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By Bonani Nyhodo, Elvis Nakana, Heidi Phahlane and Louise Kotzé

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Presentation on theme: "By Bonani Nyhodo, Elvis Nakana, Heidi Phahlane and Louise Kotzé"— Presentation transcript:

1 Agricultural Trade Relationship: What can South Africa learn from the Chilean experience
By Bonani Nyhodo, Elvis Nakana, Heidi Phahlane and Louise Kotzé We acknowledge and appreciate comments made by tralac researchers!

2 What can South Africa learn from the Chilean experience?
Experience of what? Agricultural prosperity! Agricultural trade prosperity! Improved socio – economic situation!

3 Vink (2009)

4 Lessons Targeted support to agriculture
Create a structure of governance that support a clear vision Choose specific products and support them heavily Negotiate as many FTAs as possible – economic benefits

5 Wisdom or myth! “if this be error, and upon me proved,
I never writ, nor no man ever loved” – Sonnet 116 (William Shakespear) “Let them not make me a stone and let them not spill me. Otherwise kill me” – Prayer before birth (Louis Macneice)

6 Levitt and Durbner (2006) – freakonomics: the hidden side of everything
Incentives are the core of modern life The convectional wisdom is often wrong Knowing what to measure and how to measure it make a complicated world much less so!

7 Krattiger (2010) – misconceptions and myths that every genetic resource IP and worth millions of rands. Quoted - Aristotle arguing that “the soul never think without an image” Public good is a good is free of charge – wrong! Reality moves faster than ideology Then how about implementation?

8 Scope of the study Policy evolution – both countries
Overall trade profiles Agricultural trade profile – Chile Trade reconciliation Trade chilling The relative importance of the Chilean markets

9 Chile – trade policy (past 20 yrs)
Population million (growth rate 1.2%) adopted policies to boost competitiveness Reduction of tariffs 6% (uniform approach) Government expenditure on agriculture - increased tremendously Government support to agriculture is 4% of total farm receipt (PSE) Govt - 75% of cost of new plantations in subsidised (forestry) However, Chile’s agricultural policy is regarded as liberal

10 Agriculture expenditure………….
Agricultural allocation increased by more than four folds over the past 10 years. Budget allocation ±60 percent of the total budget to agriculture Irrigation programmes (on-farm investments), Productivity and skills devt programmes (preferential credit) Rural development exclusively aimed for the poor

11 Continues…………. ± 40 percent is shared among programmes such as:
The soil recovery programme Research & development Extension & training Animals & plant health and standards Marketing and trade promotion

12 Outcomes! Poverty reduced by 26%
GDP growth rate averaged 5.6% - Agriculture 4% Chile diversified from 122 markets (2003) to 194 markets (2007) Agro-food exports have grown much faster than agro-food imports

13 South Africa trade policy (past 20 years)
Re-admission GATT/WTO Liberalisation - taking developed countries commitments (UR) was is it good or bad? Deregulation of marketing board (single marketing channels) Abolishment of tax concession favouring agricultural sector

14 Reduction of tariffs – agriculture less than 6% on average
Government support to agriculture remained at around 5% of farm receipts (PSE) Government expenditure on R&D has decreased (ARC budget) Share of agric allocation as % of total allocation remains less than 1%

15

16 Trade reconciliation To double check trade flows – reconcile trade data between partners Compare RSA reported export to Chile against Chilean recorded imports from RSA or vise versa! Convectional wisdom argues that the two rarely reconcile! Imports are always greater than export Imports equaling exports (rare) Imports less than export (explanation need)

17 Reasons Exchange rate (R or $) Time difference (in recording) Method of evaluation (CIF or FOB)

18 HS Description Chile imports RSA exports Difference All All agricultural products 3.65 3.22 -0.42 090220 Green Tea 1.34 0.07 -1.28 200949 Pineapple Juice, 0.97 0.68 -0.29 200870 Peaches 0.27 0.17 -0.10 220870 Liqueurs And Cordials 0.24 0.92 210210 Yeasts, Active 0.22 0.00 -0.22 210690 Food Preparations Nesoi 0.20 -0.20 170490 Sugar Confection 0.13 0.21 0.09 130232 Mucilages/Thicknrs 0.06 0.03 -0.03 130219 Vegetable Saps and Extracts Total of top 9 3.50 2.11 -1.39

19 Results in the table to follow!
Trade chilling Where supply and demand do not meet (RSA and Chile) RSA export to the world (Supply potential) – proxy by high export values (US$ or more) Chilean imports for the world (Demand potential) proxy by high import values (US$ or more) RSA export to Chile - less than US$1,000 regarded as no trade Chiles import from RSA - less than US$1,000 regarded as no trade Results in the table to follow!

20 All values in USUS$ million
Chile MFN tariff 5 year average HS Agricultural products Chile- World imports Chile- SA imports SA- World exports SA- Chile exports 220421 Wine 6% 2.82 0.00 478.67 100590 Maize 253.65 184.33 170199 Cane/Beet Sugar 116.48 73.53 240120 Tobacco 5.53 32.64 100190 Wheat 154.26 32.11 100510 Maize seed 16.30 29.35 030379 Fish, Nesoi 2.04 28.46 230120 Flour Meal & Pellets 35.59 17.86 220300 Beer 11.65 17.64 200969 Grape Juice 4.43 14.15 151219 Sunflower seed/oil 3.87 12.50 060310 Cut Flowers #N/A 2.14 12.37 520100 Cotton 17.76 11.03 170191 3.89 10.86 120220 Peanuts 5.04 9.70 110812 Starch 4.17 8.36 220830 Whiskies 16.00 8.16 090240 Black Tea 23.21 7.90 190531 Cookies 7.68 7.87 151710 Margarine 4.30 6.98

21 Export profiles Chile is a major competitor of South Africa for the European and USA market - agriculture. Under AGOA and the TDCA South African products enjoy preferential market access and Chile has been signing and negotiating FTAs aggressively. Chile is South Africa’s competitor for the EU and USA market. Chile is increasing its prominence in these markets

22 HS Description (SOUTH AFRICA) % Share of total agric exports (2008)  220421 Wine 9%  080510 Oranges, Fresh 8%  100590 Maize  080610 Grapes 6%  080810 Apples, Fresh 4% HS Description (CHILE) % Share of total agric exports (2008) 220421 Wine 10.04 080610 Grapes 8.44 030429 Fish Fillets 4.95 080810 Apples 4.82 030419 4.75

23 Export destinations! Rank (CHILE) Country
% Share of overall imports in 2008 World 100.00 1 EU 27 25.07 2 United States 22.37 3 Japan 10.86 4 Venezuela 5.30 5 Mexico 4.75 Rank (RSA) Country Share of Total agric exports World- 100 1 -EU 27- 39.37 2 Zimbabwe 7.38 3 United States 4.71 4 Mozambique 4.45 5 Zambia 3.65

24 Are these countries trading?
Yes! The relative importance of agricultural products of South Africa to Chile. The top ten Chilean imports from South Africa (see the table to follow) Account for 14.60% of Chilean imports (agric products) from RSA The leading product is green tea imports (US$1.34 million) Green Tea - ranks number as a source of Chile’s imports Therefore this presents an opportunity for South Africa to expand its prominent - market

25 HS Description Share of RSA’s exports of these products (%) 2008 (US$m) 090220 Green tea 36.77 1.34 200949 Pineapple juice 26.48 0.97 200870 Peaches 7.53 0.27 220870 Liqueurs and cordials 6.56 0.24 210210 Yeasts 6.17 0.22 210690 Food Preparations 5.54 0.20 170490 Sugar confection 3.43 0.13 130232 Mucilages/thicknrs 1.60 0.06 200791 Citrus fruit 1.03 0.04 130219 Vegetable saps and extracts 0.89 0.03 Total imports from RSA (million US $) 3.65 Percentage of Total Imports 14.60%

26 Conclusions Targeted support to selected agriculture products
Choose specific products and support them heavily Negotiate as many FTAs as possible – economic benefits Create a structure of governance that support a clear vision

27 Thank!


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