Trade in agricultural goods
Due to the global crisis, global goods trade decreased in 2009 for the first time since 2001
The figures in this sub-section were collected from...
. The reduction in volume accounted for 12% and it confirmed the declining trend begun in 2007. Overall, merchandise exports (fob) accounted for 11,787 billion US$.
This reduction was uneven across the different product categories. In fact agricultural goods suffered the less significant cut as they only declined by 3%. This proved its resiliency to the economic crisis. Major cuts happened to fuels and mining products and, especially to manufactures, which contracted by 15.5%.
Another remarkable fact is that the share of agricultural trade in total goods trade remains below 10%. Overall, the value of agricultural exports accounted for 1,168,847 million US$ in 2009 (fob values).
Globally, the two main agricultural exporters and importers are the EU and the USA. Considering both intra and extra-EU trade, the EU ranks first both in exports and imports. If only extra-EU trade is considered, the USA are the top world agricultural exporter (119,584 million US$ in 2009, fob values) and the EU is the top world agricultural importer (140,773 million US$ in 2009, fob values). Adding their respective shares – as importers or exporters – they represent about 20% of current agricultural trade, while in 2000 they accounted for about 25%.
This reduction is due to the emergence of a series of countries increasing their participation in global agricultural markets. An outstanding case is China, increasing yearly by 11% its exports and by 16% its imports between 2000 and 2009. Currently China is the fifth agricultural exporter and the third importer. Other countries are more specialized either on exports or either on imports activities. Instances of export-orientated countries are Brazil, Argentina, Thailand, Indonesia and Australia, while Japan, the Republic of Korea, Mexico and India are import-dependent countries.
Reference to the position of Mediterranean Countries
Referring to agricultural trade in MCs, the most outstanding feature is their reliance on imports. In fact, out of all the CIHEAM member states, only France and Spain show clearly a positive agricultural net balance in the recent years, accounted in monetary terms. While Turkish situation is nowadays more or less balanced, the rest of countries show persistent imbalances along the second half of the last decade. Moreover, for the most of the countries – i.e. Albania, Algeria, Egypt, Greece, Lebanon, Malta, Morocco, Portugal, Tunisia and Turkey – the net trade balance has worsened over the period 2005-2008. The Table 1 depicts the main figures on agricultural trade for CIHEAM countries.
Table 1 - Agricultural net trade balance in CIHEAM countries (in thousand US$)
2005 2008 Net trade as a % of total agricultural trade (average 2007/2008) Albania – 405 996 – 780 353 – 84.24% Algeria – 3 827 343 – 7 709 345 – 97.55% Egypt – 2 778 927 – 6 837 982 – 60.97% France 11 818 222 14 871 858 13.06% Greece – 2 160 698 – 3 905 706 – 27.94% Italy – 6 830 547 – 7 761 663 – 10.41% Lebanon – 1 078 496 – 1 753 142 – 66.36% Malta – 348 176 – 517 163 – 75.65% Morocco – 949 893 – 3 238 262 – 45.15% Portugal – 3 116 419 – 4 515 285 – 32.50% Spain 3 737 624 4 886 566 7.32% Tunisia – 208 491 – 1 001 942 – 21.82% Turkey 2 863 425 288 223 – 1.88%
Source: authors’ calculations based on FAOSTAT data.
The bilateral balance between the EU and the MCs has also tended to be more and more favorable to the EU in the last couple of years (Abis and Tamlilti, 2011). In the field of EU-MCs trade, a discussion on the role of the Euro-Mediterranean Agreements and the trade preferences for Mediterranean countries is made in subsequent sections of this chapter.
Another remarkable fact to highlight is the concentration of agricultural trade around the Mediterranean Basin. The MCs suppliers of agricultural products to the EU are Turkey, Morocco, Israel and to a lesser extent Egypt and Tunisia. These five countries supplied over 90% of EU agricultural imports from the MCs in the last decade, being Turkey the major origin. On the other hand, Algeria is by far the EU’s top customer: it alone absorbed about 25% of EU agricultural exports to the MCs in the same period.
Extra-EU actors are significant suppliers in the fast growing import market in the MCs (CIHEAM, 2010; Abis, 2011a). The United States ranks the leading trading partner as a source of agricultural products at Turkey, Egypt, Jordan, Morocco and Algeria, mainly based on grains, in particular wheat, maize and soybeans. Imports are also growing from Brazil, which exported around 6 billion dollars in 2008 to the Arab region (mainly beef, soybeans and sugar); and from Russia and Ukraine, which are forecasted to become major partners in the Mediterranean regions, in wheat trade. Dependency in the Mediterranean region on cereal imports is fostered by demography, by a dramatic change in consumption patterns (with a trend to withdraw from the Mediterranean Diet) and by the supply constrains (water scarcity and low productivity in rain-fed areas).
Exporting interests by Southern Mediterranean countries
Let us consider the trade evolution and main trends of two typical Mediterranean products, namely fruits and vegetables and olive oil. These products are relevant for the exporting interests of Southern Mediterranean Countries, in particular in the EU markets. We wonder about the complementarity of MCs and the EU in the supply of such products, given the fact that they are usually shown as sensitive in the bilateral trade negotiations, within the Barcelona Process-Union for the Mediterranean.
Following Wu Huang (2004), fruits and vegetables (F&V) have claimed an increasing share of world agricultural trade, from a nominal value of $3.4 billion (10.6%) in 1961 to nearly $70 billion (16.9%) in the early 21st Century. Besides, the variety of products has increased. Bananas, apples, oranges, and tomatoes accounted for over 30 percent of the total fruit and vegetable trade in the 1960s and 1970s, but by the end of the 1990s they accounted for less than 20 percent. Fresh grapes, fresh vegetables, frozen potatoes, tree nuts, and other fruit and vegetable products are entering world trade channels in increasing quantities.
A geographic segmentation of global trade in these products is also noticeable. Most trade in F&V occurs within a few geographic regions – the European Union (EU), the North American Free Trade Agreement (NAFTA) countries, and Asia. Typically, each one of these regions has high-income consumer countries, with nearby supplier countries – be it developing or developed – having suitable climates or other factors for producing. For example, imports within the EU flow mostly to the United Kingdom, France and Germany, and the largest exporters are Spain (for its produce) and the Netherlands (through whose seaports many of the exports are shipped).
There are also remarkable F&V trade flows from MCs such as Morocco or Turkey. To complete the picture of trade for these products, it may be worthwhile to refer again to the discussion on trade preferences and also to the discussion on the specific commercial policies implemented by the EU in some goods. These discussions are carried out in next subsections of this chapter.
Apart from intra-EU supplies, the EU principally buys vegetables from its Euro-Mediterranean partners. As an instance, in the period 2005-2009 the MCs supplied in average about over 40% of the vegetables imported by the EU. With regard to fruits, for the same period close to 17% of fruits imported by the EU were originated in the MCs.
There are a number of F&V to which the MCs are in fact the only suppliers of the EU, according to Comext data corresponding to the period 2006-2009. Virtually all the potatoes imported into the EU are originated in the Euro-Mediterranean partners, mainly Egypt, Israel and Morocco; the same holds for tomatoes, product to which Morocco alone holds more than 60% of EU imports in value. With the addition of the other MCs, the percentage rises to 95%. In the case of cucumbers, the joint Euro-Mediterranean partners’ share into the European imports market goes to 90%, being Turkey on top with about two thirds of total imports.
Turning into fruits, the preponderance of Mediterranean products out of all the extra-EU imports is not so outstanding, although there are several marked exceptions. For instance, Tunisia holds about 50% of dates’ imports value, and the ten Euro-Mediterranean partners jointly account for 83% of dates’ imports value. For figs, Turkey is the main EU provider with above 90% of market share. However, in the case of citrus fruits, MCs do not dominate the European market so clearly, mostly due to off-season imports from the Southern Hemisphere. In fresh oranges and fresh grapefruits, about 30% of extra-EU imports are originated in Euro-Mediterranean countries. For lemons and limes, the percentage lowers to 20%. Yet, in the case of fresh mandarins and clementines, the total Euro-Mediterranean market share rises to 50%.
From these figures one could wonder about the degree of complementarity between the EU and its Southern partners
Trade complementarity can be measured by the cosine...
. Previous researches have calculated the MCs-EU complementarity and shown that it is stronger for Belgium, Germany, Holland and France (Dell’Aquila and Velazquez, 2004). More recently, Martinez-Gomez and Arrieta (2009) assess the complementarity between Morocco and the EU. Some remarkable facts may be highlighted. First of all, considering all the agricultural trade Morocco does not show the same complementarity with all the countries of EU. In fact, the authors identify four “categories” or groups of countries within the EU, according to their affinity with Morocco. The highest affinity occurs between Morocco and France, probably because of historical causes. Another group could be called “EU Northern Countries”, which exhibit a large complementarity, but less than in the French case. The following category is formed by the European Mediterranean countries (Spain, Italy, Portugal and Greece) registering the lesser complementarity. Finally we can place in the intermediate situation the group of new EU countries after mid 2000’s enlargement. The Chart 1 plots the complementarity index for agricultural trade.
Chart 1 - Evolution of agricultural trade complementarity index between Morocco and the EU (2004-2007)
Source: Martinez-Gomez and Arrieta (2009).
A second fact to highlight is that when complementarity is measured only for F&V trade, the complementarity index results in a very high value. Moreover, the group formed by Mediterranean countries climbs to a higher position, paradoxically, at similar level that France. Perhaps such findings could be explained by some entrepreneurial strategies consisting on the diversification of purchases to keep a good portfolio of products, to fill out domestic supply.
Another crucial element to take into account regarding trade in fruits and vegetables in the Mediterranean area is the role played by Non-Tariff Measures. In section 4 we discuss about their implications.
Chart 2 - Evolution of fruits and vegetables trade complementarity index between Morocco and the EU (2004-2007)
Source Martinez-Gomez et Arrieta (2009).
A case study: entry prices on fruits and vegetables imports
The EU protects some of its fruits and vegetables through the entry price (EP) system. In many cases, the system is applied on a seasonal basis and is subject to special provisions for certain suppliers, such as EP reductions and tariff-rate quotas (TRQ). The EP system itself has received a certain degree of attention in the literature related to the implementation of the Uruguay Round agreements (Swinbank and Ritson, 1995), as well as in the analysis of bilateral preferences granted by the EU to Southern Mediterranean Countries (Grethe et al., 2006). Discussions of the EP system have renewed interest in the context of multilateral trade negotiations, as it is still considered an instrument not fully in line with the spirit of tariffication.
The EP system consists of a two-tiered tariff. When the border price of exports to the EU is above or equal to the EP, an ad valorem duty is charged; whereas exports priced below the EP level must pay a supplementary specific tariff after being taxed by the ad valorem tariff. The amount of the specific tariff depends on the relationship between the EP level and the border price for the consignment. For some products and origins, reduced EP are applied. Thus, Jordan and Morocco have agreed with the EU to a reduction of the EP for tomatoes, cucumbers, zucchini, artichokes, oranges, and clementines; while both Egypt and Israel have been granted an EP reduction for their exports of oranges. It is worth mentioning that, except for Jordan, the EP reduction only applies to a given quantity, and the preferential EP is accompanied by a reduction (often elimination) of the ad valorem component of the tariff.
The review of the EU-Morocco agricultural protocol,...
Table below shows estimates of the ad valorem tariff equivalents of the EP system for tomato as applied in the period 2004-2006 on Moroccan tomatoes (García Álvarez-Coque et al., 2010).
Calculated ad valorem equivalents for Morocco (in percentages)
Ad valorem Tariff Equivalent In-quota Ad valorem Tariff Equivalent Out-of-quota Binding TRQ? January 0 46.9 Yes February 0 52.2 Yes March 0 48.4 Yes April 0 44.4 Yes 15-31 May 0 49 Yes June 11,5 11.5 - August 12,2 12.2 - October 0,7 68.6 No November 69,2 72.7 Yes 1-20 December 0 62.1 Yes 21-31 December 0 51.6 No
Source : García Álvarez-Coque et al. (2010) based on TARIC Database (European Commission).
Differences in equivalent tariff out-of-quota and in-quota cause the emergence of a quota-rent. Chemnitz and Grethe (2005) claimed that this system encourages noncompetitive behaviour among traders and provides incentives to collusive arrangements in order to obtain much of the preference rent.
The aforementioned paper by García Álvarez-Coque et al. (2010) assessed the impact of eliminating EP constraints applied to tomato. The proposed model was of a partial equilibrium nature and took seasonality into account. The impact of phasing out the EP system was measured in terms of the loss in domestic EU sales resulting from the elimination of the system. A significant impact was found for some periods of the year, in particular for tomato imports from Morocco. This was true for the period between October and April, with the greatest impact occurring in October, when EP elimination would reduce EU domestic tomato sales by 12%. At the same time, third-country export gains are also concentrated in specific periods: notably, Moroccan tomato exports in November, 1-20 December, January to April, and 15-31 May. The simulation results indicate that EP could be significantly lowered in several periods of the marketing year without substantially affecting trade. Nevertheless, this conclusion does not contradict the hypothesis that the system helps to stabilize prices in certain periods of the marketing year. The most recent review of the Agricultural Protocol between Morocco and the EU, agreed by the end of 2010, foresees the maintenance of the EP for tomato, though TRQ are significantly increased.
While olive is currently grown in many regions of the world, it is the Mediterranean area where it is grown the most. Close to 90% of olive oil production comes from the Mediterranean basin: Spain, Tunisia, Greece, Turkey, Italy and Syria are its main producers. Besides, it has an intrinsic and traditional link with the Mediterranean area and probably olive oil is the most typical food in the Mediterranean Diet.
In spite of the recent widespread interest in the Mediterranean Diet, a noteworthy fact is the loss of market share of olive oil out of the total trade in agricultural fats and oils. In value, olive oil accounted for about the 13% of fats and oils market share in 2004, while in 2008 this weight lowered to 7.4%. In terms of quantities traded, the other main vegetable oils experienced a two-digit growth whereas olive oil volume traded reduced by about 10% for the same period 2004-2008.
The evolution of the values globally imported of different vegetable oils is depicted in the Chart 3. The plot shows the sharp growth of the value traded in vegetable oils other than olive oil, chiefly in the case of palm oil.
In the international market of olive oil, a small group of countries dominates the global market. Considering the average of the period 2006-2008, Spain (over 40% of exports share) and Italy (about 25% of exports share) account for around two thirds of worldwide exports. With the addition of Tunisia and Greece, close to 90% of total exports are originated in these four Mediterranean countries. In the imports side, Italy itself is the destination of one third of total imports, whereas the United States share is over 15%. The rest of major importers are split geographically in and out of the Mediterranean basin, such as Spain, France and Portugal, and Japan, United Kingdom and Germany.
Following Lazzeri (2011), a noteworthy fact in this market is that the per capita consumption declines in virtually all Mediterranean countries while increases in other non-traditional consumer countries. For instance, in the emerging Chinese market imports in 2012 will amount to nearly 63,000 tons and the most optimistic forecasts for the period up to 2015 are as high as 100,000 tons per year. For these countries, the healthy properties of the products are the key determinants of the growing demand and therefore an effort shall be made to ensure quality and to properly inform consumers about the different properties, varieties, origins and applications to a healthy diet. It will allow clearly differenting olive oil from other vegetable oils.
Chart 3 - Evolution of world imports value, selected vegetable oils (2004-2008, Million US$)
Source: Authors’ calculations based on FAOSTAT data.