My poster assignment in Agricultural Policy Seminar

1. Export refunds of the EU: Impact on trade with Africa
Xuan Lam Duong - Email: xuanlam.duong@stud.uni-goettingen.de
Agricultural Policy Seminar – WS 2011-2012
Sustainable International Agriculture Program
Introduction:
The European Union is a major trading partner of the Africa and has the potential to become a major source of imports to the African markets.
Agriculture is the mainstay of African economies and it is the largest employer, a source of foreign exchange earning and a means of livelihood to a
majority. Any internal or external factor that affects the sector will affect the livelihood of the entire African economies. For these reasons, the
agricultural policy pursued in the European Union has consequences to the African countries. Specifically, the usual sale of European agricultural
products to Africa using export refunds (or export subsidies) has been heavily discussed in recent decades. This paper aims to give some main ideas
about the impacts of export refunds of the EU on trade with Africa.
Export refunds of the European Union Impact of EU export refunds on trade with Africa
• The CAP was first implemented in the 1960s • The EU is the largest trading partner and • The EU imposes general higher food safety
and now more complex with export refunds largest export market for every almost every standards which are particularly challenging
considered as an important component country in Africa for smallholder producers and developing
• Annually, the EU provides more than 40 countries, including Africa nations
Figure 2: European Union trade with Africa (millions
billion Euro as subsidy to agriculture sector of euro) • EU’ goods enter into African markets easily
• The most common product groups where with less subject to the binding of tariffs as
export refunds are applied are agricultural
200,000
well as other sticky requirements in terms of
and dairy products 150,000 quality and food safety issues
• Export refunds remain a controversial and 100,000 • About every agricultural product the EU's
unresolved issue of international trade 50,000 exporters have on offer is directly or
• Under the global pressure on food security, 0
indirectly subsidised
the EU has reduced significantly its export -50,000
• With export refunds, the EU has achieved
refunds 2006 2007 2008 2009 2010 much advantages resulting in the trade
Source: EUROSTAT, 2011 Imports Exports Balance
balance with the Africa
Figure 1: The changing structure of CAP budget Figure 3: Africa trade with European Union
expenditure 1980–2009, € billion, current prices. (millions of euro)
• EU has several trade-friendly regimes in
place to facilitate market access, including 160,000
140,000
the negotiated Economic Partnership 120,000
100,000
Agreements (EPAs) with Africa 80,000
60,000
40,000
• While the African market was opened to 20,000
0
goods from Europe, it would take 12 years -20,000
-40,000
for the European market to be opened to 2006 2007 2008 2009 2010
agriculture produce from Africa Imports Exports Balance
Source: EUROSTAT, 2011
• The African countries exports mainly
consist of raw materials while the share of
manufactured goods remains comparatively • The relative poor export performance of the
• The elimination of export refunds would
low African countries can be partly attributed to
lead to an increase in world prices, but would
• Africa manufacturing firms have responded their export structures
have a limited impact on trade volumes and
welfare of DCs poorly to the availability of export subsidies
• These impact will still be significant if
combined with the elimination of tariffs and
domestic support
Conclusion
References • African countries would be particularly hurt by export subsidies,
Howard .K. Gruenspecht (1987): Export subsidies for differentiated products, Journal especially given that many of them heavily depend on agricultural
of International Economics 24 (1988) pp. 331-334. North-Holland. exports, which are the most commonly targeted by subsidies.
• Rising export subsidies will cause deterioration of
Herzfeld .T. (2005): Export refunds of the European Union and their effects on macroeconomic balances in African countries, further eroding
developing countries: the case of beef exports to Africa, Acta Agriculturae their fiscal space
Scandinavica Section C - Food Economics, Vol. 2, No. 2, pp. 77-86, 2005
• All countries should refrain from trade distorting export
Low. P. (1982): Export subsidies and trade policy: the experience of Kenya, World subsidies, given their damaging effects not only on growth, but
Development, Vol. 10, No.4, pp. 293-304. Printed in Great Britain. also on the living standards of the poor