Agricultural market access for South African fruit product exports in the EU under tariff rate quotas (TRQs)
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Date
2019-08
Authors
Muchopa, Chiedza L.
Journal Title
Journal ISSN
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Publisher
University of the Free State
Abstract
The study analysed the access of South African fruit and fruit products into the EU market under tariff rate quotas (TRQs), as granted through the trade agreement between South Africa and the European Union (EU) termed the Trade, Development and Cooperation Agreement (TDCA). The TDCA trade chapter was implemented from 1999 and replaced by the Southern African Development Community-EU-Economic Partnership Agreement (SADC-EUEPA) at the end of 2016. The TDCA provided a trade liberalisation framework for the promotion of export market access improvements among other development initiatives. The usefulness of TRQs as a trade policy tool in trade agreements – to further the goal of improving market access – forms the primary focus of the questions answered in this research. Fruit and fruit products TRQs of the TDCA have generally not been filled. The extent of influence among tariff and non-tariff factors preventing TRQ fill and the consequential trade and welfare impacts specific to fruit and fruit products TRQ liberalisation concessions of the TDCA are not well understood. This information gap has motivated this study. Four objectives have been analysed in an attempt to establish the impacts of TRQs on the access of South African fruit products to the EU market. The main study objective was to modify the Global Trade Analysis Project (GTAP) Computable General Equilibrium (CGE) model sectors and to innovate the model inputs, to enable an analysis of the market access that the TRQs of the fruit products allow under the TDCA. The publicly available GTAP version 9 database contains complete bilateral trade data and protection linkages among multiple countries and commodities for a single year (2011). Data sourced from various secondary sources, such as the GTAP, TARif Intégré Communautaire/Integrated Tariff of the European Communities (TARIC) and International Monetary Fund (IMF) databases, as well as the primary data sourced through a survey of fruit/fruit products exporting establishments was used. The data analysis methods comprise descriptive analysis, Likert score analysis and CGE analysis of TRQ liberalisation scenarios in a GTAP static model. Three main scenarios containing 10 sub-simulations were simulated based on the assumptions of full tariff liberalisation, quota expansion and NTMs reduction. The study has argued that a number of tariff and non-tariff influential factors prevent TRQ fill. This study has identified that non-tariff measures (NTMs) exhibit the greatest intensity of influence in preventing quota fill amongst tariff, TRQ administration as well as supply and demand influential factors. The GTAP model analysis shows that partial TRQ liberalisation in which tariff removal is not coupled with TRQ expansion or the removal of some NTMs, weakens South Africa’s potential gains in export market access to the EU market. In addition, the analysis of trade liberalisation scenarios indicates that when some NTMs are removed in 2011 pre full implementation of the TDCA in 2012, welfare measured in equivalent variation (EV) improves (US$189 891) in a given year, supporting the assertion that TRQs compound market access barriers and are associated with NTMs. The results show that though exports increase (5% to 37%, TRQ specific) for South Africa, output changes in South Africa are small (<0.1%). The highest welfare gain (US$221 834) was achieved through a combined full tariff liberalisation and some NTMs removal. In the frozen orange juice case, welfare improvements would have been greater for South Africa if TRQ policy (in-quota tariff) distortions had been completely removed in 2011 (US$5611) before the full implementation of the TDCA in 2012, rather than at the end of the TDCA in 2016 (US$4517). Additional welfare loss not accounted for in the EV measure was found to result from uncaptured quota rents that arise when TRQs are not filled. The conclusion is that a delay in concluding and implementing negotiated outcomes as well as a failure to fill TRQs leads to unrecoverable trade and welfare losses. This study recommends other support policies, such as export expansion, to be actively implemented to support the provisions of a trade agreement, such as the fruit and fruit products TRQs of the TDCA. In addition, the quota expansion provision should simultaneously be implemented – with full tariff liberalisation and NTMs removal – in order to improve market access and welfare. The study has contributed a methodological approach to analyse TRQ fill factors through adaptations and innovations of the GTAP model and database to suit TDCA fruit products TRQ analysis. In addition the study has contributed in the welfare findings of the TDCA assessed in terms of uncaptured quota rents from unfilled TRQs.
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Keywords
Thesis (Ph.D. (Agriculture Economics))--University of the Free State, 2019, Tariff rate quota (TRQ), Welfare, Trade Development and Cooperation Agreement (TDCA), Global Trade Analysis Project (GTAP), Computable general equilibrium (CGE), Quota rents