TRADE IN THE EUROPEAN MARKETS

Transcription

1 Delh Busness Revew X Vol. 11, No. 2 (July - December 2010) THE POSITION OF CZECH AND SLOVAK AGRO-FOOD TRADE IN THE EUROPEAN MARKETS Peter Belk* Artan Qnet** SLOVAKIA and Czech Republc went through a long-term process of transformaton snce they splt from the common federaton state. Trade flows regardng the agro-food commodtes, untl before accesson nto the EU, were lmted because of exstng dfferent tarff and non-tarff barrers. The poston of agro-food trade of a gven country can be judged n dfferent ways. In ths artcle we analyze the compettveness of agrcultural sector n the respectve countres usng Balassa ndexes n an approach developed and appled by Bojnec and Fertö (2006). The objectve of our analyss s the blateral Slovak and Czech agro-food trade, respectvely wth man European partners (EU 25, EU 15 and V-4 & Austra). Keywords: Czech Republc, Slovaka, Agro-food Trade, European Unon. Introducton Slovaka and Czech Republc went through a long-term process of transformaton snce they splt from the common federaton state. Both countres are characterzed by the small sze of ther economes, focused manly on ther nternal markets. Trade flows regardng the agro-food commodtes were untl before accesson nto the EU were lmted because of exstng dfferent tarff and non-tarff barrers. Accesson meant for both countres not only ncreasng opportuntes for agro-trade n the framework of common market, but also ncreasng competton for domestc producers. Many authors consder the ablty of successful adaptaton n the foregn markets as a sgn of compettveness (Pokrvcak and Caan, 2004; Caan and Swnnen, 2006). For all the above mentoned reasons, the analyss of the trends n export compettveness s useful because t mght help to fnd potental problems for dfferent branches of agro-food sector and propose sutable solutons for the future (Caan and Pokrvcak, 2007; Bojnec and Ferto 2006; EU-Commsson, 1999). Concepts and Methodology The poston of agro-food trade of a gven country can be judged n dfferent ways. One way s to analyze the ndcator of compettveness. Compettveness can be analyzed at three dfferent levels: () compettveness of natons (macroeconomc level); () compettveness of ndustres (mesoeconomc level); and () compettveness of frms (mcroeconomc level). Another aspect of compettveness exsts wth regards to the spatal dmenson of the nvestgaton. Compettveness of enterprses can be compared wthn a regon of a partcular country, or between countres. (Bojnec and Fertö, 2006). There are dfferent approaches that help to evaluate the compettveness at the natonal level. One way s the analyss of comparatve advantages that assumes that nternatonal trade exchanges happen due * Dean, Department of Economcs, Faculty of Economcs and Management, Slovak Unversty of Agrculture, Ntra, Slovak Reputlc ** Department of Economcs, Faculty of Economcs and Management, Slovak Unversty of Agrculture, Ntra, Slovak Reputlc. 1

2 Peter Belk and Artan Qnet to dfferences n relatve opportunty costs between trade partners. However there s a dfference between the concepton of comparatve advantage and compettveness. Frst dfference arses from trade dstortons that are ncluded nto the concept of compettveness but that are not part of comparatve advantage. Other dfferences have been dentfed by other authors (Lafay, 1992). Compettveness usually compares countres for the same selected groups of commodtes whle comparatve advantage s estmated to compare dfferent groups of commodtes. Also, compettveness s vulnerable to changes n macroeconomc varables whle comparatve advantages have a natural structural character (Bojnec, 2001; Ferto and Hubbard, 2003). We dvde the analyzed commodtes based on ther comparatve export advantage nto two groups, where the frst group ncludes commodtes that regster the hghest value of Balassa ndex and at the same tme ther exports n 2006 were above the value of 100 mllon SKK. Such condton helps for the purposes of our analyss. The other group ncludes 5 top commodty group, that regstered the hghest export value n 2006 and the value of Balassa ndexes n order to conclude about ther comparatve export advantages. The comparatve export advantages of Slovaka and Czech Republc are analyzed n relaton to these markets EU 25 (ncludes European Unon member countres after the enlargement of 2004), EU 15 (EU member countres before the enlargement of 2004) and V4 & Austra (where V4 ncludes Slovaka, Czech Republc, Poland and Hungary). The nature of comparatve advantage n trade data are the man methodologcal approaches that are appled n ths paper. The concept of revealed comparatve advantage, ntroduced by Lesner (1958) but refned and popularzed by Balassa, (1965) and therefore known as the Balassa ndex, s wdely used emprcally to dentfy a country s weak and strong export sectors. Porter, (1990) uses t to dentfy strong sectoral clusters, Amt, (1998) analyses specalzaton patterns n Europe, Proudman and Reddng (2000). The Revealed Comparatve Advantage (RCA) ndex s defned by Balassa (1965) as follows: B = (x j /x rj )/(x s /x rs ) (1) where x represents exports, s a commodty, j s a country, r s a set of commodtes and s s a set of countres. B s based on observed trade export patterns; t measures a country s exports of a commodty relatve to ts total exports and to the correspondng export performance of a set of countres. If B > 1, then a comparatve advantage s revealed,.e., a sector n whch the country s relatvely more specalzed n terms of exports. In our case x j descrbes Czech and Slovak exports for a partcular product group to EU 25, EU 15 and V4 (Poland, Hungary, Czech or Slovak Republc) countres, whle x s s total agro- food of Czech or Slovak Republc to EU 25, EU 15 and V4 & Austra. X rj denotes the EU3 s exports for a gven product and xrs total agro-food exports by EU 25, EU 15 and V4 & Austra, whch are used as the benchmark of comparson. Our paper s focused on the stablty of the B trade ndces over tme. One can dstngush at least two types of stablty Hnloopen and van Marrewjk (2001, 2004): () stablty of the dstrbuton of the ndces from one perod to the next; and () stablty of the value of the ndces for partcular product groups from one perod to the next. In our paper we analyze the frst type of stablty n the followng way: followng Dalum, Laursen and Vllumsen (1998) we use B n regresson analyss: B t 2 j = α + β B + ε t1 j j (2) where superscrpts t1 and t2 descrbe the start year and the end year, respectvely. The dependent varable, the value of B at tme t2 for sector n country j, s tested aganst the ndependent varable whch s the value of B n year t1; and α are β standard lnear regresson parameters and ε s a resdual term. If β = 1, then ths suggests an unchanged pattern of B between perods t1 and t2. If β > 1, the exstng specalzaton of the country s strengthened. If 0 < β < 1, then commodty groups wth low 2

3 Delh Busness Revew X Vol. 11, No. 2 (July - December 2010) (negatve) ntal B ndces grow over tme, whle product groups wth hgh (postve) ntal B ndces declne. The specal case s where β < 0 ndcates a change n the sgn of the ndex. However, Dalum, Laursen, and Vllumsen (1998) pont out that β > 1 s not a necessary condton for growth n the overall specalzaton pattern. Thus, followng Cantwell (1989), they argue that: σ β = σ R t 2 t1 (3) where R s the correlaton coeffcent from the regresson and β s the varance of the dependent varable. It follows that the pattern of a gven dstrbuton s unchanged when β = R. If β > R the degree of specalzaton has grown, whle f β < R the degree of specalzaton has fallen. Data and Emprcal Results For the purposes of emprcal analyss on trade types of blateral Slovak and Czech agro-food trade, respectvely wth man European partners (EU 25, EU 15 and V-4 & Austra), we use trade data from EUROSTAT by the years The sample conssts of 201 tems at four-dgt level. The Analyss of the Poston of Czech and Slovak Agro-Food Trade wth EU 25. The analyss of comparatve export advantages s done based on estmated values of Balassa ndexes. Usng ths ndex s a convenent approach because the analyss s based on ts composton serves as benchmarkng wth respect to the comparson of export flows between two countres or between a gven country and a group of countres. Table 1: The B Index Development for Selected Commodty Exports: Slovak Republc - EU In the table 1 we show the data about comparatve export advantage for Slovak Republc. Among commodtes wth the hghest B ndex we dentfy only one group where ts comparatve advantage toward EU ncreased. Ths group ncludes dry fruts, nuts and ther mx (0813). The values of other groups fell remarkably, where bggest fall was regstered for the commodty groups lke sunflower seeds and malt. It s a postve fact that all fve top export commodtes, they acheve comparatve advantages toward EU 25, where the hghest value was regstered for maze exports (8,0191). Comparatve advantage ncreased after the accesson nto EU for 3 out of 5 top export commodtes n 2006, where for groups lke 1701, 1005 and 1001 such ncrease was regstered after the accesson. Data on comparatve export advantages for Czech Republc toward countres of EU 25 are gven n table 2. In contrast to the case of Slovaka, the group of commodtes wth the hghest values of B ndex n 2006 for Czech Republc were olseeds (1207), hops (1210) and lve fsh (0301). However none of them sustaned ther comparatve advantages after the accesson of Czech Republc nto EU. 3

4 Peter Belk and Artan Qnet 4 Table 2: The B Index Development for Selected Commodty Exports: Czech Republc - EU Smlarly lke n Slovaka, the top export groups n Czech Republc regstered comparatve advantage for 2006 as well. EU accesson helped especally non-concentrated mlk and yogurts (0401) as well as sugar (1701). In order to analyze the development of comparatve export advantages for the whole sample of commodtes we estmated medan values of B ndexes as well as defne the trend n the share of B ndexes greater than 1 on the whole sample. The frst concluson s that nether Slovaka nor Czech Republc enjoyed comparatve advantages n agro-food exports to EU 25 markets. The medan value of B ndexes on each and every year was lower than one. Czech Republc seems to be n a better poston though, as t has a larger group of commodtes wth B ndexes hgher than 1. For example n 2006, 59 commodty groups had B ndexes hgher than one (n fact n 1999 the stuaton was dentcal). However the development was not constant n between these years. On the other sde n Slovaka we regster a reducton n the number of groups wth B ndexes hgher than one, whle t was 66 groups n 1999, t fell to 53 n The graphcal demonstraton of the development n the value of B ndexes hgher than one can be seen n the Fgure 1. The declne n comparatve export advantages for the Czech and Slovak Republc durng the analyzed perod can be explaned among other factors, wth the low producton base of agro-food sector n both countres n comparson to EU 25. Table 3 represent the stablty of B ndex between the start year and the end year of the analyzed perod for a sample of 201 commodty groups. Table 3: The Stablty of B Index between 1999 and 2006: Slovak, Czech Rep. - EU 25 β p value R² β/r N Slovak Republc Czech Republc If 0 < β < 1, ths suggests that commodty groups wth low (negatve) ntal B ndces are lkely to grow over tme, whereas product groups wth hgh (postve) ntal B ndces declne. In our case the values of β ndex for Slovaka and Czech Republc are postve and around 0,5 ndcatng that the hypothess of reverse patterns of the B value can not be rejected and that trade patterns have changed over the analyzed perod. Ths mght sgnal declnng comparatve advantage for Slovak and Czech agro-food commodtes that once had shown strong advantage comparng wth EU 25. The values of the β/r Slovaka and Czech Republc are approxmately smlar n the EU 25 market, whle β < R n both countres means decreasng of agro-food export specalzaton wth EU 25 countres and especally for Czech republc ths s documented also by the hgh value of B ndex even though the share B > 1 returned to the level of basc year there. Ths means that specalzaton declne was relatve.

5 Delh Busness Revew X Vol. 11, No. 2 (July - December 2010) 0,550 0,500 0,450 0,400 0,350 0,300 0,250 0, SR share B>1 R share B>1 SR medan R medan Fgure 1: Medan and the Share of Product Groups B>1: Slovak, Czech Rep. EU 25. The Analyss of the Poston of Czech and Slovak Agro-Food Trade wth EU 15 The composton of commodty groups wth the hghest value of B ndex and export value above 100 mllons SKK n 2006, n the trade relatons. There s a remarkable declne for the group of sunflower seeds whch ndeed started to fall before accesson. Almost all commodty groups faced sgnfcant declne n ther comparatve advantage n the EU 15 market except dry fruts and nuts (0813), where an ncrease n comparatve advantage was regstered before and after EU accesson. Hgher Slovak comparatve advantages n EU 15 market than n the case of EU 25 were regstered for commodtes lke: sugar (1701), maze (1005), wheat (1001). Table 4: The B Index Development for Selected Commodty Exports: Slovak Republc - EU Czech Republc regstered only slght changes n comparatve advantages n EU 15 market compared to EU 25. Hgher advantages after ts EU accesson were regstered for commodtes lke mlk and nonconcentrated yogurts, seeds and olseeds (1207). In the case of Czech Republc, agro-food commodtes regster hgher comparatve advantage n EU 15 market than n EU 25 market. Surprsngly and contrary to expectatons of many, malt beer (2203) has lower comparatve advantage n EU 15 market than n EU 25. In Czech Republc 3 out fve top export commodtes faces lower comparatve advantages after EU accesson whle n Slovaka only 2 out of fve. Data on B ndex are shown n Table 5. 5

6 Peter Belk and Artan Qnet 6 Table 5: The B Index Development for Selected Commodty Exports: Czech Republc - EU The development of medan value of B ndex n EU 15 market for the analyzed perod shows ts ntally fallng tendency, followed by an even more remarkable declne n Slovaka after ts EU accesson. However, after that moment data show some ncreasng tendency n tme. In general, nether Czech nor Slovak data for agro-food commodtes show sgns of comparatve export advantage. However the medan value for Czech Republc s for the whole analyzed perod, hgher than n Slovaka. The share B > 1 on the whole sample shows smlar tendences lke n the case of EU 25 market. In Czech Republc 59 commodtes acheve comparatve advantage n EU 15 market, equally the same as n EU 25 case. In the analyzed perod, the maxmum value was regstered for Czech Rep. n, where B > 1 for 67 commodtes. In Slovaka, opposte tendences were regstered, the share B > 1, declned from 37% (67 commodtes) to 32% (54 commodtes). Table 6 Demonstrates the Results of Regresson Analyss of B Index for the Czech Republc and Slovaka n the Perod Table 6: The Stablty of B Index between 1999 and 2006: Slovak, Czech Republc - EU 15 β p value R² β/r N Slovak Republc Czech Republc The value of β, that show for the dsperson of B ndex n tme n both countres s lower than 1. Ths means that commodty groups showng hgh comparatve export advantages n EU 15 market at the begnnng of analyzed perod, tend to declne later both n Slovaka and Czech Republc It s nterestng to see that commodtes wth relatvely low B ndex (.e. commodtes wth comparatve dsadvantage) show opposte tendences. β/r share s hgher n the EU 15 market n case of Slovaka. However n general ths share reman lower than 1, meanng that β < R for both countres. So t can be concluded that agro-food trade n Czech and Slovak Republc can be characterzed as trade wth fallng exportng specalzaton and as a result potentally loosng compettveness n EU 15 market. In Czech Republc, judgng the share B > 1, the same group of commodtes acheve comparatve advantages at the begnnng and at the end of analyzed perod. From the results of regresson analyss t can be concluded that the declne n compettveness s caused by the fall n the value of hgh B ndexes,.e., prevously strong comparatve advantages has been declnng. The Analyss of the Poston of Czech and Slovak Agro-Food Trade wth Countres of V-4 and Austra. The V4 regon ncludes countres lke Slovaka, Czech Republc, Hungary and Poland. They belong to

7 Delh Busness Revew X Vol. 11, No. 2 (July - December 2010) 0,550 0,500 0,450 0,400 0,350 0,300 0,250 0, SR share B>1 R share B>1 SR medan R medan Fgure 2: Medan and the Share of Product Groups B>1: Slovak, Czech Rep. - EU 15. ex-communst countres, that once operated a centrally planned economy and after 1989 entered an ambtous path of reforms and transformaton. Besde hstorcal smlartes these countres share also a common geographcal locaton. We added nto ths analyss Austra because t s a neghbor of both analyzed countres Slovaka and Czech Republc, as well as represents an mportant market for both countres. In Table 7 we show data on B ndex n 2006 for Slovaka testng aganst exports of V4 groups & Austra. Changes were regstered regardng the poston of Slovak commodtes wth the hghest comparatve advantage n the trade relatons wth V4 & Austra, contrary to the case of EU 25 and EU 15. The frst place belongs to commodty group lke sheep or goat meet (0204), where the value of B ndex steadly ncreased durng the whole analyzed perod. Strong comparatve export advantage were regstered for olseeds and cotton ol (1512), as well as pork and poultry fat (1501). It s mportant to emphasze that n the markets of V4 & Austra Slovak commodtes wth the hghest export values n 2006, kept ther advantage even though there were some exceptons lke sugar, maze and wheat that scored lower than n the case of EU 15 and EU 25. Table 7: The B Index Development for Selected Commodty Exports: Slovak Republc V4 & Austra Changes n comparatve export advantages for agro-food commodtes n the markets of V4 & Austra were regstered n the case of Czech Republc as well, especally commodtes wth top values of B ndexes. The group of top 5 commodtes n Czech Republc, wth the hghest B ndex n 2006 ncludes 7

8 Peter Belk and Artan Qnet lve fsh, plant juces (1302) and (contrary to the case of EU 15 and EU 25) malt beer. However after the accesson of Czech Rep. nto EU, B ndex for beer declned n the V4 & Austra markets too. Among the Czech commodtes wth hghest value of exports n 2006 only one commodty showed comparatve dsadvantage (ths s chocolate and cocoa products (1806)). In the perod after the enlargement the value of 3 out of 5 top Czech export commodtes worsened, whle n Slovaka ths was the case only for one tem: chocolate and cocoa products. Data for top export commodtes are shown n Table 8. Table 8: The B Index Development for Selected Commodty Exports: Czech Republc V4 & Austra The values of medan B ndexes n the perod show that Czech agro-food commodtes tend to reach the lmt of comparatve advantage n the markets of V4 & Austra. In Slovaka, to the contrary the B ndex values tend to fall whle the medan value of B ndex n 2006 s below that of In Czech Republc the share of B > 1 ncreased from 37% (74 commodtes) to 42% (85 commodtes) whle Slovaka faced opposte tendences as share B > 1 declned from 37% (74 commodtes) to 34% (69 commodtes). Data from regresson analyses for Czech Republc based especally on β values show that there s a tendency of fallng compettveness and specalzaton. The value of β/r however reverses the above mentoned concluson, so the agro-food export specalzaton remans n the markets of V4 & Austra. Ths backed by the medan value of B ndex as well as B > 1 frequences. 0,900 0,800 0,700 0,600 0,500 0,400 0,300 0, SR share B>1 R share B>1 SR medan R medan Fgure 3: Medan and the Share of Product Groups B>1: Slovak, Czech Rep. - V4 and Austra. Regardng the future, there s potental for ncreasng medan value.e., ncreasng export specalzaton n the markets of V4 and Austra. In the case of Slovaka, â s hgher than 0 and moves closer to1,

9 Delh Busness Revew X Vol. 11, No. 2 (July - December 2010) Table 9: The Stablty of B Index between 1999 and 2006: Slovak, Czech Rep. - V4 & Austra β p value R² β/r N Slovak Republc Czech Republc meanng that the fall n comparatve advantage for agro-food commodtes wth hgh B ndexes s slower than n the case of trade wth EU 15 and EU 25. The value of â/r approaches 1, meanng that there s no remarkable change n specalzaton. Fallng share of B > 1 frequences s compensated by a lower fall n the values of B ndexes for commodtes wth strong comparatve advantages. Conclusons of Analyss Based on the analyss of comparatve export advantages accordng to the estmated values of Balassa ndexes for the purpose of comparson of export flows between Czech Republc and Slovaka on one hand and a selected group of EU countres on the other we can conclude: There are dfferences between Czech Republc and Slovaka regardng the commodty groups wth a comparatve advantage. In general for both countres top commodtes regstered ncreased comparatve advantage wth EU 25 after accesson. Nether Slovaka nor Czech Republc enjoyed comparatve advantages n agro-food exports to EU 25 markets. In Slovaka we notced a reducton n the number of groups wth comparatve advantage toward EU 25. Trade patterns have changed over the analyzed perod and there are sgnals ndcatng declnng comparatve advantage for Slovak and Czech agrofood commodtes that once had shown strong advantage comparng wth EU 25. Smlar tendences were notced n the comparson between Slovaka, Czech Republc and EU 15. In general, nether Czech nor Slovak data for agro-food commodtes show sgns of comparatve export advantage. However data for Czech Republc durng the whole analyzed perod, show hgher agro- food comparatve advantage than n Slovaka. Regardng the group that ncludes Czech Republc Slovak neghbors (V4 + Austra), Czech Republc regstered ncreasng comparatve advantage. Slovaka faced opposte tendences. Regardng the future, there s potental for ncreasng medan value.e., ncreasng export specalzaton n the markets of V4 and Austra. Recommendatons Apparently, Czech and Slovak agro-food enterprses face a dffcult task competng n the EU market. Transformaton whle t mght have helped the economy as a whole, has not contrbuted to the ncrease of Czech and Slovak agro-food compettveness n the European markets. Both countres should focus on ncreasng the opportuntes for those products where they stll regster comparatve advantages n Europe. For the rest of commodty groups, they should look for other markets out of EU. However, gven the huge sze of agrcultural enterprses n these countres, n comparson to the rest of the EU and the Common Agrculture Polcy support dsbursed to them, the stuaton mght stll change. However, ths requres a more actve polcy from local mnstres and entrepreneurs wth respect to searchng for new markets and mprovng the poston of ther products n the EU markets by mprovng effcency, adoptng modern manageral approaches and followng the trends n the nternatonal markets. References Amt, M. (1998), New Trade Theores and Industral Locaton n the EU, Oxford Revew of Economc Polcy, Vol. 14, No. 2, pp Balassa, B. (1965), Trade Lberalzaton and Revealed Comparatve Advantage, The Manchester School of Economc and Socal Studes, Vol. 33, No. 1, pp Bojnec, S. and Ferto, I. (2006), Comparatve Advantages and Compettveness of Hungaran and Slovenan Agro-Food 9

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