Global Impacts of Zero-For-Zero Trade Policy in the World Oilseed Market: A Quantitative Assessment

Many WTO member countries have expressed interest in a “zero-for-zero” (ZFZ) policy regime for oilseeds and oilseed products which entails removing all import tariffs and export taxes. A ZFZ policy would have substantial implications not only for oilseed trade flows but also for the composition of trade given the high disparity in tariff levels between OECD and non-OECD countries and high tariff escalation between oilseeds and products for most countries. To examine the implications of the ZFZ regime on oilseed trade and welfare, the GTAP model was modified to allow for multi-product structure fitted to the joint production of oilseed processing. Using GTAP V5, a special purpose disaggregation of the “oilseed products” into “edible oils” and “meals” was also performed. A simulation of ZFZ regime shows a significantly greater expansion of global trade in edible oils compared to oilseeds while meals show little trade increase. While there is relatively little growth in imports by Japan and the EU, much growth takes place in Asian importing countries (Korea, India, China) and the Middle East & North Africa (MENA) region. The ZFZ also results in substantial shifts in processing locations, but the tradeoff between lower oilseed processing and higher imports of products shows minimal impact on overall consumption of oilseed products in countries like the EU and Japan. Much of import growth in Asia and MENA is driven by the expansion in vegetable oil consumption. This provides a boost for exporters of high oil content seeds such as rapeseed (Canada) and palm oils (Malaysia and Indonesia). The United States also benefits from the ZFZ with oilseed exports increase more than products in value terms. China’s participation also offers significant additional boost to US exports.