Economic modelling of the beef, sheep, dairy and pork sectors

In collaboration with Harper Adams University, we undertook a quantitative impact assessment of how the UK–Switzerland trade deal could impact different agricultural sectors, using an International Agri-Food Trade Network (IAFTN) model.

Trade models typically used to assess agricultural and food policy reforms (such as the partial and general equilibrium modelling frameworks) are characterised by a number of key assumptions that often do not reflect in reality the important dimensions of agricultural and food chains across and between most countries.

The IAFTN model

The IAFTN modelling approach is an extension of a network model. It considers a number of key features present in the agri-food sector – for example, intermediaries with market power in the supply chain, intra-industry trade, policy biases, and farmers’ asymmetry in productivity. 

This makes the IAFTN model unique and different from other existing approaches that are based on the standard assumption of perfect competition. This allows the IAFTN far more flexibility in terms of the ability to predict trade outcomes and assess these predictions under different scenarios and consider the real and different features of a sector.

In addition, the IAFTN can not only make predictions that are more closely aligned with the current market structure of the agri-food sector, but it can also assess the stability of new bilateral and multi-lateral agreements and possible posterior trade evolution paths or ‘what if’ scenarios.

Countries (or groups of countries) within the trade network, are referred to as ‘nodes’. For this analysis, the trade model can accommodate five nodes, which means five countries or groups of countries can be looked at.

For the Switzerland analysis, the five nodes were:

• UK
• European Union
• USA
• New Zealand and Australia
• Switzerland

A key point to consider when interpreting the modelling results is that they are not a forecast of how things will change. Rather, they show the effect of the trade deal, with all other factors remaining the same.

This means that the modelling results do not include assumptions around factors which may change in the future.

For example, the data used in the model is based on a 2020–2022 three-year average and are assumed to remain at this level. In reality, other factors will change.

Changes in global Gross Domestic Product growth, global and domestic inflation and domestic labour availability could impact the data used, but for simplicity’s sake, the model assumes that the environment of recent years will not significantly worsen or improve.

The economic modelling results, by sector

Beef

Lamb

Pork

Butter

Cheese