1/8/20: Ireland: Agricultural Subsidies and Production

CSO published final data for 2019 'value added' in agriculture. As always, a fun read from the perspective of which constituency in a 'market economy' loves Big State. You've guessed, it Agri business. And no, I can't claim it is farmers, for they get the minority stake in the largesses that are European Common Agricultural Policy subsidies.

Here is a chart:

In 2019, Irish agricultural sector gross output at producer prices was EUR 7,960.9 million. Based on estimated GNI*, this means that the entire sector gross output (not net) amounted to just around 3.73% of the domestic economy in Ireland, just around the average for the decade of the 2000-2009 (3.95%) and below the average for 2010-2018 (4.60%).  In annual terms, gross output was down 3.1 percent y/y and was the lowest since the end of 2016. Subsidies net of taxes paid amounted to EUR 1,837.1 million in 2019, the highest level since 2008 and up 2.63 percent y/y. 

Overall, subsidies in 2019 amounted to 64 percent of the entire Gross Value Added in the sector, and 96 percent of the Net Value Added. CSO reports data for 'entrepreneurial income' in agriculture, which, really, is income accruing to owners of the production units. These include farmers, but also large corporates and coops. Subsidies amounted to 69 percent of the total Entrepreneurial Income in 2019.

Subsidies fell in importance when it comes to the Net Value Added in the sector year on year from 103% in 2018 to 96% in 2019, but remained the same in terms of their importance to the 'Entrepreneurial Income' in the sector.

By decade: subsidies amounted to 39% of the 'Entrepreneurial Income' in the sector in the 1990s on average, rising to 99% in the decade of 2000s, primarily due to a massive jump over 2005-2009, before falling back to 78% for the decade through 2019. Excluding net subsidies, 'Entrepreneurial Income' in agriculture averaged EUR 1,127.6 million per annum in the 1990s, and excluding the Great Recession period, EUR 259.8 million in the 2000s. Again, excluding the period of the Great Recession, the same annual average was EUR 666.12 million in 2010-2019, with 2019 annual figure of EUR 829.6 million. 

To say there is little growth in economic activity in Irish agricultural sector, in terms of sector value added is to make an understatement. Comparing 1995-1999 average to 2017-2019 average, Irish GNI* is now 3.1 times higher than it was in the 1990s. Meanwhile, agricultural output at basic prices rose by just 46 percent, Agricultural sector Gross Value Added is up only 1 percent, Net Value Added is down 15 percent, Entrepreneurial Income is up 45.7 percent, while subsidies (net of taxes) are up 73 percent.

17/6/19: Lose-Lose-and-Lose-Some-More Trade War: Trumpism in Action

Recently, I have posted on the latest Fed research covering the impact of the President Trump's trade war with China, showing that the tariffs collected by the U.S. Federal Government are not being paid for by the Chinese producers, but are fully covered out of the American consumers' and firms' pockets.

Here is an interesting note via CFR on the balance of tariffs and farms subsidies dolled out as a compensation for the Trump trade wars: https://www.cfr.org/blog/130-percent-trumps-china-tariff-revenue-now-going-angry-farmers.

via @CFR_org

The point is that tariff revenues are a tax on American economy (households and firms), and these tax revenues collected by the U.S. Federal Government are not enough to cover compensation to the U.S. farmers for their losses due to China's retaliatory tariffs. Agrifood commodities are a buyers market: soybeans are sourced globally, traded globally and their prices are set globally. When China imposes tariffs on imports of soybeans from the U.S., the Chinese consumers do not pay the tax on their purchases of these, instead they substitute by purchasing readily available soybeans from other parts of the world. On this, see: https://trueeconomics.blogspot.com/2019/05/14519-agent-trumpovich-fails-to-deliver.html. Brazilian farmers win, American farmer lose. Uncle Sam subsidises U.S. farmers to compensate, using tax revenues it collected from the American consumers of Chinese goods.

But farming lobby is strong in the U.S. Thus, total quantity of compensation awarded to the farmers in now in excess of total tax revenues collected from the American consumers. It's a lose-lose-and-lose-some-more proposition of economics of trade.

11/12/2014: QNA Q3 2014: Real GDP & GNP Growth Dynamics

Here is the second post on QNA detailed analysis, covering sectoral distribution of activity in Q3 2014.

• My post on the top level results for Q3 2014 is here: http://trueeconomics.blogspot.ie/2014/12/11122014-q3-2014-irish-growth-broadly.html
• And the second post covering sectoral performance by broader sectors of economy is here: http://trueeconomics.blogspot.ie/2014/12/11122014-qna-q3-2014-sectoral-activity.html

Now, onto a closer look at the GDP and GNP aggregates.

First, non-seasonally adjusted data, allowing for year-on-year comparatives.

• In Q3 2014, taxes net of subsidies amounted to EUR5.103 billion which is up 4.33% (+EUR212 million) on Q3 2013
• GDP in real terms reached EUR45.972 billion in Q3 2014, which is 3.54% higher than in Q3 2013. This is the slowest rate of GDP growth in y/y terms since Q4 2013 when GDP contracted 1.15%. Overall, GDP growth in Q3 2014 in y/y terms was less than half the rate of growth in Q2 2014.
• In Q3 2014, GNP stood at EUR38.52 billion which represents a growth of 2.49% y/y - the slowest rate of growth since Q2 2013.
• Excluding taxes and subsidies, private sectors GDP (GDP netting out taxes and subsidies) few strongly in Q3 2014 - which is the good news - rising 4.18% y/y. This is slower than Q2 2014 growth of 6.66%, but is better than Q1 growth of 3.55%.

GNP/GDP gap at the end of Q3 2014 stood at 16.21% which is the lowest in 3 quarters. Private sectors GNP/GDP gap also fell - reaching 18.23%, down from 19.18% in Q2.

Now, consider seasonally-adjusted data, allowing for quarter-on-quarter comparatives:

• In Q3 2014, seasonally-adjusted GDP grew at the rate of 0.0793% which marks the slowest rate of q/q growth since Q4 2013 when real GDP contracted q/q. The rate of growth in Q3 was 14 times lower than in Q2 and almost 36 times lower than in Q1 2014. In effect, the economy - measured by real GDP - stood still in Q3 2014.
• Meanwhile, in Q3 2014, real GNP expanded by 0.472% which marks weak, sub-period average growth and the second consecutive quarter of very poor GNP performance: in Q2 2014 GNP expanded by just 0.23% on q/q basis. 
• Last healthy growth in q/q terms for real GNP was back in Q1 2014 when it expanded by 1.86%.

Quarter-on-quarter growth terms signal official recessions (defined as two consecutive quarters of negative growth). Charts below map relative GDP and GNP performance in q/q terms by each quarter, identifying strong expansions, weak expansions and contractions. As charts clearly show, in GDP terms, we are currently in the first quarter of sub-average growth after Q1-Q2 above average growth periods. In GNP terms, we are into third consecutive quarter of sub-average growth.

Once again, broadly-speaking, we are witnessing a slowdown in growth momentum (bad news), but are still managing to stay in non-negative growth territory (good news).

Stay tuned for more Q3 QNA analysis later.

19/4/2013: Decomposition of Irish GDP & Gross Operating Surplus: 2012

Recent CSO data release shows decomposition of 2012 Irish GDP and Gross Operating Surplus (defined as GDP less taxes and compensation of employees, plus subsidies). Here are annual dynamics:

 Overall,

• Households' contribution in 2012 to the GDP rose 5.66% y/y and is down 21.02% on peak
• Government's contribution in 2012 to the GDP declined -1.76% y/y and is down 12.04% on peak
• Financial Corporations' contribution in 2012 to the GDP rose 2.98% y/y and is down 10.75% on peak
• Non-Financial Corporations' contribution in 2012 to the GDP rose 3.03% y/y and is down 7.27% on peak
• Not-sectorised areas of activity contribution in 2012 to the GDP rose 4.34% y/y and is down 35.70% on peak

 Per chart above,

• Households' contribution in 2012 to the Gross Operating Surplus rose 11.12% y/y primarily due to subsidies increases, and is down 19.86% on peak. Subsidies to households rose 18.30% y/y in 2012.
• Government's contribution in 2012 to the Gross Operating Surplus declined -7.29% y/y and is down 14.89% on peak
• Financial Corporations' contribution in 2012 to the Gross Operating Surplus rose 6.01% y/y and is down 14.68% on peak
• Non-Financial Corporations' contribution in 2012 to the Gross Operating Surplus rose 2.50% y/y and is down -2.1% on peak
• Not-sectorised areas of activity contribution in 2012 to the Gross Operating Surplus rose 2.94% y/y 
• Overall Gross Operating Surplus rose 4.58% y/y and is down 9.75% on peak

Now, on to the relative importance of each broader sector in main areas of determination of the Gross Operating Surplus:

Note that in the above, Government share of any activity defining Gross Operating Surplus ranges from  zero for taxes and subsidies, to 25-27% for compensation of employees, to11.4-13.0% for GDP and overall Government accounts for only 3.18% (2002-2007 average) and 3.31% (2012 average) of the Gross Operating Surplus in the Irish economy. In other words... does it really matter that much?

Consider the disparity:

• In 2002-2007 on average, Households accounted for 17.4% of all GDP generation, a share that declined to 15.87% in 2012. Meanwhile, for the Government, the same figures were 11.41% and 13.04% - significantly less during the boom years and marginally less in 2012.
• In 2000-2007 on average, Households accounted for 26.49% of all Gross Operating Surplus in the economy, with that share sliding to 24.84% in 2012. For the Government, the same figures were 3.18% in 2002-2007 and 3.31% in 2012.
• Notice the gaps?

Consider another interesting thing:

• In 2002-2007 on average, Non-Financial Corporations (NFCs) accounted for 50.4% of all GDP generation, a share that rose to 52.4% in 2012. Meanwhile, for the Government, the same figures were 11.41% and 13.04%. So as GDP share goes, NFCs were much, much more important than the Government, by a factor of 4.
• In 2002-2007 on average, NFCs accounted for 55.6% of all Employees compensation generation, a share that rose to 53.3% in 2012. Meanwhile, for the Government, the same figures were 24.8% and 27.1%. So as Employees compensation share goes, NFCs still more important than the Government, but now only by a factor of less than 2.
• In 2000-2007 on average, NFCs accounted for 56.9% of all Gross Operating Surplus in the economy, with that share rising to 60.6% in 2012. For the Government, the same figures were 3.2% in 2002-2007 and 3.3% in 2012.
• Now, again, consider the above gaps...