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Criteria and methodology for the effects of international trade on food security in fish exporting and importing developing countries -. By Torbjorn Trondsen Norwegian College of Fishery Science University of Tromso, Norway INFOSAMEK/FAO

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slide1

Criteria and methodology for the effects of international trade on food security in fish exporting and importing developing countries -

By

Torbjorn Trondsen

Norwegian College of Fishery Science

University of Tromso, Norway

INFOSAMEK/FAO

Expert Consultation on International Fish Trade and Food Security. Casablanca 27-30 January 2003

introduction
Introduction
  • Criteria and methodology for the effects of international trade on food security in fish exporting and importing developing countries
  • Theoretical perspectives
    • International marketing
    • Strategic management
  • Focus on value chains

T. Trondsen. www.fishmarketing.com

slide3

Value chain behavioural model

Structure- Conduct- Performance

Industry structure and trade barriers:

  • Number of buyer and sellers
  • Market characteristics
  • Product homogeneity
  • Entry and exit barriers

Business conduct:

  • Product-market combinations
  • Product differentiating
  • Marketing mix
  • Organisational solutions

Rivalry

Competitive strength

Performance

T. Trondsen. www.fishmarketing.com

criteria for trade analysis
Criteria for trade analysis
  • International trade= value adding transactions carried out by entrepreneurs in value chains over national boarders
    • Where fish products and money are exchanged
  • Value chains structure
    • Integrated chains of physical, economic and social transactions between business’ transforming products from raw material to final consumption
  • Value adding
    • The value added through the value chains
    • Depended of market power

T. Trondsen. www.fishmarketing.com

criteria for trade analysis1
Criteria for trade analysis
  • Market power
    • Who’s controlling trade barriers and trade incentives?
    • Where is the power basis and interest for change?
      • Is it a conflict between food security vs. profit?
  • Resources for changing trade barriers
    • How does PEST or value chain barriers increase transaction costs?
    • PEST basis
      • Political, economic, social and technological trade environment
    • Transaction costs
      • What is the costs related to developing and maintaining transactions over time through international value chain?

T. Trondsen. www.fishmarketing.com

criteria for trade analysis2
Criteria for trade analysis
  • VRIO_ traders competitive capabilities
    • V= What is the supply value for customers?
    • R= How rare is the supply compared to competitors?
    • I = Can the supply be imitated?
    • O = Is the supply covered by organizational uniqueness?
      • Supply of product, place/distribution, promotion, price, service and customer relations

T. Trondsen. www.fishmarketing.com

norwegian fish import from russia
Norwegian Fish Import From Russia

T. Trondsen. www.fishmarketing.com

norwegian import from russia
Norwegian import from Russia
  • Cod fish from Barents sea trawlers
    • Fresh directly to Norwegian processing plants
    • Frozen directly to frozen stores
      • Processed to frozen fillets for export
      • Exported without further processed
        • E.g. China for further processing for fillets and re-exported to the US and Europe

T. Trondsen. www.fishmarketing.com

norwegian fish export to russia
Norwegian fish export to Russia

T. Trondsen. www.fishmarketing.com

export species
Export species
  • Low priced frozen small pelagic species herring to low income consumer groups
    • Round frozen Mackerel, Capelin and Blue whiting
  • High priced aqua cultured species to high income consumer groups
    • Salmon and trout

T. Trondsen. www.fishmarketing.com

drivers in the trade
Drivers in the trade
  • Norway
    • Lack of cod, surplus of pelagic fish for human consumption
    • Established network and capacity in export-oriented fish processing plants
    • Access to pelagic quotas
    • Efficient pelagic catching and processing industry
  • Russia
    • Interests for economic and business development
    • Codfish quotas of in the Barents sea
    • Inefficient fish processing industry
    • Russian regulation and tax policy for own caught catch
    • Demand for cheap food

T. Trondsen. www.fishmarketing.com

slide13

Russian gain from the Norwegian fish trade.

  • Increased the fish for inland consumption 373 mill kg
  • A profit of 1.7 billion NOK (about 200 mill USD)

T. Trondsen. www.fishmarketing.com

winners and losers
Winners and losers
  • Winners:
    • Russian consumers
      • High-income and low-income
    • The quota owners
    • The trading entrepreneurs
    • Processor industries in both countries
  • Losers
    • Processing industry and workers in North-West Russia
      • Who have lost traditional cod raw-material
      • Loss of income and welfare

T. Trondsen. www.fishmarketing.com

slide15

Food trade barriers in value chain

Region A

PEST

Region B

PEST

Local culture, skill, preferences

Local culture, skill, preferences

Raw material

Raw material

Products

Products

VRIO

Technological level

Technological level

Capability

Capability

Profits

T. Trondsen. www.fishmarketing.com

pest trade barriers high vs low gnp countries
PEST Trade Barriers High Vs. Low GNP Countries

T. Trondsen. www.fishmarketing.com

trade development
Trade Development
  • Does trade gains greater than cost of development, trading, shipping and tariffs?
  • Are products equally acceptable in the mind of middlemen and consumers?
  • Market information network
    • Are traders aware of cost differences and product attributes?
  • Does the differential provides profit for trading entrepreneurs?
  • Are there other technical, financial or legal restrictions which inhibit the products and trading of those products

T. Trondsen. www.fishmarketing.com

industrial trade strategies between income groups
Industrial trade strategies between Income Groups

Low-value products

+

Low price advantage

High scale production

3

4

+

Low-income groups

Transaction barriers

High-income groups

Competition intensity

MO R&D

+

1

2

Market quality production

Differentiation advantage

High-value products

+

T. Trondsen. www.fishmarketing.com

increasing supply and competition high value becomes low value without catch production limitation
Increasing supply and competition: High-value becomes low value (without catch/production limitation).

Example:Norwegian salmon export

From differentiation to high-scale low-cost production

T. Trondsen. www.fishmarketing.com

trade barrier changes over the product lifecycle
Trade barrier changes over the product lifecycle?

Innovator country

Production

Consumption

Other advanced country

Less developed country

New product

Maturing

Standardized product

T. Trondsen. www.fishmarketing.com

transaction trade barriers between high vs low income groups
Transaction trade barriersbetween high vs. low income groups?

T. Trondsen. www.fishmarketing.com

transaction costs to overcome trade barriers
Transaction costs to overcome trade barriers?

T. Trondsen. www.fishmarketing.com

international trade development investment to lower transaction costs as trade barriers
International trade development -Investment to lower transaction costs as trade barriers

Country A: Suppliers with alternative buyers

Investment

in trade

structure

Trade exchange

All chain members

get advantages

Information

exchange

R& D investment

Studies and trials

Country B: Buyers with money and alternative suppliers

Time and cost consuming

T. Trondsen. www.fishmarketing.com

summary hypothesises
Summary hypothesises
  • International trade of fish improves economic development, but not necessary for all
  • Trade might improve food security, but not necessary for all low-income groups
  • Food security measures should be integrated in international trade
    • encourage international trade for both economic development and for food security
  • Policy must rely on analysis of behaviour, power and interests for changes in
    • The PEST environment
    • The value chains

T. Trondsen. www.fishmarketing.com

slide26

Economic development

Economic policy

Fisheries management policy

VRIO

Distribution of consumer income

International trade

PEST

Supply policy

Preferences

Distribution

Products

Prices

Food supply security

T. Trondsen. www.fishmarketing.com

how to improve food security through trade
How to improve food security through trade?
  • I will
    • present some ideas how Government can improve both economic development and food security by introducing export quotas

T. Trondsen. www.fishmarketing.com

food security and trade
Food security and trade
  • National food security
    • Improving by exporting high-value food products and importing low-value food products.
  • BUT: In a liberalized market.
    • The traders choose the business which gives best profit.
    • Don’t necessary import food or fish products.
  • Profits a function of both prices and costs
    • Transaction cost barriers drive trade focus in the short run toward value chains with lowest transaction costs, less investment and risk relative to sales value
  • Keeping food security and regional food balance
    • may force government to influence the traders choices

T. Trondsen. www.fishmarketing.com

food security strategies
Food security strategies
  • WTO related arguments
    • Protect of domestic production to ensure food security?
      • Import has to be financed by export (less to the poor?)
      • Import may distort domestic production (less income to the poor?)
    • Increases in income a necessary long-term solution
  • Ban of fish/food export in food unsecured areas?
    • Less foreign currency
    • Less income compared to exchange high value food export in lower valued food import
    • Less economic development in the long-run
    • Decreases purchasing power for food security

T. Trondsen. www.fishmarketing.com

improving both trade for food security and development fsd
Improving both trade for food security and development (FSD)
  • Individual Export Quota (IEQ)
    • Improving food supply by selling individual fish export-quotas paid by a required import food quantity
    • Licences issued when better food supply is needed
      • Country licences issued by WTO/WHO?
      • Individual companies and contracts
      • Size of food export quota equivalent to documented food import quantity
    • No limitation of total quantity
  • Export quotas
    • well known regulatory tool allocating import quotas in other countries, but not as a food security tool

T. Trondsen. www.fishmarketing.com

impact of ieq
Impact of IEQ
  • Gain economic development in underdeveloped regions by exporting higher value products
  • Gain food security by improving import of lower value food products
  • Balanced trade development

T. Trondsen. www.fishmarketing.com

ieqs as incentives for trade development
IEQs as incentives for trade development
  • Exporters becomes trading firms
    • Exporters of high value products from FSD regions must develop compensating food import
    • Exporters of low value products to FSD regions must develop compensating food import from FSD regions
  • Development of
    • More trade of new and improved products, species and technology?
    • More trade network, market orientation and relational marketing?
    • IEQ quotas trading?
    • Better local food supply?

T. Trondsen. www.fishmarketing.com

other effects of ieq
Other effects of IEQ
  • More bureaucracy?
    • Control system can be run efficient
    • I.e. Auction of Vietnamese garment and textile quotas to regulated markets (http://vietnamnews.vnagency.com/2002-10/29/stories/17.htm)
  • Governmental/political control over trade?
    • Impact dependent of local political culture

T. Trondsen. www.fishmarketing.com

concluding hypothesis
Concluding hypothesis
  • Imposing of individual export food quotas where export quantities are balanced by a similar import quantity, may improve both economic development and food security

T. Trondsen. www.fishmarketing.com

thank you
Thank you
  • www.fishmarketing.com

T. Trondsen. www.fishmarketing.com