2018AOC New opportunities from participating in agro-food ... · Agro-food GVC hubs: EU, China...

New opportunities from participating in agro-food

global value chains and the role of agricultural policies

Silvia Sorescu

Trade and Agriculture Directorate, OECD

Rural Revitalization Strategy

2018 China Outlook Conference

20-21 April, Beijing

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http://www.agri-outlook.cn

2 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]

Outline

• What are the new opportunities for linking rural areas to domestic and global markets? • Supply or value chains • The landscape of agro-food global value chains (GVCs) and the

place of China

• Getting the most out of GVCs participation: what is the role of policies? • Agricultural policies • Enabling environment for broad rural development

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What we mean by supply or value chains

3

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www.oecd.org/tad Trade and Agriculture Directorate

Organisation for Economic Co-operation and Development (OECD)

Global Value Chains – what are they?

Value chains: describe a production process for a final good Full range of activities from concept to final good Represent all the links between industries

Global value chains focus on the international linkages relate to trade But there are also significant domestic linkages and impacts on

domestic value added And products are often delivered to final demand Rising importance in trade globally Unbundling of demand and supply and/or tasks within supply Countries contribute parts instead of whole

Others’ and own policies influence outcomes collectively Greater interdependence

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How do we measure GVCs? Concept of backward and forward linkages

Backward linkages: buying from GVCs Measures the amount of foreign value added embodied in exports Comes through intermediate input usage Forward linkages: selling into GVCs Measures the amount of domestic value added that forms part of

another country’s exports Domestic value exported can be either direct (own exports) or indirect

(exports from other domestic industries that make use of the outputs produced, e.g. processing sector exports using agricultural production as inputs)

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How to think about trade in value added

Country

A

Country

B Country

CValue-added (100)

Gross

exports (100)

Gross exports

(110)

Value-added (10)

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The landscape of agro-food GVCs and the place of China

7

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China Japan ASEAN Canada USA India EU28 Sth America Africa

China 1860 5931 567 2478 591 9353 617 878

Japan 299 389 25 103 14 340 16 38

ASEAN 2953 772 212 1002 401 3476 193 532

Canada 573 191 279 1070 22 790 111 60

USA 3384 632 2065 1533 76 2658 353 387

India 1127 110 1479 76 336 1544 67 246

EU28 1409 405 1214 367 1123 163 377 1116

Sth America 3843 486 2351 408 1086 98 7900 830

Africa 990 118 901 115 386 146 4473 65

Agro-food GVC hubs: EU, China followed by ASEAN, USA

Column shows source of foreign value added in own exports: Buying from GVCs

Row shows how exported value added is used in other country exports: Selling to GVCs

What does the agro-food GVC landscape look like?

Source: OECD estimates.

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China 1860 5931 567 2478 591 9353 617 878

Japan 299 389 25 103 14 340 16 38

ASEAN 2953 772 5470 212 1002 401 3476 193 532

Canada 573 191 279 1070 22 790 111 60

USA 3384 632 2065 1533 76 2658 353 387

India 1127 110 1479 76 336 1544 67 246

EU28 1409 405 1214 367 1123 163 43776 377 1116

Sth America 3843 486 2351 408 1086 98 7900 830

Africa 990 118 901 115 386 146 4473 65

ASEAN and EU important linkages

For EU, GVCs are internal to the common market

Example: Who uses China’s agro-food exports as inputs into their own exports?


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China 1860 5931 567 2478 591 9353 617 878

Japan 299 389 25 103 14 340 16 38

ASEAN 2953 772 5470 212 1002 401 3476 193 532

Canada 573 191 279 1070 22 790 111 60

USA 3384 632 2065 1533 76 2658 353 387

India 1127 110 1479 76 336 1544 67 246

EU28 1409 405 1214 367 1123 163 43776 377 1116

Sth America 3843 486 2351 408 1086 98 7900 830

Africa 990 118 901 115 386 146 4473 65

China sources globally, with key links to USA, South America and ASEAN

Example: Where does China source from for its own exports?


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0

0.1

0.2

0.3

0.4

0.5

0.6

Other foodproducts

Vegetables, fruit,nuts

Other crops Pork & poultry Meat(Pork&Poultry)

Beverages andtobaccoproducts

Oilseeds Vegetable oils &fats

Wool & raw silk

China EU28 ASEAN USA World

How does China’s buying from GVCs compare with the rest of the world?

Backward linkages low for China’s main exports • Large

domestic market

• Policy

settings

Foreign value share (from all sectors) in gross export value


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-0.25

0.25

0.75

1.25

1.75

2.25

2.75

3.25

Other foodproducts

Vegetables,fruit, nuts

Other crops Pork & poultry Meat(Pork&Poultry)

Beverages andtobaccoproducts

Oilseeds Vegetable oils &fats

Wool & raw silk

China EU28 ASEAN USA World

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How does China’s selling to GVCs compare with the rest of the world?

For forward linkages much higher: • Exports

intermediates

• High amounts of indirect exports

Domestic value added in other countries’ exports as share of direct export value


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Getting the most out of GVCs participation

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Getting the most from GVCs

What is ‘success’ in GVCs? GVC participation creates economic opportunities for agricultural

producers, but also for other sectors rural economy Getting into GVCs opens doors to new markets GVCs can have ‘feedback’ benefits Participation is linked with higher levels of productivity Employment effects

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Getting the most from GVCs: enhancing domestic value added

Participation indicators only provide some indirect evidence on benefits Domestic value added generated provides a more direct link Domestic value added represents the return from being involved It represents the returns to labour and capital, along with taxes paid to

governments (but less subsidies) It picks up the benefits to the entire economy from the activity

Both within the sector and to all who contribute

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Where is value added created in agro-food in China: final $1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

China USA Japan EU Brazil … World

Services Industry Food Agriculture

High share of agriculture compared with selected economies

Less processing in food consumption compared with some


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Significant employment effects for some economies

0%

10%

20%

30%

40%

50%

60%

70%

80%

Wool Raw milk Other animals Cattle Other crops Plant fibres

Sugarcane Oilseeds Veg & Fruit Other grains Wheat Paddy rice

Share of total agricultural workforce returns from GVC participation


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What is the role of policies?

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Policies are particularly important for GVC participation

-0.04 -0.02 0 0.02 0.04

Distance

GDP/capita

Tariffs charged

Ag Land (sq. km)

SPS charged (L1)

TBT charged (L3)

RTA export share

RTA import share

Finance

Primary edu

Transport infrast.

Food safety

Ag R&D intensity

FDI (inflow)

Customs

Backward

-0.5 0 0.5 1

GDP/capita

Ag R&D intensity

Tariffs faced

TBT faced (L2)

SPS faced (L1)

Distance

RTA import share

Finance

Food safety

RTA export share

Transport infrast.

Primary edu

Customs

Ag Land (sq. km)

FDI (outflow)

Forward

Market size increases domestic sourcing and shift to final products

Trade facilitation important

Trade policies important

So too are aspects of the enabling environment

Effect on standardised coefficients: direction of effect is important, not size


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What influences outcomes: Domestic Value Added creation

Effect on standardised coefficients: direction of effect is important, not size

4.0

-0.4 -0.2 0 0.2 0.4 0.6 0.8 1

FDI (inflow)

Tariffs charged

SPS charged (L1)

GDP/capita

Distance

RTA export share

RTA import share

Finance

Food safety

Tariffs faced

SPS faced (L1)

Primary edu

Ag Land (sq. km)

TBT charged (L3)

Transport infrast.

Ag R&D intensity

TBT faced (L3)

FDI (outflow)

DVA

Imports important for export value creation

Complex effects of NTMs

Robust enabling environment also important


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Agricultural policies potential impacts

General services to agriculture Infrastructure Agricultural innovation and

knowledge systems Marketing and promotion Inspection and control Public stockholding

backward linkages forward linkages

Payments to individual producers including: related to output market price support variable input use

can forward linkages

but at the cost of domestic value added

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Composition of public policy support to agriculture matters

Percentage of GDP, by country, 2014-16

Source: 2017 OECD PSE/CSE/GSSE database.

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Levels of support to individual producers continue to

vary widely across countries

Percentage of gross farm receipts

Source: 2017 OECD PSE/CSE database.

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Support targeting individual agricultural commodities the largest component of support to farmers across countries

Single commodity support, all countries


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China’s level of support is unequal across commodities

Source: 2017 OECD PSE/CSE database.

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Payments increasingly tied to specific production practice but further efforts warranted

Percentage of gross farm receipts


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Support to general services continues to vary across countries

Share of GSSE in total support (%), 1995-97 to 2014-16


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Composition of support to general services in China

Share of components in GSSE (%), 2001-16


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What policy packages to benefit from these new opportunities while addressing pressing challenges?

The enabling environment for agriculture matters

access to education, capital and physical infrastructure

functioning of goods, services, land and labour markets

Greater efforts into supporting key general services for the agricultural

sector

sector-specific infrastructure (including marketing)

agricultural knowledge and information system

Rebalancing the portfolio of agricultural support to reflect priorities for

long-term productivity growth, sustainability and competitiveness in

the sector

coherence with agri-environmental policy objectives: encouraging the

adoption of environmentally friendly production practices

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Contact us [email protected] [email protected] [email protected]

We look forward to hearing from you!

Access all of the information from the Trade & Agriculture Directorate at: www.oecd.org/tad

You can reach us via e-mail by sending your message to the following address: [email protected]

We invite you to connect with us on Twitter by following our accounts: @OECDtrade @OECDagriculture

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2018AOC New opportunities from participating in agro-food ... · Agro-food GVC hubs: EU, China...

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