1.1 China's soybean and soybean oil imports
Impacts of Argentina's Export Tax Reform on China's Soybean and Soybean Oil Imports* Wei Chen, Shanghai University of Finance and Economics Andrew Muhammad, ERS, USDA** Mary A. Marchant, Virginia Tech * This project was funded by the USDA-CSREES National Research Initiative (NRI) Competitive Grant Program as grant #2005-35400-15413. ** The views expressed here are those of the author(s), and may not be attributed to the Economic Research Service or the U.S. Department of Agriculture. Paper to be presented at the 2010 Annual General Meeting of International Agricultural Trade Research Consortium (IATRC), December 12-14, 2010. Berkeley, California.
Outline 1. Background 2. Research Problems 3. Model 4. Data 5. Estimation Results 6. Projections 7. Conclusions
1. Background
1.1 China’s soybean and soybean oil imports
Figure 1. China’s soybean imports from U.S., Brazil, Argentina, and Rest of World (ROW) 2002/2003-2007/08, Million Metric Tons (MMTs) (Source: FAS, USDA GAINS Reports).
• China’s soybean imports: 21.5 MMTs in 2002/03, 37.8 MMT in 2007/08, with three countries, the U.S., Brazil and Argentina, dominating the market.
Figure 2. China’s soybean oil imports 2002/2003 – 2007/08 (unit: MMT, Source: FAS, USDA GAINS Reports).
• China’s soybean oil imports from Argentina and Brazil reached 2.5 MMTs in 2007/2008, accounting for 95 percent of China’s total soybean oil imports.
1.2 Argentina’s soybean and soybean oil exports
Figure 3. Argentina’s soybean exports to China and world markets, 2002/20032007/08, Million Metric Tons (MMTs) (Source: FAS, USDA GAINS Reports).
• China’s imports account for around 70-80 percent of Argentina’s total soybean exports.
Figure 4. Argentina’s soybean oil exports to China and world markets, 2002/20032007/08, Million Metric Tons (MMTs) (Source: FAS, USDA GAINS Reports).
• China’s imports account for around 30-40 percent of Argentina’s total soybean oil exports.
1.3 Argentina’s export taxes on agricultural commodities Table 1. Argentina’s export taxes on soybeans and soybean oil, 1991 – Present
Source: FAS, USDA GAINS Reports
1.4 The Argentine government’s sliding export tax regime proposed in August 2008 • Argentina’s government proposed a sliding export tax regime to increase export tax rates to 44 and 40 percent for soybean and soybean oil exports, respectively. • This increase triggered a nationwide farmer protest lasting four months.
•
This bill was rejected in the Senate in the last minute.
• This failure led to the loss of absolute majority of President Cristina Fernández de Kirchner in the Chamber of Deputies and Senate.
• Agricultural experts in Argentina expect cuts in export taxes after the President election in 2011. • Argentina’s economy has recovered in 2010 and President Kirchner’s approval ratings have rebounded. • Death of Mr. Nestor Kirchner in October 2010, who was the former president of Argentina, husband of the incumbent president, might strengthen the opposition before the 2011 election.
2. Research Problems
• To evaluate how future possible changes in Argentina’s export taxes on soybeans and soybean products will impact China’s imports from global markets and Argentina’s tax revenue of government and export revenue of exporters in Argentina.
3. Model
3.1 Differential production model • Proposed in Laitinen and Theil (1978), Laitinen (1980) and Theil (1980) • Differential production model has been applied to study single products like U.S. lamb imports (Muhammad, et. al, 2007) and EU rose imports (Muhammad 2009). • Soybean and soybean imports are treated as inputs (Davis and Jensen, 1994 and Koo et al. 2001)
,
.
3.2 Import demand system
The constraints on it are
3.3 Conditional elasticities
,
.
4. Data
• Monthly values and quantities of China’s soybean imports are collected from the Global Trade Information Services. • Analysis focuses on China’s membership in the World Trade Organization (WTO) and uses data from May 2003 to December 2008.
,
.
5. Estimation Results
Table 2. Estimates for the import demand system for China’s soybean and soybean oil imports
Note: Significance level *** 0.01; ** 0.05, * 0.10.
• Marginal factor share • Own price estimates • Three pair of substitutes between soybean and soybean oil imports • Two pair of complements
.
Table 3. Divisia index elasticities and conditional price elasticities
Note: Significance level *** 0.01; ** 0.05, * 0.10.
• Conditional Divisia index elasticities • Three competitive relationships • Two complementary relationships soybeans from the U.S. and Brazil.
.
6. Projections
Table 4. Changes in the PRICES of China’s soybean and soybean oil imports from Argentina if Argentina’s government changed export tax rates
• Monthly ocean freights of Panamax from Argentina to China are available on the DCE (Dalian Commodity Exchange) website. • If Argentina’s government increased export tax rates on soybeans and soybean oil to 44 and 40 percent, then China’s import prices would increase 5.36 and 5.52 percent for soybeans and soybean oil from Argentina. • If Argentina’s government decreased export tax rates on soybeans and soybean oil to zero, then China’s import prices would decrease 20.99 and 22.12 percent for soybeans and soybean oil from Argentina
• The predicted soybean and soybean oil imports given changes in Argentina’s government export taxes. xit
xit
c i1
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w1t w1t
c i2
w2t w2t w2t
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Table 5. The estimates of changes in China’s IMPORTS caused by changes in Argentina’s export taxes
• Soybeans imports from the U.S and Brazil: increasing with Argentina’s export tax rates
• Soybeans from Argentina, soybean oil from Brazil Argentina: decreasing with Argentina’s export tax rates
Table 6. The estimates of China’s imports from each country after Argentina’s government changes its export taxes, unit MMTs
• Import changes between soybeans and soybean oil If tax rates increased (decreased), China’s soybean imports would increase (decrease) and soybean oil imports would decrease (increase). • Import changes between source countries If tax rates increased (decreased), China’s soybean imports from the U.S. and Brazil would increase (decrease) and soybean oil imports from Brazil and Argentina decreased (increased).
6.3 How Argentina’s government revenue and export revenue would change Table 7. Changes in Argentina’s tax revenue and export revenue after Argentina’s government changes its export taxes, unit $Million
• Government tax revenue and export revenue would change in two opposite directions. • If tax rates increased (decreased), the decrease (increase) in Argentina’s export revenue would be greater than the increase (decrease) in government tax revenue in value.
7. Conclusions
• If Argentina’s government increased tax rates to 44 and 40 percent for soybean and soybean oil exports, China’s total soybean imports would increase but its total soybean oil imports would decrease. • If Argentina’s government decreased tax rates to zeros for soybean and soybean oil exports, China’s total soybean imports would decrease but its total soybean oil imports would increase. • If Argentina’s government decreased (increased) tax rates for soybean and soybean oil exports, the gain (loss) in Argentina’s exporter revenue would dominate the loss (gain) of the government tax revenue.
Acknowledgements We are grateful to Drs. Jim Hansen and Francis Tuan from ERS, USDA for their comments on this research at the 2010 AAEA annual conference.
Thank you
Outline 1. Background 2. Research Problems 3. Model 4. Data 5. Estimation Results 6. Projections 7. Conclusions
1. Background
1.1 China’s soybean and soybean oil imports
Figure 1. China’s soybean imports from U.S., Brazil, Argentina, and Rest of World (ROW) 2002/2003-2007/08, Million Metric Tons (MMTs) (Source: FAS, USDA GAINS Reports).
• China’s soybean imports: 21.5 MMTs in 2002/03, 37.8 MMT in 2007/08, with three countries, the U.S., Brazil and Argentina, dominating the market.
Figure 2. China’s soybean oil imports 2002/2003 – 2007/08 (unit: MMT, Source: FAS, USDA GAINS Reports).
• China’s soybean oil imports from Argentina and Brazil reached 2.5 MMTs in 2007/2008, accounting for 95 percent of China’s total soybean oil imports.
1.2 Argentina’s soybean and soybean oil exports
Figure 3. Argentina’s soybean exports to China and world markets, 2002/20032007/08, Million Metric Tons (MMTs) (Source: FAS, USDA GAINS Reports).
• China’s imports account for around 70-80 percent of Argentina’s total soybean exports.
Figure 4. Argentina’s soybean oil exports to China and world markets, 2002/20032007/08, Million Metric Tons (MMTs) (Source: FAS, USDA GAINS Reports).
• China’s imports account for around 30-40 percent of Argentina’s total soybean oil exports.
1.3 Argentina’s export taxes on agricultural commodities Table 1. Argentina’s export taxes on soybeans and soybean oil, 1991 – Present
Source: FAS, USDA GAINS Reports
1.4 The Argentine government’s sliding export tax regime proposed in August 2008 • Argentina’s government proposed a sliding export tax regime to increase export tax rates to 44 and 40 percent for soybean and soybean oil exports, respectively. • This increase triggered a nationwide farmer protest lasting four months.
•
This bill was rejected in the Senate in the last minute.
• This failure led to the loss of absolute majority of President Cristina Fernández de Kirchner in the Chamber of Deputies and Senate.
• Agricultural experts in Argentina expect cuts in export taxes after the President election in 2011. • Argentina’s economy has recovered in 2010 and President Kirchner’s approval ratings have rebounded. • Death of Mr. Nestor Kirchner in October 2010, who was the former president of Argentina, husband of the incumbent president, might strengthen the opposition before the 2011 election.
2. Research Problems
• To evaluate how future possible changes in Argentina’s export taxes on soybeans and soybean products will impact China’s imports from global markets and Argentina’s tax revenue of government and export revenue of exporters in Argentina.
3. Model
3.1 Differential production model • Proposed in Laitinen and Theil (1978), Laitinen (1980) and Theil (1980) • Differential production model has been applied to study single products like U.S. lamb imports (Muhammad, et. al, 2007) and EU rose imports (Muhammad 2009). • Soybean and soybean imports are treated as inputs (Davis and Jensen, 1994 and Koo et al. 2001)
,
.
3.2 Import demand system
The constraints on it are
3.3 Conditional elasticities
,
.
4. Data
• Monthly values and quantities of China’s soybean imports are collected from the Global Trade Information Services. • Analysis focuses on China’s membership in the World Trade Organization (WTO) and uses data from May 2003 to December 2008.
,
.
5. Estimation Results
Table 2. Estimates for the import demand system for China’s soybean and soybean oil imports
Note: Significance level *** 0.01; ** 0.05, * 0.10.
• Marginal factor share • Own price estimates • Three pair of substitutes between soybean and soybean oil imports • Two pair of complements
.
Table 3. Divisia index elasticities and conditional price elasticities
Note: Significance level *** 0.01; ** 0.05, * 0.10.
• Conditional Divisia index elasticities • Three competitive relationships • Two complementary relationships soybeans from the U.S. and Brazil.
.
6. Projections
Table 4. Changes in the PRICES of China’s soybean and soybean oil imports from Argentina if Argentina’s government changed export tax rates
• Monthly ocean freights of Panamax from Argentina to China are available on the DCE (Dalian Commodity Exchange) website. • If Argentina’s government increased export tax rates on soybeans and soybean oil to 44 and 40 percent, then China’s import prices would increase 5.36 and 5.52 percent for soybeans and soybean oil from Argentina. • If Argentina’s government decreased export tax rates on soybeans and soybean oil to zero, then China’s import prices would decrease 20.99 and 22.12 percent for soybeans and soybean oil from Argentina
• The predicted soybean and soybean oil imports given changes in Argentina’s government export taxes. xit
xit
c i1
w1t
w1t w1t
c i2
w2t w2t w2t
1
Table 5. The estimates of changes in China’s IMPORTS caused by changes in Argentina’s export taxes
• Soybeans imports from the U.S and Brazil: increasing with Argentina’s export tax rates
• Soybeans from Argentina, soybean oil from Brazil Argentina: decreasing with Argentina’s export tax rates
Table 6. The estimates of China’s imports from each country after Argentina’s government changes its export taxes, unit MMTs
• Import changes between soybeans and soybean oil If tax rates increased (decreased), China’s soybean imports would increase (decrease) and soybean oil imports would decrease (increase). • Import changes between source countries If tax rates increased (decreased), China’s soybean imports from the U.S. and Brazil would increase (decrease) and soybean oil imports from Brazil and Argentina decreased (increased).
6.3 How Argentina’s government revenue and export revenue would change Table 7. Changes in Argentina’s tax revenue and export revenue after Argentina’s government changes its export taxes, unit $Million
• Government tax revenue and export revenue would change in two opposite directions. • If tax rates increased (decreased), the decrease (increase) in Argentina’s export revenue would be greater than the increase (decrease) in government tax revenue in value.
7. Conclusions
• If Argentina’s government increased tax rates to 44 and 40 percent for soybean and soybean oil exports, China’s total soybean imports would increase but its total soybean oil imports would decrease. • If Argentina’s government decreased tax rates to zeros for soybean and soybean oil exports, China’s total soybean imports would decrease but its total soybean oil imports would increase. • If Argentina’s government decreased (increased) tax rates for soybean and soybean oil exports, the gain (loss) in Argentina’s exporter revenue would dominate the loss (gain) of the government tax revenue.
Acknowledgements We are grateful to Drs. Jim Hansen and Francis Tuan from ERS, USDA for their comments on this research at the 2010 AAEA annual conference.
Thank you
