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Trade and policy influences

 

The trade and policy research program enables BFAP to analyse and compare commodity trade flows with other countries, be they suppliers or markets. This makes it possible to understand and explain the role of bilateral and multilateral trade obligations in policy formation. The effects of macroeconomic indicators, such as exchange rates, and other macroeconomic policies of other countries that are transmitted into the South African markets are explained through the linkages with agricultural commodities.

The BFAP modelling framework has been used successfully to provide objective simulations regarding trade policy. Potential changes to trade policy are simulated at sector level and compared to the baseline in order to quantify the effect of proposed policy changes on the South African agricultural sector. Use of the complete modelling system allows quantification throughout the value chain. Policy shocks simulated at sector level are transmitted to farm level in order to illustrate the effect on the long-term sustainability of primary producers. At the same time, changes to producer prices are transmitted to retail level, quantifying the effect on consumer prices and welfare. The labour multiplier model further enables quantification of possible employment implications.

Successful simulations have been conducted for the NAMC and ITAC regarding poultry import tariffs (2013) and the reference price related to wheat import tariffs (2012). A single graph illustrating the type of results obtained from a simulation comparing different tariff rates is included below:

 Trade and policy1

 

 

Apart from quantitative simulations used to inform policy, detailed analysis by BFAP’s trade specialists enable an improved understanding of trade patterns for specific commodities as well as the origin and destination of products being traded. Understanding trade flows and the reasons underlying changes in trade flows present an integral part of trade policy analysis, allowing simulations to be conducted at a disaggregated level in order to present results and implications at a high level of detail. While quantification remains integral, a qualitative understanding is equally important. A detailed breakdown of trade in chicken products is provided as a single example below: