Title: Market Analysis Tools for Trade Flow Analysis and Modeling Trade Negotiation Outcomes
1Market Analysis Tools for Trade Flow Analysis and
Modeling Trade Negotiation Outcomes
- Presented
- By
- Dr. Lovemore Rugube
- Presented at IDEP s Training Facility, Dakar
Senegal, 26 to 30 April, 2010
2The challenges facing agricultural export
development in Africa
- External constraints are mainly market access
while the internal constraints can be categorized
as supply-side constraints. - Market access has in particular contributed to
concentration of African exports into specific
markets (EU and USA) and concentration of exports
into a few products. - High tariffs, tariff peaks and tariff
escalations discouraged value addition. - Supply side constraints are perhaps the most
important constraints to export diversification.
3The challenges facing agricultural export
development in Africa
- These constraints have led to inability of many
African countries to take full advantage of
preferential market access provisions, EBA,
EU-ACP, AGOA. - Preferential market access provisions need to be
accompanied with supply-side enhancing capacity
to enable trade expansion and diversification of
Africa countries exports. - The supply-side constraints
- Inadequate infrastructure, both physical and
soft. - Freight charges far more restrictive barriers to
African exports than tariffs. For example freight
cost as a percentage of total import value in
2001 was 13 and 8.8 for Africa and developing
countries respectively.
4The challenges facing agricultural export
development in Africa
- Lack of coherent and supplementary policies. Such
as the failure of governments to develop the
energy sector. - Poor trade facilitation particularly inefficient
customs services increase costs on exporters
reducing competitiveness - Inability to conform to standards and other
requirements in the international markets - Weak and inadequate institutions
- Lack of appropriate institutional frameworks and
systems for managing trade policy
5The challenges facing agricultural export
development in Africa
- Weak private-public dialogue
-
- Lack of information
- Lack of credit institutions
- Production structures. smallholder face
challenges related to economies of scale
investments and lack access to credit facilities - Drought or other adverse climatic conditions
6Patterns of Agricultural Protection/Distortions
- More than two-thirds of the Africas poor depend
directly or indirectly on agriculture for their
livelihood - Government policies, in the past at least, have
depressed farm incomes in Developing Countries
-D Cs - Anti-agric policies in D Cs themselves
- Pro-agric policies in H I Cs, which lower intl
food prices and thereby some farm-gate prices in
D Cs - The policy instruments chosen are not the most
efficient for achieving governments stated
objectives, in either - D Cs or H I Cs
-
7What are the patterns of government distortions
to agricultural trade?
- H I Cs protect agric relative to manufacturing, D
Cs tend to do the opposite - Degree of agric protection is correlated with
degree of agric comparative disadvantage - Countries tend to move towards protecting agric
(and textiles and clothing) as they grow and
industrialize
8Types of instruments that distort trade
- Market access These include import tariffs and
quotas that protect local producers from
competing imports. Protection induces local
production to be higher than would be the case at
market prices, at the expense of international
producers and exporters. - Export subsidies These include government
payments that cover some of the costs of
exporters such as marketing expenses, special
domestic transport charges, and payments to
domestic exporters to make sourcing products from
domestic producers competitive. - Domestic support These include direct support to
farmers linked to the type, price, and volume of
production. Depending on the level of support,
local production is usually higher and competing
imports lower than in the absence of subsidies.
9 Traditional exports for selected African
countries
10High-value commodity markets
11Export Strategies for SSA Countries
- Rational
- High dependency on very few commodities
- (traditional tropical export commodities)
- Risk due to price volatility for these
commodities - Long term downward trend in the prices of these
commodities - High-value commodities higher income elasticity
of demand - High-value commodities lower price variability
12Agricultural Exports
- Coffee/tea/cocoa/spices 30 percent of Africas
ag exports - strongly dominated by five major players--Cote
dIvoire, Ghana, Kenya, Cameroon, and Madagascar - SSA relatively minor global player (10 percent of
the global market) - Share fluctuates (and declined) due to global
price volatility - Share of fruits and vegetables increased from 4
percent in 1990 to more than 16 percent in 2004. - Dominated by South Africa (60 percent), Kenya (12
percent) and Cote dIvoire (9 percent) - Fish and shellfish and other seafood increased
from 2 percent to 11 percent - Main players South Africa (20 percent), Namibia
(17 percent), Senegal (15 percent), and
Seychelles (11 percent)
13- Intra SSA import
- Not much (18 percent)
- Intra-African food and agricultural imports are
less important - More for landlocked economies
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15Intra-regional trade
- Relatively little (17 percent) intra African food
and ag Exports - Landlocked African countries tend to undertake
more intra-regional trade
16Intra-regional trade
17How have African agri-food export products
performed?
- Revealed Comparative Advantage (RCA) Index
- RCAij market share of country i s export of
good j/market share of country i s total export -
- Country i has revealed comparative advantage in
good j if RCAij gt 1 - This is more an indicator of export performance
than a predictive number
18Top 15 performers in terms of RCA
19Bottom 10 performers in terms of RCA
20RCA
- Competitive performances of Africas major export
commodities like tea, coffee, sugar, and tobacco
has decreased significantly between 1990 and 2004 - However, RCA improvement for cocoa, cotton and
wood chips - Plus, non-traditional high-value exports such as
fresh fruits and vegetables and fish and shell
fish products performed well ? an indication of
an increased degree of diversification of
Africas food and agricultural exports?
21Protection is Still High and Mostly at the
Border(rate of protection, percent )
22OECD Protection is still High(percent)
23Border Protection is non-Transparent(Tariff
lines that are not Ad-Valorem,percent of total
tariff lines)
24Tariffs Escalate in Final Products
25Examples of Tariff Escalation
26Downward trend in applied tariffs (simple
average, )
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28Effects of full global libn on SSA agric
change in Real value of agric and food exports Real net farm income
South Africa 56 10
Other Southern Africa 50 9
Rest of Sub-Saharan Africa 45 5
All S S Africa 50 7
29Key elements of the Doha Agenda
- 3 agricultural pillars (including cotton)
- Non-agricultural market access
- Services
- Lesser tariff and subsidy cuts for developing
countries (DCs) and zero cuts for least-developed
countries (LDCs)
30Whats on the table? Market access
- Elimination or sharp reduction of use of the
Special Safeguard (SSG-- currently permits many
developed countries to impose duties above their
Uruguay Round bindings) - New Special Safeguard Mechanism (SSM) with both
price and quantity triggers for developing
countries. - Import duties of up to 25 percentage points could
be imposed when imports exceeded 110 percent of a
three year moving average - A price-based measure could be invoked if the
price of imports falls below 85 percent of a
three-year moving average of import prices, with
a duty up to 85 percent of the gap between
current import prices and the three year moving
average.
31Whats on the table? Export Subsidies
- Draft agreement involves abolition of all export
subsidies. - Very little impact in the short runbecause
current export subsidy levels are negligible - Rules out a return to the disruptive situation of
the 1980s, when world prices were severely
depressed by high levels of export subsidies that
displaced efficient producers. - Will reduce the uncertainty faced by producers in
developing countries, and should help promote
needed investment.
32Whats on the table? Domestic Support
- Traditional Aggregate Measure of Support (AMS) to
be reduced using a tiered formula - 70 percent cuts in the EU 60 percent in members
with intermediate amounts of support (including
the USA) and 45 percent in other members. - Additional constraint applied on Overall Trade
Distorting Support (OTDS)-- the total of AMS, de
Minimis, and Blue Box support. - cut by between 75 and 85 percent in the EU 66 to
73 percent in the USA and 50 to 60 percent in
smaller industrial economies. - Blue box support limited to 2.5 percent (5
percent) of the value of production for developed
(developing) members. - Product-specific limits introduced on AMS and on
the blue box, with the cap on support to cotton
being lowered very sharply and under an
accelerated timetable.
33Implications for Sub-Saharan Africa
- Doha would give SSA only a small fraction of
their potential gains from a move to global free
trade - If DCs (including LDCs) were to fully
participate, their gain more than doubles - To gain more, SSA DCs have to reduce bound
tariffs further, so that applied tariffs fall
more - Isnt it better to do that under Doha, so as to
get reciprocity and/or more aid, rather than
unilaterally especially as that would lead to
less trade diversion when EPAs are signed with
the EU?
34Why Exclude Certain Products from Tariff
Reduction Negotiations
- Significance of local production
- Food Security
- Fiscal revenue
- Protection of infant industry
- Balance of payments
- Health reasons
35A List of offers by Product for Market Access
Negotiations
36Agricultural trade in RTAs (N-N)
- Agricultural trade within developed countries,
- - exports account for some 80, imports 70 of
total developed countries agricultural trade -
- 70 EU agricultural exports, 60 of imports are
within EU. - Agricultural trade among the EU countries
represents 30 of total world agricultural
trade. - Agricultural trade in S-S RTAs?
- - SSA 9
371. Intra regional agricultural and food exports
and imports- low2. Intra- regional market access
issues
38Agriculture is relatively protected
- COMESA countries have protected their
agricultural sectors as compared to their
industrial sectors. - Kenya and Uganda, (EAC), have tariffs higher than
CET level of 25 for some agricultural
commodities, which are the regions sensitive
products. - Within the framework of the ongoing EPA
negotiations, countries have developed a
sensitive list of their agricultural products
39Why low regional agricultural trade
- Similar products
- Limited transformation and value addition
- Most of traded agricultural commodities are in
their raw form- while imports are in their
processed form. - Underdeveloped value chain and linkages
- -There are limited industries inter-linkages in
the region as well as limited or poor
dissemination of market information
40Why low regional agricultural trade (contd)
- Inadequate trade facilitation
- -Customs documentation requirements and
procedures continue to be a hindrance to smooth
regional trade despite the FTA status and various
initiatives to facilitate regional trade. - Limited demand in some commodities
- -The region in some cases is producing some
commodities whose demand in the region is (such
as cut flowers). - TBTS Need for harmonized food safety standards.
- Unpredictable Trade Environment
- -Adhoc measures always taken to restrict trade,
measures are not communicated to traders in
advance
41Potential for intra-regional COMESA trade
- For COMESA and SADC,
- -product complementarities and levels of
intra-regional trade are low - -Complementarily index measures similarities
between the export basket - -Low complementarity between products of
different countries means that products from the
two countries are relatively similar and
therefore there is a likely to be polarisation in
the regional market - -Complementarity is high between products of
relatively higher developed member countries and
those that of less developed (Egypt)
42Overlapping African Regional Agreements
- Too much Regional Trade Agreements
- Logistical Constraints
- Loss of Identity