Tariff equivalents of nontariff measures: the case of European horticultural and fish imports from African countries

In the context of the Partnership Agreements between the European Union (EU) and the African, Caribbean, and Pacific countries, this study estimates ad valorem tariff equivalents of European food safety standards on imports of key horticultural and fish products from Kenya, Tanzania, Uganda, and Zambia. The study uses an extension of the price‐wedge method to account for imperfect substitution and factor endowment in monopolistic competition. The estimated tariff equivalents are 55% and 98% for imports of fresh peas from Zambia to the Netherlands and the U.K., respectively. They range from 39% to 64% for imports of green beans and avocados from Kenya and from 63% to 270% for imports of frozen fish fillets in EU countries from the East African Community. We also observe large variations in tariff equivalents for the horticultural and fish products over time and EU importing countries.     

Economics and politics of food standards,trade, and development#

Standards have played an important role in food trade for a very long time. Their rapid growth in recent years has triggered vigorous debates on their impacts on international trade and development, with many arguing that standards are “non‐tariff barriers” to trade and that standards are marginalizing the poor. I present conceptual frameworks and review empirical evidence on the equity and efficiency effects and the political economy of standards. Models which incorporate essential aspects of standards yield complex theoretical results and nuanced conclusions. Careful empirical analyses support such nuanced arguments and find complex effects. For trade, standards can create welfare gains but also involve rent redistribution which induces lobbying by interest groups to set the standards at their preferred level. This makes it difficult to distinguish socially desirable standards from those resulting from political rent‐seeking. For development, it is crucial to explicitly account for (a) the endogeneity of the institutional organization of value chains and (b) both smallholder contracting and employment creation on large scale farms when considering the impact of standards on development and poverty.     

Food price increases and net food importing countries: lessons from the recent past

Recent increases in food and other commodity prices have highlighted concerns that many poor countries are net food importers and higher food prices would worsen their trade balances. In this article, we analyze the changes in food trade balances associated with the 32% increase in food prices from 2000/2001 to 2004/2005. We find a small deterioration in food trade balances of low‐income countries and an improvement in middle‐income countries. The deterioration is most severe for countries in conflict and small island states, so attention should be placed first on these countries and on a few very‐low‐income countries that are also vulnerable. Because low‐income countries as a group had much lower agricultural GDP growth rates than middle‐income countries, the answers to food vulnerability in low‐income countries should probably be addressed within the context of incentives for agricultural production.     

Modeling differentiated quality standards in the agri-food sector: the case of meat trade in the enlarged EU

Quality standards play an increasingly important role in international agri-food trade, and their functioning as nontariff barriers to trade is widely discussed. We argue that food quality standards imposed by importing countries are more than just border measures and can have profound effects on the market structure of the exporting industry, thereby significantly influencing the supply response. We develop a stylized oligopoly model that accounts for compliance costs (fixed and variable) and investigate alternative policy options to explore different mechanisms an importing county may use to enhance the quality of its imports. The model explicitly recognizes the coexistence of complying and noncomplying firms, which is a situation often found in low-income countries where a small modern export-oriented segment invests in meeting foreign quality standards. We use the adjustment of the Polish meat sector to the tight EU food quality standards as an empirical example. The simulations show that a subsidy scheme can promote compliance with standards and can contribute to an upgrade of the industry in the exporting country, but its marginal effectiveness is diminishing.     

Harmonisation of food regulations and trade in the Single Market: evidence from disaggregated data

A structural gravity model is used to quantify the effect ofharmonisation of EU food regulations on intra-EU trade during1990–2001. We construct a database that identifies foodproducts covered by harmonised regulations at a very detailedlevel. We find, at different levels of aggregation, that harmonisationof food regulations has led to more intra-EU trade, and thatthe tariff equivalents of the cost of not harmonising food regulations,subject to the sub-sector elasticity of substitution, vary significantlyacross some food sub-sectors.     

Enhancing food security in South Sudan: the role of markets and regional trade

South Sudan faces serious problems of food insecurity due to low levels of domestic food production, periodic droughts, widespread poverty, and since late 2013, renewed armed conflict. This article explores market price behavior using cointegration analysis and estimates the effects of production and trade shocks through multimarket model simulations. We show that market prices in the capital city, Juba, of both maize and sorghum are cointegrated with import parity prices of these cereals sourced from Uganda, consistent with observed trade flows. Model simulations, using econometrically estimated demand parameters, suggest that private sector imports of maize and wheat would greatly mitigate the potential fall in consumption in the case of a decline in domestic cereal production. Other simulations indicate that if total imports of cereals are reduced by one‐third (still more than two times the levels of food aid in 2013) because of disruptions to private market flows, domestic prices of cereals could rise by 45% or more. The article concludes that whatever measures are taken involving national food security reserves, it is crucial that government policy serves to maintain incentives for private sector imports to avoid destabilizing market supplies, domestic prices, and ultimately, food consumption of the poor.     

Non‐Reciprocal Trade Preferences and the Role of Compliance Costs in the Agricultural Sector: Exports to the EU

We investigate whether non‐reciprocal preferential regimes granted by the European Union have an impact on agricultural export flows from beneficiary countries while accounting for the costs of compliance that may prevent exporters from taking full advantage of potential benefits. Compliance costs are heterogeneous and difficult to measure. We proxy their influence and specify a model that allows for a different preferential margin impact according to the proxy costs. Adopting the gravity framework and using a sample of 554 lines of agricultural products for 131 developing countries in 2002, we find that the costs of compliance play a role in making the schemes work: the lower the costs, the greater the impact of the preferential margins. Moreover, the estimated margin effect differs between different regimes.     

An analysis of bundle pricing in horizontal and vertical markets: The case of the U.S. cottonseed market

The U.S. cottonseed market has seen the rapid development and adoption of seeds with differing bundles of genetically modified (GM) traits. It has also seen an increase in vertical integration by biotechnology firms. In this article, we investigate the price impacts associated with structural changes in the U.S. cottonseed market from 2002 to 2007. We develop a structural model to examine the substitution/complementarity relationships among cottonseeds sold with different genetic trait bundles and under different vertical arrangements. We examine the price impacts emanating from product differentiation, market concentration, and market size. The econometric investigation finds evidence of subadditive bundle pricing in patented biotech traits. While higher own‐market concentrations are found to be associated with higher prices, we also uncover evidence of cross‐product complementarity effects that lead to lower prices. Simulations are used to evaluate net price effects, illustrating the usefulness of the approach in the analysis of changing market structures.     

Production technology option value: the case of rbST in Michigan

Agricultural producers are increasingly required to adjust production practices to satisfy retailer, and ultimately consumer, preferences. This article highlights the option value that underlies decisions related to production technologies using the case of Michigan dairy farmers and recombinant bovine somatotropin (rbST). Welfare impacts were calculated for dairy producers when milk production systems which allowed the use of rbST were eliminated from the producer choice set. Those dairy producers using rbST just before its elimination realized a higher welfare loss than those not using the technology. However, significant welfare impacts were found for all dairy producers indicating that all producers valued the option to use this production technology.     

Energy price reform and food markets: the case of bread supply chain in Iran

Reforming energy price is the core of Iranian economic reform plan during 2010–2014. However, increasing price of energy may have adverse effects on the agricultural and food markets. This study was conducted to address these problems in the most important food of Iranian people “bread” by developing a spatial supply chain model. Results show that consumers’ welfare would experience a sharp decrease though the impacts on farmers are trivial. Also, results indicate that the key to success the reform without political backlash in the short‐run is the cash transfer program under which the government redistributes part of the reform's benefits among consumers. Per capita compensation payments would be equal to 51.50 and 46.09 US$ per year for a typical rural and urban person, respectively. Moreover, the results provide more detailed information about the market characteristics and the payments both in nationwide and regional scale as well as in different income groups.