The impact of climate change and the European Union GSP-scheme on East Africa’s horticultural trade
Lubinga, Moses Herbert
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With the aim of generating reliable information upon which appropriate decisions can be based to benefit the various stakeholders, this research at one hand aims at developing a set of meteorological indices, which are used as proxies to evaluate the impact of climate change on horticultural trade flows to the European Union (EU) market. On the other hand, the study examines the role of European Union's Generalised System of Preferences (EU-GSP scheme) in boosting agricultural imports into the EU. Furthermore, the study assesses the export competitiveness of various horticultural commodities of East African states within the EU market, as well as exploring East Africa's trade potential and performance of the selected commodities within the EU. Various techniques were used to attain the above objectives. Such techniques include; Balassa's Revealed Comparative Advantage (RCA) approach, the out-of sample technique, the relative difference and absolute difference methods. To estimate the various gravity models specified, a set of the extended Poisson models, viz: Zero Inflated Poisson (ZIP) and Negative Binomial Regression (NBR) techniques for panel data estimations were employed so as to deal with the excess zeros and over dispersion problems associated with highly disaggregated data. Time series data for a period of 23 years (1988-2011) for 15 EU member states and 3 East African states (Kenya, Tanzania and Uganda) were used for the analysis. Data was obtained from various sources such as the TRAINS database, World Bank Development Indicators, African Growth and Development Policy Modeling Consortium (AGRODEP) database, Food and Agriculture Organisation (FAO) database, and TYN CY 1.11 database provided by the Tyndall Centre for Climate Change Research. Some of the key empirical findings decomposed at country level reveal that: - Kenya has export competitiveness in Asparagus, Mushrooms and truffles. Uganda exhibits competitiveness in exporting pepper, bananas and eggplants while for Tanzania, vegetables were the most competitive. Therefore, each of these countries should put much emphasis on producing and exporting commodities over which she has comparative advantage. Climate change generally has both positive and negative effects on horticultural trade flows into the EU-Market, depending on the kind of proxy being put into consideration. Within the EU market, anomalies in precipitation enhance horticultural imports from East Africa while temperature anomalies tend to hinder trade. Anomalies in temperature in exporting countries boost horticultural trade flows from Tanzania and Uganda while the contrary is true for Kenya. Precipitation anomalies in exporting countries favor horticultural trade flows from Kenya while they curtail trade flows from Tanzania and Uganda. Thus, results imply that the use of anomalies as proxies for climate change in agrarian based economies provides a more reliable measure of the effects of climate change in trade than using the generalized Kyoto Protocol policies. - The EU-GSP scheme selectively favors importation of certain horticultural commodities into the EU-market, depending on the country of origin. It promotes importation of bananas, beans and peppers from Uganda and beans from Tanzania. On the contrary, it deters asparagus and bean imports from Kenya. Given that the findings concur with findings of other scholars, it is imperative to argue that the use of preference margin, based on all policy instruments (tariff rates, MFN, specific duties and Tariff Rate Quotas) embedded within the EU-GSP scheme provides apt commodity specific inferences regarding the effect of the EU-GSP scheme on horticultural imports into the EU-market. - Kenya and Uganda exhibit existence of un realised trade potential within the EU market. For Kenya, asparagus has room for further market expansion across all EU-member states while Uganda's beans and pepper can further be imported many EU member states like France, Germany, Luxembourg, Portugal and Greece, among others. A similar scenario applies to beans from Tanzania. This implies there is still have room to expand East Africa's horticultural trade within the EU-market. - The three East African states evidently exhibit poor trade performance within the EUmarket in the various commodities. This suggests that there exists some barriers to trade which limit the proliferation of East Africa's horticultural imports into the EU. Thus, it is incumbent upon East African states to foster cooperation in horticultural trade with the EU member states.. Conclusively, it is commendable that anomalies in temperature and precipitation may be used as climate change proxies, particularly when evaluating the impact of climate change on international trade skewed towards agricultural commodities rather than using other based on Kyoto Protocol policies. It is also recommended that assessment of the influence of nonreciprocal preferential trade agreement(s) granted to developing countries, based on preference margins should always take into account all the policy instruments embedded within the agreement.