Does trade policy impact food and agriculture global value chain participation of SSA countries? Jean Baliè 1 Davide Del Prete 1 2 Emiliano Magrini 1 Pierluigi Montalbano 3 4 Silvia Nenci 5 1 FAO 2 IMT Lucca 3 Sapienza University 4 Sussex University 5 Roma Tre University AEC 2017 - Addis Ababa Davide Del Prete Agro-Food GVCs in SSA AEC 2017 1 / 36
Introduction Main Motivations Global Value Chains (GVCs) are re-shaping the political process through which trade policy is made: 2011 WTO Made in the World Initiative TPP focus on supply chains (Wall Street Journal, 2013) China s One Belt, One Road intiative (The Economist, 2017) Supply Chains consequences of Brexit (Financial Times, 2017) Their complexity makes it harder to understand trade and to formulate policies that allow workers, firms, and governments to capitalize on GVCs while mitigating negative side-effects (Dollar, 2017) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 2 / 36
Introduction Main Motivations Economic growth: In SSA, agriculture generates 25% of GDP on average and roughly 65% of the employment. The broader agribusiness sector is estimated to account for about 50% of GDP. Global demand: World food production may need to increase by 70% by 2050 (FAO, 2016). Africa can contribute to the global supply to meet increasing global demand. Trade policy: in agriculture and food import protection levels are still significant (Bown and Crowley, 2016). This may have an amplified effect when production processes involve multiple border crossings (OECD, 2013). Davide Del Prete Agro-Food GVCs in SSA AEC 2017 3 / 36
Introduction Traditional vs. VA trade statistics in Cotton VC Figure: from AEO (2014) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 4 / 36
Introduction Research Question and Main Findings 1 By applying the WWZ (2013) decomposition, we first provide a full map of the bilateral/sectoral participation of SSA countries into the agro-food GVCs: a deep involvement into GVCs and an increasing importance of international linkages, although still limited to upstream production stages. looking at the bilateral trade in value added, we show that the demand pull for SSA agricultural production is not regional but mainly driven by the EU and emerging countries. 2 Do bilateral trade policies matter for GVC participation in the agro-food sectors? trade agreements and tariffs are key determinants of the heterogeneous involvement across SSA. Davide Del Prete Agro-Food GVCs in SSA AEC 2017 5 / 36
Introduction Plan of talk 1 Introduction 2 Data and Methodology 3 Descriptive Analysis 4 Empirical Analysis Bilateral and Sectoral Decomposition 5 Policy implications Davide Del Prete Agro-Food GVCs in SSA AEC 2017 6 / 36
Introduction Data Trade policies: bilateral RTA for the last 66 years (Egger and Larch, 2008). bilateral average tariff at 2-digit level (WITS-TRAINS). GVC bilateral/sectoral indicators: Eora provides a detailed multi-regional I-O table, first release mid-2012. Eora is very detailed: 185 countries and 25 harmonized sectors from 1990 to 2013. Davide Del Prete Agro-Food GVCs in SSA AEC 2017 7 / 36
Introduction Coverage: African Countries 1 Algeria 18 Ethiopia 34 Namibia 2 Angola 19 Gabon 35 Niger 3 Benin 20 Gambia 36 Nigeria 4 Botswana 21 Ghana 37 Rwanda 5 Burkina Faso 22 Guinea 38 Sao Tome and Principe 6 Burundi 23 Kenya 39 Senegal 7 Cameroon 24 Lesotho 40 Sierra Leone 8 Cape Verde 25 Liberia 41 Somalia 9 CAR 26 Libya 42 South Africa 10 Chad 27 Malawi 43 Swaziland 11 Congo 28 Madagascar 44 Tanzania 12 Cote d Ivoire 29 Mali 45 Togo 13 DRC 30 Mauritania 46 Tunisia 14 Congo 31 Mauritius 47 Uganda 15 Djibouti 32 Morocco 48 Zambia 16 Egypt 33 Mozambique 49 Zimbabwe 17 Eritrea Davide Del Prete Agro-Food GVCs in SSA AEC 2017 8 / 36
Introduction Coverage: Common 25 ISIC-type classification. Sector name ISIC Rev.3 correspondence Agriculture 1,2 Fishing 5 Mining and quarrying 10,11,12,13,14 Food and beverages 15,16 Textiles and wearing apparel 17,18,19 Wood and paper 20,21,22 Petroleum, chemical and mineral products 23,24,25,26 Metal products 27,28 Electrical and machinery 29,30,31,32,33 Transport equipment 34,35 Other manufacturing 36 Recycling 37 Electricity, gas and water 40,41 Construction 45 Maintenance and repair 50 Wholesale trade 51 Retail trade 52 Hotels and restaurants 55 Transport 60,61,62,63 Post and telecommunications 64 Financial intermediation and business activities 65,66,67,70,71,72,73,74 Public administration 75 Education, health and other services 80.85,90,91,92,93 Private households 95 Others 99 Davide Del Prete Agro-Food GVCs in SSA AEC 2017 9 / 36
Introduction Gross Exports Decomposition equation Figure: from Wang et al. (2013) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 10 / 36
Introduction Gross Exports Decomposition: DVA, FVA and DC Figure: adapted from Wang et al. (2013) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 11 / 36
Introduction Value-Added trade statistics and its components Figure: adapted from AEO (2014) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 12 / 36
Introduction Plan of talk 1 Introduction 2 Data and Methodology 3 Descriptive Analysis 4 Empirical Analysis Bilateral and Sectoral Decomposition 5 Policy implications Davide Del Prete Agro-Food GVCs in SSA AEC 2017 13 / 36
Descriptive Analysis Gross Exports Decomposition 2013 Davide Del Prete Agro-Food GVCs in SSA AEC 2017 14 / 36
Descriptive Analysis GVC participation Agriculture 2013 Davide Del Prete Agro-Food GVCs in SSA AEC 2017 15 / 36
Descriptive Analysis Uganda bilateral agriculture GVC participation 2013 Davide Del Prete Agro-Food GVCs in SSA AEC 2017 16 / 36
Empirical Analysis Plan of talk 1 Introduction 2 Descriptive Analysis 3 Data and Methodology 4 Empirical Analysis Bilateral and Sectoral Decomposition 5 Policy implications Davide Del Prete Agro-Food GVCs in SSA AEC 2017 17 / 36
Empirical Analysis Empirical Strategy GVC ijt = β 0 + β 1 TP ijt + Φ it + Φ jt + Φ ij + ε ijt Variables: GVC: dirdva, DVX, FVA, dirrdv, MVA. Trade Policies: bilateral tariff and RTA. Φ: reporter-time, partner-time, country-pair fixed effects. Davide Del Prete Agro-Food GVCs in SSA AEC 2017 18 / 36
Empirical Analysis Gravity-like estimates for Agriculture Davide Del Prete Agro-Food GVCs in SSA AEC 2017 19 / 36
Empirical Analysis Gravity-like estimates for Food Davide Del Prete Agro-Food GVCs in SSA AEC 2017 20 / 36
Conclusions Conclusions Despite low trade shares at the global level, SSA countries are deeply involved in GVCs and the relevance of their international linkages is increasing over time, although still limited to upstream production stages. The demand pull for SSA agricultural production in value added is not regional but mainly driven by the EU and emerging countries. Trade policies are key determinants of heterogeneity in GVC participation and position across SSA and there is evidence of a chain effect. Our framework provides scholars and policymakers with a proper and useful tool to test the importance of alternative sectoral policy measures on bilateral trade relationships. Davide Del Prete Agro-Food GVCs in SSA AEC 2017 21 / 36
Conclusions Follow-ups Network analysis: we analyze the existence of specific choke (central) points along the chain that can lead to relatively high trade frictions (Del Prete, Leone Sciabolazza and Santoni (2017)). OECD-FAO: The GTAP database contains a rich source of data on agricultural sectors. This project will make use of version 9.2 of the database, which covers 141 regions across 22 agro-food sectors in 2004, 2007 and 2011, and the approach developed in Greenville et al. (2017a). Davide Del Prete Agro-Food GVCs in SSA AEC 2017 22 / 36
Thank you davide.delprete1986@gmail.com https://sites.google.com/site/davidedelprete1986/
Appendix GVC participation All Sectors 2013 Davide Del Prete Agro-Food GVCs in SSA AEC 2017 24 / 36
Appendix GVC participation over time Davide Del Prete Agro-Food GVCs in SSA AEC 2017 25 / 36
Appendix GVC participation Agriculture in SSA 2013 Davide Del Prete Agro-Food GVCs in SSA AEC 2017 26 / 36
Appendix Bilateral RTAs by region/area Davide Del Prete Agro-Food GVCs in SSA AEC 2017 27 / 36
Appendix Tariffs faced by region/area Davide Del Prete Agro-Food GVCs in SSA AEC 2017 28 / 36
Appendix Tariffs faced by sectors Davide Del Prete Agro-Food GVCs in SSA AEC 2017 29 / 36
Appendix Gravity-like estimates for Agriculture (weighted tariffs) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 30 / 36
Appendix Gravity-like estimates for Food (weighted tariffs) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 31 / 36
Appendix Gravity-like estimates for Agriculture and Food (2SLS) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 32 / 36
Appendix Gravity-like estimates for Agriculture (country pair clustered SE) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 33 / 36
Appendix Gravity-like estimates for Food (country pair clustered SE) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 34 / 36
Appendix PPML estimates for Agriculture (country pair clustered SE) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 35 / 36
Appendix PPML estimates for Food and Beverages (country pair clustered SE) Davide Del Prete Agro-Food GVCs in SSA AEC 2017 36 / 36