The comparative advantage of South Africa soybean production

Abstract

The effect of trade policy on the South African soybean industry is analyzed by using 4 digits Standard International Trade Classification of soybean (1201) data of 1996-2011. The Revealed comparative advantage (RCA), Hirschman index, Major export category, Effective rate of protection (ERP) and Nominal rate of protection (NRP) were calculated. The RCA of the soybean industry in South Africa has shown a revealed comparative disadvantage from 1996-2011. Hirschman index indicates that the soybean industry shows lower concentration throughout 16 years. Lower concentration reduces the impact of international trade risk due to the possibility of price fluctuation of the soybean product. MEC measurement also indicates that South Africa does not rely its international trade from the soybean industry. ERP and NRP were also calculated, using an enterprise budget for soybean production. The result shows that the ERP is negative, which indicates that the weighted input tariffs on soybean inputs amount are more than the output tariffs; that is an indication producers of soybean would be better off, everything else being equal, by not being protected through tariffs. The NRP is higher than the ERP which implies that the tariff applied on the output is higher than the tariff applied on inputs. The structure of the tariff schedule may have an important bearing on efficiency. Thus, the study recommended that an extremely dispersed and ill-chosen tariff structure implies that protection remains uneven and gains from openness may still be confined.