Transcript Slide 1

Market 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
The 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.
The 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.
The 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
The 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
Patterns of Agricultural Protection/Distortions
More than two-thirds of the Africa’s 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 int’l 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
What 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
Types 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.
Traditional exports for selected African countries
Country
Commodity
Benin
Cameroon
Cotton
Cocoa
Coffee
Cocoa
Cocoa
Tobacco
Cotton
Cocoa
Coffee
Cotton
Cashews
Coffee
Cote d'Ivoire
Ghana
Malawi
Mali
Nigeria
Tanzania
Uganda
share of
agricultural
exports
94%
25%
26%
56%
92%
75%
57%
51%
30%
29%
21%
77%
High-value commodity markets
200
Agr. Export Index
150
Meat & dairy
products
100
Sugar
50
Coffee, cocoa,
tea
Cotton
0
Fruit &
vegetables
-50
1990 1992 1994 1996 1998 2000 2002 2004
Export 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
Agricultural Exports
Coffee/tea/cocoa/spices: 30 percent of Africa’s ag exports
– strongly dominated by five major players--Cote d’Ivoire, 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 d’Ivoire (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)
Intra SSA import
Not much (18 percent)
Intra-African food and agricultural imports are less
important
More for landlocked economies
SSA Composition of Agricultural Imports by Partner 2004
% EU25 members % Sub Saharan Africa
Country
World
Zambia
153,858
5.94
85.21
Zimbabwe
453,269
9.50
70.26
Malawi
66,320
12.52
61.92
Burundi
17,529
34.77
51.35
Burkina Faso
158,337
24.20
43.13
Togo
105,557
32.50
35.64
Madagascar
168,328
19.41
22.29
Mauritius
551,026
22.72
20.82
Kenya
571,829
18.02
19.60
Uganda
310,155
8.56
16.21
Tanzania
421,268
10.06
14.78
Cameroon
480,662
50.68
13.06
Senegal
860,835
36.79
11.47
Ghana
900,090
23.67
10.90
Seychelles
143,971
69.15
10.51
South Africa
2,975,069
18.81
10.13
Gabon
240,101
59.76
9.58
Cape Verde
137,656
70.32
4.00
Sub Saharan Africa 8,715,860
24.57
18.21
Intra-regional trade
Shares of Intra-Regional Trade for selected African exporters, 2003
Share of Agricultural Exports going to Share of Merchandise exports going to
Countries
SSA
SSA
o Relatively little (17
percent) intra African Top 10 Intra-regional Trade Partners
food and ag Exports
Rwanda
92.23
84.27
88.53
86.38
o Landlocked African Burkina Faso
Niger
81.82
34.57
countries tend to
Nigeria
75.92
8.35
undertake more intraZambia
60.21
44.86
regional trade
Namibia
58.51
61.43
Togo
39.4
52.33
Tanzania
28.86
22.76
Uganda
26.34
30.08
Malawi
24.85
28.66
Average: Sub-Saharan Africa
17.35
15.96
Intra-regional trade
Shares of Intra-Regional Trade for selected African exporters, 2003
Share of Agricultural Exports going to
Share of Merchandise exports going to
Countries
SSA
SSA
Bottom 10 Intra-regional Trade Partners
Cote d'Ivoire
7.98
23.33
Cameroon
7.72
13.04
Gabon
6.42
23.15
Mauritius
6.29
9.86
Ghana
4.01
9.77
Madagascar
3.37
10.57
Gambia, The
2.64
10.28
Sao Tome and Principe
1.15
2.87
Seychelles
0.68
0.76
Sudan
0.31
0.51
Average: Sub-Saharan Africa
17.35
15.96
Source: UNCTAD TRAINS database accessed through WITS.
How 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 > 1
This is more an indicator of export performance than a
predictive number
Top 15 performers in terms of RCA
Product Name
RCA
1990
RCA 2004
Change
between
1990-94
and
2000-04
246
Wood chips/waste
0.02
17.25
684.91
269,101
231
Natural rubber/latex/etc
1.86
2.17
452.62
60,677
223
Oil seeds-not soft oil
0.99
2.66
373.83
17,509
248
Wood simply worked
1.09
2.36
321.38
538,049
072
Cocoa
20.47
32.38
307.19
1,383,774
122
Tobacco, manufactured
0.29
1.75
283.88
195,460
037
Fish/shellfish,prep/pres
0.54
5.30
265.65
357,788
034
Fish,live/frsh/chld/froz
0.55
3.88
219.04
726,075
263
Cotton
7.74
17.77
210.28
1,047,933
112
Alcoholic beverages
0.18
1.78
145.56
642,806
036
Crustaceans molluscs etc
1.72
4.04
78.51
390,880
054
Vegetables,frsh/chld/frz
0.99
1.82
66.42
349,029
057
Fruit/nuts, fresh/dried
0.82
5.84
60.94
1,442,622
247
Wood in rough/squared
6.11
5.31
53.44
275,772
292
Crude veg materials nes
1.60
3.16
47.95
480,416
SSA Export in
2004
Source: UNCTAD TRAINS database accessed through WITS. Authors’ calculations
Bottom 10 performers in terms of RCA
Product Name
RCA
1990
RCA 2004
Change
between
1990-94
and
2000-04
046
Flour/meal wheat/meslin
0.80
2.60
6.19
45,975
058
Fruit presvd/fruit preps
2.78
4.77
-15.90
267,318
091
Margarine/shortening
1.16
2.45
-31.91
40,957
075
Spices
22.74
11.07
-32.93
194,962
074
Tea and mate
34.85
24.82
-40.60
611,887
061
Sugar/mollasses/honey
17.21
8.56
-41.21
774,155
071
Coffee/coffee substitute
25.31
5.73
-41.23
411,376
044
Maize except sweet corn.
3.99
2.50
-52.83
179,770
121
Tobacco, raw and wastes
40.28
18.58
-53.70
837,050
265
Veg text fibre ex cot/ju
15.84
3.73
-72.78
24,340
SSA Export in
2004
Source: UNCTAD TRAINS database accessed through WITS. Authors’ calculations
RCA
o Competitive performances of Africa’s major export
commodities like tea, coffee, sugar, and tobacco has
decreased significantly between 1990 and 2004
o However, RCA improvement for cocoa, cotton and wood
chips
o 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 Africa’s food and agricultural exports?
Protection is Still High and Mostly at the Border
(rate of protection, percent )
160
Border Protection
Domestic Support
120
80
40
0
US
OECD
OECD developing
EU
Japan
QUAD
Manufacturing
OECD Protection is still High
(percent)
80
60
40
20
0
1965 -74
1979 -81
1986 -88
1995-97
2000 -02
Border Protection is non-Transparent
(Tariff lines that are not Ad-Valorem,
percent of total tariff lines)
40
Agriculture
Manufacture
30
20
10
0
QUAD
Large Middle Other Middle Lower Income
Income
Income
Tariffs Escalate in Final Products
Average MFN Applied Out-of-quota Duties (%)
50
45
Raw
Intermediate
Final
40
tariffs (%)
35
30
25
20
15
10
5
0
QUAD
Canada
Japan
US
EU
Large Middle
Income
Other Middle
Income
Lower Income
Examples of Tariff Escalation
Tropical Products
Coffee
raw
final
Cocoa
raw
intermediate
final
Expanding Commodities
Fruits
raw
intermediate
final
Vegetables
raw
intermediate
final
Seafood
raw
EU
US
Japan
7.3
12.1
0.1
10.1
6.0
18.8
0.5
9.7
30.6
0.0
0.2
15.3
0.0
7.0
21.7
9.2
13.3
22.5
4.6
5.5
1 0.2
8.7
13.2
16.7
9.9
18.5
18.0
4.4
4.4
6.5
5.0
10.6
11.6
Downward trend in applied tariffs
(simple average, %)
1988-90
1995-97
2001-03
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
Low-income
Middleincome
High-income
1988-90
1995-97
2001-03
Low-income
Middleincome
High-income
Effects of full global lib’n on SSA agric
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
% change
in:
Key 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)
What’s 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.
What’s on the table? Export Subsidies
Draft agreement involves abolition of all export subsidies.
Very little impact in the short run—because 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.
What’s 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.
Implications 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
– Isn’t 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?
Why Exclude Certain Products from Tariff Reduction
Negotiations
Significance of local production
Food Security
Fiscal revenue
Protection of infant industry
Balance of payments
Health reasons
A List of offers by Product for Market Access
Negotiations
Agricultural 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%
1. Intra regional agricultural and food exports and imports- low
2. Intra- regional market access issues
Economic
Community
ECOWAS
Agriculture
(as a % of
total
exports)
40
Agriculture Free Trade
(as % of
Area
total
imports)
24
Proposed
ECCAS
38.4
22
SADC (excluding
SACU)
COMESA (excluding
SACU)
AMU
SACU
37
16
48
20
proposed for
2007
proposed for
2007
Partial
10
19.4
16
15
stalled
in force
Customs Union
proposed for
2007
proposed for
2011
proposed for
2010
proposed for
2008
stalled
in force
Agriculture 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
Why 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
Why low regional agricultural trade (cont’d)
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
Potential 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)
Overlapping African Regional Agreements…
Too much Regional Trade Agreements
Logistical Constraints
Loss of Identity