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
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)
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!
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?
Policy evolution – both countries Overall trade profiles Agricultural trade profile – Chile Trade reconciliation Trade chilling The relative importance of the Chilean markets
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, Chiles agricultural policy is regarded as liberal
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
± 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
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
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
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%
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! 1. Imports are always greater than export 2. Imports equaling exports (rare) 3. Imports less than export (explanation need)
Reasons 1. Exchange rate (R or $) 2. Time difference (in recording) 3. Method of evaluation (CIF or FOB)
HSDescriptionChile importsRSA exportsDifference AllAll agricultural products Green Tea Pineapple Juice, Peaches Liqueurs And Cordials Yeasts, Active Food Preparations Nesoi Sugar Confection Mucilages/Thicknrs Vegetable Saps and Extracts Total of top
Where supply and demand do not meet (RSA and Chile) RSA export to the world (Supply potential) – proxy by high export values (US$ 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$1,000 regarded as no trade Results in the table to follow!
All values in USUS$ million Chile MFN tariff 5 year average HS Agricultural products Chile- World imports Chile- SA imports SA- World exports SA- Chile exports Wine6% Maize6% Cane/Beet Sugar6% Tobacco6% Wheat6% Maize seed6% Fish, Nesoi6% Flour Meal & Pellets 6% Beer6% Grape Juice6% Sunflower seed/oil 6% Cut Flowers#N/A Cotton6% Cane/Beet Sugar6% Peanuts6% Starch6% Whiskies6% Black Tea6% Cookies6% Margarine6%
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 Africas competitor for the EU and USA market. Chile is increasing its prominence in these markets
HSDescription (CHILE) % Share of total agric exports (2008) Wine Grapes Fish Fillets Apples Fish Fillets4.75 HSDescription (SOUTH AFRICA) % Share of total agric exports (2008) Wine 9% Oranges, Fresh 8% Maize 8% Grapes 6% Apples, Fresh 4%
Rank (RSA)Country Share of Total agric exports World EU Zimbabwe7.38 3United States4.71 4Mozambique4.45 5Zambia3.65 Rank (CHILE) Country % Share of overall imports in 2008 World EU United States Japan Venezuela5.30 5Mexico4.75
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$1.34 million) Green Tea - ranks number as a source of Chiles imports Therefore this presents an opportunity for South Africa to expand its prominent - market
HSDescription Share of RSAs exports of these products (%)2008 (US$m) Green tea Pineapple juice Peaches Liqueurs and cordials Yeasts Food Preparations Sugar confection Mucilages/thicknrs Citrus fruit Vegetable saps and extracts Total imports from RSA (million US $)3.65 Percentage of Total Imports14.60%
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