Do Import Tariff Adjustments Bolster Domestic Production? Analysis of the South African-Brazilian Poultry Market Case

Abstract

The South African poultry industry plays an important food security contributory role, hence, consumer and producer interests ought to be accounted for in order to maintain the long term value of the industry in the presence of import competition. This study used the Error Correction Model (ECM) to investigate the relationship between the variables as well as the Impulse Response Model to assess the level of responsiveness of import volume and domestic production due to changes in the import tariff for the period 2010m04 to 2020m06. The ECM results with a negative ECT value of −0.53, indicate that a long run relationship exists between domestic broiler production volume, imported broiler quantity and the Ad Valorem import tariff. The Impulse Response Model has shown that over ten periods, the adjustments in the Ad Valorem tariff initially produce desirable results showing that a one standard deviation shock to the Ad Valorem tariff culminates in a sharp decline in import volume and a sharp increase in domestic volume produced. However, this response cannot be maintained over the long term, thus signaling the need for a more effective and viable solution other than an increase in the Ad Valorem import tariff to alleviate the stiff competition between domestic production and an increased supply of broiler imports. The study findings have policy implications for resolving internal issues in the South African poultry industry, such as improving production capacity and sector competitiveness at the same time maintaining the gains from trade especially for consumers.