Compatibility of trade policy and domestic support

1
Compatibility of trade policy and domestic support

• The case of maize in Zambia

2
Outline

• Agricultural policies national development
  objectives
• Maize domestic trade support
• Maize external trade
• Imports exports
• Import/Export policy inconsistency
• External/domestic policy inconsistency
• Summary

3
Agricultural policy national development
priorities

• Goals
• Diversification, Productivity Income growth
• Objectives
• Reducing production and marketing distortions on
  maize
• Expand domestic utilization of local products
• Improve competitiveness of products in regional
  market
• Strategy
• Private sector led development

4
Maize domestic trade

• Maize grain meal on exempt VAT schedule
• Producers pay VAT on supplies
• Domestic price support
• 60 above market price
• Fertilizer and hybrid seed subsidies
• 60 below market price
• Inter-district movement restrictions
• Levy absorbed by farmers consumers
• Mandatory maize meal fortification
• Increase in price market share of industrial
  products

5
Maize external trade - Imports

• Tariffs _at_15 for grain 25 for meal
• Import Value Added Tax _at_17.5
• Protection 35 above world prices
• Quantity restrictions
• Permits for commercial imports only
• Technical regulations
• Inspection in the field demand for non GMO is
  disguised protection
• Government participation in imports
• Ltd disclosure, variation leading to market
  paralysis

6
Maize external trade - Exports

• Maize a restricted good under the Control of
  Goods Act need permits
• Quantity restrictions
• Suspension of permit issuance
• Notice never given no formal complaints raised
• Government participation in exports
• Transfer consumption subsidy to neighboring
  countries
• Quality control and certification
• Standards and capacity low

7
Import export policy inconsistency

• Tax measures render maize uncompetitive
• Duties, VAT, excise, profit corporate tax
• Duty exemption
• production inputs machinery not processing
• Duty drawback for export industries
• Discourage backward linkages
• Import VAT deferment
• Production and not processing machinery

8
External domestic trade inconsistency

• Export market access can replace domestic price
  support
• Large small producers receive world prices
• Removal of import duties can replace export bans
• Consumers pay world prices for maize and maize
  meal
• Removal of domestic taxes should replace need for
  subsidies on seed fertilizer

9
SUMMARY

• Domestic support programs erode private sector
  investment competition
• Tax measures add to cost of production reduce
  export competitiveness
• Tariffs make producers inefficient and reduce
  real incomes of consumers
• External market restrictions inhibit sustainable
  growth in production and productivity
• Producers, consumers, taxpayers and government
  benefit from eliminating trade interventions

10
THE END

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