Applied Trade Methods

7/29/2019 Applied Trade Methods

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INDIAN INSTITUTE OF FOREIGN TRADE

Dr. Bibek Raychaudhuri

Comprehensive Analysis usingPrimary & Secondary Data


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Approach & Methodology for the study

Potential Products for Exports

NTBs & Market Access Issues Export Strategies & Implementation

Issues

Plan


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Objective

To find new export products from a geographicregion


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Uniqueness

Find products which are new export items Export potential at a sub-regional level


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Approach & Methodology


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Approach

Secondary Analysis

Primary Analysis

Policy Implications


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Data Source

The export data of India has been accessed from DGCI&S (Website ofMinistry of Commerce) for the year 2000-2001 & 2005-06 at four digitHS-96 Code

The production data of the state has been sourced from Annual Surveyof Industries at 3 digit of NIC-98 Code for the year 2003-04

Finally the codes has been matched by using the concordance tableprepared by Debroy & Santhanam and later developed by Debroy &Chakraborty

Agriculture data has been obtained from CSO for the year 2002-03. Asconcordance is not available for agricultural product, it has beenlogically matched


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Methodology

Items with high value of production and products having

production advantage (Production RCA>1) in Karnataka arematched with the set of commodities where export growth arehigh from India or there are potential markets for exportable fromIndia (according to the Shift Share Methodology)

The set of products with value of production are matched with

Karnatakas export items: If they matched potential have beenrealised, if not there is unrealised potential for exports. Samemethod has been applied for the products having high productionor production advantage in Karnataka and products havingpotential from India as identified by shift share approach

The union of the products identified through the two sets ofproduct matching in the earlier step have been identified asproducts having export potential from Karnataka.


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Through a survey of the various stakeholders (like exporters,producers, Govt. Officials, Export promotion bodies) in Karnatakawe have tried to verify the robustness of our methodology toidentify the products.

Secondly, products which couldnt be identified due to the

limitation of secondary data has been added through theperception of the stakeholders.

For the potential products the destination have been identifiedand market access issues have been analyzed for thosecountries, where relevant

Policy measures for Export promotion have been highlightedthrough the survey findings, focusing the exporters concerns

Methodology( Cont.)


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Limitations

The secondary analysis would not identify products which

can be exported from Karnataka based on skill availability

but are not produced in the state.

Secondly, A product with high value of production and/or

production advantage from Karnataka may not be exported

if domestic demand is very high.

Lastly due to problems in data collection and records both

at the state-level and the district-level may distort the data.


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Stakeholders & Districts Surveyed

Type of Stakeholders:Exporters 35%

Producers 9%

Government

officials 21%

EPBs/ CBs 35%Districts:

Belgaum,

Shimoga,

Mangalore,

Hubli,Bellary &

Bangalore

Sample Distribution

35

9 35

21

Exporters Producers

TPOs Govt. Off


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RCA

RCA (Export) =

= Export of commodity i by country J

= Export of all commodities by country J

= Export of commodity i by world

Export of all commodities by world

W

iW

J

iJ

X

X

X

X

iJX

JX

iWX

W

X


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Production RCA

RCA (production) =

Production of i-th commodity at Karnataka

Total production (of all commodities) atKarnataka

= Production of i-th commodity in India

= Total production (of all commodities) in India

I

iI

K

iK

P

P

P

P

iK

P

K

P

iIP

IP


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Shift Share: A Digression

Shift-share analysis requires measurements on avariable of interest (an exported product) for each

member of the group (exported items) at the

beginning and end of a specified period of analysis.

The growth rate (GR) of the item (i) can be

measured as:

ztitiiVVV ,,


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Shift Share: A Digression (Contd.)

Now the growth rate of all items (k) is the ratio oftotal value of terminal time periods to the total valueat the initial time period:

where i = 1---------n.

n

i

zti

n

i

ti

V

V

k

1

,

1

,


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The expected value of the growth is the product of growth all itemsand the value at the initial time period:

The expected change of the value of a growth variable for aparticular item in a given time period is the difference between the

expected value and the actual value for the item at the end of theinitial time period. If E(Vi) is the expected change, then:

ztitikVVE

,, )(

ztitiiVVEVE ,, )()(


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The difference between the actual change and theexpected change is the net shift. So, the Net Shift is :

Now the sum of positive net shifts or the sum ofnegative net shifts Srepresents the total absolute

net shift

)(ii

VEVNi

2

)(1

n

i

iiVEV

S


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The relative gain or loss in the value of a growthvariable for a particular product i, in a given time

period is defined as the percentage net shift (which

represents market gain or loss) Pi

Where

%)100(S

NP

i

i


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Matching

SupplySide

High Value of Production

PRCA>1

Shift Share

Percentage Net Shift >0

RCA > 1

Demand Side

Set of

Potential

Products


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Findings: Potential Products

Jowar

Maize

Ragi

Arhar Horsegram

Groundnut

Coconut

Sunflower

Sugar

Drugs & Narcotics Cardamom

Dry Chillies

Dry Ginger

Turmeric

Arecanut

Banana

Cashewnut

Onion

Horticulture Crops

Flouriculture

Tobacco & Related Products

Coca & Chocolates


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Findings: Potential Products (Contd.)

Silk

Handicrafts

Wearing Apparel, Dressing & Dyeing Of Fur

Publishing, Printing And Related Activities Medical, Precision And Optical Instruments

Motor Vehicles, Trailers And Semi-Trailers

Electrical Machinery And Apparatus, N.E.C

Basic Metals

Aerospace


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Products Classified based

on the Degree of Potentiality

The products have been further divided into different subcategories according

to different entry barriers. This classification is primarily based on three typesof entry barriers in a country for the different products along with the exportersperceptions.

They are:

MFN Applied Tariff Import Penetration Ratio

Non-tariff Barriers

Products which are facing low MFN Applied Tariff and high Import PenetrationRatio in a particular country will indicate a high export potential.

Less stringent non-tariff barriers will be an added advantage for the product inthat particular country.

High MFN Applied Tariff and low Import Penetration Ratio with stringent non-tariff barriers will indicate a less potential for a product.


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Products Classified based

on the Degree of Potentiality (Contd.)

The classification of products is given below:

Products having less potential:

Jowar, Maize, Ragi, Cardamom, Sugar, Banana, Fruits, Paper,

Print equipment, etc.

Products having High Potential:

Safflower (Singapore), Groundnut (Singapore), Onion

(Malaysia), Turmeric (UAE), Silk (Hong Kong), Electrical

Machinery (Hong Kong), Precision engineering (Singapore)

Products having Medium Potential:

Sunflower (Germany), Tobacco (Germany), Ginger (Spain),

Flowers (Germany)


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Non-tariff Barriers and Market Access

Issues

Fruit Pulps:

Destinations:

Netherlands, USA, UAE, UK, Saudi Arab, Japan

Barriers:

The cost of labelling & testing are as high as 10-15 per cent ofthe total costs.

The cost of an imported gas chromotograph for evaluatingpesticide residues may cost as much as 50 per cent of one

consignment. The running costs may be an additional 2 per cent per

consignment.


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Issues (Contd.)

Spices:

Destinations:

USA, UK, Saudi Arab, UAE, Japan, Pakistan

Barriers:

Processing and sale of spices are regulated by food lawsnamely, protection of public health and promotion of fairdealing in food commodities.

Two types of food laws generally recognized are horizontal

regulations that regulate food standards, use of additives,prevention of food contaminations, labelling of food in themarket in general, and vertical regulations which are productwise application of regulations.


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Issues (Contd.)

Apparel: Destinations:

USA, Germany, France, UK

Barriers:

Textile products require quality certification for exports. Most importingcountries accept the quality certification from ISO and Bureau Veritas.

The NTB notification made in the NAMA negotiation are:

Excessive technical regulation and standards, and certificationrequirement

Excessive labeling or marking requirements

Specific Packaging requirements

Pre-shipment inspection requirement

Import restriction of fabrics


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Issues (Contd.)

Automobiles: Destinations:

USA, South Africa, Sri Lanka, Italy, UK

Barriers:

Non tariff barriers applied can be time consuming andburdensome certification requirements, standards and a lack ofmutual recognition, additional testing requirements, excise andluxury taxes that add on to the sales prices and negatively

effect a company's compatibility.


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Types of Non-tariff Barriers for Major

Countries

US Technical Standards

Environmental Regulations

SPS Measures

Anti-Dumping and Countervailing Measures

Government Procurement and Domestic Preference

Legislation


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Types of Non-tariff Barriers for Major

Countries

EU Communities

Anti-Dumping Measures

Technical Standards

SPS Measures

Child Labour

Source: UNCTAD, EU Market Access Database, USTR

Japan

Technical Standards

SPS Measures

Environmental Regulations


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Barriers of Exports:

Primary Findings from Districts

District SurveyedBelgaum, Hubli, Bellary, Mangalore, Shimoga

Major Findingso Development of Clusters emphasised

o Construction of Air Cargo Complex is important in Bellary

o High Fuel prices hindering exportso Containers depot is to be set up mainly for the agri-products

o Quality of road infrastructure needs to be revamped

o Karwar port to be developed for export of horticulture

o Local Levies like toll tax need to be rationalised for the exporters

o Port congestion at Mangalore affects the exports from the region

o For financing Agro-products it was suggested for lowering of thedemands for collateral, and adjusting the time of repayments.


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Barriers of Exports:

Primary Findings from Districts (Contd.) At Bellary Power cuts disrupting the timely delivery of quality products and

leads to the cost escalation

Lack of variety in design hindering the development of garment industry

Lack of market knowledge on the destination countries hindering the export

Agro complex should be developed at Mangalore

Route to be set up directly from Mangalore to Dubai (and not throughCochin)

As the Mangalore port is busy with heavy exportable, the small port shouldbe developed by following the model of Gujarat

Inland water transport can be developed as well

Service contract for the capital equipment can be done

Authority should be there to supply containers for each product in continuousmanner

For explosives export Mangalore port should be available

Wooden carriage should be available as in case of Gujarat to cut cost and toincrease capacity

The labour costs are to be equalised in Mangalore port

Hinterland development should get the prime focus


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Thank You

Applied Trade Methods

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