Presentation on theme: "By Bonani Nyhodo, Elvis Nakana, Heidi Phahlane and Louise Kotzé"— Presentation transcript:
1Agricultural Trade Relationship: What can South Africa learn from the Chilean experience ByBonani Nyhodo, Elvis Nakana, Heidi Phahlane and Louise KotzéWe acknowledge and appreciate comments made by tralac researchers!
2What can South Africa learn from the Chilean experience? Experience of what?Agricultural prosperity!Agricultural trade prosperity!Improved socio – economic situation!
4Lessons Targeted support to agriculture Create a structure of governance that support a clear visionChoose specific products and support them heavilyNegotiate as many FTAs as possible – economic benefits
5Wisdom 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)
6Levitt and Durbner (2006) – freakonomics: the hidden side of everything Incentives are the core of modern lifeThe convectional wisdom is often wrongKnowing what to measure and how to measure it make a complicated world much less so!
7Krattiger (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 ideologyThen how about implementation?
8Scope of the study Policy evolution – both countries Overall trade profilesAgricultural trade profile – ChileTrade reconciliationTrade chillingThe relative importance of the Chilean markets
9Chile – trade policy (past 20 yrs) Population million (growth rate 1.2%)adopted policies to boost competitivenessReduction of tariffs 6% (uniform approach)Government expenditure on agriculture - increased tremendouslyGovernment 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
10Agriculture expenditure…………. Agricultural allocation increased by more than four folds over the past 10 years.Budget allocation±60 percent of the total budget to agricultureIrrigation programmes (on-farm investments),Productivity and skills devt programmes (preferential credit)Rural development exclusively aimed for the poor
11Continues…………. ± 40 percent is shared among programmes such as: The soil recovery programmeResearch & developmentExtension & trainingAnimals & plant health and standardsMarketing and trade promotion
12Outcomes! 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
13South Africa trade policy (past 20 years) Re-admission GATT/WTOLiberalisation - 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
14Reduction 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%
16Trade reconciliationTo double check trade flows – reconcile trade data between partnersCompare 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 exportImports equaling exports (rare)Imports less than export (explanation need)
17ReasonsExchange rate (R or $)Time difference (in recording)Method of evaluation (CIF or FOB)
18HSDescriptionChile importsRSA exportsDifferenceAllAll agricultural products3.653.22-0.42090220Green Tea1.340.07-1.28200949Pineapple Juice,0.970.68-0.29200870Peaches0.270.17-0.10220870Liqueurs And Cordials0.240.92210210Yeasts, Active0.220.00-0.22210690Food Preparations Nesoi0.20-0.20170490Sugar Confection0.130.210.09130232Mucilages/Thicknrs0.060.03-0.03130219Vegetable Saps and ExtractsTotal of top 93.502.11-1.39
19Results in the table to follow! Trade chillingWhere supply and demand do not meet (RSA and Chile)RSA export to the world (Supply potential) – proxy by high export values (US$ 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 tradeChiles import from RSA - less than US$1,000 regarded as no tradeResults in the table to follow!
20All values in USUS$ million Chile MFN tariff5 year averageHSAgricultural productsChile- World importsChile- SA importsSA- World exportsSA- Chile exports220421Wine6%2.820.00478.67100590Maize253.65184.33170199Cane/Beet Sugar116.4873.53240120Tobacco5.5332.64100190Wheat154.2632.11100510Maize seed16.3029.35030379Fish, Nesoi2.0428.46230120Flour Meal & Pellets35.5917.86220300Beer11.6517.64200969Grape Juice4.4314.15151219Sunflower seed/oil3.8712.50060310Cut Flowers#N/A2.1412.37520100Cotton17.7611.031701913.8910.86120220Peanuts5.049.70110812Starch4.178.36220830Whiskies16.008.16090240Black Tea23.217.90190531Cookies7.687.87151710Margarine4.306.98
21Export profilesChile 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
22HSDescription (SOUTH AFRICA)% Share of total agric exports (2008) 220421Wine9% 080510Oranges, Fresh8% 100590Maize 080610Grapes6% 080810Apples, Fresh4%HSDescription (CHILE)% Share of total agric exports (2008)220421Wine10.04080610Grapes8.44030429Fish Fillets4.95080810Apples4.820304194.75
23Export destinations! Rank (CHILE) Country % Share of overall imports in 2008World100.001EU 2725.072United States22.373Japan10.864Venezuela5.305Mexico4.75Rank (RSA)CountryShare of Total agric exportsWorld-1001-EU 27-39.372Zimbabwe7.383United States4.714Mozambique4.455Zambia3.65
24Are 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 RSAThe leading product is green tea imports (US$1.34 million)Green Tea - ranks number as a source of Chile’s importsTherefore this presents an opportunity for South Africa to expand its prominent - market
25HSDescriptionShare of RSA’s exports of these products (%)2008 (US$m)090220Green tea36.771.34200949Pineapple juice26.480.97200870Peaches7.530.27220870Liqueurs and cordials6.560.24210210Yeasts6.170.22210690Food Preparations5.540.20170490Sugar confection3.430.13130232Mucilages/thicknrs1.600.06200791Citrus fruit1.030.04130219Vegetable saps and extracts0.890.03Total imports from RSA (million US $)3.65Percentage of Total Imports14.60%
26Conclusions Targeted support to selected agriculture products Choose specific products and support them heavilyNegotiate as many FTAs as possible – economic benefitsCreate a structure of governance that support a clear vision