Asymmetric trade arrangements : a case of regulatory measures affecting South African beef exports to the European Union

Abstract

The international trade in agriculture and food markets are characterised by extensive use of regulatory measures. Most of the measures used comprise Sanitary and Phytosanitary measures (SPS) and Technical Barriers to Trade (TBT). The use of regulatory measures between members can be asymmetric. This implies that one partner implements more regulatory measures than another might. This can lead to trade imbalance or be viewed as trade barriers by exporters. Global exporters of agri-food products to the European Union (EU) need to comply with more regulatory measures than for any other region. These measures apply to all exporting countries, regardless of trade agreements. South Africa has signed two free trade agreements with the EU since the beginning of the 21st century. These free trade agreements imply that South African exports in general to the EU would be expected to increase and vice versa. However, in the case of South African beef exports to the EU, these declined from 2000 to 2019. This study aimed to evaluate the effect of EU regulatory measures on South African beef exports to the EU. From this perspective, four objectives were specified in pursuit of this aim, namely to: (1) determine whether there were significant differences in the number of regulatory measures between the EU and South Africa; (2) determine whether the EU regulatory measures affected South African beef exports to the EU; (3) determine whether the EU regulatory measures affected South African beef exports to other trade partners; and (4) evaluate other factors affecting South African beef exports to the EU. The study used t-tests and a gravity model to address the specific objectives. A panel data set from 1992 to 2019 was used, which covered six trade partners. These were: the EU, SADC, the Rest of other African countries, the Middle East, China, and the Rest of the world. The gravity model was conducted using pooled, fixed and random effects. Later, the best model selection tests were conducted. At first, the study did the poolability test, which was followed by the Hausman test. The study found that from 1992 to 1999, the EU was the leading importer of South African beef. However, from 2000 to 2019, the EU imports of South African beef declined. These exports were diverted to other trading partners. The study found that from 2000 to 2011, the SADC was the main importer of South African beef. From 2012 to 2019, the Middle East, China, and the SADC became the leading beef importers of South African beef. The study also found that there were significant differences in the numbers of regulatory measures. It was revealed that there were both asymmetric regulatory measures and trade arrangements between the EU and South Africa. At first, the EU tariffs were high as compared with the regulatory measures. But later, when the tariffs reduced, the EU increased the regulatory measures. It was found that the EU regulatory measures negatively affected South African beef exports to the EU, while they positively affected South African beef exports to all other partners. Lastly, it was found that the EU tariffs negatively affected South African beef exports to the EU. The reduction in tariffs reduced the trade cost; hence, South African beef exports to the EU were expected to have increased. On other factors that have affected South African beef exports to the EU, the study found that the EU GDP positively affected South African beef exports to the EU. Furthermore, the EU population was found to have a negative effect, and the EU exchange rate was insignificant in determining beef exports. This study recommended that there should be negotiations on the use of regulatory measures. Secondly, there should be a development of mutual recognition between the parties. Lastly, policymakers should review regulatory measures to improve South African beef exports to the EU.