The Uruguay Round of trade negotiations resulted in three main areas of trade
liberalization in agriculture, namely market access, domestic support, and export
subsidies. In terms of market access, the introduction of tariff rate quotas (TRQs) was
one of the main tools to facilitate greater market access. After the liberalization of the
agricultural sector and phasing out of past protection mechanisms South Africa
introduced a process of tariff reform in compliance with WTO regulations.
Furthermore, a system of TRQs was introduced in compliance with WTO regulations.
Literature on South African agricultural trade shows that very little research has been
conducted on the impacts of TRQs. In this study the impacts of further TRQ
liberalization on the South African livestock industry were investigated using four TRQ
liberalization scenarios, namely: 33 per cent expansion of import quotas, 33 per cent
reduction in ad valorem MFN tariffs, a combination of the first two scenarios and a
complete removal of tariffs.
The approach followed in this study is spatial partial equilibrium in nature and consists
of the primary (beef cattle, broilers, pigs, and sheep) and secondary (beef, poultry, pork and sheep meat) sub-sectors. The model delineates South Africa into its nine provinces,
as well as neighbouring important meat producers รข Namibia and Botswana.
For the four secondary products (beef, poultry, pork and sheep meat) the border prices
declined by between 0.89 and 2.39 per cent for scenario one, 2.35 and 7.96 per cent for
scenario two, 2.96 and 9.97 per cent for scenario three and 8.25 and 25.19 per cent for
scenario four. The largest decline in beef and sheep meat prices due to liberalization was
recorded in the Eastern Cape and KwaZulu-Natal Provinces. Cattle and sheep numbers
owned by emerging producers are more than those of the established commercial farmers
in these two provinces. The implication is that the development efforts by government
aimed at commercializing emerging commercial stock farming in order to address equity
and poverty may be slowed down considerably with further trade liberalization.
The study used the consumer and producers surplus concepts, as well as the equivalent
variation concept to measure the impact on welfare of potential trade policy changes
mentioned. Welfare as measured by consumer surplus increases by R230.8 million in
scenario 1 to R1 880.8 million in scenario 4. Producer surplus decreases by R77.6
million in scenario 1 to R656.89 million in scenario 4. Welfare as measured by
equivalent variation increased by R60.6 million in scenario 1 to R468.2 million in
scenario 4. The equivalent variation concept revealed much more moderate changes to
consumer well being. The reason for this is that consumer and producer surplus
estimations assume linearity of the demand and supply curves, whereas the model used in
this study accounts for the non-linearity of demand and supply curves. Consumer and
producers surplus estimates nevertheless provide useful insight into the relative impact of
trade policy changes.
Should further TRQ liberalization be considered in the South African livestock industry,
consideration should first be given to expanding the existing quota rather than reducing
tariffs. Further research on the following aspects is recommended, (i) products differentiated by
place of origin based on the Armington assumption, (ii) expansion of current modelling
framework to include additional products and (iii) explicit modelling of TRQs such as the
creation of rents and its distribution.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:ufs/oai:etd.uovs.ac.za:etd-08312006-081253 |
| Date | 31 August 2006 |
| Creators | Oyewumi, Olubukola Ayodeji |
| Contributors | Prof A Jooste, Prof HD van Schalkwyk, Dr W Britz |
| Publisher | University of the Free State |
| Source Sets | South African National ETD Portal |
| Language | en-uk |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.uovs.ac.za//theses/available/etd-08312006-081253/restricted/ |
| Rights | unrestricted, I hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to University Free State or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
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