|**Table 21. Welfare eff**|**ects ofpolicy scenarios i**|**n million dollars at 19**|**95prices**<br>|**(average 1999-2001)**||
|---|---|---|---|---|---|
|Country|FMTL&US|FMTL|GMTL&US|GMTL|CIFTL|
|Argentina|16.07|15.94|9.97|9.84|12.66|
|EU-15|-51.83|-51.27|-34.40|-33.82|-58.87|
|China|666.25|668.76|650.65|653.33|716.25|
|India|213.27|214.11|196.57|197.79|228.59|
|Rest of the world|-126.69|-127.06|-4.21|-4.86|-71.06|
|Canada|-5.94|-5.87|-4.88|-4.81|-4.59|
|Mexico|-7.43|-7.34|-6.11|-6.01|-5.73|
|Senegal|41.03|40.96|21.93|21.86|21.39|
|Nigeria|15.93|15.77|7.22|7.07|13.45|
|South Africa|2.30|2.28|2.19|2.17|0.53|
|Malawi|7.45|7.45|7.60|7.61|-1.06|
|Gambia|0.43|0.42|0.24|0.24|0.36|
|USA|20.18|16.70|21.71|18.40|12.39|
|Africa-5 total<sup>1</sup>|67.14|66.89|39.18|38.95|34.67|
|**Total**|791.01|790.87|868.48|868.79|864.32|

1. Denotes the aggregate of Senegal, Nigeria, South Africa, Malawi, and the Gambia.

We investigated two key assumptions in the model: the prevailing groundnut market price underlying the US market, and the level of protection of the groundnut markets in China. We calibrated the model on 2002/3 US prices ($389/mt) to see if the new US policy would have had a stronger impact on the world market under lower prevailing prices. US farm prices in 2002/3 were 25 percent lower than in 2001/2. We remove the loan rate, counter-cyclical payments, and fixed payments (recall the latter two components are assumed fully coupled in our model to provide an upper bound on the effect of the US program), while holding all other distortions in place in all other countries. The price floor provided by the loan rate is effective under the lower 2002/3 farm price. US Output decreases by 7 percent under the new prices and US exports decreases by 52%, inducing a 0.9 percent increase in the world price of groundnuts and further negligible price impacts in the other markets. The aggregate net welfare effect is negligible and negative. Higher world prices exacerbate distortions in other markets or increase import costs in net-importing countries. The US gains about 22 million dollars (program cost savings net of the producer loss). We also tested the same change but with all other distortions removed in all countries (FMTL&US scenario). In this scenario, the world price levels of groundnuts was 0.5 percent higher than under free trade _cum_ U.S. farm bill. We concluded that removing the farm bill incentives in a free trade world would decrease US production by about 4 percent and decrease its exports by 31 percent. The aggregate welfare gains vary by less than $1 million. Hence, the conclusions that the new US groundnut policy is much more benign than its predecessor remains unaltered under much lower prices.

The sensitivity analysis on China’s protection structure is more pivotal to the conclusions reached, especially the protection of the groundnut sector. We consider the following assumptions changes: the protection of groundnut producers is assumed to be 15 (tariff is redundant in the original model). The Chinese farm sector is no longer assumed to be a net exporter without assistance. Under this new assumption and following full trade liberalization (FMTL&US), China becomes a net importer of groundnuts because demands for edible and crush groundnuts increase. China’s welfare gains are 1,029 million dollars. Aggregate welfare gains are 1160 million dollars. World prices increase by 18, 19, 29 percent for groundnuts, cake 30