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Agricultural Trade Relationship: What can
South Africa learn from the Chilean experience
By
Bonani Nyhodo, Elvis Nakana, Heidi Phahlane and Louise KotzéWe acknowledge and appreciate comments made by tralac researchers!
What can South Africa learn from the Chilean experience?
Experience of what?
1. Agricultural prosperity!
2. Agricultural trade prosperity!
3. Improved socio – economic situation!
Vink (2009)
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
0
5000000
10000000
15000000
20000000
25000000
Agricultural exports
Argentina Australia ChileNew Zealand South Africa
US
$ 0
00
Chile exports started to increase!
Lessons
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
Wisdom 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)
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?
Scope of the study
Policy evolution – both countries
Overall trade profiles
Agricultural trade profile – Chile
Trade reconciliation
Trade chilling
The relative importance of the Chilean markets
Chile – trade policy (past 20 yrs)
Population - 16.3 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,
Chile’s agricultural policy is regarded as liberal
Agriculture expenditure………….
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
Continues………….
± 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
Outcomes!
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
South Africa trade policy (past 20 years)
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%
Trade reconciliation
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)
HS Description Chile imports RSA exports Difference
All All agricultural products 3.65 3.22 -0.42
090220 Green Tea 1.34 0.07 -1.28
200949 Pineapple Juice, 0.97 0.68 -0.29
200870 Peaches 0.27 0.17 -0.10
220870 Liqueurs And Cordials 0.24 0.92 0.68
210210 Yeasts, Active 0.22 0.00 -0.22
210690 Food Preparations Nesoi 0.20 0.00 -0.20
170490 Sugar Confection 0.13 0.21 0.09
130232 Mucilages/Thicknrs 0.06 0.03 -0.03
130219 Vegetable Saps and Extracts 0.03 0.03 0.00
Total of top 9 3.50 2.11 -1.39
Trade chilling
Where supply and demand do not meet (RSA and Chile)
RSA export to the world (Supply potential) – proxy by high export values
(US$500 000 or more)
Chilean imports for the world (Demand potential) proxy by high import
values (US$500 000 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 5 year average 5 year average 5 year average
HSAgricultural
products
Chile- World
imports
Chile- SA
imports
SA- World
exports
SA- Chile
exports
220421 Wine 6% 2.82 0.00 478.67 0.00
100590 Maize 6% 253.65 0.00 184.33 0.00
170199Cane/Beet Sugar
6% 116.48 0.00 73.53 0.00
240120 Tobacco 6% 5.53 0.00 32.64 0.00
100190 Wheat 6% 154.26 0.00 32.11 0.00
100510 Maize seed 6% 16.30 0.00 29.35 0.00
030379 Fish, Nesoi 6% 2.04 0.00 28.46 0.00
230120Flour Meal & Pellets
6% 35.59 0.00 17.86 0.00
220300 Beer 6% 11.65 0.00 17.64 0.00
200969 Grape Juice 6% 4.43 0.00 14.15 0.00
151219Sunflower seed/oil
6% 3.87 0.00 12.50 0.00
060310 Cut Flowers #N/A 2.14 0.00 12.37 0.00
520100 Cotton 6% 17.76 0.00 11.03 0.00
170191Cane/Beet Sugar
6% 3.89 0.00 10.86 0.00
120220 Peanuts 6% 5.04 0.00 9.70 0.00
110812 Starch 6% 4.17 0.00 8.36 0.00
220830 Whiskies 6% 16.00 0.00 8.16 0.00
090240 Black Tea 6% 23.21 0.00 7.90 0.00
190531 Cookies 6% 7.68 0.00 7.87 0.00
151710 Margarine 6% 4.30 0.00 6.98 0.00
Export profiles
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 Africa’s competitor for the EU and USA market.
Chile is increasing its prominence in these markets
HS Description (CHILE)% Share of total agric exports (2008)
220421 Wine 10.04
080610 Grapes 8.44
030429 Fish Fillets 4.95
080810 Apples 4.82
030419 Fish Fillets 4.75
HS Description (SOUTH AFRICA)
% Share of total agric exports (2008)
220421 Wine 9%
080510 Oranges, Fresh 8%
100590 Maize 8%
080610 Grapes 6%
080810 Apples, Fresh 4%
Export destinations!
Rank (RSA) CountryShare of Total agric exports
World- 100
1 -EU 27- 39.37
2 Zimbabwe 7.38
3 United States 4.71
4 Mozambique 4.45
5 Zambia 3.65
Rank (CHILE)
Country% Share of overall imports in 2008
World 100.00
1 EU 27 25.07
2 United States 22.37
3 Japan 10.86
4 Venezuela 5.30
5 Mexico 4.75
Are 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 RSA
The leading product is green tea imports (US$1.34 million)
Green Tea - ranks number as a source of Chile’s imports
Therefore this presents an opportunity for South Africa to expand its
prominent - market
HS DescriptionShare of RSA’s exports of these products (%) 2008 (US$m)
090220 Green tea 36.77 1.34
200949 Pineapple juice 26.48 0.97
200870 Peaches 7.53 0.27
220870 Liqueurs and cordials 6.56 0.24
210210 Yeasts 6.17 0.22
210690 Food Preparations 5.54 0.20
170490 Sugar confection 3.43 0.13
130232 Mucilages/thicknrs 1.60 0.06
200791 Citrus fruit 1.03 0.04
130219 Vegetable saps and extracts 0.89 0.03
Total imports from RSA- 2008 (million US $) 3.65
Percentage of Total Imports 14.60%
Conclusions
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
Thank!
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