Also, the target price for grain can be adjusted each month to take
account of storage costs. Therefore, grain prices would drop at the end
of every marketing year. Because of this, some transitional compensation
is granted to holders of year end grain stocks produced in the Community.
This compensation cannot exceed the difference between the target price
for the last month of the previous year and the target price for the first
month of the current year.

Since grain prices in the European Economic Community are higher than
world grain prices, grain exports are not possible without assistance.
Community grain export assistance takes the form of variable export
subsidies which are the counterpart of the variable import levies. The
variable export subsidy equals the difference between the Community grain
price and the price in the destination country. Thus, with this variable
eXport subsidy, Community grain can be competitive in any market.

Licenses are required for all Community imports and exports of grain

and grain products and are freely awarded upon request. The variable

20
import levy or subsidy may be determined when the license is issued,
rather than when the transaction actually takes place.

As an alternative to subsidizing exports, premiums may be paid for
diverting grain into a separate second market. For example, a denaturing
premium is used to help support the market for food grain by allowing the
surplus soft wheat and rye of milling quality to be sold at a lower price
only in the feed grain market. The original methods for doing this
consisted of either mixing the surplus food grain with mixed feed grain
in a specified fixed proportion (admixture) or crushing the food grain
kernals (denaturing). The kernal crushing method of denaturing had the
disadvantage of making denatured food grain unsuitable for certain
purposes. In order to eliminate this disadvantage, the denaturing process
was changed to one of dyeing twenty percent of the kernals blue and mixing
them with undyed kernals. The denaturing premium is composed of two
separate parts: ". . . a partial amount taking account of the difference
between the price for soft wheat and that for barley, [and] the other
partial amount shall take account of the technical costs of denaturing,
fixed in a standard way, or the special costs of admixture."6 The
difference between soft wheat and barley price is taken into account in
the denaturing premium in order that denatured food grain does not disturb

the barley and corn market.

Beef and Veal
The Common Agriculture Policy for beef and veal took effect on

November 1, 1964, and the common market was established by July 29, 1968.

 

6Ernest Koenig, "Denaturing of Wheat and Rye," Department of State
Airgram, From U.S. Mission to the European Communities, Brussels to
Department of State/Washington, Pass Agriculture, July 19, 1968, Encl. l,
p' 20

21

European Economic Community imports of beef and veal are subject to two
types of trade restrictions: a common external tariff and a supplemen-
tary variable import levy. The common external tariff for live cattle is
sixteen percent ad valorem and is twenty percent ad valorem for meat.

When domestic beef and veal prices are under pressure from low-cost
imports, an additional form of protection--the supplementary variable
import 1evy--can be imposed.

The European Commission sets a guide price for beef and veal products.
This guide price is not a guaranteed producer price, but rather an average
price which they consider to be desirable for producers to receive for
their production. However, this guide Price does serve as the basis from
which the supplementary variable import levies and the intervention
prices are derived. Whenever the internal market price is equal to or
less than the guide price, the domestic producers receive the protection
of a supplementary variable import levy. If the internal market price is
between 100 and 102 percent of the guide price, only 75 percent of the
supplementary variable import levy is charged. When the internal market
price is from 102 to 104 percent of the guide price, 50 percent of the
levy is charged. Only 25 percent of the supplementary variable import
levy is collected if the internal market price is between 104 and 106
percent of the guide price; and no levy is collected when the internal
market price exceeds 106 percent of the guide price. This supplementary
variable import levy is the difference between a calculated import price
(plus the ad valorem tariff) and the guide price. The calculated import
price for live animals is a weighted average of prices in Austria,
Denmark, Ireland and the United Kingdom. The calculated import price for

fresh, chilled and smoked beef and veal is based on this price for the

22
live animal adjusted by a live weight-caress weight conversion factor.
For frozen beef and veal, the calculated price is based on the most
favorable c.i.f. world price.

Under the General Agreement on Tariffs and Trade, the European
Economic Community has agreed to a levy free quota for 22,000 tons of
frozen beef. The tariff rate cannot exceed twenty percent on that 22,000
tons. This 22,000 tons, however, is a very small portion of the total
imports of frozen beef. If there is a lack of frozen beef available for
the processing industry, the Council of Ministers can reduce or eliminate
the levy in order to increase imports.

In order to increase beef and veal production without a corresponding
increase in milk production, some special concessions are allowed on
imports of calves and young fattening cattle. Whenever the internal market
price for calves is greater than the guide price, the supplementary
variable import levy on calves and young fattening cattle will not be
charged. Also, in this case, the common external ad valorem tariff will
be cut in half.

During the transition period, the tariff rates in each member country
were gradually harmonized. The member countries could also apply a
supplementary variable import levy on imports from another member country.
If the importing country intervened in their national market the maximum
levy they could impose was one that raised the price of the imported
product to no more than ninety-six percent of their guide price. If a
member country did not intervene in its domestic market, the maximmm
levy could not raise the price of the imported product to more than ninety
percent of their guide price. Neither supplementary variable import

levies nor intervention in the domestic market were allowed for calves.

23

Also, during the transition period guide prices were established
for individual member countries. These were gradually aligned until a
common guide price was established in 1968.

Two intervention prices exist for mature cattle and, through live
weight-carass weight conversion factors, for beef. The first inter—
vention price is set at ninety-eight percent of the guide price. At this rfi
price, intervention in the market may take place. The second intervention
price is set at ninety-three percent of the guide price. When the market {u
price reaches this level, intervention must take place. No intervention
price nor intervention procedure is provided for in the calf market.

The European Economic Community is a net importer of beef and veal;
however, variable export subsidies can be paid on any Community exports
in order to bring the internal price down to the world price level.
This subsidy is the same throughout the Community but can be differentiated
by destinations.

Import and export certificates are required for trade in beef and
veal. Beef and veal imports are also subject to standarized sanitary

and veterinary regulations.

Egrk

Since pork is a 'processed' product based primarily on feed grain,
the variable import levy for pork is calculated in a different manner
than the variable import levy for beef and veal or even grain. The
variable import levy consists of two parts. The first takes into con-
sideration the difference between feed grain prices. It equals the
difference in the value of the feed grain ration required to produce a
unit of pork when that ration is priced at the world market price level

.and at the European Economic Community price level. A second element,

24
seven percent of the previous years sluice-gate price, is added in order
to give the domestic pork producers a margin of preference.

The sluice-gate price is, in effect, a minimum import price. It
differs from a threshold price in that it is not tied in any way to a
guaranteed producer price. The sluice-gate price for pork is also
composed of two parts. The first is equal to the value, at world market
prices, of a specified, efficient feed grain ration required to produce
a unit of pork. The second part is a fixed sum representing other costs
of production and marketing. When pork imports threaten to enter at a
price below the sluice-gate price, a supplementary variable import levy
is charged. This supplementary variable import levy is equal to the
difference between the sluice-gate price and the lower import price.

During the transition period, July 30, 1962 to July 1, 1967, trade
between Community members was subject to two types of protection. First
were the member countries customs duties which were gradually eliminated
during the transition period. The second was a variable import levy
calculated in the same manner for trade between member countries as that
between a member country and third countries. As feed grain prices were
harmonized, this variable import levy gradually disappeared.

The Common Agriculture Policy also provides for mandatory internal
market intervention for pork. However, the intervention mechanism is not
via a guaranteed intervention price, as is the case with grain and beef.
Base prices are fixed annually and, whenever internal prices fall to this
base price, the Council is required to examine the market situation and
decide whether any market intervention is called for. Intervention must
take place if it appears that internal pork prices will remain below the

base price for any length of time. The intervention price must then be

25
between eighty-five and ninety-two percent of the base price. This base
price is set after considering the level of the sluice-gate price, the
level of the variable import levy and the desire to maintain stable
pork prices without the buildup of surplus pork.

Variable export subsidies are also provided for pork. The level of
this variable export subsidy is equal to the difference in the costs of
the feed grain required to produce the pork in the two countries.

During the transition period, there existed an alternative method of
determining the level of the variable export subsidy for trade between
member countries. A country could refund an amount equal to the variable
import levy on its imports from third countries. If this method was used,
however, the importing member country had the option of imposing a
variable import levy equal to that it applied to imports from third
countries.

Imports of either pork or live animals require import certificates
and surety deposits. Pork trade is also subject to standardized veteri-

nary and sanitary regulations.

Eggs and Poultry

The Common Agriculture Policy for eggs and poultry is based only on
a system of variable import levies and variable export subsidies. No
provisions exist for any internal market intervention activities. Since
the European Economic Community has been a deficit production area, it
was felt that import restrictions alone would provide sufficient price
support for domestic producers.

Eggs and poultry, like pork, are 'processed' products; therefore,
the variable import levy on eggs and poultry is calculated in the same

manner as that for pork. The levy consists of two elements. The first,

26
the feed grain differential, equals the difference in value of the feed
grain required to produce a unit of eggs or poultry in the European
Economic Community and on the world market. Seven percent of the
previous years sluice-gate price is added to the feed grain differential
in order to give domestic producers an added margin of preference.

The sluice-gate price for eggs and poultry is a minimum import
price, as is the case for pork; and it is calculated in the same manner
as the pork sluice-gate price. Whenever egg or poultry imports threaten
to enter at a price below the sluice-gate price plus variable import
levy, a supplementary variable import levy is charged. This supplemen-
tary variable import levy equals the difference between the import
offer price and the sluice-gate price plus variable import levy.

During the transition period, August 1, 1962 to July 1, 1967, the
variable import levy system also applied, but in a slightly modified
form. As is the case now, the variable import levy included a feed grain
differential. For internal trade this gradually disappeared as feed
grain prices were harmonized. A second part of the levy was based on the
customs duties in force at the beginning of the transition period. This
portion was gradually reduced until finally eliminated by the end of the
transition period. A third part, applicable only to non-member countries,
gave a preference to Community producers. This portion started at two
percent of the previous years sluice-gate price and rose to the
present seven percent by the end of the transition period.

Export subsidies are also granted by the European Economic Community
in order for producers to sell eggs and poultry to non-member countries
at world prices. These variable export subsidies are calculated in the

same manner as the ones for pork.

27
A common system of egg-grading came into effect January 1, 1968,
which must be complied with by all imports. A mark of origin must be on
all egg containers, also. Poultry products are subject to sanitary and

veterinary regulations, too.

Summary

A summary of the Common Agriculture Policy regulations is presented

in Table II-A.

Table II-4.--The European Economic Community's Common
Agriculture Policy arrangements for grain
and livestock products

 

  
 
  

: : : : . Supple-
TargetzThreshold :Sluice-: Free at : Variable: mentary
price : price : gate :frontier : import :variable

Arrangements °

 

Commodities ; : : price : price : levy : import
: : : : : : levy

Grain ...........: X X X X
Beef and veal ...: X1 X X
Pork ............. X X X
Eggs and poultry : X X X
Milk and dairy 3

products ......: X X X X

--Continued

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28

Table II-4 (cont'd.)

 

Arrangements :

 

Provision Provision : . :Unifi-
:Import: for market for vari- :Quota: Initial :cation
:tariff: intervention :able export: date : date
Commodities ' subsidy
Grain ......... X X 8-1-62 7-1-67
Beef and veal : x x x x2 11-1-64 7-29-68
Pork .......... X X 8-1-62 7-1-67
Eggs and .
poultry ....: X 8-1-62 7-1-67
Milk and dairy: 4
products ...: X X 11-1-64 7-29-68

 

1Guide price.

2

3Milk only.

Levy free import quota on frozen beef

4Butter and skimmed milk powder only.

Source:

Adapted from Ministry of Agriculture and Fisheries of the

Netherlands, Statistics and Documentation Section, "Selected
Agri-Figures of the E.E.C."

July 1968, p. 48.

CHAPTER III

Theoretical Framework

The objective of this chapter is to develop an international
trade model that will simulate the grain-livestock trade sector of the
European Economic Community. Since international trade in agricultural
commodities is not completely transacted within a competitive framework,
an important aspect of this study will be the incorporation of institu-
tionally controlled policy variables into the model. By incorporating
this type of variable in the model, it is hoped that we will be able to
more realistically simulate the agricultural trade flows for the
European Economic Community.

The general technique applied here will be spatial equilibrium
analysis. Spatial equilibrium analysis is a broad methodology covering
a wide range of techniques: from fixed production-fixed consumption
models at one end of a continuum to supply-demand models at the other
end.

There have been numerous interregional studies using the full range
of spatial equilibrium techniques. However, there have been few studies
of spatial equilibrium analysis applied to international trade.

Dean and Collins used a fixed production-fixed consumption (trans-
portation) model to analyze the effects of European Economic Community
tariff policies on world trade in fresh oranges. They estimated
production and wholesale demand curves for each country. Given these
estimated demand curves, existing price levels were adjusted until world
demand equaled world production. These quantities demanded, with the
estimates of production, transportation costs and tariff rates, were

29

30

used in a transportation model to determine the optimum trade pattern.
The solution to the transportation model implied a set of price
differentials based on transportation rates and tariff rates. These
price differentials were compared with the original adjusted prices,
and the quantities demanded were re-adjusted until world demand again
equaled world production and until the newly adjusted prices were
consistent with those implied in the transportation model solution.

A second transportation model was solved, using the re-adjusted esti-
mates of world demand and production. This procedure was repeated
until a consistent set of prices, consumption and trading patterns was
obtained.

Fox, in his study of the EurOpean Economic Community's grain trade,
employed activity analysis models-~linear programming production models
augumented by international transfer activities. Unlike Dean and
Collins, he assumed grain prices were predetermined--politically
predetermined. Given these prices and demand and resource levels, he
estimated trade patterns between countries and resource use and
production levels for each country. Fox's models dealt with three
commodities: food wheat, feed wheat and feed grain.2

In his study of international trade in feed grain, Bjarnason

employed a supply-demand spatial equilibrium model. He used a least

 

1Gerald W. Dean and Norman R. Collins, "World Trade in Fresh
Oranges: An Analysis of the Effect of European Economic Community
Tariff Policies," Giannini Foundation Monograph Number 18, California
Agricultural Experiment Station, January 1967.

2Roger William Fox, "Some Possible Production and Trade Effects of
the EEC's Common Agricultural Policy for Grains," Unpublished Ph.D.
dissertation, Department of Agricultural Economics, Michigan State
University, 1965.

31

squares regression technique to estimate demand and, indirectly, supply.
An acreage and a yield function were estimated. The product of these
two functions provided a supply function. Given the supply functions,
the demand functions and a transportation cost matrix, Bjarnason
maximized international consumer surplus or what Samuelson called "net
social pay-off” to determine the optimum production, consumption,
prices and trade patterns for each country.3’ 4

Utilizing the same basic spatial equilibrium model as Bjarnason,
Bates and Schmitz analyzed international trade in sugar. They also
made use of a transportation model to study the efficiency of the world
sugar trade.5

In 1964, Takayama and Judge developed an interregional supply-
demand spatial equilibrium model involving several interrelated

6

commodities. By including trade policies, Bawden adapted this inter-

regional model to international trade.7 Bawden's model was utilized by

 

3Harold Frederick Bjarnason, "An Economic Analysis of 1980 Inter-
national Trade in Feed Grains," Unpublished Ph.D. dissertation,
Department of Economics, University of Wisconsin, 1967.

4Paul A. Samuelson, "Spatial Price Equilibrium and Linear
Programming," American Economic Review, Vol. 42, June 1952, pp. 283-303.

5Thomas H. Bates and Andrew Schmitz, "A Spatial Equilibrium
Analysis of the World Sugar Economy," Giannini Foundation Monograph
Number 23, California Agricultural Experiment Station, May 1969.

6T. Takayama and G. G. Judge, "Spatial Equilibrium and Quadratic
Programming," Journal of Farm Economics, Vol. 46, February 1964, pp. 67-
93; and T. Takayama and G. G. Judge, "An Intertemporal Price Equilibrium
Model," Journal of Farm Economics, Vol. 46, May 1964, pp. 477-484.

7D. Lee Bawden, ”A Spatial Equilibrium Model of International
Trade,” speech presented at the annual meeting of the Econometric
Society, New York, N. Y., December 30, 1965; and D. Lee Bawden, "A
Spatial Price Equilibrium Model of International Trade," Journal of Farm
Economics, Vol. 48, November 1966, pp. 862-874.

 

 

32

the North Central Regional Marketing Project No. 33 to analyze the
affect of domestic and foreign trade policies on production, consumption,
prices and trade patterns for five interrelated commodities and eleven

geographic regions.8

Formulation of the Model

As already stated, the objective of this chapter is to develop an
international trade model that will simulate the trade patterns for the
grain-livestock sector of the European Economic Community. A second
objective is to do the above with the most elementary model possible.
To develop a model that requires only easily available data is also an
important criterion.

One conclusion of the North Central Regional Marketing Project
No. 33 was:

"The model can provide realistic and definitive results

only if realistic data inputs are obtained. Data requirements

are demand and supply equations, including cross price elastic-

ities, transfer costs, and policy assumptions. A complex

interaction results. This imposes, more so than in simpler

models, the requirement of reliable and consistent data inputs.

Data from currently available sources do not always meet these

requirements."9
For these reasons a supply-demand spatial equilibrium model, similar to
that developed by Bawden, was eliminated at the start as a feasible
alternative.

The approach, therefore, was to start with the simplest type of

spatial equilibrium model: a fixed production-fixed consumption or

 

8D. Lee Bawden, James G. Kendrick, Carmen O. Nohre and Howard C.
Williams, "A Model For Agricultural Trade Analysis," Unpublished contri-
bution to North Central Regional Marketing Project No. 33, "Implications
of the European Economic Community for Midwestern Agriculture,"

June 17, 1968.

91bid., p. 37

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33
transportation model. A transportation model given production,
consumption and transportation costs will generate the trade pattern
which minimizes total (world) transportation costs. This model assumes
that free trade exists; that transportation costs are the only barrier
to trade. However, trade restrictions do exist in the world. Thus, a
simple transportation model will not simulate international grain-
livestock trade. It can, nevertheless, serve as a base on which a
somewhat more complex and realistic model can be constructed.
Since one of the objectives of this study is to incorporate
institutionally controlled policy variables into the model, the next
step should be to define what forms these institutionally controlled
policy variables will take. In general these variables take the form
of policies that tend to restrict international trade. The types of
institutionally controlled policy variables that one should, if
possible, consider include:
1. Import duties
A. Fixed or specific import duties
B. Ad valorem import duties

2. Export duties
A. Fixed or specific export duties
B. Ad valorem export duties

3. Transit duties

4. Variable import levies

5. Import quotas

6. Export quotas

7. Export subsidies

34

A. Fixed or specific export subsidies
B. Variable export subsidies

8. Export and import licenses

9. Mark-of-origin regulations

10. Sanitary regulations

11. Mixing and milling regulations

12. Administrative protection devices

These policy variables can be incorporated into the basic trans-
portation model in one of two ways. Some can be incorporated in the
form of additional restrictions in the transportation model; the rest
can be incorporated in the objective function (the transportation cost
function) which is to be minimized. Thus, the objective function must
be redefined. Total transfer, not transportation, costs must now be
minimized. Transfer costs are all costs involved in moving a commodity
from one country to another. They include transportation costs plus
other costs.

The above model is defined in terms of a particular commodity. No
direct interrelationships between commodities are included in this model.
For example, consider four commodities: food grain, feed grain, veal,
and beef. Transfer cost models for these commodities can be schemati-
cally represented as in Figure III-1.

However, interrelationships do exist between these grain and live-
stock commodities. Food grain (wheat) can be utilized as feed grain.
Thus, the production of food grain and the consumption of feed grain
are related. The relationship between veal and beef must be considered.
The question here centers around whether one should market his calves

in the form of veal or beef. Thus, veal production and beef production

35

Production of food grain Production of feed grain
Consumption of food grain Consumption of feed grain
Production of veal Production of beef
Consumption of veal Consumption of beef

Figure III-l.--Schematic diagram for transfer cost
models with no commodity interrelationships

Production of food grain Production of feed grain

I J
I I

 

 

Consumption of food grain Consumption of feed grain
Production of veal *) Production of beef
Consumption of veal Consumption of beef

Figure III-2.--Schematic diagram for transfer cost
model with commodity interrelationships

36
are related. A third complication enters, too. The demand for feed
grain is a derived demand. We now have a third relationship--that
between veal and beef production and feed grain consumption. A
schematic diagram including the interrelationships between the
commodities listed above is shown in Figure III-2.

Thus, a country must determine how its food grain production will
be utilized: consumed as food grain (domestically or exported) and/or
consumed as feed grain (domestically or exported). They must also decide
how to meet, say, an excess demand for beef. Should they import beef?
Or should they utilize any excess feed (or food) grain production and/
or import feed grain to domestically produce the beef necessary to meet
their demand? If the country has an excess supply of feed grain,
should it export feed grain or convert it to meat (for either domestic
or foreign consumption)?

The question now arises as to how to include these interrelation-
ships into the model.

The most direct method is to define the production and consumption
relationships in the model in terms of supply and demand functions
rather than in terms of quantities supplied and demanded. In this
manner these cross elasticity type relationships can be incorporated
by essentially adding another term to the appropriate supply and/or
demand function. This approach has been discarded apriori.

A second method for considering these interrelationships is an
indirect one and one that can utilize the minimum transfer cost model
as postulated. In the transfer cost model these interrelationships
enter through their effects on production and consumption of different

commodities. This second method is essentially one of defining a

37
particular set of circumstances and its corresponding interrelation-
ships. By doing this we define production and consumption to be of a
certain magnitude. By changing any assumption or interrelationship,
one or more production and/or consumption level will correspondingly
change. For example, the transfer cost model can be solved under the
assumption that a country with an excess demand for beef will fill this
excess demand by importing beef. Conversely, the solution could be
based on the assumption that a country with an excess demand for beef
will import feed grain and produce beef domestically to fulfill their
excess demand. Thus, this transfer cost model, compared to the model
assuming beef imports, requires that consumption of feed grain, beef
production and veal production be changed for that country. After these
changes have been made, a second minimum transfer cost solution can be
obtained.

Criteria must then be developed upon which to base a decision as to
which of the alternative formulations of the transfer cost model is most
relevant. So the interrelationship problem is considered separately
from the transfer problem. In fact, it is handled both separately and
prior to the transfer problem since this interrelationship problem must
be solved before determining the production and consumption levels
necessary as inputs for solving the transfer problem. Thus, this
doesn't really resolve this interrelationship problem. It just makes
the 'total' model a two step model: (1) determine the interrelation-
ships and (2) determine the least transfer cost trade patterns.

The type of interrelationships considered here have been production
oriented. They have all involved modifying what was initially final

commodities in the transfer cost model to what is, in part at least, an

38
intermediate commodity. That is, some of the grain and livestock
commodities are inputs in the production process for other commodities.
A third alternative for including these interrelationships would be to
change the minimum transfer cost model into a minimum total cost model
where total costs include transfer costs and production costs. This
model would include not only transfer activities but also production
activities for all commodities. In this model, as opposed to the second
alternative above, the criteria for determining the most relevant
transfer solution have been directly incorporated. In this total cost
model, optimum trade patterns and production levels will be determined
simultaneously for all commodities.

What has been described so far is a partial equilibrium world trade
model for the grain-livestock sector of the economy. Since the primary
interest of this study is the grain-livestock sector of the European
Economic Community, the question now is how to limit the above world
trade model to the European Economic Community. Production levels in
non-European Economic Community countries and trade patterns between
these countries are not within the scope of this study. Thus,
production activities for 'outside' countries and transfer activities
between 'outside' countries are unnecessary in this model. A European
Economic Community trade model must, therefore, include four types of
activities for each commodity: (1) production activities for the
European Economic Community countries, (2) transfer activities for trade
between any two European Economic Community countries, (3) purchase
activities for imports from 'outside' countries and (4) sale activities

for exports to 'outside' countries. This model then lies somewhere

39
between the transfer cost model and the general (world) total cost model
on the continum of spatial equilibrium models.

Another question need be asked now. Is the relevant optimizing
criterion minimization of total costs? Three alternative optimizing
criteria come to mind: (1) cost minimization, (2) revenue maximization
and (3) profit maximization. Microeconomic theory tell us that
economic man maximizes profit. This might logically be the best criteria.
However, the model being developed here is not a microeconomic model but
a macroeconomic model. While not a model of the total economy of the
European Economic Community, it is a model of one sector--the grain-
livestock sector--of that economy. Therefore, the relevant objective
criteria is the macroeconomic equivalent to profit maximization.

Profits are the returns to that factor of production called entre-
preneurship. Under competition the other factors--land, labor, and
capital--earn their marginal product. This is the maximum that they
can earn. Thus, all factors of production are earning the maximum
possible returns. At a macroeconomic level, one definition of national
income is the sum of the returns to all factors of production. It
follows then that the relevant macroeconomic decision criteria would be
national income maximization.

The microeconomic decision criteria of profit maximization is a
special case of this macroeconomic criteria. Under competition the
scarcity of the other factors assures them of receiving their maximum
returns (their marginal product); therefore, the decision criteria is
tnaximization of the residual--profits. Maximizing national income will

still be the relevant decision criteria even if the economy isn't

4O
competitive. Under conditions of less than perfect competition, some
factors of production are able to extract some of the returns to other
factors of production. Maximizing national income maximizes the sum of
these returns and does not consider the welfare question of how this
maximum bundle of returns is distributed among the factors of
production. Any welfare considerations could be included in this
national income maximizing model by placing additional restrictions on

the distribution of resources on the model.

The Model

Before presenting the formal model, it is useful to look at a
schematic outline of the commodities included in the model and the
interrelationships between these commodities. Figure III-3 represents
only one European Economic Community country in detail. The relation-
ships between this country and the other European Economic Community
countries are via the transfer items in the outline. Purchase and sale
items represent the links of this country with 'outside' countries.

The direction of movement in this outline is shown by arrows.

This diagram, and the model, incorporates the following inter-
relationships between commodities: (l) the utilization of food grain
as feed grain for livestock on a farm; (2) the utilization of food grain
as feed grain, via a denaturing process; (3) the derivation of feed
grain consumption (by livestock); (4) the production of a joint product:
milk, beef and feeder calves; (5) the derivation of feeder calf con-
sumption; (6) the production of beef by alternative production
techniques; (7) the satisfaction of a commodity consumption level by
either domestic production (utilizing domestically produced and/or

inmx>rted inputs in the case of the livestock commodities), transfer from

41

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42
another European Economic Community country and/or purchase from an
'outside' country of that commodity and (8) the export of surplus
production of any commodity by a transfer to another European Economic
Community country and/or sale to an 'outside' country.

From the outline, it can be seen that only one type of external
input restriction exists for the production activities: a land
restriction. Crop land is a limiting factor on the production of grain
in a country and forage land is a limiting factor on the beef and veal
production in a country. Feed grain is a second input for the livestock
production activities, but it in turn is limited by the amount of cr0p
land available in the country. I have assumed that capital and labor
are not limiting factors of production for the agricultural sectors of
the European Economic Community. These two factors can be obtained from
the other sectors of the economy, at least to the point where the land
restrictions become operative. Thus, capital and labor are not
limiting resources in this model.

The following notation is used in the formal model:

(1) The subscripts i and j represent countries or regions included

in the model, where

France

0"
v
(.1.
ll
l-'
ll

2 = Italy

3 = Germany-Benelux

4 = EurOpean Free Trade Area
5 = Eastern Europe

6 = Other Europe

7 = United States of America

8 = Canada

43

9 = Latin America

0 = Africa and Mid East

A = Other Asia

B = Australia, New Zealand, and South Africa

(2) The superscripts k and h represent the commodities, inter-

mediate and final, included in the model, where

k,h = 1 food grain

2 = denatured food grain

3 = feed grain

4 = total feed grain equivalent

5 = the joint product, milk-beef-feeder calf10
6 = feeder calves

7 = beef (cull dairy cows)

8 = beef (fed more than one year)

9 = beef (fed less than one year)

0 = total beef

A = veal
B = pork
C = eggs
Z = poultry

(3) R = returns to the grain-livestock sector.
k
(4) Pi = the price of commodity k in country i.

k
(5) Pj

the price of commodity k in country j.

 

10This joint product is a milk cow that produces three separate
products; milk, feeder calves and cull cow beef; over her productive
life.

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

(18)

44

SE = the level of production of commodity k in country i.

TIj = the unit transportation cost of moving commodity k from
country i to country j.
X3. = the quantity of commodity k transferred from country i
1
J to country j (when i = j, XIj = the quantity of commodity
k that is produced in country i and consumed in country
i).
ID:j = the per unit fixed or specific import duty on commodity
k from country i imposed by country j.
IDRI:j = the ad valorem import duty rate on commodity k from
country i imposed by country j.
k
ESij = the per unit export subsidy granted by country i on
commodity k exported to country j.
EDI;j = the per unit fixed or specific export duty on commodity
k imposed by country i on exports to country j.
EDRI;j = the ad valorem export duty rate on commodity k imposed
by country i on exports to country j.
Fi = the quantity of forage land in country i.
f: = the number of units of forage land necessary to produce
one unit of commodity k in country i.
L1 = the quantity of crop land in country i.
l: = the number of units of crop land necessary to produce one

unit of commodity k in country i.

14 ,
w, = the percentage of food grain production in country 1 that
1

is fed to livestock on the farm (without going through a

market).

45

k

(19) Mi = the minimum production of commodity k in country i.
k

(20) Ni = the maximum production of commodity k in country i.

(21) r:5 = the proportion of commodity k that can be produced from
the joint product milk-beef-feeder calves in country i.

k
(22) Dj = the level of consumption of commodity k in country j.

I
(23) D6 = the level of consumption of total feed grain equivalent
J
for industrial and seed purposes in country j.
kh
(24) s = the number of units of commodity k necessary to produce
j

one unit of commodity h in country j.
(25) G = net revenue or expenditure by the European Agricultural
Guidance and Guarantee Fund.

2
(26) E. = the cost of denaturing food grain in country i.
1

k
(27) %.. = the historical minimum percentage of commodity k
1]
transferred from country i to country j.
The object of the model is to maximize returns tothe grain-
livestock sector of the European Economic Community where
k k k k k k k k k
R = ([(P. - E.)s.] + [T. x..] + [(T.. - ID.. - IDR . P.)
i j k 1 1 1 1j 13 13 13 ij 1
k k k k k k
x ] - [(P + T + (P - P ) - ES
ij i ij j i ij
k k k k 11
+ED +EDR P)X ]).
ij ij i ij
The term in the first pair of brackets represents the production
activities in the model. Internal European Economic Community transfer

activities are represented by the second term. For these two terms

i, j 5'3. The terms in the third bracket represent sale activities. In

 

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‘JIII'III'I

IIIIH

I
'IIII

D‘II

AI"!

( I

0‘ ,

'I
'I

46

these terms i.$ 3 and j>>3. The final bracketed terms represent
purchase activities. Here i > 3 and j.S 3.

This objective function allows for import duties, both fixed or
specific and ad valorem, imposed on European Economic Community sales
by 'outside' countries (see the sale activity term). Export duties,
both fixed or specific and ad valorem, on sales by 'outside' countries
to members of the European Economic Community are included in the
purchase activity term. This purchase activity term also includes an
export subsidy imposed on European Economic Community purchases by
'outside' countries. The term representing a European Economic
Community export subsidy is incorporated into the production activity
term. Prices in the above equation are internal, domestic prices rather
than world prices; therefore, an export subsidy is implicit in all
European Economic Community sales. For the same reason, variable
import levies and variable export subsidies on transfers between European
Economic Community members are implicit in the production activity term.
The variable levy imposed by European Economic Community members on
'outside' imports is included in the purchase term.

This objective function is subject to the following restrictions:

(1) There is a maximum amount of forage land in country i

(i _<_ 3) available for production of the joint product milk-

beef-feeder calves, beef and veal.

5 8 9 9 A
F, >»f,S? + f,38 + f,S, + f,S§
1 " 1 1 1 i 1 1 1 1

(2) All crop land in country i (i 313) is used in the production

of food grain, denatured food grain and feed grain.
l l 2 2 3 3

L =1s +13 +13,
1 ii ii 11

(3)

(4)

(5)

(6)

(7)

47
The amount of total feed grain equivalent produced in country
i (1.5 3) is the sum of the amount of farm fed food grain,

denatured food grain production and feed grain production.

S4 = WIAS1 + $2 + S?

i i i i 1
The amount of feed grain produced in country i (i S 3) is at

least as great as the level of consumption of total feed grain

equivalent for industrial and seed purposes.
12

3 3
S g'M.

i 1
The amount of the joint product milk-beef-feeder calves
produced in country i (1.5 3) is at least as great as that
necessary for country i to be self-sufficient in milk but no
greater than that amount required to produce the surplus of

milk projected in the Michigan State University-United States

Department of Agriculture study.
5 5 5

N ZS._)_M
i 1 i

The amount of feeder calves produced in country i (i‘g 3)
equals the amount that is produced from the joint product
milk-beef-feeder calves.

S6 _ r6585

i i i
The amount of beef (cull dairy cows) produced in country i

(i.S 3) equals the amount that is produced from the joint

product milk-beef-feeder calves.

7 75
S 5

r S
i i 1

 

48

(8) The total amount of beef produced in country i (i 3’3) equals

(9)

(10)

the amounts of beef produced by the different production

processes in country i.

O 7 8 9
S. = S. + S. + S.
1 1 1 1

The total production of commodity k in country i (i S 3) is

transferred (or sold) to country j. For k = l

1 14 1 :E: 1
S. - w S = X..
i i j 1J

1

and for k = 4, 6, O, A, B, C, Z
k k
s, =:E Ix
1 j i

The total consumption of commodity k (k = l, 4, 6, O, A, B, C,

j

Z) in country j (j.5 3) is equal to the amounts of commodity k

transferred from country i to country j.
k k

D = X
j 1 ij

The consumption levels of food grain, total beef, veal, pork,
eggs and poultry are predetermined as this represents the

demand for final products. The consumption levels for the total
feed grain equivalent and feeder calves are not predetermined
and represent a derived demand. Total feed grain equivalent in
a European Economic Community country (j‘S 3) is utilized by

livestock and for industrial and seed uses.
4 45 5 48 8 49 9 4A A 43 B 40 C
D = s S + s S + s S + s S + s S + s S
j j j j I j j j j j j j j

42 .
+ s s2 + 94

III

49
Feeder calves in a European Economic Community country
(j'S 3) are utilized in some beef production activities and

in the veal production activity.

6 68 8 69 9 6A A
D, = s. S_ + s. S. + s S.
J J J J J j J

(11) There is a maximum amount of net expenditures by the European

Agricultural Guidance and Guarantee Fund.13

(E E282 E E E [( k k) k k k k
G . + P. - P. - ID.. - IDR,,P. + ES..
1 1 i i j k 1 J 13 13 1 1

J

k k k k
- ED,, - EDR P,] x,,,
1] ij 1 1J

where i $_3, j = 4 to B, k = l, 4, 6, O, A, B, C, Z.

(12) In order to simulate trade patterns more accurately it is
necessary to place additional restrictions on the transfer
activities, particularly the purchase and sale activities.
Because the model is linear, no more than one purchase or sale
activity will enter the solution at a positive level for each
commodity traded.14 The restrictions in this model are in
terms of minimum quantities of commodity k (k = l, 4, 6, O,

A, B, C, Z) transferred between countries. This minimum quantity
is based on historical trade patterns. The most logical method
of determining this minimum is to base it on a historical

percentage of consumption in the country.

 

13C may be negative if the grain-livestock sector of the European
Economic Community contributes a net revenue to the European Agricul-
tural Guidance and Guarantee Fund.

14This model differs from a transportation type model in that it
is not a closed system. It would be, however, if all countries were
specified in the same manner as the European Economic Community
countries.

50

This formulation will be sufficient in defining the minimum

xtj (j‘S 3) for all internal European Economic Community
transfer activities and for all purchase activities.15 It will
not define the minimum XIj for European Economic Community sale
activities (145 3 and j 2_4). In order to do this, D?
(j 2.4) must be defined. This is not done in this model.16

For sale activities the minimum quantity of commodity k
(k = l, 4, O) transferred between countries will be based on a
historical percentage of production in a country (i # j and
1.5 3).

k
xk > 15 s

ij" 1.11
This minimum percentage can be determined by solving the
7.1?

above equations for 1j and substituting historical data into

the right hand side of the equation.17 It Will be based on an
average of percentages for a predetermined historical time
period.

It would be simpler if these restrictions on the transfer

activities could be in terms of fixed minimum quantities of

 

15When i = j, sz represents the amount of domestic consumption

that is satisfied via domestic production.

16This formulation does define the minimum quantity sold by one
European Economic Community country to another, however. This type sale
activity is definable since it can be viewed from either end of the
transaction; i.e., any internal sale (transfer) activity can be viewed
as a purchase (transfer) activity.

k k
l
%k = Xij .k X13
1j -k— or A - —k—
Dj 1] Si

51
commodity k over each feasible route. If consumption (D?) and
production (8:) levels were completely predetermined, a fixed
minimum percentage would imply a fixed minimum quantity.
Since not all consumption and production levels are pre-
determined, fixed minimum quantity restrictions cannot be used
whereas fixed minimum percentage restrictions can be used.

How will this last restriction affect the results of the
model? This is a method by which certain rigidities in the
economic system can be incorporated in the model. That is,

a certain portion of trade will be allocated on the basis of
historical trading patterns and the rest will be allocated on
the basis of the internal criteria of the linear programming
model. If a time dimension were added to this model, this
historical minimum percentage would take the form of a moving

average of past trading patterns. This, ceteris paribus, would

 

cause the solution over time to converge toward the linear
programming solution for the model without this set of

restrictions.

CHAPTER IV

Testing the Model

In the previous chapter a theoretical system was postulated that
could possible be used to predict future production and trade patterns
for the European Economic Community. This set of postulates was an
effoft to describe the behavior of the European Economic Community. An
attempt was first made to make the postulates in the system consistent
with that body of knowledge termed 'economic theory.‘ Within this broad
set of postulates bounded by economic theory those included in this
specific system were again constrained by limiting the postulates (or
hypotheses) to those for which supporting empirical evidence was readily
available.

This alone does not assure one of having a theoretical system
capable of predicting future production and trade patterns for the
European Economic Community. On top of this theoretical framework we
must build an empirical framework. This combination of theoretical and
empirical structure allows us to test the ability of the model to pre-
dict the behavior of the endogenous variables in the model (in this case,
production and transfer levels). Making a prediction, then comparing
the prediction to reality, is the only way in which any predictive model
can be tested. This can be handled either by making a prediction, then
waiting to see how well your prediction fits reality; or by building
your model to simulate a preexisting situation then postdicting the be-
havior of the endogenous variables in the system on the basis of the
theoretical framework representing this historical period and the
empirical values of the exogenous variables in the system.

52

53

Thus the core of the model testing problem is one of testing the
'goodness of fit' of the predictions (or postdictions) to reality.
Especial problems are involved in testing the 'goodness of fit' of the
typical spatial model that predicts a number of different endogenous
variables. As long as we are concerned with the prediction of a single
variable over a number of replications (time series) standard statistical
procedures are available for testing the 'goodness of fit' of the pre-
diction.

With a spatial model many different endogenous variables are pre-
dicted simultaneously. Two separate problems arise depending upon
whether the spatial model contains a time dimension or not. If a time
dimension exists, standard statistical techniques will allow each
endogenous variable prediction to be tested for 'goodness of fit' over
this time dimension. However, this type of test does not allow for a
test of the overall realiability, or overall 'goodness of fit,’ of the
model. For example, these tests cannot tell us anything about whether a
model that predicts ten endogenous variables with seventy percent
accuracy is or is not better than a model that predicts the same ten
endogenous variables, four with one hundred percent accuracy, one with
seventy percent accuracy and five with forty-six percent accuracy.

If a time dimension is not part of the spatial model only one pre-
diction of each endogenous variable exists. With a sample size of one
the 'goodness of fit' tests alluded to above are inoperative and we are
immediately confronted with the question of the overall 'goodness of fit'
of the model.

Much spatial research avoids, or sidesteps, these problems com-

pletely. This kind of research treats spatial models in a normative

54

sense. These theoretical spatial models are viewed as a norm against
which the efficiency of the system simulated can be judged. This, if one
can be a little facetious, smacks of 'the model is right; the world's
wrong'! As Wallace says, "This rather pointed and perhaps unfair remark
serves to remind us that in an area of research confounded by multiple,
interdependent hypotheses, satisfactory criteria for judging the
"reasonableness" of a model are lacking. The normative approach discards
from the outset the single objective criterion by which we may separate
good from bad models -- the criterion of predictions."1

Many of the researchers that do disregard this normative, efficiency
oriented approach and use spatial models in a more positivistic manner
for predictive purposes do not come to grips with the problem of model
testing. They do one of three types of things.

Some fall back on the idea of building a logical theoretical model
that is consistent with economic theory then flesh this framework out
with 'good' (meaning best available) empirical data. They then take a
more normative stance and say that this model will now predict what the
effect on the endogenous variables should be. And, since society is
rational and logical and economic theory is rational and logical, society
will do what it should; or at least move in that direction. Therefore,
the predictions will be good predictions.

Others utilize these models for predictive purposes and let time be

the test of their model. However, they seldom return to their predictions

 

1Thomas D. Wallace, "The General Problem of Spatial Equilbrium: A
Methodological Issue," in Richard A. King, Editor, Interregional Com-
pgtition Research Methods, The Agricultural Policy Institute Series 10,
School of Agriculture and Life Sciences, North Carolina State of the
University of North Carolina, Raleigh, North Carolina, 1963, p. 13.

55

when tomorrow becomes today. They seldom test their predictive models.
What happens with this approach to predictive models is that not the
model but the model builder is subject to some sort of test by inspec-
tion of the type 'What does Dr. X have to say about tomorrow; he is right
more often than not.’

Not all predictive models that let time be their test of prediction
are left untested. Those that are part of long range, continually on-
going research projects are continually checked for predictive accuracy
and then modified so that their ability to predict becomes better over
time.

Finally there is that group of researchers that test their model by
postdicting the levels of the endogenous variables for a known historical
period. It seems as if this is a valid way to test a spatial model --
at least as a first approximation test. However, our original set of
problems still exist. If we postdict a series of historical periods
with a given model we can use standard statistical procedures to test
the 'goodness fo fit' of the prediction of each endogenous variable.

But what is the overall 'goodness of fit' of the n endogenous variables
in the model? If only one postdiction of a single historical period is
made we are immediately confronted with the problem of the overall
'goodness of fit' of the model. Wallace says that he knows of no predic-
tive test for spatial models and offers no specific suggestions as to
how to test the overall realiability of spatial models.2 Those who have
used their model to postdict have made no real attempt to use this post-

diction as a test to evaluate the ability of their model to predict; let

 

2Ibid., p. 14.

56
alone to develop some objective criteria to test the predicting ability
of a model or its 'goodness of fit'. They have relied on some sort of
subjective criteria that somehow indicates to them how much confidence
they have in their own research. This seems to be based on some unstated
process whereby the researcher, utilizing his prior knowledge and
experience, achieves a certain degree of confidence in his predictions.

Even when no explicit attempt is made to test a model's 'goodness of
fit' there exists this implicit subjective test before prediction is
attempted. The problem is that this implicit test is not subject to
replication by others. At a very minimum, some acceptable quantitative
measures of 'goodness of fit' are needed in order to compare alternative
formulations of a spatial model. This alone will allow one to have some
relative scale by which to compare alternative models. Models can then
be ranked from best to worse in their ability to postdict.

Ideally this would be just a first step in the test of any Spatial
model. What is really needed is something more than a relative scale of
'goodness of fit.‘ The next step involves developing an acceptable
criteria for deciding how good is good enough -- good enough for accurate
postdictions that is.

This still will not assure that any accurate postdicting spatial
model will also be a good predicting model. For this to be true we must
be able to assume that the underlying structure of that which we are
trying to simulate does not change from the postdicted period to the
period we wish to predict. Then we must assume that the'theoretical
framework of the model does represent that structure and that as 'good'

a set of empirical input data exists for the predicting model as existed

for the postdicting model. If this assumption cannot be made, if the

57
underlying structure does change in the interim, this change must be
accounted for by adjusting either the theoretical framework or empirical
input data in such a way as to account for and be consistent with this
underlying structural change.

Reaching this point allows one to predict. The second step in
testing of a spatial models ability to predict is the 'test of time'
talked about earlier. Were good predictions made? Every time you can
say yes to this question you increase your confidence in the ability of
the model to make new predictions. Any spatial model used for predictive
purposes can only be truly tested when its predictions are evaluated as
history. Thus the final testing of a model involves continued effort
over time. Actually this testing process should never end, particularly
in a model dealing with the social sciences where the underlying struc-
ture you are trying to represent is continually in flux.

This whole testing and predicting process, even at best, will in-
volve many decisions that are purely subjective in nature. What I am
advocating is that at any point in this whole testing and predicting
process (particularly the testing) where a choice can be made between an
objective decision criteria and a subjective decision criteria the choice
should be in favor of the more objective one. Little has been done in
making the testing of spatial models more objective.

Additional effort along this line can help in two ways. It will
allow nonparticipants in a research project involving projections from a
spatial model to better judge the validity of projections. It can do
this by either allowing them to make their own subjective decisions on
the basis of these objective criteria or by allowing them to more easily

follow the researchers reasoning process in reaching his final predictions.

58
Also the process of developing (and quantifying) these objective testing
criteria should point out some of the problem areas and weakness of the

model in question.

lGoodness of Fit' Criteria for Spatial Models

 

As discussed earlier there are two types of testing problems that
arise from spatial models. If a time dimension exists, standard statis-
tical techniques are available for testing the 'goodness of fit' of each
endogenous variable. I will not pursue these types of testing procedures
here as the model in the previous chapter is a static model. The second
type of testing problem involves the testing of a model for its overall
'goodness of fit.‘ Whether you have a single postdiction or a series of
them for each endogenous variable you still have a scale conversion pro-
blem of trying to compare 'apples and oranges.‘

How can you add crates of oranges to bushels of apples and get a
meaningful measure of apples and oranges? The obvious way of course is
to view each endogenous variable in terms of a percent error, then these
percentages can be jointly evaluated. However, solving one problem in
this manner creates other problems of equal importance. Depending upon
the base, problems can arise whenever either the actual value or the
predicted value of the endogenous variable is zero. This percent error
is also strictly a relative measure. Each error is relative to the base
for that variable; however, this base changes between variables. A ten
percent error on a base of ten is not as important, in many cases, as a
ten percent error on a base of ten million. This problem of the
importance of both the relative and absolute magnitude of the error is a
second type of problem that affects 'goodness of fit' tests for these

types of models.

59

Very little work has been done in trying to develop quantitative
measures of overall 'goodness of fit' and/or criteria for accepting or
rejecting a spatial model as a good predictor of reality. The next
sections will attempt to present some alternative suggestions as to how

this might be accomplished.

Key Variables

 

Wallace suggests that "if the question that promotes the research
relates to a specific variable, the research should be keyed on that
variable. Reliability of the model should be based upon how well the
key variable is predicted."3

This is excellent advice in that by their nature spatial models con-
tain a large number of endogenous variables, some of which will be rela-
tively unimportant. However, again by the nature of spatial models and
the nature of the problems they typically are used for, more than one
key variable exists. Thus this approach narrows down the range of
interest but still leaves a subjective decision regarding 'goodness of

fit.‘

Turing's Test

A second subjective approach to the problem of overall 'goodness of
fit' of a model suggests itself from Turing's consideration of whether
a machine can think.4 In terms of the problem we are considering

Turing's 'imitations game' would involve giving a noted authority on

 

31bid., p. 15.

4A. M. Turing, "Computing Machinery and Intelligence" Mind, October
1950, pp. 433-460.

60

whatever you are trying to simulate the results from your model and the
comparable actual results. These two sets of results would 22; be
labeled. If this noted authority could not tell which was which, the
model passes Turing's test. You then have a good model.

This approach is similar to what many do. Only they place themselves
in the role of the noted authority. When asking themselves the question
they decided they couldn't tell the difference. As a result they effec-

tively say "the results of the model look good enough to me."

Theil's Inequality Coefficient

Theil proposes a special type of correlation coefficient to measure
the 'goodness of fit' of the predictions to the actual outcomes.5 This
coefficient, U, he calls the inequality coefficient. The inequality

coefficient is defined as:

 

:1 IH
A
'0
HI
I
{D
H.
V
N

 

 

5

n
: : 812
i=1

where p1 . . . pn are the predictions from the model and a1 . . . an are

.1 Pi +
n

tilt—-

the actual outcomes of the endogenous variables. The range of U is from
zero to one. When the predictions are perfect, p = a for all

i = l . . . n and U = O. U = 1 when all pi or all a1 are zero. This

 

SH. Theil, Economic Forecasts and Policy, North-Holland Publishing

Company, Amsterdam, 1961, pp. 31-48.

61
means that all predictions are zero for nonzero values or else all non-
zero predictions for actual values that are all zero. Either of these
cases represent the ultimate in bad predicting.

This inequality coefficient as formulated is subject to a major
problem. The p1 and the a1 are not necessarily additive (the 'apples
and oranges' problem). If a conversion factor can be applied to the Pi
and the ai which will convert them to a scale that is additive this in-
equality coefficient can still be used. It must, however, be of the

following form:

 

n 2
:2: [Ci (Pi ’ 81)]
.=1

C
II
Shd

 

 

n n
2 2
Z (CiPi) + I 2 (C131)
i=1 n i=1

=IF‘

where ci is a conversion factor that converts each Pi and a1 to units
which are additive. This conversion factor must be defined separately
from the model and be constant throughout alternative tests of the model.
Since U is a function of the set of ci's, choosing a different weighting
system for the c1 will change the magnitude of U. However, giygg a set
of conversion factors, U is a function of the predicted and actual values
and U then becomes a measure of the 'goodness of fit' of the model.

This inequality coefficient, unlike a correlation coefficient, is
not invariant against additive variations. It measures relative error
between p1 and a1, not absolute error. Thus unit errors on a series with
base of 1,000 will produce a lower inequality coefficient than unit

errors on a series with a base of ten.

62

The inequality coefficient provides an objective measure of the
relative merits of alternative predictive models. Two subjective deci-
sions are still required however. We must decide how low the inequality
coefficient should be before we are willing to accept the predictive model
as an adequate representation of the system we are trying to simulate.

Also a set of conversion factors, the set of c1, must be defined.

The Sign Test

 

The sign test is a nonparametric test whereby the hypothesis that the
predicted and actual values of the endogenous variables are identically
distributed can be tested. The test statistic involved is the number of
plus signs or the number of times the predicted value exceeds the actual
value in the paired sample.6 Each pair of values (Pi: ai) can be con-
sidered a Bernoulli trial and therefore the statistic has a binomial
distribution with parameters (n, p) where p = 1/2.

One problem exists with the sign test however. It does not take
into account the magnitude of the error. It weights every error identi-
cally and only considers the sign of the error. If there are certain key
variables the sign test does not allow extra recognition of these vari-
ables. This could in part be overcome by multiplying the set of plus
signs by an apriori weighting function. This weighting function would
allow the researcher to single out or emphasize the key variables in the
model. The test statistic would then be the weighted number of plus

signs.

 

6When the predicted value equals the actual value the sign would be
neither plus or minus. The best method for handling these equalities is
to disregard them.

63
Regression
A linear regression of the predicted values on the actual values has
been suggested by Cohen and Cyert as a method of testing the 'goodness of

fit.'7

If the predicting model were perfect, then pi = a1 and the
resulting regression equation would be one with a zero intercept and a
slope of one. The 'goodness of fit' test would then involve testing
whether the parameters of the regression are significantly different from
zero and one.

Again a measurement scale problem exists. The Pi and ai must be
expressed in common units. Thus regressions cannot be run on the pi and
a1. However, a set of conversion factors can be used to convert the raw
data to units which are additive. The regression analysis can then be
applied to these converted data (the cipi and ciai). As before,this set
of conversion factors must remain constant throughout. Choosing a
different set of conversion factors will change the inequality coefficient
and thus affect the estimates of the parameters.

A regression equation is concerned with the absolute error (the
deviations from the regression equation). It does not take into con-
sideration the relative error. Thus an error of ten units at a level of
one hundred units is equally as important as an error of ten units at a
level of one million units. If the relative error is important to the
model as well as the absolute error the set of converted data must be
again weighted by a set of factors that will represent the importance of

the relative error. Then the regression analysis should be based on the

 

7Kalman J. Cohen and Richard M. Cyert, "Computer Models in Dynamic
Economics," The Quarterlijournal of Economics, Vol. 75, February 1961.
pp. 112-127.

64

weighted converted data (wicipi and wiciai) where wi is the set of rela-
tive weights attached to the 1 separate endogenous variables. Since the
regression equation is a function of this weighting function it must,
like the set of conversion factors,be determined apriori and remain
constant throughout alternative tests of a model.

This regression technique can also be applied to different subsets
of the endogenous variables or for combinations of key variables. In this

manner the regression analysis can not only be a test of 'goodness of fit'

but also a technique whereby problem areas in the model become highlighted.

Summary

All of the criteria discussed above are attempts to achieve some
indiction of the overall 'goodness of fit' of a spatial model. Whether
you have a time series or just a single observation for each endogenous
variable the same problem exists. The objective criteria are subject to
two possible problems. The first is the problem of not having an additive
scale on which two originally noncomparable units can be compared.
Secondly, both the relative errors and the absolute errors are of impor-
tance in this type of model. Some of these criteria only take account of
one type. To take account of both types of error some type of weighting
function must be decided upon, then incorporated into the criteria.

Whether the data needs to be adjusted by a scale conversion factor

or a weighting function is summarized in Table IV-l.

The European Economic Community Trade Model -- A Test

 

In order to test the grain-livestock trade model developed for the
European Economic Community in the last chapter a postdiction was made

for 1964. 1964 was selected as the base for the postdiction because it

65

Table IV-l.--Data adjustments required for
overall 'goodness of fit' criteria

 

 

Scale .
Criterion : conversion Weight1ng
funct1on
factor
Theil's Inequality Coefficient .....: X
The Sign Test ...................... : X
Regression .........................: X X

 

served as the base period for the Michigan State University-United States
Department of Agriculture production and consumption projections. The
exogenous data developed for the 1964 model, as well as a brief summary
of their sources and methods of calculation, are presented in Appendix A.
The endogenous variables include production levels and trade levels for
the European Economic Community countries. For food grain, feed grain
and beef trade internal transfer, purchase and sale activities were
allowed. Internal transfer and purchase activities were allowed for
feeder calves. Only internal transfer activities were permitted for
veal, pork, eggs and poultry.

Predicted production levels for the European Economic Community when
compared with actual levels showed errors varying from less than one per-
cent for eggs to twelve percent for poultry and averaged about five per-
cent for the five product categories (total grain, beef and veal, pork,
eggs and poultry) in Table IV-2.8 The predicted production levels for

France, Italy and Germany-Benelux also showed errors of a similar small

 

8More detailed production levels for beef, veal and grain are shown
in Tables IV-8 and IV-12.

66

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67

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68

 

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69

Table IV-4.--l964 transfer levels: beef and veal

Importer : 2 3 Germany- ‘ All other
- France ° Italy ‘ Benelux ' countries
Exporter : 2 3 3

 

 

: : ---------------- 1,000 metric tons ----------------
France .....: actual : 1,358.1 2.6 54.8 10.6
: model : 1,385.3 350.5 1,073.8 0
Italy ...... : actual : 0.1 1,090.4 0 0
: model : 0 390.6 0 0
Germany- : actual : 27.2 39.5 1,472.6 9.7
Benelux ..: model : 10.1 14.2 597.5 0
EFTA ....... : actual : 4.4 58.9
: model ° 0 21.3
Eastern : actual : 0.5 16.2
EurOpe ...: model : 0 7.1
Latin : actual : 26.9 114.2 93.4
America ..: model : 0 55.0 46.7

 

Source (actual): Sorenson and Hathaway, 22, 215.
United Nations, Statistical Office of the United Nations,
Department of Economic and Social Affairs, "Commodity
Trade Statistics", Statistical Papers, Series D, various
issues.

70

Table IV-5.--1964 transfer levels: pork

Importer : : :
Germany-
: France : Italy : B 1
Exporter : : : ene ux

 

 

: ----------- 1,900 metric tons ------------
France ...... ......: actual : 1,199.6 0.2 2.6
: model : 1,153.8 36.0 249.2
Italy ....... ......z actual : 0 396.9 0
° model : 0 364.1 0
Germany-Benelux ...: actual : 51.0 3.9 2,363.6
: model : 23.5 4.0 2,265.8

 

Source (actual): Sorenson and Hathaway, op. cit.
United Nations, op, cit.

Table IV-6.--l964 transfer levels: eggs

 

Importer : : 3 Germany-
: France : Italy 2 Benelux
Exporter : 3 :

 

: ----------- 1,000 metric tons -----------
France ..... .......: actual : 552.2 0.2 5.6
° model : 545.9 35.5 0
Italy ..... ........: actual : 0 457.4 0.1
° model : 0 463.1 0
Germany-Benelux ...: actual : 1.5 10.5 1,072.7
' model : 11.1 15.4 1,066.0

 

Source (actual): Sorenson and Hathaway, op. cit.
United Nations, op. cit.

71

Table IV-7.--1964 transfer level: poultry

Importer : : 2 Germany-
: France = Italy : Benelux
Exporter : 3 :

 

 

: ----------- 1,000 metric tons -----------
France ...... ......: actual : 525.7 0 15.5
‘ model : 572.0 35.5 47.8
Italy oooooooo .....; actual : 0 339.6 0.2
° model : 0 322.5 0
Germany-Benelux ...; actual : 0.2 0 A 354.0
° model : 0 0 434.2

 

Source (actual): Sorenson and Hathaway, gp. cit.
United Nations, op. cit.

72
magnitude. The one exception being beef and veal production. The model
shows France becoming the major European Economic Community beef producer
instead of the other members, particularly Germany-Benelux.

The trade patterns resulting from these production patterns are
presented in Tables IV-3 to IV-7.9 With two exceptions predicted total
grain transfer levels have the same order of magnitude as actual trans-
fers. The two exceptions being French exports to Eastern Europe and
French imports from Germany-Benelux. The model does show increases in
German-Benelux total grain imports, primarily from the United States,
over actual imports.

The difference in beef and veal production is carried over to the
transfer sector of the model. The beef that was more profitable to pro-
duce in France is now shipped to Germany-Benelux and Italy. The pre-
dicted transfer patterns for pork, eggs and poultry are close to actual
levels. For both production and transfer activities the predicted values
are generally of the same order of magnitude as the actual values.

The 1964 model does show some deviations from what actually happened
in 1964. These primarily revolved around a shifting of production pat-
terns and the resulting trade changes. The model showed an increase in
meat production in France of over 1.7 million metric ton. Over 1.3 mil-
lion metric ton of this increase was increased beef production which was
exported to Germany-Benelux and Italy. French pork production in the
model was also up by over 200 thousand metric ton. The bulk of this

excess French pork production was shipped to Germany-Benelux to replace

 

9Tables IV-9 to IV-ll and IV-13 to IV-l4 present more detailed trade
levels for beef, veal and grain.

73

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74

Table IV-9.--l964 transfer levels: feeder calves

 

Importer : : : German _
: France : Italy : y
Benelux
Exporter : : :

 

: ----------- 1,000 head -----------
France ................. : actual : 8,540.6 330.9 46.4
° model : 6,374.4 38.9 0
Italy .................. : actual : 0 2,647.0 0
° model : 2,001.9 1,050.5 0
Germany-Benelux ........ : actual : 27.3 174.2 6,722.5
- model : 3,796.6 38.9 1,904.8
EFTA ...................: actual : 418.0 2,290.7
° model : 103.8 291.4
Eastern Europe ......... : actual : 0 434.4 204.0
model : 0 64.8 44.8

 

Source (actual): Sorenson and Hathaway, pp. cit.
United Nations, op. cit.

75

Table IV-10.--1964 transfer levels: beef

 

m orter : : : :
I P Germany- All other
: France : Italy : : ,
Benelux countries
EXQorter : : : :

 

: --------- 1,000 metric tons ----------

France ........... ......: actual :

: model : 1,003.4 337.9 1,058.0 0
Italy .................. : actual :

: model : 0 275.8 0 0
Germany-Benelux ........ : actual :

: model : 10.1 14.2 453.4 0
EFTA ...................: actual :

: model : 0 21.3
Eastern Europe ......... : actual :

: model : 0 7.1
Latin America .......... : actual :

: model : 0 55.0 46.7

 

76

Table IV-11.--l964 transfer levels: veal

Importer 2 : 1 : Germany-
. France . Ita Y ' Benelux
Exporter 3 : :

 

 

: -------- 1,000 metric tons --------
France ................. : actual
model : 381.9 12.6 15.8
Italy .................. : actual
' model : 0 114.8 0
Germany-Benelux ........ : actual

model : 0 0 144.1

 

77

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78

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79

Table IV-14.-—1964 transfer levels: feed grain

Importer ; : : : :
: France : Italy : Germany : EFTA : Other
Benelux Europe
Exporter ; = : : :

 

 

: -------------- 1,000 metric tons --------------
France ......... : actual: 232.9 1,022.3 952.3 722.4
: model : 15,450-2 257.5 696.4 690.7 172.7
Italy .......... : actual: 55.3 170.3
: model : 343.3 5,664.0 0
Germany-Benelux : actual: 0.4 0 331.5
: model : 686.7 85.8 14,627.3 314.3
EFTA ........... : actual: 258.8
: model : 464.2
United States ..: actual: 407.0 996.0 3,211.4
: model : 343.3 600.6 5,101.0
Latin America ..: actual: 58.6 2,338.9 910.1
: model : 171.7 1,631.8 1,392.3
Africa & Mid : actual: 23.6 24.8
East .... ..... : model : 171.7 232.1
Australia, New :
Zealand, South: actual: 157.3 294.4
Africa .......: model : 343.3 696.4

 

Source (actual): Sorenson and Hathaway, op. cit.
United Nations, 22. cit.

80
their decrease in pork production. The model's poultry production in
France was also up by over 100 thousand metric ton. This increased
poultry production was consumed equally by the three European Economic
Community regions. There was also a slight increase in the French egg
production which was then exported to Italy.

To achieve their increased beef production France imported large
numbers of feeder calves from both Germany-Benelux and Italy. Almost
two-thirds of their production was shipped to France. These feeder calf
imports were in lieu of producing these calves domestically. With fewer
calves being produced fewer cows were required in France. Thus the model
postulated a sixty percent lower milk surplus in France than that pre-
dicted in the Michigan State University-United States Department of
Agriculture study. The model predicted a milk self-sufficiency position
for Italy and a milk surplus level equal to that predicted in the above
study for Germany-Benelux. Also, since France increased their beef pro-
duction at the expense of Italian and German-Benelux production, European
Free Trade Area and Eastern Europe exports of feeder calves to Germany-
Benelux and Italy dropped accordingly.

This increase in meat production also resulted in an increase in
feed grain consumption in France. This need for feed grain was met
through an increase in the production of feed grain in France by over
one million metric ton and through a one million metric ton increase in
imports. These imports were from Germany-Benelux, Italy, Africa and the
‘Mid East and Latin America. These increased exports of feed grain by
Italy and Germany-Benelux were the result of a shift from food grain to

feed grain production in the two countries. To fill their newly created

81

shortage of food grain they increased their food grain imports: Italy
from North America and Germany-Benelux from France and Canada.

The difference between predicted 1964 and actual 1964 hinges about
one central point. The 1964 model shows France developing into the
major agricultural center of the EurOpean Economic Community. It is the
major grain producer already and to utilize this grain most efficiently
it also needed to become a major producer of livestock products. Italy
and Germany-Benelux support this shift by becoming major input suppliers
for France (particularly for feeder calves). With France assuming this
new role the European Economic Community would move to virtual self
sufficiency in livestock production. With the shift from food grain to
the feed grain production necessary for the livestock production the net
exports of food grain by the European Economic Community decreased. This
shifting production mix between grains however was not adequate to meet
consumption requirements under livestock self-sufficiency and net European
Economic Community imports of feed grains increased.

A final difference should be pointed out. The composition of the
feed grain fed is different from what the model predicts. According to
the model a substantial portion of the grain fed in France and in Germany-
Benelux is denatured food grain rather than feed grain. In fact, only
that amount of feed grain required for seed and industrial purposes is

produced in these two regions.

Theil's Inequalitngoefficient -- the 1964 Model
The Theil inequality coefficient is a type of correlation coefficient
used to measure the 'goodness of fit' of predicted to actual outcomes.

This coefficient ranges from zero (a perfect fit) to one (no correlation)

82
in value. The calculated coefficients for the 1964 model are presented
in Table IV-15. Coefficients are given for the production and transfer
subsections of the model as well as for the complete model.

As you will recall one problem with Theil's inequality coefficient
is that the predicted and actual values must be additive. The values
presented in Tables IV-2 to IV-l4 obviously are not additive. In order
to convert these data to a scale that was additive a conversion factor
was defined for use throughout the testing of this basic model. A
commonly accepted conversion factor in economic literature is price (the
additive scale then being dollars). The 1964 price, however, could not
be used to convert the production and transfer data to common units
because the levels of the activities in 1964 are functions of these
prices. Thus a change in the conversion factors would cause not only
immediate changes in Theil's inequality coefficient but also changes in
the activity levels. These changing activity levels would again alter
the value of the coefficient.

The 1960-1968 average world price for the grain-livestock products
was used to convert the 1964 results to common units. This is still a
price but is as far removed as possible from being an exogenous variable
in the model. This average price will be used throughout wherever a
scale conversion is necessary in order to carry out any 'goodness of fit'
test. Thus any changes in the test results will be due only to changes
in the levels of the activities. The average world prices used in this
conversion process are presented in Table IV-16.

This coefficient does not provide a test of the 'goodness of fit'
of this model. It does provide a relative measure of the 'goodness of

fit' of separate portions of the model. Thus sectors of the model can

83

 

 

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mH.Hmm.H «0.0 ow.o NM.NNH Hh.mwfl nausea am.o m............. “mmmcmpu HH<
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m "mmHuH>Huom coHuosvoum
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HovoE dooH man u- mHuouHuo .uHm mo mmmeooo.uu.mHu>H oHan

84

Table IV-l6.--Average world prices: 1960-1968

 

 

: Unit : Price
Food grain .....................: 1,000 m.t. $ 64,252
Feed grain ..................... : 1,000 m.t. 88,521
Total grain .................... : 1,000 m.t. 74,066
Milk-beef-feeder calves ..... ...: 1,000 head 144,770
Feeder calves ...... . ....... ....: 1,000 head 144,770
Beef ............ ........ ....... : 1,000 m.t. 738,256
Veal .... ....... . ............... : 1,000 m.t. 738,256
Pork ...........................: 1,000 m.t. 706,459
Eggs ....... ....................: 1,000 m.t. 553,222
Poultry ........................: 1,000 m.t. 674,943

 

Source: United Nations, Food and Agriculture Organization, Trade
Yearbook, various issues.

be ranked according to their 'goodness of fit.‘ As can be seen from
Table IV-15 the transfer sections for eggs, pork, poultry and total

grain have the 'best fit' of all sections. A second grouping; consisting
of the production activities, feed grain transfer and the total model

(all production and transfer activities); fall into a 'second best fit'
category. The 'third best fit' grouping includes beef and veal transfer,
food grain transfer and total transfer activities. Finally, come the
feeder calf transfer activities. This ordered ranking of the coefficients
is consistent with where the major variations between the 1964 predicted
results and the 1964 actual results occurred: a shift in beef production

and the resulting shifts in feeder calf production and transfer.

85

The Sign Test —- the 1964 Model

 

The hypothesis that the predicted and actual quantities for sections
of the 1964 model were distributed equally was tested by sign tests. The
results of these tests are presented in Table IV-15. All parts of the
model, except the feeder calves transfer and beef and veal transfer
activities, were accepted as being equally distributed with their actual
counterparts at the 0.05 level.

This again is consistent with a visual inSpection of the data. Beef
is, in the model, produced in France from feeder calves imported from
Germany-Benelux and Italy. This is not what actually happened in 1964;

therefore, these two parts of the model were rejected by the sign test.

Regression -- the 1964 Model

 

A third test of 'goodness of fit' centers around a regression of
predicted values of the activities on actual values. A 'perfect' model
would be one where all predicted values equaled actual values. This is
equivalent to a regression equation with parameters zero and one.10

Regression coefficients, and their standard errors, for different parts
of the 1964 model are presented in Table IV-15. The regression results
are not based on the data in Tables IV-Z to IV-14. These data have been
converted on the basis of 1960-1968 average world prices (see Table
IV-l6) in order to provide an additive scale.

The hypothesis that the intercept of the regression equations
equaled zero was accepted at a significance level of 0.05 for all group-
ings of activities on the basis of a t-test. Using the same type of

10That 13 pi = BC + P13].- With PC = O and p1 = 1.

86

test the hypothesis that the slope of the regression equations equaled
one was rejected for total grain transfer, feeder calves transfer, beef
and veal transfer, all transfer and the complete model. The hypothesis
was accepted for the other divisions of activities. This implies that
the predictions of the total grain activities are overestimated while
the whole model, particularly the feeder calves and beef and veal trans-
fer activities,are underestimated.

Again the results of the regression analysis are consistent with

where the predicted and actual variations occur in the 1964 model.

A Further Test -- 1968

 

As a second test of the model, comparable input data for 1968 was
introduced into the model. This input data can also be found in Appendix
A. Only the input data was changed. The basic structure of the model
remained the same from 1964 to 1968.

Predicted production levels for 1968, when compared with actual
levels for the European Economic Community, showed errors ranging from
less than one fourth of one percent to eighteen percent and averaging
about five percent for total grain, beef and veal, pork, eggs and poultry
(see Table IV-l7).11 As with 1964, with the exception of beef and veal,
the predicted production levels for the three European Economic Community
regions were close to the actual production levels.

The resulting 1968 transfer patterns are shown in Tables IV-18 to

IV-22.12 With the exception of French-Eastern Europe, Italian-French,

 

11More detailed production levels for beef, veal and grain are pre-
sented in Tables IV-23 and IV-27.

12Tables IV-24 to IV-26 and IV-28 to IV-29 show more detailed trade
levels for beef, veal and grain.

87

Table IV-l7.--l968 production levels

 

 

 

T t 1 Beef :
o 3 and Pork Eggs : Poultry

grain veal °
: --------------- 1,000 metric tons ---------------
France ...... actual : 32,704.0 1,648.0 1,344.0 621.0 680.0
model : 34,238.2 3,019.6 1,624.1 850.5 791.6
Italy ....... actual l4,33l.0 590.0 528.0 480.0 532.0
model 15,443.8 438.7 411.0 416.1 455.9
Germany- : actual : 22,153.0 1,714.0 3,575.0 1,225.0 514.0
Benelux ..: model : 22,855.l 550.7 2,407.9 997.4 475.4

European

Economic : actual : 69,188.0 3,952.0 5,447.0 2,326.0 1,726.0
Community : model 72,537.1 4,009.0 4,443.0 2,264.0 1,722.9

 

Co-Operation and Development
1955-1968", Paris, 1969.

Source (actual): Organization for Economic
"Agricultural Statistics:

88

u- pmscwucoo

 

 

   

o.omo m.wo~.m q.on " Hosea ".... mafiuma<

m.msH.H ~.Hom.~ «.mou ” Hanson ” sauna

s.o~o «.mNH N.HHH u Hoses "

o.mno m.mmm m.0m " Hmauom "....... msmamo

H.NHN.~ o.woa.u m.on " Hmcoa "..... moumum

o.H~m.m 0.0mm.m o.m~h " Hmsuom " swung:

«.mms u Hmeoa "

Nommo H Hmsuom "00000.00. <H—mm
a.ooH n.0mm s.ooH w.omo n.0ns.nm m.Ho o " Hmcoe ".... stmcwm
n.0AH m.~mm o.ooH H.5ms n.0ao.om w.~ 0.x " Hmsuom " -scmeuou

m.sn~ o n.osm o.qhx.mfi m.qu.H " Hmcoe ”
s.~q~ o m.mH n.mmo.¢u m.~ " Hmauom "........ AHMUH
m.¢H¢ w.oom o.a~m m.¢oH.H m.mqm.H m.omo.m H.40m H.4mm.qw " Hmeoe "
o.won m.m¢m.H o.~mm ~.st H.Hom.H N.omm.m w.-m o.m~¢.- " Hanson "....... magnum
uuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuu mcou oHuumE ooo.H nuns-uuuuu1uuusuuunnnuunuuinunuuu u
u n u u u n u " Houuoaxm
mHm< . ummm sz . maousm . omouom . . anmcom . . .
umsuo . m moHum< H nonuo H auoummm H 48mm H nhcmEumw H mHmuH . mocmum .

. MouHanH

 

:Hmum Hmuou ”mHm>mH ummmcmuu womHuu.an>H mHan

89

"AHmsuomv mousom

 

 

.m~u>H vcm wmn>H mmHan

 

 
  

 

s.st.m «.mm " Haves mowum<

m.~o~ m.o¢q " Hmsuom " suoom

" " .pcmHmoN
" "smz .mHHmuum:¢

o o ” Hopoe "... umwm sz
o.moN m.mm " Hmauom " w moHum¢

uuuuuuuuuuuuuuuuuuuuuuuuuuuuuu . mcou oHuume ooowH nu-------------uuunuuuuuuuuuuuuuu "
u u u n n u u " umuuomxm
mHm< " uwmm sz " vacuum " muonsm u <Hmm " onmcom " mHmuH " possum "
“mayo " m moHum< “ umsuo " cuwummm " " umcmEumu u n " umuuanH
A.e.ucouV wH->H mHnme

Table IV-19.--1968 transfer levels:

90

beef and veal

 

 

 

Importer 2 : : _:
: France : Italy : germiny : All other
EEBQrter : : : ene ux : countries
: --------- 1,000 metric tons ----------
France ................. : actual : 1,493.1 11.4 119.0 20.2
: model 1,362.9 436.3 1,220.3 0
Italy ........ . ......... : actual : 0 589.6 0.4 0
: model 0 438.7 0 0
Germany-Benelux ........: actual : 15.1 62.6 1,619.2 8.9
: model 0 9.8 541.0 0
EFTA ........ . .......... : actual : 2.6 50.9
: model : 10.0 88.0
Eastern Europe ......... : actual : 4.5 45.7
: model 0 58.6
Latin America .... ...... : actual : 8.5 40.9 63.5
: model 10.0 107.5 32.8

 

Source (actual): Organization for Economic Co-Operation and Development,

22. cit.

UnitEd—Nations, Statistical Office of the United
Nations, Department of Economics and Social Affairs,
"Commodity Trade Statistics", Statistical Papers, Series
D, various issues.

91
Table IV-20.--1968 transfer levels: pork

 

 

 

Importer : : : Germany-
: France : Italy : Benelux
Exporter : ' :
: ------- 1,000 metric tons --------
France .................. : actual : 1,338.7 1.8 1.4
model : 1,159.7 44.9 419.5
Italy ................... : actual : 0 528.0 0
' model : 0 411.0 0
Germany-Benelux ..... ....: actual : 105.1 24.4 3,443.0
' model : 48.3 29.1 2,330.5

 

Source (actual): Organization for Economic Co-Operation and Development,

22. cit.
United Nations, 22. cit.

Table IV-21.--1968 transfer levels: eggs

Importer : : : Germany-
: France : Italy : Benelux
Exporter : : :

 

 

: ------- 1,000 metric tons -------
France .............. ....: actual : 613.4 1.9 3.6
model : 602.9 70.0 177.6
Italy .. ..... . ...... .....: actual : 0 479.6 0
' model : 0 416.1 0
Germany-Benelux ......... : actual : 12.7 3.1 1,195.8
model : 6.1 4.9 986.4

 

Source (actual): Organization for Economic Co-Operation and Development,

22. cit.
United Nations, op. cit.

92

Table IV-22.--1968 transfer levels: poultry

Importer : 3 3 German -
: France : Italy : y
Benelux
Exporter : : :

 

 

: ------- 1,900 metric tons --------
France .................. : actual : 662.0 0 10.0
‘ model : 624.0 82.1 85.6
Italy .............. .....: actual : 0 529.4 2.1
° model : 0 455.9 0
Germany-Benelux ...... ...: actual : 1.2 1.1 498.0
: model : 0 0 475.4

 

Source (actual): Organization for Economic Co-Operation and Development,
22. cit.
United Nations, op. cit.

93
United States-German-Benelux and Australian, New Zealand, South African-
German-Benelux trade predicted total grain shipments were similar to
actual shipments. Again trade patterns for beef and veal depended on
production patterns. With the exception of French beef exports to
Germany-Benelux and Italy and a slight tendency for a similar pattern in
other livestock products the predicted trade levels for all the livestock
products were also close to actual levels.

The 1968 model shows the same type of deviation from what actually
happened as did the 1964 model. France is still, in this model, the
major producer of livestock products in the European Economic Community.
This is particularly true for beef and veal. The model shows that in
1968 75.3 percent of the European Economic Community's beef and veal
production (rather than the actual 41.7 percent) is produced in France.
This excess production is shipped to Germany-Benelux and Italy. France
is supplying over two-thirds of the beef consumed in Germany-Benelux and
over a third of that consumed in Italy. French exports of beef and veal
are increasing (from 59.6 to 134.7 thousand metric ton during the 1964-
1968 period), however, not as fast as the model predicts.

What is true for beef and veal is true, to a lesser extent for the
other livestock products in the model. French pork production is twenty
percent over what it really was in 1968. The model shows this extra
production being shipped primarily to Germany-Benelux with some to Italy.
Total pork production in the European Economic Community was larger than
predicted. The model, however, does not allow for any exportable surplus
of pork to build up. Over a 200 thousand metric ton increase over actual
in egg production is indicated for France. This is in large part at the

expense of German-Benelux production with France supplying about fifteen

94

.uHo .mm .ucmanHm>oa paw aoHumquano oHEocoom now GOHumNHcmwuo ”AHmouomv mousom

 

o.aoo.q o.m¢o o.qu.m o o.~am.H a.H~m.H o.~o~.mH q.oHo.NN ” Hmuoe "...... suma52200
o.~mm.m o.mmm.N~ " Hmsuom " oHEocoom cmoaonom
5.0mm a.HmH m.mH¢ o m.aHs c.4mo.m m.wws.n " Haves "

o.¢Hn.H o.mmw.m “ Hmsuom ".. stocomnzcmEumw
“.mmq w.oMH a.Hom o o m.uom ¢.oam.m m.mqa.q " Hopes "

0.0®m cuedfinq u HQDUUN noooooooooooo uAHmUH
o.aHo.m m.oms m.Nmm.N o.~oa.H ~.ooo m.oow.o o.~mH.oH " Emcee "

o.wqo.H o.~on.m n Hmsuom "........... wocmum

 

 

---auuuuuna-u-nnuu mcou owuuoe ooo.H nuuuuuuuauaunuununu ---: paw: ooo.H u---"

 

Hmo> " u u I.” I " Amzoo " u mm>Hmo "
wow " mo> ” womb ”A.u% H_Vona.um H AV u HHsoV " mm>Hmo " powwow u
moon " H " Hmuoa " momm " wmmm " moom " nopomm " umomn u

u u u u u u " uxHHz "

 

mHm>mH coHuoswoua Hmm> paw moms wwHHMumc womHuu.mNn>H mHan

95

Table IV-24.--l968 transfer levels: feeder calves

Importer : : : Germany-
: France : Italy 3 Benelux
Exporter = 3 :

 

 

: : ----------- 1,000 head ------------
France ..................: actual : 569.5 248.8
model : 6,820.1 46.4 0
Italy ................... : actual : 0 0
° model : 2,089.0 1,251.9 0
Germany-Benelux .........: actual : 40.6 370.9
° model : 3,456.3 46.4 1,551.9
EFTA ....................: actual : 464.4 930.6
' model : 123.6 237.4
Eastern Europe .......... : actual : O 1,472.2 460.2
model : 0 77.3 36.5

 

Source (actual): Organization for Economic Co-Operation and Development,

op. cit.
United Nations, 22. cit.

96

Table IV-25.--l968 transfer levels: beef

 

Importer 3 : 3 Germany- : All other
- France - Italy ' Benelux : countries
Exporter : : : :

 

: --------------- 1,000 metric tons ---------------
France ...... actual :
: model : 964.4 411.7 1,196.7 0
Italy ....... actual :
model : 301.9 0
Germany- : actual :
Benelux ..: model : 9.8 409.6
EFTA ....... : actual :
: model : 88.0
Eastern ° actual :
Europe ...: model 58.6

Latin

America ..:

: actual :
model

107.5 32.8

 

97

Table IV-26.--1968 transfer levels: veal

Importer : : : German _
: France : Italy : y
Benelux
Expprter : : :

 

 

: ------- 1,000 metric tons --------
France .................. : actual .
model : 378.5 24.6 23.6
Italy ................... : actual
model : 0 136.8 0
Germany-Benelux ......... : actual

model : 0 0 131.4

 

98

.uHo .mm .ucoanHo>oa pco COHumquOuoo UHEocoom How GOHuouHcowuo "AHoauomv oousom

.HopoE mHnu CH omoo onu mp3 mo ouop poanHASQ
osu CH coHumasmcoo xooumo>HH you pco cOHuaESmcoo amass now poospoum cHouw poom coosuon opoE mH GOHuocHume
oz .oHnouanoo %HuoHuum uoc ouo mHo>oH coHuoSpoum cHouw poow paw cHouw poom pouoHpoHa pco Hosuo<H

 

H.5mm.- m.mmu.ws m.nsm.mu o.owm.mm m.oo~.Hm m.o~m.mN . Hopes

 

 

o.wwH.mc o.oom.mm o.wmm.mm ” Housoo u muH::EEoo oHEocoom cooaounm
H.mmm.NN o.nmm.au o.mwm.q H.Nmo.mH n.0mn.~m s.msm.m H Hopes ”
o.mmH.- o.nwo.oH o.poH.HH " Hosuoo u............. stocomuzcmEhoo
w.mq¢.mH o.MHo.m m.om~.o m.moH.m o m.moH.a " Hence "
OuHMMAAVH Con—HQNAQ Ooommn© n Hmsuom ”co-coco.oooooooooooooo. kAHmUH
N.wmm.qm a.wwu.mm c.4ww.H N.qmm.~m o.~¢m.wH o.HHm.MH “ Hosea “
00¢ONQNM OoNQwoNH OoquAQH u Hmsuom "...-......oooooooooooo mocmhh
..... uuuuuuuuuauuuuuuuu- mcou oHuuoE ooo.H uuuunuuuunuuuunuuuuuuuuuu "
“ uaoHo>Hmwo " n n u "
cHouw " sHouw u cwoum " cHouw u cwouw n :Hmum "
Houoa ” poom " pooh " poom " poom n poom "
" HouOH u . " HouOH " poHSuocoo " "

 

HoHo>oH GOHuospoum chuw poHHouop womHuu.nmu>H oHnoH

.uHo .mm .mGOHuoz pouHcD
.uHo .mm .ucoEmoHo>om poo coHuoquOnoo oHEocoom pom cowuoNHcmwuo “AHoSuoov oonsom

 

99

 

 

  
 

o “ Hopoe "
o " Hosuoo ".... umom pH: p moHum<
o.pmH m.wom n.HHH " HopoE "
w.mm m.nmq o.p¢ " Hoouom "........ momuoa< cHuoH
q.omo ~.m~H m.HHH u HopoE u
QOMNe mowmm $00“ H Hmpuom "0.0.0.000000000 mvmcmo
“.mpq o.mm p.5pH u Hopoa "
m.H¢o.H m.mHN m.m¢m " Hmsuoo u........ monoum pouHcD
max: 5on s53 «.03. «53$ 0 o " 33a "
n.oNH m.~mm o.ooH o.mwm o p.m ” Hoouoo "...... stocomuhcoEuou
55 o o «62.» o " Hopes "
quqN o mcHH O u Hmsuom ”cocooooooooooooo %HmUH
m.qu w.pom m.¢oH.H c.0oo w.moq.m m.mo~ m.mmH.m " Hopoa "
o.won m.m¢w.H N.wH¢ «.mHo o.moo.H w.mNH " Hosuoo "............... oocoum
uuuuuuuuuuuuuuuuuuuuuuuuuuu mcou oHuuoE OOOWH unuuuuuuuuuuuuuuuuuuuuuunnu "
u u u u u " nouuomwm
on< " umom pH: " oaousm u <Hmm " stocom " mHouH u oocoum u
Hosuo " p ooHum< " cuoumom " ” nacoEuoo " u " HouuanH

 

GHouw poom "mHo>oH nommcmuu womHua.w~->H oHnoH

.uHo .mm .ocoHuoz pouHcD
.uHo .mm .uaofiaoHo>on pom :oHuoquOuoo oHanoom pow GOHuoanowuo uaHoauoov oouaom

 

100

 

 

 

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m.~m~ m.o¢¢ " Hoauom " nusom .pcoHooN 3oz .oHHouum=<
o o " HopoE u
OOMON momm H nguum "0.00.00.00.00... “mam Vflfizamofihw¢
«.mmq o.ooo.~ N.NH~ " Hopes "
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4.xqa.u o.oHo.H m.mmo " Hopes "
Hoqunq moomnflam Moowm u Hmsuom noon-000.00.000.00... mmuwum “w“..fic:
¢.am¢ " HopoE "
Nommw u Hmauow no...coco-cocoooooooooooooo-o. <h—Urmm
in? 282: 8.3 o " 385 n
moMN woN O u Hmnuom Hooocoooooooooooooo NDHmcmml%cmEQU
a.m¢~ o.mHo.m m.msu.u " Hosea "
moH woN u Hmauom "coco-0000.00.00.00.cocooooOothmUH
0.5No «.mmH.H m.w¢~.H ~.mm ~.mm5.aH “ Hopes "
Oonm Now¢m NoMMHnN Oomi—NH n Hmsuom nooooooooooooococooooooooooo mocmhm
uuuuuuuuuuuuuuuuuuuu mcou oHuuoE ooo.H uuuuuunnuuu-unuuuuuuuu u
u n n u N Am nouuomwm
oaousm u 49mm " stocom " mHouH " oocoum
nosuo " " u>GoEuoU " u " uouuanH

 

cHoum poom "wHo>oH Hommcouu womHnu.m~n>H oHnoH

101

percent of both Italian and German-Benelux demand. The model's poultry
production relative to actual production in France is also up -- by over
sixteen percent. This added French production is then shipped to both
Italy and Germany-Benelux.

As in the 1964 model the increased beef production in France requires
substantially more feeder calves than are produced in France. About two-
thirds of both Italian and German-Benelux feeder calves were shipped to
France. Again since a large portion of France's demand for feeder calves
is supplied via imports this model predicts a milk surplus only a third
as large as that actually existing in France in 1968. A self-sufficiency
position, with no milk surpluses, is predicted for both Italy and Germany-
Benelux. Since French beef production replaced Italian and German-Benelux
production, their imports of feeder calves fell substantially.

France's increased meat production caused corresponding repercussions
in the feed grain section of the model. The increased demand for feed
grain in France is met by over a 2.6 million metric ton increase in pro-
duction and over a 1.5 million metric ton increase in imports (two-thirds
of which were from Italy). The corresponding decrease in demand for feed
grain in Italy and Germany-Benelux meant a drop in imports for the two.
Italy's imports from both the United States and Latin America fell by
over 500 thousand metric ton. Not only did Germany-Benelux's imports
fall by over 500 thousand metric ton but the composition of the remaining
imports changed. There were reductions in German-Benelux imports from
the United States, France and Latin America while at the same time a
significant increase in imports from Australia, New Zealand, South Africa.

The model also shows at least a twenty-five percent increase in

German-Benelux imports of food grain. With two exceptions the transfer

102
pattern for food grain is reasonable. Germany-Benelux imports food grain
from France at the expense of the United States. The excess production
of France is shipped to Germany-Benelux and Eastern Europe in the model
rather than Africa and the Mid East and Germany-Benelux.

To summarize the grain sector, the model shows a shifting away from
food grain and toward feed grain production in the European Economic
Community (especially in Germany-Benelux). As a result of this shift the
European Economic Community's net imports of grain fell. A goodly portion
of this drop in imports was at the expense of United States exports to
Germany-Benelux and Italy. Again, as in 1964, the model shows feed grain
production in France and Germany-Benelux to be composed chiefly of de-

natured food grain.

Theil's Inequality Coefficient -- the 1968 Model

 

In order to calculate the inequality coefficients the 1968 quantity
data were weighted on the basis of the 1960-1968 average world price for
the different grain-livestock prices (Table IV-l6). These are the same
weights used in computing the coefficients for 1964. Results for 1968
are presented in Table IV-30.

If we again ranked the sections of the model as to their relative
'goodness of fit' the poultry transfer section would have the best fit.
Falling into a 'second best fit' grouping come the total grain transfer,
the production, the total model, pork transfer and total transfer
activities. Next come the egg, beef and veal and feed grain transfer
activities. A final grouping consists of the food grain and feeder

calves transfer activities.

103

 

 

00.000.0 00.0 00.0 00.000 0n.000 000000 00.0 m ... 00000 00000000 000
00.000.0 00.0 00.0 00.000 00.n00 000000 00.0 m ... ... 00000000 000
00.000 no.0 00.0 00.no0 nn.000 000000 00.0 W ... ........ 0000000
00.000 no.0 00.0 00.000 00.000 000000 00.0 W ... ........... 0000
00.000.0 no.0 00.0 00.000 00.000 000000 00.0 m ... ........... 0000
00.000.0 00.0 00.0 00.00n 00.000 000000 00.0 m ... .. 000> 000 0000
00.n00.0 00.0 00.0- 00.000 n0.0n0.0 000000 00.0 m ... .. 00>000 000000
00.000 00.0 n0.0 00.000 00.00- 000000 00.0 W ... .... 00000 00000
00.000 n0.o 00.0 00.000 00.000 000000 00.0 W ... ..... 00000 0000
0H.mqm 0H.o Hw.o N0.No N0.0m uaoooo no.0 M ... ..... cfiouw pooh
m “mofiuw>wuoo HommcouH
00.000.0 00.0 00.0 00.000.0 00.000.0 000000 00.0 W ................ 000
m “moHuH>Huoo coauospoum
.n o n u u
00. 0% 00¢ 000 0% cm W 30.01.00 0000 m 00000000000 m
00Hn + on 00 "cowmoouwom m cwfim onH m muHHoDvoC0 m.H0onH m

 

00000 0000 000

oHuouwuo .ufiw mo mmocpooo.nu.0mu>H oHnoH

104

The ranking is again consistent with where the major deviations
occur between the 1968 predicted results and the 1968 actual results --
the transfer of beef and the resulting effects on grain and feeder calves.
The inequality coefficient shows that the 1968 model is better than the
1964 model (0.18 to 0.29). At the same time however the coefficients
for the separate sections of the model tend to be larger. This is in
large part due to the fact that Theil's inequality coefficient measures
relative error. The 1968 model does as good as a job as the 1964 model
does in predicting the major activities. However, the error on the minor
activities in 1968 tended to be larger than in 1964. This caused the

coefficients to increase somewhat in size.

The Sigp Test -- the 1968 Model

 

Again the hypothesis that the distribution of the predicted quanti-
ties equaled the distribution of the actual quantities was tested for
the sections of the 1968 model by sign tests. This hypothesis was

accepted at the 0.05 level for all parts of the model (Table IV-30).

Regression -- the 1968 Model

The results of regressions of predicted values on actual values of
different sets of activities are presented in Table IV-30. As before,
the regressions are based on dollar value data rather than the quantity
data in Tables IV-l7 to IV-29. The 1960-1968 average world prices
(Table IV-l6) were used to convert the data to value terms.

The hypothesis that the intercept equaled zero was accepted for all
groupings of activities except feed grain transfer on the basis of a
t-test at the 0.05 significance level. With the same type of test the

hypothesis that the slopes of the regression equation equaled one was

105

accepted for the production, the food grain transfer and the poultry
transfer activities. This hypothesis was rejected for the other activity
divisions. Since the slope coefficients (with the exception of total
grain transfer) are all less than one, this implies that the predictions
of the 1968 model tend to underestimate actual activity levels.13

Rejection of the hypothesis that the slopes of the regression equa-
tions equal one is not inconsistent with the results of the sign test.
It does, however, emphasize some of the shortcomings of the sign test.
The sign test is only concerned with whether you overestimate or under-
estimate. It is not concerned with the size of either the aboslute
error or the relative error -- just the sign of the error. In the 1968
case the model did not predict the large valued transfer activities with
as much accuracy as it did in 1964. More often than not it tended to
underestimate these values. This phenomenon would cause the slope of a
regression equation to be less without affecting appreciably the number
of overestimations and underestimations. One large underestimation
could cause the regression test to be rejected without changing the

results of a sign test.

Conclusions

 

One objective of this research was, using only easily available in-
put data, to deve10p the simplest model possible that was able to simulate

the grain-livestock economy of the European Economic Community. Given

 

13The negative sign on the feeder calves transfer activities can be
explained by the Italy-France and Germany-Benelux-France transfers. The
divergence between actual and predicted is so great for these two
activities that they completely dominate the regression coefficients;
resulting in an equation with a negative slope.

106

this objective and the results of the objective 'goodness of fit' tests
on the 1964 and 1968 models it seems reasonable to conclude that this
model is a 'good' first approximation of the world. While it may be
possible to further improve the model's 'goodness of fit' it could only
be done by expanding the size and complexity of the model and/or by
utilizing better, more detailed input data. This takes us further away
from the objective of a simple model. Besides, some of the data required
by a better model are not presently available.

The differences between actual and predicted values can be accounted
for by any of a combination of three factors. The first hinges on the
characteristics of a linear model. Activities enter a linear model one
at a time. In this model the activity producing the most revenue enters
first. Its level increases until some sort of maximum restriction stops
it from increasing more. Then a second activity enters. Thus in many
cases whether a given activity enters the model is an 'either-or'
decision. An example of this would be the model of Chapter 111 without
restirction twelve. Without this minimum historical percent transferred
over any given route only one purchase or sale activity would enter the
model. This restriction allows one to overcome some of the linear pro-
perties of the model. It is this type of problem that is causing so
little feed grain to be produced in France and Germany-Benelux. It is
more profitable to produce food grain for feed purposes than it is feed
grain. It is an 'either-or' decision in the model. This linear model
also does not allow for diminishing returns on the production activities
(or transfer activities for that matter). With sufficiently detailed
data concerning the shape of the production function (and therefore the

total revenue curve) step functions could be included for all activities.

107
This will move the decision as to what activity to include away from an
'either-or' type decision. It does this by moving the linear model a
step closer to a non-linear model.

This brings us to a second factor. The differences between actual
and predicted values is also a function of the accuracy and availability
of the input data in the model. Whenever two alternative activities are
good substitutes errors in the data affecting these activities (be it in
the objective function or in the coefficients of the restrictions) can
cause activities to enter at different rates and times. Data for inter-
country models tend to be inadequate and incomplete. This coupled to the
necessity for comparable data for all countries causes the collection of
even minimum input data to be a problem of some magnitude. For this
model improved transport costs and forage and grain conversion factors
for livestock should improve the predictions. This is particularly true
for transportation costs within Europe.

This lack of comparable data will also account for the feeder calves
transfer section of the model performing so poorly. The data aren't
completely comparable. The predicted values are in terms of feeder
calves while the actual values are in terms of live cattle. To the
extent that live cattle transfers are not feeder calves, comparison between
actual and predicted values in this section of the model are not completely
valid.

A final reason for the models divergence from reality lies in the
theoretical structure or framework of the model. If the framework of the
model does not accurately represent the structure of the economy you are
trying to simulate, the model will not predict reality. This final

reason, coupled with the lack of data, is probably the major reason why

108

the 1964 model differed from reality. This model predicted a shifting

of livestock production to the area which generates the greatest European
Economic Community revenue-France. This shift is based on four relative
factors: product prices, land availability, feed conversions and trans-
port costs. These are the only four. The model does not consider the
importance, cost and availability of other factors of production. Even
if France is the 'best' producer, livestock production may not shift

from Italy and Germany-Benelux. Whether production shifts or not depends
upon the alternatives of the other factors of production. If livestock
production is their best alternative, then this may offset the reasons
for shifting. Livestock production would then stay in Italy and Germany-
Benelux. Even if this phenomenon of shifting livestock production is
occuring the model cannot adequately account for the inertia of the real
world. Time is only superficially a component of the model. This same
type of reasoning could also explain why the model shows food grain being
utilized as feed grain.

A final reason for concluding that this model is, at least, a good
first approximation of reality is a normative reason. The major
deviations this model shows from reality are all in the direction that
economic theory would tell us to expect them to be. If this optimizing
model does in any sense represent how an 'efficient' economy should
operate, and if the European Economic Community will over time move from
a less efficient to a more efficient position; the errors in this model
will decrease in importance over time. Therefore, as better, more
accurate data are introduced into this model, not only will the model
move closer to simulating the real world, but the real world will move

closer to what the model says it should be doing.

CHAPTER V

Short Run Predictions - 1970

In the last chapter the model developed in Chapter III was accepted
as being a valid predicting model. This chapter presents the results of
predictions for 1970. Since the Michigan State University-United States
Department of Agriculture study made projections to 1970 this same period
was used for prediction here. The Michigan State University-United States
Department of Agriculture study presented price projections for some com-
modities in terms of a range of prices; therefore, this study also pre-
sents predictions based on this same range of prices. The 1970 input

data are presented in Appendix A.

The 1970 Model

 

The results for the 1970 predictions are presented in Tables V-l to
V-13. These tables give the results for both the low price, 1970(L), and
the high price, 1970(H), projections. As the only differences in the two
sets of predictions lie in the beef transfer activities the 1970(L) and
1970(H) are reported together for the other sections of the two models.

For veal, pork, eggs and poultry the model restricted production to
a 100 percent self-sufficiency level. No exportable surpluses were
allowed the Community for these products. Therefore, the production
levels for these commodities are restricted to that level necessary to
meet internal demand. Both models show Germany-Benelux essentially self-
sufficient in poultry with a few imports from France. On the other hand
twenty percent of the Italian poultry consumed comes from France. About
twenty percent of both the eggs and the veal consumed in Italy and
Germany-Benelux originates in France. France also supplies twenty percent

109

110

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111

 

 

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113

 

 

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114

Table V-4.--1970(L) and 1970(H) transfer levels:

feed grain

 

 

 

Importer . : Germany- = 3 Other
France : Italy : Benelux EFTA : Europe
Exporter : ° - -
: -------------- 1,000 metric tons --------------
France ................. : 22,141.8 98.1 1,700.6 1,301.1 780.7
Italy ............... ...: 1,682.3 5,992.0 o
Germany-Benelux ........; 0 92.9 l3,479.3 137.1
EFTA .................... 10,334.6
United States ..........: 744.6 1,668.9 1,983.8
Latin America .......... : 248.2 1,765.0 567.0
Africa & Mid East ...... i 0 0
Australia, New Zealand, .
3 283.5

South Africa ......... : 196.

 

115
Table V-5.--l970(L) and 1970(H) transfer levels: feeder calves

Importer : : : G rm _
: France : Italy : e any
Benelux
Exporter : : :

 

 

: -------------- 1,000 head ---------------
France ................... ....: 6,780.5 45.4 0
Italy ........................: 2,182.7 1,181.1 0
Germany~Benelux ..... .........: 4,490.6 90.8 1,486.7
EFTA ............ ... .......... : 121.1 227.5
Eastern Europe ...... . ........ : 0 75.7 35.0

 

Table V-6.--1970(L) transfer levels: beef and veal

 

Importer; ; .

 

 

France : Italy ; Germany- : A11 otner
Exporter : . . Benelux : countries
: ------------------ 1,000 metric tons -------------------
France ......... : 1,609.5 44.1 1,385.4 0
Italy .......... : 144.7 288.3 0 0
Germany-Benelux : 12.9 63.6 469.1 0
EFTA .......... .: 0 74.2
Eastern Europe : 0 63.5

Latin America ..: 12.9 693.7 36.5

 

Table V-7.--l970(H)

116

transfer levels: beef and veal

 

Importer :

Germany- i All other

 

 

Exporter : France Italy Benelux ; countries
: ------------------ 1,000 metric tons ------------------

France . ..... 1,754 2 518.9 765.9 0

Italy . ......... 0 433.0 0 0
Germany-Benelux : 12.9 63.6 569.1 0

EFTA . .......... 2 o 74.2

Eastern Europe : 0 63.5

Latin America ..: 12.9 74.2 656.0

 

Table V-8.--1970(L) transfer levels: beef

 

Germany- 3 All other

 

 

Importer : :

‘\\;;;;::;;\\‘\\3 France : Italy : Benelux ; countries
2 ------------------ 1,000 metric tons ------------------

France ..... . 1,122.3 10.6 1,352.3 0
Italy .......... : 144.7 154.3 0 0
Germany-Benelux 12.9 63.6 436.9 0
EFTA ............ 0 74.2
Eastern Europe 0 63.5
Latin America ..: 12.9 693.7 36.5

 

117

Table V-9.--1970(H) transfer levels: beef

Importer : = : Germany- : All other
- France ° Italy ' Benelux ' countries
Exporter : : : :

 

 

;----, -------------- 1,000 metric tons ------------------
.France .........: 1,267.0 485.4 732.8 0
Italy .......... : 0 299.0 0 0
Germany-Benelux 12.9 63.6 436.9 0
EFTA ........... i 0 flLZ
Eastern Europe 0 63.5
Latin America 12.9 74.2 656.0

 

Table V-10.l970(L) and 1970(H) transfer levels: veal

Importer : : : German _
: France : Italy : y
Benelux
__i Exporter : : :

 

 

; ------------ 1,000 metric tons -----------
France ................ 487.2 33.5 33.1
Italy ....................... 0 134.0 0
Gert“any-Benelux . . . . . ........ 0 0 132. 2

\

118

Table V-ll.-—l970(L) and 1970(H) transfer levels: pork

Importer : : : G
: France : Italy : ermany
Benelux
Exporter : : :

 

 

: ------------ 1,900 metric tons -----------
France ...................... ; 1,333.9 65.6 581.2
Italy ....................... : 0 403.8 0
Germany-Benelux ............. : 85.1 35.3 2,324.8

 

Table V-12.--l970(L) and 1970(H) transfer levels: eggs

: France 3 Italy : Benelux
Exporter = : :

 

 

: ------------ 1,000 metric tons ------------
France ...................... : 659.3 120.1 267.2
Italy .......................: 0 505.6 0
Germany-Benelux ............. : 6.7 6.3 1,068.8

 

Table V-l3.--l970(L) and 1970(H) transfer levels: poultry

 

I orter : : :
mp Germany-
: France : Italy :
Benelux
Exporter : : :

 

: ------------ 1,000 metric tons -----------
France ......................: 748.0 104.2 14.5
Italy ........ ...... ......... : 0 416.8 0

Germany-Benelux ............. : 0 0 711.5

 

119
of Germany-Benelux's and thirteen percent of Italy's demand for pork.
Italy, as well as France, imports some pork from Germany-Benelux too.

Beef production levels are the same in both the 1970(L) and 1970(H)
models. In both cases France produces over three-fourths of the beef
produced in the European Economic Community. With the low beef price
projections France supplies Germany-Benelux with over seventy percent of
the beef they consume. France finds it more profitable to export beef to
Germany-Benelux in the 1970(L) model than to consume it domestically.
After supplying Germany-Benelux they must import beef to meet their
domestic demand. The 1970(L) model shows France importing beef from
Italy, however, this is in reality transhipped beef from Latin America.
This beef is shipped through Italy because of the lower variable import
levy into Italy relative to that into France. This model also shows that
over fifty percent of the beef consumed in Italy comes from Latin America,
with another twenty percent from the European Free Trade Association,
Germany-Benelux, Eastern Europe and France.

Under the high beef price predictions France supplies domestic con-
sumers first, then Italian and finally German-Benelux consumers. Thus
France does not import beef from Latin America in the 1970(H) model.
Since France does supply Italy, Italian imports from Latin America drop
drastically relative to the 1970(L) model. After supplying Italy,
France's remaining excess production is shipped to Germany-Benelux. This,
however, along with German-Benelux production, is not sufficient to meet
their consumption needs. The remaining German-Benelux demand is met
through Latin American imports. The exports of Latin America are the
same for the 1970(L) and the 1970(H) model. The different beef prices

just cause a rerouting of Latin American and French beef exports.

120

In as much as both models show France producing over three-fourths
of the beef and only a little over forty percent of the feeder calves
produced in the European Economic Community, France must import feeders.
The main movement of feeder calves is from Germany-Benelux and Italy to
France with them supplying thirty-three percent and sixteen percent
respectively of the French demand. To do this required Germany-Benelux
to ship over seventy percent and Italy over sixty percent of their feeder
calf production to France. Since beef production in Italy and Germany-
Benelux fell the demand for feeder calves in these two countries fell.
Thus imports of feeder calves from Eastern Europe and the European Free
Trade Area fell substantially from their 1968 levels.

While France imports a substantial number of feeder calves it only
imports a little over ten percent of the feed grain used for livestock.
It does import some feed grain from Italy (which it hadn't been doing in
the past), the United States and Latin America. Germany-Benelux on the
other hand produces somewhat less than half its needs. A third of its
demand is supplied by imports from the European Free Trade Area, with the
rest coming from the United States, France, Latin America and Australia,
New Zealand, South Africa. To the extent that the European Free Trade
Area cannot supply the indicated amounts of feed grain, feed grain trans-
fers will be shifted to first Australia, New Zealand, South Africa, then
in order Latin America, the United States and Africa and the Mid East.

With the exception of the European Free Trade Area the 1970 model
shoWs external European Economic Community feed grain trade down from the
1968 levels. The model shows United States exports of feed grain down
from actual 1968 levels by over a third. Exports to France are up by

95.8 percent but down to Italy by 21.9 percent and to Germany-Benelux by

121

55.7 percent. Since the European Free Trade Area and Australia, New
Zealand, South Africa would, in all likelihood, not be able to supply
Germany-Benelux with that amount of feed grain indicated by the model,
United States exports to Germany-Benelux and therefore the European
Economic Community would be larger than indicated. If the exports of
the European Free Trade Area and Australia, New Zealand, South Africa
were at a level equivalent to three-fourths of their total feed grain
exports in 1968 then United States feed grain exports to the European
Economic Community would increase about five percent rather then fall by
a third. Under this assumption United States exports to Germany-Benelux
would be up by about nine percent.

The 1970 model shows that the European Economic Community is a net
importer of food grain. The exports of food grain would primarily be
soft wheat while the imports would be hard wheat. Compared to the 1968
trade levels France has moved from a net exporter of 4,469.5 thousand
metric ton to a net importer of 333.2 thousand metric ton of food grain.
It reached this position by substantial reduction in its exports to
Germany-Benelux, the European Free Trade Area and Africa and Mid East
and a major increase in imports from Latin America. Italy remained a
net importer in the 1970 model however, due to decreases in the level of
imports from North America from the 1968 level, their net import position
fell from 935.3 thousand metric ton to 570.6 thousand metric ton. The
significant drop in United States food grain exports to Germany-Benelux
caused them to move from a net import position of 1,833.1 thousand metric
ton to one of 546.5 thousand metric ton.

Relative to 1968 this model shows the United States losing 45.3

percent of their EurOpean Economic Community food grain market. Their

122

exports to all three regions fell with the greatest decline being in the
German-Benelux market.1

The European Economic Community was a net importer of grain in 1968.
Not only does the model predict them to be a net importer in 1970 but it
predicts that their net grain imports should rise by 87.2 percent. This
increased demand for grain is met through an increase in grain imports
(42.0 percent) and a decrease in grain exports (20.6 percent). However,
the United States position, according to the model, in the European
Economic Community total grain market deteriorates. In 1968 the United
States exported 8,597.2 thousand metric ton of grain to the EurOpean
Economic Community. This model shows exports of 5,272.8 thousand metric
ton, a drop of 35.2 percent. Even allowing for the above postulated
shift from European Free Trade Area exports of feed grain to United States
exports to Germany-Benelux, the total grain exports of the United States
to the European Economic Community will fall about five percent from
their 1968 levels. The only place where the United States increases its
exports is to France. This is because the increased feed grain exports
offset the decrease in food grain exports.

Projected total grain production was down two percent from the 1968
levels. As was the case with the two postdictions the model shows total
feed grain to be composed primarily of denatured food grain for both
France and Germany-Benelux. The main reason for the decreased production
in the European Economic Community involves a decline in the crop land

available for grain production.

 

1United States exports of food grain to France fell by 32.6 percent,
to Italy by 23.2 percent and to Germany-Benelux by 54.1 percent relative
to their 1968 levels.

123

A Second 1970 Model

Early in 1970 the production and consumption projections in the
Michigan State University-United States Department of Agriculture were
revised. The original projections were based on data through 1964.

These new projections modified the earlier ones on the basis of the actual
changes that occurred between 1964 and 1968. Since projected consumption
levels for final products are inputs into the spatial model new predic-
tions can be made. Again the predictions are made for both the low price
projections, the 1970(L) update, and the high price projections, the
1970(H) update. These predictions are presented in Tables V-14 to V-26.
Again the only differences in the predictions are in the beef transfer
activities. Therefore, the 1970(L) update and the 1970(H) update results
are presented together for the other sections of the models.

Since the only differences between the models in this section and
the ones in the last section are changes in the levels of consumption
(see Table A-39) we would expect the predictions for these two models to
exhibit the same general patterns as the previous predictions. And, with
a few exceptions, this is what happens.

The updated projections show an increase in the demand for poultry
in the European Economic Community (the increase in Italy more than off-
sets the decreases elsewhere). Since the Community is a closed system
this increased demand generates a corresponding increase in production --
particularly in Italy. The transfer pattern again shows France exporting
poultry to Italy.

For eggs, pork and veal the updated demand projections are lower
than the original projections. This again is manifested by lower pro-

duction levels for the European Economic Community. The same is true for

124

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125

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126

 

 

 

  

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127

 

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128

 

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129

Table V-18.--1970(L) update and 1970(H) update

transfer levels: feeder calves

 

 

 

Importer : : : G _
: France : Italy : ermany
Benelux
Exporter : : :
: --------------- 1,000 head ----------------

France ......................: 6,203.2 47.6 0

Italy ... ................: 2,126.3 1,237.5 0
Germany-Benelux .. .......... : 4,588.8 95.2 1,384.2
EFTA ........... . ....... .....: 126.9 211.8
Eastern Europe .............. : 0 79.3 32.6

 

Table V-19.--1970(L) update transfer levels:

beef and veal

 

 

 

‘\\\\\‘ETE:::::\E France : Italy : Germany- All other
Exporter : : : Benelux countries

: ------------------- 1,000 metric tons ------------------
France ...... . 1,401.3 466.0 1,234.8 0
Italy . ......... 0 439.4 0 0
Germany-Benelux ; 10.3 66.6 563.6 0
EFTA .... ........ 0 77.7
Eastern Europe 0 66.5
Latin America ..§ 10.3 169.8 33.6

 

130

Table V-20.--l970(H) update transfer levels: beef and veal

r r : : : :
Impo te Germany- All other
: France : Italy : :
Benelux countries
Exporter : : : :

 

 

: ------------------- 1,000 metric tons -----------------
France .........: 1,401.3 558.0 1,142.8 0
Italy ... ....... : 0 439.4 0 0
Germany-Benelux : 10.3 66.6 563.6 0
EFTA ....... ....: 0 77.5
Eastern Europe : 0 66.5
Latin America ..: 10.3 77.7 125.6

 

Table V-21.--1970(L) update transfer levels: beef

 

 

 

Importer E E . Germany- 3 All other
Exporter ; France : Italy : Benelux ; countries
: ------------------ 1,000 metric tons ------------------
France ......... : 1,012.1 430.9 1,204.4 0
Italy ..........: 0 299.0 0 0
Germany-Benelux : 10.3 66.6 442.0 0
EFTA ........... ; 0 77.7
Eastern Europe : O 66.5

Latin America ..: 10.3 169.8 33.6

 

131

Table V-22--1970(H) update transfer levels: beef

 

m r : : : :
I p0 ter Germany- All other
: France : Italy : : .
Benelux countries
Exporter : : : :

 

: -------------------- 1,000 metric tons -----------------
France ......... ; 1,012.1 522.9 1,112.4 0
Italy .......... : 0 299.0 0 0
Germany-Benelux : 10.3 66.6 442.0 0
EFTA ...........: 0 77.7
Eastern Europe : 0 66.5
Latin America ..: 10.3 77.7 125.6

Table V-23.--1970(L) update and 1970(H) update transfer levels: veal

 

 

 

Importer : Germany-
France : Italy : Benelux
Exporter : : :
: ------------ 1,000 metric tons ------------
France ........ .............: 389.2 35.1 30.4
Italy .. ................. ...: 0 140.4 0

Germany-Benelux ............: 0 0 121.6

 

132

Table V-24.--1970(L) update and 1970(H) update transfer levels: pork

Importer : : : G
: France : Italy : ermany
Benelux
Exporter : : :

 

 

: ------------ 1,000 metric tons -----------
France ......................2 1,223.0 71.8 587.2
Italy ................... 2 0 441.6 0
Germany-Benelux ............. : 78.0 38.6 2,348.8

 

Table V-25.--1970(L) update and 1970(H) update transfer levels: eggs

Importer : : : German _
: France : Italy : y
Benelux
EXporter : : :

 

 

: ------------ 1,000 metric tons -----------
France .............. . ....... : 631.6 95.6 248.8
Italy ....................... : 0 402.4 0
Germany-Benelux ............. : 6.4 5.0 995.2

 

Table V-26.--1970(L) update and 1970(H) update transfer levels: poultry

 

 

 

Importer : : : Germany-
: France : Italy : Benelux
Exporter : ° :
: ------------ 41,000 metric tons -----------
France ........... ...........: 724.0 149.0 12.9
Italy ....................... : 0 596.0 0

Germany-Benelux ............. : 0 0 631.1

 

133
each country for these products except for Italy and Germany-Benelux for
pork and Italy for veal where demand and production both increased. The
transfer pattern was the same as before. France ships eggs and veal to
Germany-Benelux and Italy and pork to Germany-Benelux.

The updated projections indicate that consumption of beef will be
less than origianlly predicted for France and Germany-Benelux and more
for Italy; the net result being a decrease in demand for beef in the
European Economic Community. Given this changed demand the 1970 update
models show an increase in European Economic Community beef production --
both in France and Germany-Benelux. No inconsistency exists here as the
beef sector is not a completely closed internal system. Since veal pro-
duction fell from the previously predicted levels in both countries more
feeder calves became available for beef production. Under both price
level projections this option was exercised at the expense of beef im-
ports. With the low price projections France's added production was ship-
ped to Italy at the expense of Latin American imports. Increases in
German-Benelux production replaced some of their imports -- particularly
from France. The decline in French demand also caused French imports of
Latin American beef (via Italy) to fall.‘

Assuming the high price projections the results are similar with the
earlier predictions with France first supplying domesitc, then Italian
and finally German-Benelux consumers. Since French consumption was down
and since these predictions show French production up, more beef is
available for export to Germany-Benelux. These French exports replace a
large part of Latin American exports of beef to Germany-Benelux.

The pattern of trade for feeder calves in the update models is very

similar to that for the first 1970 models. France still produces a large

part of its' beef from German-Benelux and Italian feeder calves. Since

134
veal demand increased in Italy fewer Italian feeder calves were available
for export to France. This was more than offset, however, by the in-
creased German-Benelux exports. Given this greater availability of
imports coupled with France's decline in veal production French produc-
tion of feeders fell from that level predicted in the 1970(L) and 1970(H)
models.

The net effects of the higher production levels for beef in France
and Germany-Benelux and the lower production levels of other livestock
products relative to the first 1970 models leads to a decreased demand
for feed grain. For France this is evidenced by a marked decline in
imports from Italy; while for Germany-Benelux imports from European Free
Trade Area fall. This decline in European Free Trade Area exports would
in all likelihood be a decline in United States exports. As was the case
before the European Free Trade Area and Australia, New Zealand, South
Africa would not be able to supply Germany-Benelux with the predicted
amount of feed grain. Therefore, any decline would in reality be a
decline in United States exports, not EurOpean Free Trade Area exports.
On balance there is a decline in United States exports to the European
Economic Community by about fifteen percent from the 1970(L) and 1970(H)
levels.

The updated demand for food grain was lower than the original pro-
jections in France and Germany-Benelux and higher in Italy. The changes
in demand were met by corresponding changes in production levels in the
three regions. As a result there was a relative shift in the production
levels of food and feed grain. In France and Germany-Benelux food grain
production fell, freeing more land for feed grain production. The reverse

occurred in Italy.

135

Production Predictions -- A Comparison

 

Since both the Michigan State University-United States Department
of Agriculture study and this study made predictions of production
levels for 1970 we can compare the results of the two different methods
of prediction. The four separate 1970 production predictions are given
in Table V-27. In comparing the original Michigan State University-
United States Department of Agriculture projections with this study's
predictions we find that this study's predictions are about five percent
higher. For the updated predictions this study's results are about five
percent lower than those of the other study.

For the two original studies total grain production predictions are
very close together. These two models production projections differ in
the livestock areas. This study shows a shift in the regions comparative
advantage of livestock production, with beef and pork production shifting
from Italy and Germany-Benelux to France and egg production shifting from
Germany-Benelux to France.

For the two updated studies, when trade is allowed for, you again
get a shift in the regions comparative advantage in livestock production.
This study's results show a shift of livestock production to France,
particularly for beef, eggs and pork. This model also underestimates
total European Economic Community pork production relative to the other
model. There is no allowance for surplus pork to be produced in this
model. This is a possibility in the Michigan State University-United
States Department of Agriculture model. Total grain production predic-
tions are less for this model than for the other model. This is due to
the Michigan State University-United States Department of Agriculture

updated projections being based, in part, on assumed higher grain yields

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136

 

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137
than in their original projections. The yield assumptions in both the
original and update predictions of this model are the same. They are the
same as those used in the original Michigan State University-United

States Department of Agriculture study.

CHAPTER VI

Summary and Conclusions

In this study, I have attempted to deve10p an international trade
model that will simulate the grain-livestock sector of the European
Economic Community. The above objective was subjected to two interrelated
restrictions. I wanted to develop the simplest possible model that would
still simulate this grain-livestock sector. Because of this, the model
was also limited to one that required only easily available data. Since
the study concerned itself with trade my interests were directed toward
spatial models. And given the above restrictions this interest was
directed more toward the transportation model end of a continuum than
toward the supply-demand spatial models.

The framework finally settled upon was a production-transfer spatial
equilibrium model. This model included four types of activities. First,
were transfer activities for food grain, feed grain, feeder calves, beef,
veal, pork, eggs and poultry between France, Italy and Germany-Benelux.
These commodities are not independent. With feed grain and feeder calves
utilized in the production of some of the other products, production
activities were also included in the model so that the derived demand
relationships could be accounted for. The consumption levels for all
final products were assumed given at predetermined levels. Since the
European Economic Community is not a closed economic system external
trade activities were allowed. These were in terms of purchase and sale
activities rather than transfer activities. Had they been in terms of
transfer activities it would have been necessary to back these with the

production relationships as was done for the internal Community trade.

138

139

This would have required the development of a world trade system and was
beyond the scope of this study. Food grain, feed grain, feeder calves
and beef purchase activities were included. Sale activities for food
grain, feed grain and beef were included. This allows European Economic
Community countries to import and export these commodities. Thus the
results of the model will be in terms of the quantities for the various
products produced in the three European Economic Community regions and
the quantities of these products traded between the European Economic
Community regions and between them and their major trading partners.

The decision making criteria in the model was based on maximizing
returns to the grain-livestock sector of the European Economic Community.
Domestic pricing policies are included in the production revenues and the
tariffs, variable import levies and variable export subsidies are incor-
porated into the transfer, purchase and sale activities.

The production activities have one basic input restriction -- land.
It was assumed that the other factors of production would be available
at least to the point where the land restriction became operative. Thus
grain production is limited only by the amount of crop land available.
Livestock production is limited by the amount of feed grain and forage
land available. But internal feed grain production is limited in turn
by the availability of crop land.

Purchase and transfer activity levels are limited in the final
analysis by demand. And demand for final products is assumed fixed.
Sale activities are limited by production which in turn is limited by
land availability. Additional restrictions are placed on the transfer,
purchase and sale activities. These are in terms of minimum percentages

of consumption (production for sale activities) that must be shipped along

140
certain trade routes. The percentages are based on historical moving
averages. They are included so that more than one purchase and sale
activity will enter the optimal solution at the same time. Thus, in
part, imports and exports are determined on the basis of past trends in
imports and exports.

After a model has been developed the relevant question becomes does
it simulate? Are the results a 'good' proxy for reality? Making a pre-
diction, then comparing it with reality, is the only way in which any
predictive model can be tested. This is most easily done by post-
dicting -- predicting a past period.

'Goodness of fit' tests for spatial models have not been developed.
As long as one is concerned with predicting a single variable over time
standard statistical procedures are available for testing the 'goodness
of fit' of a prediction. With a spatial model many different variables
are predicted simultaneously. If the spatial model can be replicated
over time so that for each variable a series of predictions are made we
can test the 'goodness of fit' of each variable over time. Many times
it is not possible to make this larger number of predictions. In any
case these tests do not allow for a test of the overall realiability of
a model. These tests can tell us nothing about whether a model that
predicts five variables with ninety percent accuracy is or is not better
than one that predicts the same five variables, three with one hundred
percent and two with seventy five percent accuracy. When a time dimen-
sion is not part of the spatial model only one prediction of each vari-
able exists. With this sample size of one this question of a model's

overall 'goodness of fit' is immediately confronted.

141

Some criteria are discussed in Chapter IV that attempt to confront
this 'goodness of fit' problem. As a first approximation the rule of
thumb that you focus in on key predicted variables is suggested. To the
degree that some variables are more important than others it is more
important to obtain predictive accuracy for these variables than it is
for the other variables. A second test of a subjective nature, coined
the Turing test, is suggested. This involves asking an 'expert' his
opinion of the predictions. More objective than this is Theil's in-
equality coefficient. This is a type of correlation coefficient that
ranges from zero (perfect predictions) to one (no correlation). This in-
equality coefficient however, only provides an objective measure of the
'goodness of fit' of a predictive model. It must still be decided how
low the inequality coefficient should be before the model can be accepted
as an adequate representation of the system being simulated.

Two actual tests of 'goodness of fit' are discussed. The first, the
sign test, tests whether the predictions and the actual values of the
variables are identically distributed. The sign test however does not
take account of the magnitude of the error. It weights each error equally
by considering only the sign of the error. The second test is a regres-
sion based test. With a perfect model a regression of predicted on
actual values of the variables would yield an equation with a zero inter-
cept and a unit slope. This 'goodness of fit' test then would involve
testing whether the parameters of the regression are significantly
different from zero and one. A problem exists here too. Regressions
are concerned with absolute errors not relative errors.

No one of these suggested 'goodness of fit' criteria is without

fault. However each are steps toward answering the question of how 'good'

142
the simulation is. Taken together they should provide more information
on the 'goodness of fit' of a model. While they may not provide us with
means by which we can accept a model as good, they do provide us with
criteria by which we can reject a model. At worst they will provide
criteria by which models can be rejected or alternatively tenatively
accepted; i.e., reserve judgment on.

Two tests of this spatial model were conducted, one for 1964 and one
for 1968. The test results are presented in Tables IV-15 and IV-30. As
can be seen from these two tables the different tests sometimes give con-
flicting valuations as to the 'goodness of fit' of the two models. As
was stated above this is due to each test measuring a different type of
error. The 1964 and 1968 tests can both be summarized by saying that the
model tends to overestimate as often as it tends to underestimate, how-
ever when it does underestimate it underestimates the variables of large
magnitude.

0n the basis of the 1964 and 1968 simulations the production-transfer
model developed in Chapter III was tentatively accepted as providing a
good simulation of the grain-livestock sector of the European Economic
Community. This is the first step in developing a 'good' predictive
model. Even if the model is a 'good' simulation of an existing situation
it may not be a good predictive model. To also be a good predictive
model the underlying structure of that which we are trying to simulate
must remain stable from the simulated period to the predicted period.

The empirical input data for the predicting model must be as good as
that for the simulating model too.

In light of these two new restrictions the simulation model was

tentatively accepted as a 'good' predictive model. Input data were then

143

developed in order that the model could be used to predict 1970 grain-
livestock production and trade levels for the European Economic Community.
These predictions are presented in Chapter V.

The 1970 predictions show France developing into the major agri-
cultural center of the European Economic Community. It already is the
major grain producer. To take advantage of their comparative advantage
France utilizes this grain for livestock production. The predictions show
France becoming both the major grain and livestock producer. This is
particularly true for beef production. France produces a large part of
the beef consumed in the European Economic Community and ships it to
both Italy and Germany-Benelux. To support this expanded livestock pro-
duction (primarily beef) the demand for feeder calves and feed grain in
France increases. The demand for feeder calves is met through large
imports of dairy calves from Germany-Benelux and Italy. This new demand
for feed grain caused a shift from food grain to feed grain production
in France, and to a certain extent in Italy which shipped some feed grain
to France. The end result of the shift to France being the agricultural
center is that the European Economic Community will become more self-
sufficient in the future. Thus the United States cannot expect their
grain exports to Europe to expand as much as they have in the past. In
fact this model shows that United States grain exports to the European
Economic Community will actually decline in the future.

The intent of this study was to develop a simple, short run predic-
tive model for grain-livestock trade patterns for the European Economic
Community. Within the rather severe limitations imposed on the predic-
tive model the results show that this model does have the ability to pre-

dict. The 'goodness of fit' or accuracy of these predictions would, in

144
all likelihood, be even better as some of these restrictions are relaxed.
While the 1964 model does an excellent job in predicting the pork pro-
duction and transfer subsector of the economy the 1968 model is somewhat
less accurate. In looking at the data we find that by 1968 some surplus
pork was produced. Therefore restricting the European Economic Community
to a self-sufficiency position in pork may not be appropriate. Better
predictions might be obtained with a relaxing of this assumption.

As important as this model's ability to predict then, and possibly
more so, is its' ability to highlight areas where we lack knowledge of
the system we are trying to first simulate, then predict from. The model
provides one with added insight into the two areas which can cause pre-
dictions to be in error -- the quality of the input data and the under-
lying structure of the model.

During the process of collecting input data for this model two major
quality gaps were found. The first concerned transportation data. Very
little effort has been directed toward the understanding of the European
transportation system. Not only are no detailed transportation cost data
available, but also little has been done concerning methods, routes,
capacities and relative costs of the different transportation methods for
the grain-livestock products. The same thing is true for data on feed-
livestock conversion. Not much of the input-output type data is available
for alternative production methods. This is particularly true for forage
utilization.

Another area, that involves both data quality and structure, that
causes inaccuracy of predictions concerns choosing the appropriate
decision making criteria. This model uses a revenue maximization

criteria. It may not be the appropriate criteria. Even if an optimizing

145

decision criteria is retained, a cost minimizing or a profit maximizing
objective function may provide a structure that yields better predictions.
Again a data problem exists. No detailed costs of production data are
available for grain-livestock products. This data problem must be over-
come before we can even consider these alternative decision criteria.

Relaxing some of the structural restrictions of the model, while in-
creasing its' complexity, also gives some indication of being able to
improve the predictability of the model. A pork surplus had developed
by 1968. By relaxing the self-sufficiency restrictions for pork, and
for veal, eggs and poultry for that matter, additional options are
available to producers. By this type of change the option of surplus
production is not assumed away.

Other expansions of the model might improve the model. One possible
option is to expand along the product line. This sector as defined is
not independent of other products. Milk and milk products are handled
in a very cursory manner. Changes in the demand for, or supply of, these
products do affect the results of this model. To the extent that dairy
policy changes over time, predictions of the grain-livestock sector based
on a constant dairy policy will be inaccurate. Disaggregation of the
products included in the model may also improve predictability. To the
extent that food grain isn't wheat, feed grain isn't corn, corn isn't
barley, and French beef isn't the same as Italian beef excessive aggrega-
tion may introduce more errors than it eliminates.

The model may also be expanded by internalizing some of the countries
that are now represented only by purchase and sale activities. To the
extent that countries are internalized, this puts restrictions on the

maximum amounts of a product that can be sold to or purchased from them.

146

Purchases would be limited by productive capacity. Sales by demand. The
first step along this line should probably be to include the European
Free Trade Area countries. Since a likely policy alternative for the
European Economic Community is expansion to include these countries a
model to predict the grain-livestock trade for the Community will not be
accurate without including them. Due to the importance of this market to
North America it might be of interest to internalize the United States
and Canada. Ultimately it would be possible to develop a world trade
model where all regions are included through production and transfer
activities rather than purchase and sale activities.

Another area of the model where the results show that the model is
predicting inaccurately concerns the use of denatured food grain for
livestock feed. It is obvious that the model as stated does not include
the right criteria for determining how much food grain will be denatured.
This is an additional area where attention should be focused. If we knew
more about denaturing policy we should be able to change the structure of
this model and improve its' ability to predict.

This model assumes that production is a function of one factor of
production -- land (two for livestock -- land and grain). Our theory
tells us that this isn't true. With more information the production
functions could be expanded to include other factors of production.

The main feature of linear programming models is their linearity.

To the extent that the economy that we are trying to simulate is not
linear, predictions from a linear model will not be accurate. Additional
predictive accuracy may be gained by moving from the simplest linear
model toward a non-linear model. This could be accomplished by expanding

certain activities through the use of step functions. The most promising

147
candidates here would probably be the production functions and the trans-
portation functions.
In summary, this model presents first order predictions of grain-
livestock trade patterns for the European Economic Community. It also
serves to give us some valuable insight into where future research efforts

can be directed. Definitely, more research in this area will be needed.

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Organization for Economic Co-Operation and Development. "Agricultural
Statistics: 1955-1968". Paris, 1969.

"Food Consumption Statistics, 1954-1966". Paris, 1968.

152
"The Market for Beef and Veal and its Factors". Paris, 1967.

"Trade By Commodities: Detailed Analysis by Products".
Foreign Trade Series C, Paris, various issues.

Petit, Michel J. and Jean-Baptiste Viallon. "The Grain-Livestock Economy
of France With Projections to 1970 and 1975". Research Report
No. 3, Institute of International Agriculture, Michigan State
University, East Lansing, Michigan.

Rossmiller, George E. "The Grain-Livestock Economy of West Germany With
Projections to 1970 and 1975". Research Report No. l, Insti-
tute of International Agriculture, Michigan State University,
East Lansing, Michigan.

Samuelson, Paul A. "Spatial Price Equilibrium and Linear Programming".
American Economic Review, XLII (June 1952), 283-303.

Sorenson, Vernon L. "EEC: Summary Statement of Recent Change and Up-
dated Projections 1970-75". London, May 18-22, 1970 (Mimeo-
graphed).

Interview, May 15, 1970.

and Dale E. Hathaway. "The Grain-Livestock Economy and Trade
Patterns of the European Economy Community With Projections to
1970 and 1975". Research Report No. 5, Institute of Inter-
national Agriculture, Michigan State University, East Lansing,
Michigan.

Takayama, T. and G. G. Judge. "An Intertemporal Price Equilibrium Model".
Journal of Farm Economics, 46 (May 1964), 477-84.

. "Spatial Equilibrium and Quadratic Programming". Journal of
Farm Economics, 46 (February 1964), 67-93.

Theil, H. Economic Forecasts and Policy. Amsterdam: North-Holland
Publishing Company, 1961.

Turing, A. M. "Computing Machinery and Intelligence". Mind, (October
1950), 433-60.

United Nations, Food and Agriculture Organization. Production Yearbook.
Rome, various issues.

"Technical Conversion Factors for Agricultural Commodities".
Rome, 1960.

Trade Yearbook. Rome, various issues.
, Statistical Office of the United Nations, Department of

Economic and Social Affairs. "Commodity Trade Statistics".
Statistical Papers, Series D, various issues.

153
Statistical Yearbook, various issues.

United States Department of Agriculture, Agricultural Research Service.
"Consumption of Feed by Livestock, 1909-56" by Ralph D.
Jennings. Production Research Report No. 21. Washington,
D. C.: Government Printing Office, November 1958.

, Economic Research Service. "Agricultural Policies in Europe
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No. 46. Washington, D. C.: Government Printing Office,
July 1968.

"Conversion Factors and Weights and Measures for Agricultural
Commodities and Their Products". Statistical Bulletin No. 362.
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. "The European Agricultural Guidance and Guarantee Fund" by
Byron L. Berntson. Foreign 144. Washington, D. C.: Govern-
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"The European Community's Common Agricultural Policy: Impli-
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C. 0. Nohre. Foreign Agricultural Economic Report No. 55.
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"European Economic Community Agricultural Trade Statistics,
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"The Grain-Livestock Economy of the European Economic
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"The Grain-Livestock Economy of the European Economic
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"Growth in Demand for Feed Grains in the EEC, Projection to
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"The Uniform Grain Price in the European Economic Community"
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154

"Outlets for French Grain" by L. Schertz and R. Cannon.
Washington, D. C.: Mimeographed, February 8, 1965, revised

March 21, 1965.

United States Department of State. "Denaturing of Wheat and Rye" by
Ernest Koenig. Airgram from US Mission to the European
Communities, Brussels to Department of State/Washington, pass
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"New Common Market Financial Regulation and Prospects for
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Washington, D. C.: January 14, 1970.

Walsh, A. E. and John Paxton. The Structure and Develogment of the Com-
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Weightman, Paul W. H. "Concentrated Feedingstuffs for Livestock in the
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Agricultural Economics Research 239, Department of Agricultural
Economics, Cornell University, Ithaca, New York, January 1968.

Letter, January 1968.

Appendix A

Appendix A

The input data develOped for the various models are presented in
Tables A-l to A-47. In as many cases as possible the input data were
based on data from easily available secondary data sources. A
combination of the lack of data and the lack of intercountry compara-
bility of data meant that much of the data were not available in the
form in which it was required by the model. Listed under each table in
this appendix are the basic sources used in developing this input data.
The specific computation procedure used to arrive at any of these data
can be obtained from the author.

Food grain prices for the European Economic Community countries
are based on wheat prices except in the case of Germany-Benelux where
a volume weighted average of wheat and rye prices was used. A volume
weighted average of barley, oats, maize and rye (except Germany-
Benelux) prices gave the feed grain price. The price of the joint
product milk-beef-feeder calves was composed of three parts: that
received for milk, for cull cow beef and for feeder calves. All meat
prices are in terms of carcass weight prices. Purchase prices are
based on f.o.b. prices calculated from export quantities and values and
for 1970 were calculated on the basis of a 1960-1968 trend.

Transportation costs, where no better data were available, were
based on average cost per kilometer and the distance transported. The
rates were assumed equal for food grain and feed grain and for beef and
veal. The transport cost for live feeder calves was assumed to be the
same as that for live hogs. These transportation costs were calculated
for 1964. The 1968 and 1970 costs were developed on the basis of the
1964 costs and an index of transport costs. The index of tranSport

156

157
costs for 1970 was calculated from a trend equation on the 1960-1968
period.

The variable import levies, the variable export subsidies and the
import duties were calculated on the basis of the policies discussed
in Chapter II.

The minimum percentage of a commodity transferred between countries
was based on a moving average for the most recent four year period for
grains and eggs and the most recent two year period for feeder calves
and for all the meat products. The percentages used in the 1970

models were based on 1967-1968 averages.

158

Table A-l.--Food grain prices ($/100 kg.)

\ Importer 3 : g
= France = Italy 1 Germany-

 

 

. i Benelux
Exporter : Year :
France ..........: 1964 8.09
° 1968 8.98
1970(L) 9.37
1970(H) 9.37
Italy ........... : 1964 11.11
° 1968 10.85
1970(L) 10.63
1970(H) 10.63
Germany-Benelux : 1964 10.48
: 1968 9.39
1970(L) 9.52
1970(H) 9.52
United States ...: 1964 6.59 6.59 6.59
' 1968 6.15 6.15 6.15
1970(L) 6.25 6.25 6.25
1970(H) 6.25 6.25 6.25
Canada .......... : 1964 6.94 6.94 6.94
' 1968 6.90 6.90 6.90
1970(L) 7.15 7.15 7.15
1970(H) 7.15 7.15 7.15

--Continued

159

Table A-1 (cont'd.)

 

\ Importer

 

 

‘ : France : Italy : Germany-
Exporter : Year : : : Benelux
Latin America ..... : 1964 6.53 6.53 6.53

: 1968 5.81 5.81 5.81

: 1970(L) 5.73 5.73 5.73

: 1970(H) 5.73 5.73 5.73
Africa & Mid East : 1964 6.79

: 1968 9.07

: 1970(L) 8.79

: 1970(H) 8.79

 

Source:

Epp, "Changes in Regional Grain and Livestock Prices
Under the European Economic Community Policies."

Mangum, "The Grain-Livestock Economy of Italy With
Projections to 1970 and 1975."

Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968," Paris, 1969.

Petit and Viallon, "The Grain-Livestock Economy of France
With Projections to 1970 and 1975."

Rossmiller, "The Grain-Livestock Economy of West Germany
With Projections to 1970 and 1975."

Sorenson and Hathaway, "The Grain-Livestock Economy and
Trade Patterns of the European Economic Community With
Projections to 1970 and 1975."

United Nations, Food and Agriculture Organization, Trade
Yearbook, various issues.

'. {7,-4‘10’»
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160

Table A-2.--Feed grain prices (3/100 kg.)

HHHH~H-H\\\‘\‘\\\\¥ Importer : : :
: France : Italy : Germany-

 

 

Exporter 3 Year 3 : : Benelux
France ............ Q 1964 7.25
- 1968 7.25
: 1970(L) 8.90
; 1970(H) 8.90
Italy ............. Q 1964 7.93
: 1968 8.34
: 1970(L) 8.71
- 1970(H) 8.71
Germany-Benelux ...; 1964 9.18
; 1968 8.08
: 1970(L) 8.51
. 1970(H) 8.51
EFTA .............. § 1964 6.56
: 1968 5.50
. 1970(L) 5.73
1970(H) 5.73
United States ..... § 1964 5.33 5.33 5.33
. 1968 5.01 5.01 5.01
1970(L) 5.63 5.63 5.63
1970(H) 5.63 5.63 5.63
Latin America .....§ 1964 4.81 4.81 4.81
. 1968 5.22 5.22 5.22
1970(L) 5.38 5.38 5.38
1970(H) 5.38 5.38 5.38

--Continued

161

Table A-2 (cont'd.)

 

~

\ 1111130171281? : 3 :
3 France 3 Italy 3 Germany-

 

 

- Benelux
Exporter ; Year
Africa & Mid East : 1964 5.82 5.29
: 1968 6.56 6.21
: 1970(L) 6.04 6.57
: 1970(H) 6.57
Australia, New
Zealand, South
Africa ........ ...: 1964 4.95 4.95
° 1968 5.04 5.04
1970(L) 5.66 5.66
1970(H) 5.66 5.66
Source: Epp, op. cit.

Institute Fur Wirtschaftsforschung, "Long-Term Development
of Demand and Supply for Agricultural Products in the
Federal Republic of Germany," Studien Zur Agrarwirtschaft,
Heft 1, Abteilung Landwirtschaft, Munchen 1967.

Mangum, .23 cit.

Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968."

Organization for Economic Co-Operation and Development,
"Food Consumption Statistics, 1954-1966," Paris, 1968.

Petit and Viallon, op. cit.

Sorenson and Hathaway, _p, cit.

United Nations, Statistical Office of the United Nations,
Department of Economics and Social Affairs, "Commodity
Trade Statistics," Statistical Papers, Series D, various

issues.

United Nations, Food and Agriculture Organization,
Production Yearbook, various issues.

United Nations, Trade Yearbook.

 

 

 

   

   

 

   

 

 

 

 

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162

Table A-3.--Milk-beef—feeder calf prices ($/head)

\ Importer 2 2 2
: France : Italy : Germany-

 

 

Exporter E Year 3 : : Benelux
France ............ : 1964 309.30
: 1968 360.93
: 1970(L) 386.51
: 1970(H) 386.51
Italy ............. : 1964 384.63
: 1968 453.58
: 1970(L) 409.04
: 1970(H) 409.04
Germany-Benelux ...: 1964 517.43
: 1968 558.51
: 1970(L) 566.83
' 1970(H) 566.83

 

Source: Epp, 22. cit.
Mangum, _p. cit .

Organization for Economic Co-Operation and Development,
”Agricultural Statistics: 1955-1968."

Petit and Viallon, op. cit.

Rossmiller, op. cit.
United Nations, Production Yearbook.
United Nations, Food and Agriculture Organization,

"Technical Conversion Factors for Agricultural Commodities,"
Rome, 1960.

”a, Al I} '
O O
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D O
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163

Table A-4.--Feeder calf prices ($/head)

\ Importer 2 : .
: France : Italy : Germany-

 

 

 

Exporter : Year : : : Benelux
EFTA .............. : 1964 321.90 246.71
: 1968 297.10 272.14
: 1970(L) 304.06 295.50
: 1970(H) 304.06 295.50
Eastern Europe ....: 1964 275.68 275.68 275.68
: 1968 274.10 274.10 274.10
: 1970(L) 291.82 291.82 291.82
: 1970(H) 291.82 291.82 291.82
Source: Epp, op. cit.

Petit and Viallon, op. cit

H. Schmidt and L. Grunewald, "Aggregation of Future Demand

and Supply for Agricultural Products in the European

Economic Community 1970-1975," Studien Zur Agrarwirtschaft,

Haft 5, IFO-Institut Fur Wirtschaftsforschung Abteilung

Landwirtschaft, Munchen 19

69.

United Nations, "Commodity Trade Statistics."

United Nations, "Technical Conversion Factors for

Agricultural Commodities."

United Nations, Trade Yearbook.

 

 

 

E .

 

 

‘1 '3 j “I o r' i:

 

\-

1‘. (3 C

0 (‘1 (J

( f)": (-’

mgr-TO

‘r—p

r-

164

Table A-5.--Beef prices ($/100 kg.)

Importer; ;
= France :

 

1 2

 

Italy : Germany-
Year : Benelux
Exporter
France ..... 1964 102.68
1968 115.45
1970(L) 117.17
1970(H) 135.67
Italy .....: 1964 123.46 105.38
' 1968 121.33 108.06
1970(L) 121.77 104.08
1970(H) 141.02 120.52
Germany-
Benelux 1964 101.48
1968 110.45
1970(L) 131.73
1970(H) 152.54
EFTA ....... 1964 93.64 98.55
1968 98.66 82.83
1970(L) 99.00 97.79
1970(H) 99.00 97.79

--Continued

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165

Table A-5 (cont'd.)

 

 

Importer; . 1 ;
. France : Italy : Germany-
Exporter Year : : : Benelux
Eastern :
EurOpe : 1964 78.10 88.37
: 1968 96.56 76.85
: 1970(L) 107.76 106.53
: 1970(H) 107.76 106.53
Latin :
America : 1964 53.29 53.29 53.29
° 1968 63.07 63.07 63.07
1970(L) 69.35 69.35 69.35
1970(H) 69.35 69.35 69.35

 

1The double column for Italy consecutively represents prices

for beef

Source:

fed more than one year and beef fed less than one year.

Epp, 22. cit.
Mangum, op. cit.

Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968."

Petit and Viallon, op. cit.
Rossmiller, 22° cit.
United Nations, "Commodity Trade Statistics."

United Nations, "Technical Conversion Factors for
Agricultural Commodities."

United Nations, Trade Yearbook.

 

(

:51”)
1-
HHM’
1. ‘3
JV
4' 3.

166

Table A-6.--Veal prices ($/100 kg.)

 

HHHHH-~H\‘\‘\\\\\\\ Importer : : :
= France : Italy : Germany-

 

Exporter : Year : : : Benelux
France ............: 1964 151.00
° 1968 173.73
1970(L) 143.97
1970(H) 166.71
Italy .............: 1964 147.77
: 1968 170.69
: 1970(L) 146.97
: 1970(H) 170.19
Germany-Benelux ...: 1964 129.73
° 1968 158.95
: 1970(L) 158.41
: 1970(H) 183.45

 

Source: Epp, _p. cit.
Mangum, op. cit.

Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968."

Petit and Viallon, op. cit.

Rossmiller, op. cit.

United Nations, "Technical Conversion Factors for
Agricultural Commodities."

167

Table A-7.--Pork prices ($/100 kg.)

 

Importer

France

 

Exporter : Year

Italy

3 Germany-
: Benelux

 

France ............. : 1964 76.71
° 1968 78.51

1970(L) 78.09

1970(H) 78.09

Italy .............. : 1964
' 1968

1970(L)

1970(H)

Germany-Benelux ....: 1964
° 1968

1970(L)

1970(H)

74.07
82.17
80.60
80.60

83.11
72.27
76.77
76.77

 

Source: Epp, op. cit.

Mangum, op. cit.

Organization for Economic Co-Operation and Development,

'Agricultural Statistics: 1955-1968."
Petit and Viallon, op. cit.

Rossmiller, op. cit.

United Nations, "Technical Conversion Factors for

Agricultural Commodities."

168

Table A-8.--Egg prices ($/100 kg.)

 

\Importer ; ; :
: France : Italy : Germany-

Exporter : Year : ; : Benelux

 

France ...............: 1964 64.53
° 1968 53.74

1970(L) 57.29

1970(H) 57.29

Italy ................: 1964 69.65
° 1968 64.46

1970(L) 55.55

1970(H) 55.55

Germany-Benelux ...... : 1964 87.30
' 1968 73.63

1970(L) 50.39

1970(H) 50.39

 

Source: Epp, op. cit.
Mangum, op. cit.

Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968."

Petit and Viallon, op. cit.

Rossmiller, op. cit.

169

Table A-9.--Poultry prices ($/100 kg.)

 

Importer

France

 

Exporter : Year :

France ............ : 1964
: 1968
: 1970(L)
° 1970(H)

Italy .............: 1964
- 1968
: 1970(L)
: 1970(H)

Germany-Benelux ...: 1964
- 1968

1970(L)

1970(H)

89.90
66.00
53.81
53.81

Italy

61.12
70.27
51.09
51.09

3 Germany-
: Benelux

66.85
55.28
54.02
54.02

 

Source: Epp, op. cit.

Mangum, op. cit.

Organization for Economic Co-Operation and Development,

"Agricultural Statistics:
Petit and Viallon, op. cit.

Rossmiller, op. cit.

United Nations, "Technical Conversion Factors for

Agricultural Commodities."

1955-1968."

170

Table A-10.--Denaturing costs ($/100 kg.)

 

 

: 1964 : 1968 : 1970
France -------- : 2.30 1.58 1.27
Italy --------- : 2.30 1.58 1.27
Germany-Benelux: 2.30 1.58 1.27

 

Source: Epp, _p. cit.

Ernest Koenig, "Denaturing of Wheat and Rye,"
Department of State Airgram, from U.S. Mission to
the European Communities, Brussels to Department
of State/Washington, Pass Agriculture.

L. Schertz and R. Cannon, "Outlets for French Grain,"
Grain and Feed Division, Foreign Agriculture Service,
United States Department of Agriculture, 2/8/65,

Rev. 3/21/65.

171

Table A-ll.--Food grain transportation
costs ($/100 kg.)

 

 

Importer : :
: France : Italy

 

Germany—
Exporter : Year Benelux
France ............... : 1964 3.04 2.05
' 1968 3.01 2.03
1970 3.22 2.17
Italy.................: 1964 3.04 2.23
1 1968 3.01 2.21
1970 3.22 2.36
Germany-Benelux ......: 1964 1.85 1.98
° 1968 1.83 1.96
1970 1.96 2.10
United States ........ 3 1964 2.46 1.69 1.85
' 1968 2.86 1.97 2.15
1970 2.59 1.78 1.95
Canada ...............= 1964 2.17 1.76 1.77
‘ 1968 2.52 2.05 2.06
1970 2.28 1.85 1.86
Latin America ........: 1964 2.13 2.03 2.31
° 1968 1.42 1.36 1.55
1970 1.73 1.65 1.88
Africa & Mid East ....: 1964 1.64
' 1968 1.62
1970 1.74

--Continued

172

Table A-ll (cont'd.)

 

Importer: : : :

EFTA : Eastern : Africa & : Other

 

 

Exporter Year Europe 3 Mid East : Asia
France ............... : 1964 1.29 4.45 1.69 2.08
° 1968 1.28 4.41 1.67 2.06
1970 1.37 4.71 1.79 2.20
Italy ................: 1964 2.70 1.69
° 1968 2.67 1.67
1970 2.86 1.79
Germany-Benelux ......: 1964 1.18 3.52 2.29 1.94
' 1968 1.17 3.48 2.27 1.92
1970 1.25 3.73 2.43 2.05
Source: D. Lee Bawden, James G. Kendrick, Carmen O. Nohre and

Howard C. Williams, "A Model for Agricultural Trade
Analysis," Unpublished Paper, June 17, 1968.

Harold Frederick Bjarnason, "An Economic Analysis of 1980
International Trade in Feed Grains," Unpublished Ph.D.
Thesis, University of Wisconsin, 1967.

Epp, pp. cit.

Donald J. Epp, Letter, October 22, 1968.

European Economic Community, "Analyse Des Facteurs Qui
Influent Sur L'orientation De L'offre Regionale De
Céréales Et De Produits Transformés Dérivés De cereales,"

Estudes Série Agriculture 17, Bruxelles.

Roger William Fox, "Some Possible Production and Trade

Effects of the EEC's Common Agricultural Policy for Grains,"

Unpublished Ph.D. Thesis, Michigan State University, 1965.

International Wheat Council, "World Wheat Statistics,"
London, various issues.

Kartographisches Institut Und Verlag, "Europe Road Map,
1:3000000," Frankfurt/M.

United Nations, Statistical Office of the United Nations,
Department of Economic and Social Affairs, Statistical

 

Yearbook, various issues.

173

Table A-12.--Feed grain tranSportation
costs ($/100 kg.)

Importer: : : : :
: France : Italy : Germany- : EFTA : Other

 

 

Exporter E Year : Benelux f 3 Europe
France .......: 1964 3.04 2.05 1.29 1.20
' 1968 3.01 2.03 1.28 1.19
1970 3.22 2.17 1.37 1.27
Italy ........ : 1964 3.04 2.23
° 1968 3.01 2.21
1970 3.22 2 36
Germany- .
Benelux ....: 1964 1.85 1.98 1.14
° 1968 1.83 1.96 1.13
1970 1.96 2 10 l 21
EFTA .......... 1964 1.42
1968 1.57
1970 1 67
United .
States ..... : 1964 2.09 1.87 2.04
' 1968 2.43 2.17 2.37
1970 2.20 1 97 2 15

--Continued

174

Table A-12 (cont'd.)

Importer: : : : :
2 France : Italy : Germany- 3 EFTA 2 Other

 

 

Exporter : Year : Benelux : : Europe
Latin :
America : 1964 2.43 2.03 2.72
' 1968 1.63 1.36 1.82
1970 1.98 1.65 2.21
Africa & Mid:
East .....: 1964 1.64 2.29
° 1968 1.62 2.27
1970 1.74 2.43
Australia,
New
Zealand,
South .
Africa ...: 1964 2.53 2.53
° 1968 1.73 1.73
1970 1.81 1.81

 

Source: Bawden, Kendrick, Nohre and Williams, op, cit.
Bjarnason, _p. cit.
Epp, op. cit.
Epp, Letter.
European Economic Community, "Analyse Des Facteurs Qui
Influent Sur L'orientation De L'offre Régionale De
Céréales Et De Produits Transformés natives Des Céréales."
Fox, _p, cit.

International Wheat Council, "World Wheat Statistics."

Kartographisches Institut Und Verlag, "EurOpe Road Map,
1:3000000," Frankfurt/M.

United Nations, Statistical Yearbook.

 

175

Table A-l3.--Feeder calf transportation
costs ($/head)

 

 

HHHHHH-HH\‘\\\\\\N\¥Importer ; ;
; France ; Italy

 

Germany-
Exporter 3 Year Benelux
France ............. : 1964 2.16 4.87 4.17
° 1968 2.14 4.82 4.13
1970 2.29 5.16 4.42
Italy .............. : 1964 4.16 4.60
' 1968 4.12 4.55
1970 4.41 4.87
Germany-Benelux ....: 1964 3.27 3.68
' 1968 3.24 3.64
1970 3.46 3.90
EFTA ............... : 1964 3.27 3.70
' 1968 3.24 3.66
1970 3.46 3.92
Eastern Europe ..... : 1964 6.46 4.72 5.94
° 1968 6.40 4.67 5.88
1970 6.84 5.00 6.29

 

Source: European Economic Community, "Analyse Des Facteurs Qui
Influent Sur L'orientation De L'offre Régionale De
Céréales Et De Produits Transformés Derivés Des cereales."
International Wheat Council, "World Wheat Statistics."

Kartographisches Institut Und Verlag, "Europe Road Map,
1:3000000," Frankfurt/M.

United Nations, Statistical Yearbook.

I
(10".O'.

'D II
'T'\
‘,\

’
I O

’ \

‘IlK‘

11' 1.1.l-ul

((3)1
'l)(.'
’n.\( l

I"| 11H] 1

176

Table A-14.--Beef tranSportation
costs ($/100 kg.)

 

\ Importer : : :
: France : Italy ; Germany-

 

 

Benelux
Exporter Year
France ............ : 1964 1.54 2.78 2.63
° 1968 1.52 2.75 2.60
1970 1.63 2.94 2.79
Italy ............. : 1964 2.69 2.84
° 1968 2.66 2.81
1970 2.85 3.01
Germany-Benelux ...: 1964 2.33 2.82
' 1968 2.31 2.79
1970 2.47 2.99
EFTA ..............: 1964 6.47 3.66
‘ 1968 7.16 3.62
1970 7.59 3.84
Eastern Europe ....: 1964 3.95 2.91
° 1968 3.91 2.88
1970 4.18 3.08
Latin America .....: 1964 7.67 7.67 7.83
° 1968 5.13 5.13 5.24
1970 6.24 6.24 6.37
Source: Bawden, Kendrick, Nohre and Williams, 22, gig,

Epp, 22. cit.

European Economic Community, "Analyse Des Facteurs Qui
Influent Sur L'orientation De L'offre Regionale De
Céréales Et De Produits Transformés Derivés Des Céréales."

International Wheat Council, "World Wheat Statistics."

Kartographisches Institut Und Verlag, "Europe Road Map,
1:3000000," Frankfurt/M.

United Nations, Statistical Yearbook.

177

Table A-15.--Veal transportation
costs ($/100 kg.)

Importer : : :
France 3 Italy ; Germany-

 

 

 

Exporter : Year : : Benelux
France ..... .......: 1964 1.54 2.78 2.63
: 1968 1.63 2.94 2.60
: 1970 1.52 2.75 2.79
Italy ............. : 1964 2.69 2.84
: 1968 2.85 2.81
: 1970 2.66 3.01
Germany-Benelux ---: 1964 2.33 2.82
: 1968 2.47 2.79
° 1970 2.31 2.99

 

Source: Bawden, Kendrick, Nohre, and Williams, op. cit.

Epp, op. cit.

European Economic Community, "Analyse Des Facteurs Qui
Influent Sur L'orientation De L'offre Régionale De
Céréales Et De Produits Transformés Dérivés Des cereales."

International Wheat Council, "World Wheat Statistics."

Kartographisches Institut Und Verlag, "EurOpe Road Map,
1:3000000," Frankfurt/M.

United Nations, Statistical Yearbook.

178

Table A-16.--Pork transportation
costs ($/1oo kg.)

 

 

 

Importer : : :
3 France 3 Italy 3 Germany-
Exporter E Year 3 f f Benelux
France ............ : 1964 1.65 3.63 3.02
: 1968 1.75 3.84 3.20
' 1970 1.63 3.59 2.99
Italy ............. : 1964 3.09 3.47
: 1968 3.27 3.67
: 1970 3.06 3.44
Germany-Benelux ...: 1964 2.52 3.45
° 1968 2.67 3.65
1970 2.49 3.42

 

Source: Epp, _p. cit.
European Economic Community, "Analyse Des Facteurs Qui
Influent Sur L'orientation De L'offre Régionale De
Céréales Et De Produits Transformés Derivés Des cereales."

International Wheat Council, "World Wheat Statistics."

Kartographisches Institut Und Verlag, "Europe Road Map,
1:3000000," Frankfurt/M.

United Nations, Statistical Yearbook.

 

179

Table A-l7.--Egg transportation
costs ($/100 kg.)

\ Importer 3 3 1
; France ; Italy ; Germany-

 

 

. . . . Benelux
Exporter : Year ' ‘ '
France ............ : 1964 2.09 2.25 1.87
: 1968 2.21 2.38 1.98
: 1970 2.07 2.23 1.85
Italy .......... ...: 1964 2.92 3.30
: 1968 3.09 3.49
: 1970 2.89 3.27
Germany-Benelux ...: 1964 2.35 2.28
' 1968 2.49 2.41
1970 2.33 2.26

 

Source: Epp, op. cit.
European Economic Community, "Analyse Des Facteurs Qui
Influent Sur L'orientation De L'offre Regionale De
Céréales Et De Produits Transformés Derivés Des Cereales."

International Wheat Council, "World Wheat Statistics."

Kartographisches Institut Und Verlag, "Europe Road Map,
1:3000000," Frankfurt/M.

United Nations, Statistical Yearbook.

 

180

Table A-l8.--Pou1try transportation
costs ($/1oo kg.)

Importer : : :
; France ; Italy ; Germany-

 

 

 

Exporter : Year 3 : Benelux
France ............: 1964 2.19 2.36 1.95
° 1968 2.32 2.50 2.07
1970 2.17 2.34 1.93
Italy .............: 1964 3.09 3.49
° 1968 3.27 3.70
1970 3.06 3.46
Germany-Benelux ...: 1964 2.47 3.47
° 1968 2.62 3.67
1970 2.45 3.44

 

Source: Epp, op. cit.
European Economic Community, "Analyse Des Facteurs Qui

Influent Sur L'orientation De L'offre Regionale De
Céréales Et De Produits Transformés Dérivés Des Céréales."
International Wheat Council, ”World Wheat Statistics."

Kartographisches Institut Und Verlag, "Europe Road Map,
1:3000000," Frankfurt/M.

United Nations, Statistical Yearbook.

181

Table A-l9.--Food grain variable import
levies (+) and variable export
subsidies (-) ($/100 kg.)

‘\\\~\\\\\\\\\\‘Importer : : : :
: France : Italy : Germany- : EFTA

 

 

Exporter 2 Year Benelux
France ........: 1964 3.17 3.70 -1.52
° 1968 -2.46
1970(L) -2.8l
1970(H) -2.81
Italy .........: 1964 -3.20 .78
° 1968
1970(L)
1970(H)
Germany-Benelux: 1964 -2.39 .78 -3.91
: 1968 -2.87
1970(L) -2.96
1970(H) -2.96
United States : 1964 3.45 4.79 5.32
° 1968 4.10 4.33 4.01
1970(L) 4.08 4.30 3.98
1970(H) 4.08 4.30 3.98
Canada ........: 1964 3.45 4.79 5.32
° 1968 4.10 4.33 4.01
1970(L) 4.08 4.30 3.98
1970(H) 4.08 4.30 3.98
Latin America : 1964 3.45 4.79 5.32
° 1968 4.10 4.33 4.01
1970(L) 4.08 4.30 3.98
1970(H) 4.08 4.30 3.98
Africa & Mid
East ........ : 1964 3.45
° 1968 4.10
1970(L) 4.08
1970(H) 4.08

--Continued

182

Table A-l9 (cont'd.)

 

Africa & ; Other

 

‘-~\\-\\\\\\\\\\¥Importer ;
. Eastern

 

Exporter : Year Europe ; Mid East : Asia
France ...........: 1964 -1.52 -1.52 -1.52
: 1968 -2.46 -2.46 -2.46
1970(L) -2.81 -2.81 -2.81
1970(H) -2.81 -2.81 -2.81
Italy ............ : 1964 -4.54 -4.54
: 1968 —4.33 -4.33
1970(L) -4.07 -4.07
1970(H) -4.07 -4.07
Germany-Benelux : 1964 -3.91 -3.91 -3.91
' 1968 —2.87 -2.87 -2.87
: 1970(L) -2.96 -2.96 -2.96
: 1970(H) -2.96 -2.96 -2.96

 

Source: Foreign Agricultural Service, United States Department

of Agriculture, "Grain Developments in the Common
Market," FAS-M-202, December 1968.

Hans G. Hirsch, "The Uniform Grain Price in the European
Economic Community," ERS-Foreign 110, United States
Department of Agriculture, March 1965.

1111‘

183

Table A-20.--Feed grain variable import levies (+)
and variable export subsidies (-) ($/100 kg.)

 

 

 

mter . .
France : Italy : Germany- : EFTA : Other
: : : Benelux : : Europe
Year
Exporter -
France .......... : 1964 -.68 2.95 -1.66 -1.66
: 1968 -l.10 -l.10
: 1970(L) -2.47 -2.47
: 1970(H) -2.47 -2.47
Italy ........... : 1964 .96 2.27
: 1968
: 1970(L)
: 1970(H)
Germany-Benelux : 1964 -l.93 -1.25 -3.59
: 1968 -l.93
: 1970(L) -2.08
: 1970(H) -2.08
EFTA ............ : 1964 4.71
: 1968 3.20
: 1970(L) 3.35
: 1970(H) 3.35
United States ...: 1964 3.40 1.37 4.71
: 1968 3.22 2.50 3.20
: 1970(L) 3.46 2.67 3.35
: 1970(H) 3.46 2.67 3.35
Latin America ...: 1964 3.40 1.37 4.71
. 1968 3.22 2.50 3.20
: 1970(L) 3.46 2.67 3.35
: 1970(H) 3.46 2.67 3.35

continued --

184

Table A-20 (cont'd.)

 

mrter : : 3 : :
: : : Germany- : : Other

, France , Italy

 

. : Benelux Europe
Year
Exporter :
Africa & Mid : 1964 3.40 4.71
East .......... : 1968 3.22 3.20
: 1970(L) 3.46 3.35
° 1970(H) 3.46 3.35
Australia, New : 1964 1.37 4.71
Africa ........ = 1970(L) 2.67 3.35
: 1970(H) 2.67 3.35

 

Source: Hirsch, 22' cit.
United Nations, "Commodity Trade Statistics."

United States Department of Agriculture, "Grain Developments in
the Common Market."

 

185

Table A-21.--Feeder calf variable import
levies (+) and variable export
subsidies (-)($/head)

 

Importer

 

France 3 Italy

Exporter . Year

= Germany-
: Benelux

 

France ............ : 1964
' 1968

1970(L)

1970(H)

Italy .............3 1964
3 1968

1970(L)

1970(H)

Germany-Benelux ---= 1964
1 1968

1970(L)

1970(H)

--Continued

186

Table A-21 (cont'd.)

 

\ Importer ; : ;
; France ; Italy ; Germany-

 

 

Exporter Year : Benelux
EFTA .............. : 1964
' 1968 21.04 6.56
1970(L) 19.46 3.66
1970(H)
Eastern Europe ....: 1964
' 1968 2.44 15.16 5.98
: 1970(L) 2.75 16.47 4.17
: 1970(H)
Source: Commission of the European Communities, "Farm Prices 1970/

1971," Information Memo, P-31, June 16, 1969, Brussels.

Epp, 22. cit.

European Community Information Service, "The Common
Agricultural Policy," Community Topics 28.

Rosemary Fennell and A. Power, "Problems of the Organization
of the Meat Market in the E.E.C.," International Journal of
Agrarian Affairs, Vol. III, No. 5, June 1963.

 

General Agreement on Tariffs and Trade, "Trade in Agricul-
tural Products, Reports of Committee 11 on Consultations
with the European Economic Community, the United States of
America and the United Kingdom," Geneva, 1965.

Ministry of Agriculture and Fisheries of the Netherlands,
Statistics and Documentation Section, "Selected Agri-Figures
of the E.E.C."

1'
')
I I
|
7" )
‘.
,
\
";|‘|

187

Table A-22.--Beef variable import

levies (+) and variable export
subsidies (-) ($/100 kg.)

~\-~\\\‘\\\‘\\\\\\‘Importer : : :
: France : Italy : Germany-

 

 

Exporter : Year : Benelux
France ............: 1964
° 1968
1970(L)
1970(H)
Italy .............= 1964
’ 1968

: 1970(L)
: 1970(H)

Germany-Benelux ...: 1964
: 1968

1970(L)

1970(H)

EFTA .............. : 1964
- 1968 7.96 14.90
1970(L) 7.55 .98

1970(H)

--Continued

1 f

L

r
.v—r '
) _ 'l
I 't'l
.‘ I.

188

Table A-22 (cont'd.)

 

‘\--‘-~\\“‘\\\\\Importer : : :
: France : Italy :

 

 

Germany-
Exporter 3 Year : : : Benelux
Eastern Europe ....: 1964
: 1968 10.48 20.31
' 1970(L) 4.91 4.27
1970(H)
Latin America .....: 1964 42.45
1968 50.67 32.72 53.52
1970(L) 43.13 18.04 34.49
1970(H)

 

Source:

B. L. Berntson, O. H. Goolsby and C. O. Nohre, "The
European Community's Common Agricultural Policy: Impli-
cations for U.S. Trade."

Commission of the European Communities, "Farm Prices 1970/
1971."

European Community Information Service, "The Common Agri-
cultural Policy."

Fennell and Power, op. cit.

General Agreement on Tariffs and Trade, "Trade in
Agricultural Products, Reports of Committee II on Consul-
tations with the European Economic Community, the United
States of America and the United Kingdom."

Ministry of Agriculture and Fisheries of the Netherlands,
"Selected Agri-Figures of the E.E.C."

189

Table A-23.--Pork variable import
levies ($/100 kg.)

 

 

\ Importer 3 3
: France : Italy

 

: Germany-
Exporter : Year ‘ Benelux
France ............. : 1964 2.86 3.38
Italy ....... .......: 1964 5.57
Germany-Benelux ....: 1964 8.11 5.25

 

Source: Fennell and Power, op. cit.

Table A-24.--Egg variable import
levies ($/100 kg.)

 

-\---‘\“~\“‘\\‘Importer : :
: France : Italy

: Germany-

 

Exporter E Year : Benelux
France .............1 1964 2.36 10.61
Italy .............. : 1964 9.48 13.34
Germany-Benelux ....: 1964 6.60 2.36

 

Source: General Agreement on Tariffs and Trade, "Trade in Agricul-
tural Products, Report of Committee II on the Consultation

with the European Economic Community."

190

Table A-25.--Poultry variable import
levies ($/100 kg.)

 

 

\Importer 2 :
: France : Italy

: Germany-

 

Exporter : Year : Benelux
France ............. : 1964 6.76 15.84

Italy ..............: 1964 16.32 15.45

Germany-Benelux ....; 1964 16.41 6.45

 

Source: General Agreement on Tariffs and Trade, "Trade in Agricul-
tural Products, Report of Committee 11 on the Consultation

with the European Economic Community."

Table A-26.--Feeder calf import
duties ($/head)

 

‘\~\\\-\\\‘\‘\\\\\ ‘Importer : :
: France : Italy

Exporter = Year

France ooooo ........: 1964 6.45
' 1968
1970(L)
1970(H)

Italy .............. : 1964 19.08
- 1968
1970(L)
1970(H)

Germany-
Benelux

7.02

7.47

--Continued

191

Table A-26 (cont'd.)

 

‘\\\\-~\\\\\\\\\\\Importer

 

 

 

France Italy Germany-
Exporter Year Benelux
Germany-Benelux ...: 1964 15.50 5.58
1968
1970(L)
1970(H)
EFTA ............... 1964 19.16 11.91
1968 20.95 11.25
1970(L) 20.51 11.14
1970(H) 20.51 11.14
Eastern Europe ....: 1964 28.77 16.41 13.30
1968 15.77 19.33 11.33
1970(L) 15.81 19.69 11.00
1970(H) 15.81 19.69 11.00
Source: Commission of the European Communities, "Farm Prices 1970/

1971."

Epp, op. cit.
European Community Information Service, "The Common
Agricultural Policy."

Fennell and Power, op. cit.

General Agreement on Tariffs and Trade, "Trade in
Agricultural Products, Reports of Committee II on Consul-
tations with the European Economic Community, the United
States of America and the United Kingdom."

Ministry of Agriculture and Fisheries of the Netherlands,
"Selected Agri-Figures of the E.E.C."

"H. m r.— _-.—.

192

Table A-27.--Beef import
duties ($/100 kg.)

\Importer ; : ;
: France ; Italy : Germany-

Benelux

 

Exporter : Year

 

France .............: 1964 5.65 11.29
: 1968
: 1970(L)
° 1970(H)

Italy ..............: 1964 23.83 13.58
- 1968
1970(L)
1970(H)

Germany-Benelux ....: 1964 19.59 5.58
: 1968
: 1970(L)
1970(H)

EFTA ............... : 1964 28.56 12.81
° 1968 19.73 16.57

1970(L) 19.80 19.56

1970(H) 19.80 19.56

--Continued

193

Table A-27 (cont'd.)

 

\Importer ; ; g
; France : Italy ; Germany-

 

 

Exporter Year 3 Benelux
Eastern Europe ..... : 1964 23.82 11.49
: 1968 19.31 15.37
1970(L) 21.55 21.31
1970(H) 21.55 21.31
Latin America ...... : 1964 16.25 6.93 10.66
' 1968 12.61 12.61 12.61
1970(L) 13.87 13.87 13.87
1970(H) 13.87 13.87 13.87
Source: Berntson, Goolsby and Nohre, op. cit.

Commission of the European Communities, "Farm Prices
1970/1971."

European Community Information Service, "The Common
Agricultural Policy."

Fennell and Power, 22. cit.

General Agreement on Tariffs and Trade, "Trade in
Agricultural Products, Reports of Committee 11 on
Consultations with the European Economic Community,
the United States of America and the United Kingdom."

194

Table A-28.--Veal import
duties ($/100 kg.)

 

4---~\‘~\‘\‘\\‘\‘ Importer : : :
: France : Italy : Germany-

 

Exporter ‘ Year : : : Benelux
France ...... .....: 1964 8.31 16.61
Italy ....... .....: 1964 28.52 16.25

Germany-Benelux : 1964 25.04 7.14

 

Source: Fennell and Power, op. cit.

General Agreement on Tariffs and Trade, "Trade in
Agricultural Products, Reports of Committee 11 on
Consultations with the European Economic Community,
the United States of America and the United Kingdom."

rv-—r,.~ ——

 

195

 

 

  

  

 

ooo.oH ooo.oH ooo.oHnmoagm< ausom
" .wamfimow
" .wqamuumad
ooo.oH ooo.oH 25.3H mama guano
ooo.oH ooo.oH " “mam ea:
" d magnum
" mowuma<
" oHumA
" ... upmamo
u . mmuMum
" vaHGD
ooo.oH ooo.oa 25.2H . maouam
" umnuo
ooo.oH ooo.o~ 25.2U . sacrum
" cumummm
ooo.oH ooo.oH 80.2H ..... aamm
ooo.oH ooo.oH oco.oH ooo.oH ooo.oH OH- ooo.o~ u xsaocmm
" -xamsumu
ooo.oH ooo.oH ooo.oH ooc.oa ooo.o~ ooo.oH ooo.oH ooo.o~ oH- ” .... samuH
ooo.oH ooo.o~ ooo.oH ooo.o~ ooo.oH OH- " ... mocmnm
mowum< " u ummm “ u u u u n u u u u umuuomxm
nuaom vamH" mwm< u was "wowuma<n "moumumnmmousmu maoudm" " x: moon" " "
-mmN 3oz "umsuo " w " cgumq umwmcmouwouficau umnuoucumummmu mymm "-maweumunmfimuH Housman"
.mafimuum:<u "mowum4u " u u u u n u u "
Amummz Ham .wV
mumoo hafisv samuw woomnu.m~n< manme

196

 

ooo.oH

.moaum< ausom

 

    

 

" .pcmamom
"362 .ofiamuumo<
ooo.oH ooo.oH ooo.oHn... mfim< Husuo
ooo.o~ "... swam ea:
" a wofium<
”.... woauoa<
" sauna
ooo.oH ooo.oH ooo.oHn....... mvwcmo
"..... mmumum
" pmuficb
ooo.oH ooo.oH ooo.oHu..... maouam
“ umnuo
ooo.oH ooo.oH ooo.oH ..... oaousm
" cumummm
OOOQOH OOOAOHuooooooooo 48mm
ooo.oH ooo.oH ooo.oH ooo.oH ooo.oH coo.oH ooo.o~ ooo.oH OH: ooo.o~ ".... xaaocmm
" uxcmaumu
ooo.oH ooo.oH ooo.o~ ooo.oH ooo.o~ ooo.oH ooo.oH ooo.oH ooo.oH ooo.oH 0H- "........ mHmuH
ooo.oH ooo.oH ooo.oH ooo.oH ooo.oa ooo.oH ooo.oH OH- "....... magnum
wowuw< u " ummm “ n u u u u u n u “ umuuoaxm
cuoom .pomH" mHm< " was "mogumE<u "mmumumumaousmu maouam" u xoamcmmu " "
-wwN smz “nonuo " a u :Humu "mwmcmouuouwcan umnuoucumummmu mamm "-mamsuwuumamuH Housman"
.mHHmuum=<u "mowum¢u " u n u u u n u "
Amumom Ham .wv
mumoo meant cwwuw poomnu.omu< manna

197

Table A-31.--Feeder calf dummy costs ($, all years)

    

 

 

Importer :
France : Italy Germany-

Exporter ' Benelux
France ..............: -10
Italy ...............E -10 10,000
Germany-Benelux ..... § 10,000 -10
EFTA ....... ...... ...: 10,000
Eastern Europe ......:
Other Europe ........: 10,000 10,000 10,000
United States .......: 10,000 10,000 10,000
Canada ..............: 10,000 10,000 10,000
Latin America .......: 10,000 10,000 10,000
Africa & Mid East ...; 10,000 10,000 10,000
Other Asia ..........: 10,000 10,000 10,000
Australia, New :

Zealand, South :

Africa ............: 10,000 10,000 10,000

 

g»! (In!

Table A-32.--Beef dummy costs ($, all years)

198

 

    
  

Importer

 

: France Italy Germany- : All other
Exporter : Benelux countries
France . . . ...; -10 10,000
Italy .............; -10 10,000 10,000
Germany-Benelux ...: 10,000 -10 10,000
EFTA ..............: 10,000
Eastern EurOpe ....E 10,000
Other Europe ...... E 10,000 10,000 10,000
United States ..... E 10,000 10,000 10,000
Canada ......... ...: 10,000 10,000 10,000
Latin America .....:
Africa & Mid East ; 10,000 10,000 10,000
Other Asia ........; 10,000 10,000 10,000
Australia, New
Zealand, South :
10,000 10,000 10,000

Africa ..........:

 

'..ll\l\

 

up- ..y--
.c

.‘h‘

 

v I 11' fl

199

Table A-33.--Vea1, pork, eggs and poultry

dummy costs ($, all years)

 

 
   
 

Importer

 

 

 

 

 

France ; Italy Germany-
Exporter : Benelux
France .............: -10
Italy .............. : -10 10,000
Germany-Benelux ....: 10,000 -10
Table A-34.--Land area (ha.)
Year Forage Crop
land land
France ,,,,,,,,,,,,,,,,, 1964 19,334,000 9,188,000
1968 18,937,000 9,282,000
1970 18,860,000 8,862,000
Italy ,,,,,,,,,,,,,, , 1964 9,373,000 6,250,000
1968 9,372,000 5,950,000
1970 9,372,000 5,588,000
Germany-Benelux ....... ; 1964 5,723,000 6,024,000
1968 5,354,000 6,038,000
1970 5,249,000 5,965,000
Source: European Economic Community, Office Statistique Des

Communautes EurOpéennes, Production Vegetale,

issues.

Sorenson and Hathaway, op. cit.

various

200

Table A-35.--Land conversion factors

 

 

 

Year Forage land conversion factors
To the joint product : To beef fed more
milk-beef feeder than one year
calves
(ha./head) (ha./100 kg.)
France ..... 1964 .95 .50
1968 .86 .45
1970 .88 .46
Italy .....: 1964 1.21 .65
° 1968 1.14 .61
1970 1.14 .61
Germany-
Benelux 1964 .63 .34
1968 .58 .32
1970 .56 .31

--Continued

201

Table A-35 (cont'd.)

 

 

 

Year Forage land conversion factors
To beef fed less To veal
than one year
(ha./100 kg.) (ha./100 kg.)
France ...... 1964 .26
1968 .22
1970 .23
Italy ...... : 1964 .52 .27
° 1968 .49 .26
1970 .49 .26
Germany-
Benelux 1964 .23
1968 .19
1970 .16

--Continued

202

Table A-35 (cont'd.)

 

 

 

 

: Year : Crop land conversion factors
To food grain : To feed grain
(ha./100 kg.) : (ha./100 kg.)
France ....: 1964 .032 .040
° 1968 .027 .029
1970 .028 .030
Italy ..... : 1964 .049 .036
° 1968 .043 .032
1970 .042 .030
Germany-
Benelux 1964 .029 .031
1968 .026 .028
1970 .028 .029
Source: EurOpean Economic Community, Office Statistique Des

' o f o
Communautes Européennes, Production Vegetale, various
issues.

 

Ralph D. Jennings, "Consumption of Feed by Livestock,
1909-56," Production Research Report No. 21, United
States Department of Agriculture.

Organization for Economic Co-Operation and Deve10pment,
"Agricultural Statistics: 1955-1968."

Sorenson and Hathaway, op. cit.
United Nations, "Technical Conversion Factors for
Agricultural Commodities."

United States Department of Agriculture, Economic Research
Service, "The Grain-Livestock Economy of the European
Economic Community: A Historical Review, 1951-63,"
Foreign Agricultural Economics Report No. 31.

203

Table A-36.--Percent of farm fed food grain

 

 

: 1964 : 1968 : 1970
France ........... ..... ....... : 20 20 20
Italy ............. . ........... 8 8 8
Germany-Benelux ..............: 8 8 8

 

Source: Robert H. Clarke and Richard J. Goodman, "Grain Marketing in the

EEC: France-Germany" Great Plains Wheat, Inc. (mimeographed),
September 1963.

United States Department of Agriculture, "Grain Developments in
the Common Market."

204

Table A-37.--Production restrictions

 

 

 

; Year Feed ; The joint product
grain milk-beef-feeder calves
Minimum Minimum Maximum
(100 kg.) (head) (head)
France ............. : 1964 16,970,000 8,432,875 11,135,959
1968 18,840,000 8,877,111 12,915,963
1970 20,000,000 9,126,907 12,259,362
Italy .............. : 1964 15,140,000 4,522,043 4,522,0431
- 1968 13,180,000 4,949,490 4,949,4901
1970 12,940,000 4,983,389 4,983,3891
Germany-Benelux ....: 1964 28,730,000 7,841,499 8,504,184
1968 47,830,000 7,488,301 8,717,764
1970 44,710,000 7,774,392 8,989,851
1This number is M? since M2 ) NE.

Source:

Rossmiller, op. cit.

Vernon L. Sorenson,

"EEC:

1955-1968."

Organization for Economic Co-Operation and Development, "Agri-
cultural Statistics:

Summary Statement of Recent Change

and Updated Projections 1970-75," Working document for discus-
sions held in London, May 18-22, 1970.

Sorenson and Hathaway, 22. cit.

 

205

Table A-38.--Consumption levels

 

Food grain ;

Feed grain for;

 

Year Beef
industrial

and seed

purposes
(100 kg.) (100 kg.) (100 kg.)
France ; 1964 59,750,000 16,970,000 10,135,000
- 1968 55,870,000 18,840,000 10,045,000
1970 58,180,000 20,000,000 12,929,000
1970(update) 53,610,000 20,000,000 10,328,000
Italy 2 1964 88,530,000 15,140,000 7,115,000
. 1968 89,620,000 13,180,000 9,776,000
1970 82,040,000 12,940,000 10,598,000
1970(update) 89,950,000 12,940,000 11,105,000
Germany- Q 1964 82,890,000 28,730,000 15,581,000
Benelux ; 1968 78,300,000 47,830,000 16,390,000
- 1970 79,810,000 44,710,000 18,257,000
1970(update) 75,710,000 44,710,000 16,800,000

--Continued

206

Table A-38 (cont'd.)

 

 

 

Year Veal Pork Eggs Poultry
(100 kg.) - (100 kg.) : (100 kg.) (100 kg.)
France ...: 1964 3,819,000 11,773,000 5,570,000 5,720,000
1968 3,785,000 12,080,000 6,090,000 6,240,000
: 1970 4,872,000 14,190,000 6,660,000 7,480,000
: 1970(update) 3,892,000 13,010,000 6,380,000 7,240,000
Italy ....: 1964 1,274,000 4,041,000 5,140,000 3,580,000
- 1968 1,614,000 4,850,000 4,910,000 5,380,000
: 1970 1,675,000 5,047,000 6,320,000 5,210,000
: 1970(update) 1,755,000 5,520,000 5,030,000 7,450,000
Germany-

Benelux : 1964 1,599,000 25,150,000 10,660,000 4,820,000
: 1968 1,550,000 27,500,000 11,640,000 5,610,000
: 1970 1,653,000 29,060,000 13,360,000 7,260,000
: 1970(update) 1,520,000 29,360,000 12,440,000 6,440,000

Source: Centre De Recherches Et De Documentation Sur La

Consommation, "Production and Uses of Selected Farm
Products in France, Projections to 1970 and 1975,"
Paris, France, December 1967.

Institute Fur Wirtschaftsforschung, "Long-Term Develop-

ment of Demand and Supply for Agricultural Products in

Munchen 1967.

Vernon L. Sorenson, "EEC:
Change and Updated Projections 1970-75."

Sorenson and Hathaway, 22.

the Federal Republic of Germany," Studien Zur
Agrarwirtschaft, Heft 1, Abteilung Landsirtschaft,

Donald W. Regier, "Growth In Demand For Feed Grains in
the EEC, Projection to 1970 and 1975 in Relation to
Consumption of Meat and Livestock Products," Economic
Research Service, United States Department of Agricul-
ture, ERS-Foreign 158, July 1967.

Summary Statement of Recent

cit.

207

Table A-39.--Livestock conversion factors

 

 

 

: Year Feed grain
To the joint product To beef fed : To beef fed
milk-beef-feeder more than less than
calves one year one year
(100 kg./head) (kg./kg.) (kg./kg.)
France 1964 2.94 1.85
1968 4.17 2.28
1970 4.79 2.50
Italy ...: 1964 5.01 1.34 .69
1968 5.86 1.49 .85
1970 6.28 1.56 .93
Germany- :
Benelux: 1964 8.64 1.73
° 1968 10.21 1.91
1970 11.01 2.00

--Continued

208

Table A-39 (cont'd.)

 

 

 

: Year : Feed grain
To veal : To pork : To eggs : To poultry
(k8./kg-) = (k8-/k8-) = (kg-lkg.)= (k8./k8-)
France . : 1964 .69 3.47 3.50 2.97
: 1968 1.29 3.35 3.37 2.84
: 1970 1.59 3.29 3.30 2.77
Italy ...: 1964 2.46 5.92 3.02 3.00
: 1968 3.42 5.41 3.15 2.85
: 1970 3.90 5.15 3.23 2.77
Germany- :
Benelux: 1964 1.77 3.22 3.70 2.97
: 1968 1.96 3.13 3.43 2.79
: 1970 2.05 3.36 3.30 2.70

--Continued

209

Table A-39 (cont'd.)

 

 

 

Year Milk-beef-feeder calves
: To feeder calves : To beef: cull dairy cows
(head/head) (100 kg./head)
France 1964 .675 .58
1968 .675 .59
1970 .675 .59
Italy ...° 1964 .675 .61
1968 .675 .61
1970 .675 .60
Germany- :
Benelux: 1964 .675 .55
1968 .675 .56
1970 .675 .57

--Continued

 

210

Table A-39 (cont'd.)

 

: Year : Feeder calves

 

: To beef fed more: To beef fed less: To veal
than one year : than one year .
(head/100 kg.) : (head/100 kg.) :(head/lOO kg.)

0 o
A A A .4

 

France ...: 1964 .35 1.39
1968 .34 1.31
1970 .34 1.27
Italy ...,2 1964 .33 .46 1.13
; 1968 .33 .46 1.13
1970 .33 .46 1.13
Germany-
Benelux : 1964 .37 1.53
: 1968 .36 1.39
: 1970 .36 1.32
Source: Agricultural Economics Research Institute, "Supply and

Demand, Imports and Exports of Selected Agricultural
Products in the Netherlands, Forecast For 1970 and 1975,”
The Hague, 1967.

Centre De Recherches Et De Documentation Sur La
Consommation, "Production and Uses of Selected Farm
Products in France, Projections to 1970 and 1975."

Epp, 22. cit.

Institute Fur Wirtschaftsforschung, "Long-Term Develop-
ment of Demand and Supply for Agricultural Products in the
Federal Republic of Germany."

Mangum, op. cit.
Petit and Viallon, op. cit.
Rossmiller, 22, cit.

United Nations, "Technical Conversion Factors for
Agricultural Commodities."

Paul W. H. Weightman, "Concentrated Feedingstuffs for Live-
stock in the Netherlands, 1960-61 to 1965-66 (Livestock Feed
Balance)," Agricultural Economics Research 239, Department
of Agricultural Economics, Cornell University, January 1968.

Paul W. H. Weightman, Letter, January 1968.

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213

Table A-41.--Minimum percent of feed grain transferred

Importer ; 2 ; ; ;
= France : Italy : Germany-: EFTA: Other

 

 

Exporter 3 Year Benelux : : Europe
France ........... 1964 3 3 4 1
1968 l 5 5 4
1970 l 6 5 3
Italy ...........: 1964 2
° 1968 l 1
1970
Germany- :
Benelux ....... : 1964 4 l 2
° 1968 3
1970 l
EFTA ............. 1964 2
1968 2
1970 3
United States ...: 1964 2 7 22
' 1968 3 17 7
1970 3 17 7

--Continued

 

214

Table A-41 (cont'd.)

N-N--\‘\“\\\‘Importer : : : : :
: France : Italy : Germany- : EFTA : Other

 

 

Exporter E Year 3 Benelux E f EurOpe
Latin :
America ......: 1964 l 19 6
' 1968 1 21 2
1970 l 18 2
Africa & Mid
East ..... ....: 1964 1 1
' ,1968
1970
Australia, New
Zealand, South:
Africa .......: 1964 4 3
: 1968 l l
: 1970 2 l

 

Source: Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968."

Organization for Economic Co-Operation and Development,
"Food Consumption Statistics, 1954-1966."

United Nations, "Commodity Trade Statistics."

215

Table A-42.--Minimum percent of feeder calves transferred

 

NN-~NNN\\\\\\\\‘Importer ;
3 France

 

 

Italy Germany-Benelux
Exporter 3 Year 3
France .........: 1964 >3,<10
1968 >3,<10
1970 >3,<10
Italy ..........: 1964
° 1968
1970
Germany-
Benelux ...... : 1964 1 3
1968 1 3
1970 1 3
EFTA ............ 1964 8 13
: 1968 8 l3
: 1970 8 13
Eastern :
Europe .......: 1964 5 2
1968 5 2
1970 5 2

 

Source: Vernon L. Sorenson, Interview, May 15, 1970.

United Nations, "Commodity Trade Statistics."

.~-Oll.

216

Table A-43.--Minimum percent of beef transferred

~\\\\\\‘\\\\\\\\\Importer ; Q ;
: France : Italy ; Germany-Benelux

 

 

Exporter : Year
France .........: 1964 4
° 1968 4
1970 1 6
Italy .......... : 1964
° 1968
1970
Germany- .
Benelux ...... : 1964 1 2
° 1968 l
1970 1 6
EFTA ........... : 1964 3
° 1968 l 9
1970 7
Eastern :
Europe .......: 1964 1
° 1968 6
1970 6
Latin :
America ...... : 1964 2 3
: 1968 1 ll 2
: 1970 1 7 2

 

Source: Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968."

Organization for Economic Co-Operation and Development,
"Food Consumption Statistics, 1954-1966."

Organization for Economic Co-Operation and Development,
"The Market for Beef and Veal and Its Factors." Paris,
1967.

United Nations, "Commodity Trade Statistics."

II.‘

III

I

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o n
4 1
O o

217

Table A-44.--Minimum percent of veal transferred

 

\\ Importer 3 3 3
: France : Italy : Germany-

EXporter : Year Benelux

 

France .............. : 1964 90
‘ 1968 85
1970 80

Italy ............... = 1964 90
: 1968 85
1970 80

Germany-Benelux ..... : 1964 90
: 1968 85
1970 80

 

Source: Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968."

Organization for Economic Co-Operation and Development,
"Food Consumption Statistics, 1954-1966."

Organization for Economic Co-Operation and Development,
”The Market for Beef and Veal and Its Factors."

Sorenson, Interview.

United Nations, "Commodity Trade Statistics."

218

Table A-45.--Minimum percent of pork transferred

 

 

Importer :
: France

 

Italy . Germany-

Exporter E Year . . Benelux
France ...... .......; 1964 90

1968 85

1970 80
Italy .......... ....; 1964 9o

1968 85

1970 80
Germany-Benelux ....; 1964 2 l 90

1968 4 6 85

1970 6 7 80

 

Source: European Economic Community, "Basic Statistics of the
Community."

Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968."

Organization for Economic Co-Operation and Development,
"Food Consumption Statistics, 1954-1966."

Sorenson, Interview.

United Nations, "Commodity Trade Statistics."

219

Table A-46.--Minimum percent of eggs transferred

 

Importer ; 2 3
; France ; Italy : Germany-

 

Exporter = Year : : ; Benelux
France .............. 3 1964 90
- 1968 85
1970 80
Italy ........... . . . .; 1964 90
- 1968 85
1970 80
Germany-Benelux -3---; 1964 2 3 90
1968 l 1 85
1970 l l 80

Source: European Economic Community, "Basic Statistics of the
Community."

Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968."

Organization for Economic Co-Operation and Development,
"Food Consumption Statistics, 1954-1966."

Sorenson, Interview.

United Nations,'Commodity Trade Statistics."

220

Table A-47.--Minimum percent of poultry transferred

 

N------N‘\‘\“~_Imparter 3 3 3
: France : Italy : Germany-

 

EXporter : Year : = : Benelux
France .............. t 1964 90 2

: 1968 85 2

: 1970 80 2
Italy ...............: 1964 90

: 1968 85

: 1970 80
Germany-Benelux ..... : 1964 90

: 1968 85

: 1970 80

 

 

Source: European Economic Community, "Basic Statistics of the
Community."

Organization for Economic Co-Operation and Development,
"Agricultural Statistics: 1955-1968."

Organization for Economic Co-Operation and Development,
"Food Consumption Statistics, 1954-1966."

Sorenson, Interview.

United Nations, "Commodity Trade Statistics."