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16MODELS OF AGRICULTURE EXPORT CAPACITY DEVELOPMENT
Karasova N.
Doctor of Economics, Associate Professor Kyiv National University of Culture and Arts,
Ukraine
ORCID:0000-0002-8471-3870
ABSTRACT
Export-oriented capacity building depends on the country's advance in economically efficient exchange, which is based on proper definition of priorities of the general agricultural policy and adequate concentration of regulatory instruments and resources in strategic directions. The objective of this article is to study the types of the agriculture export-oriented models and to determine the specific features of regulatory policies of the leading countries for further use of the bast practices. The article analyses the conceptual approaches to regulation of social and economic relations in the agricultural sector across the world, classifies export-oriented models of the agricultural sector, and studies the models that ensures permanent growth of export of products (services) specific to the Latin American countries as well as steady export in the EU countries.
Keywords: export-oriented model, agricultural sector, agricultural policy, steady growth, state support.
JEL classification: Q17, F15.
1. Introduction. Open economy treats export an instrument to ensure the extended market space for restructured branches and productions capable of intensive international competition. Export-oriented capacity building, dynamisation of economic growth in the agricultural sector, improvement of well-being and life quality of population today depend on the country' s advance in economically efficient exchange, which is based on proper definition of priorities of the general agricultural policy and adequate concentration of regulatory instruments and resources in strategic directions. Therefore, the study of bast practices of the leading countries in creating and building export potential is currently relevant.
Global best practices in development and implementation of the agricultural policies in order to implement their positive aspects in Ukraine has been studied by a number of researchers such as O. M. Bubliienko, I. V. Klymenko, B. M. Kryvoruk, Yu. O. Ulianchenko, N. O. Shevchenko, N. V. Shybaieva, T. M. Kviatko, V. H., Kremin, and others. These researchers have studied specific features of the agricultural policies of the EU, the US and Canada. Some researchers such as I. M. Kulish and O. I. Tkach studied development of agriculture regulatory policies of the Latin American countries. The studies cover numerous aspects of state support of the industry. Fewer works study export support programs. Therefore, the objective of the article is to study the types of the agricultural sector's export-oriented models to determine the specific features of regulatory policies of the leading countries for further use of the best practices in Ukraine.
Presentation of Basic Materials. The analysis of conceptual approaches to regulation of social and economic relations in the agriculture of different countries allows to distinguish the following two types of the agricultural policies:
- Product agricultural policies, which ensure high productivity, efficiency, intensity and steady export capability of the industry. This type of agricultural policies is common in the most oECd countries, in particular the EU countries and the US, as well as specific to some countries of Asia, Northern and Southern America, Among them, the most outstanding results and leadership in the world market were reached by China, Brazil, Argentina and the Philippines. As evidenced by the study materials, success in development of the agricultural sector of these countries is associated with and depends directly on significant capital investments and support from the state [1; 6];
- Consumer agricultural policy characterized with low productivity, efficiency and intensity. This type of agricultural policy is common in many developing
countries, and outputs of the agricultural sector in these countries are mostly used for domestic consumption.
The study of the agricultural policies of the first type is relevant for scientific justification and implementation of the model of development in the developing countries, which seek to gain a foothold in the global agriculture and food market, while the task of developing and building the agricultural sector's export potential must be centred around the general agriculture and food policies of the state and comply with their principles.
The studies lack systematization of the agricultural sector's export-orienter models; however, scientific materials [3; 5; 7; 8; 15] and analytical data [10] reveal the following two main types of export-oriented models: the model that ensures permanent growth of export of the agricultural sector's products (services) used in the Latin American countries as well as the model that ensures steady export specific to the EU countries.
The first model is focused on increasing product competitiveness and export as well as sales market expansion. The advantages of export-oriented development of the agricultural sectors of the US, Brazil, Argentina, Columbia and other countries include the land and labour resources as well as the management system. The state policies in this case are aimed at stimulation of development of large-scale export-oriented agricultural productions. In view of steady increase in export volumes, the governments chose the consolidated sector governance system, which had been developing for many years. For instance, in the US, 70% of export products account for 14% of large-scale agricultural households. In Brazil and Argentina, around 80% of all the cultivated lands are occupied with large latifundia accounting for almost all the export crop products.
The leadership of the US in the global agriculture and food market is ensured both by resources and effective state support, the main instruments of which are the price control and the export programs. The farm income is maintained at the level of income of workers in other economy sectors by stabilisation of prices for agricultural products and reduction of non-distributed stocks.
As evidences by the study materials [1; 2; 13; 14], the US provides federal subsidies in case of reduction of market prices to agricultural products below the guaranteed level. A special government organisation takes products in pledge from producers at guaranteed prices, and in case the market price exceeds the pledge rate, the producer takes its commodities out of pledge and sells them in the market. If the prices are lower than
the pledge rates, the commodities are kept by the government organisation. This way, the US, which is the biggest exporter of agricultural products, supports its domestic producers through maintaining the price range which allows the domestic producers to benefit from the conditions and the state to control the level of world prices. At the same time, the US neither regulates nor subsidises the prices for agricultural resources and the interest rate provided under the state agricultural credit programs. This allows to keep prices balanced (key characteristics of the American agricultural policy) and to avoid creating preconditions to compensate farmers for the capital goods acquisition. On the other hand, the government helps farmers establish cooperatives for purchase and, in some cases, production of agricultural machinery and equipment.
According to the Food Security Act of 1985, the US Government also initiated the application of direct export subsidies, which was caused by the pressure of the subsidised products from Europe rather than internal factors (increase in grain stocks and, consequently, the negative impact of overvalued dollar and commodity credit rates). Such programs provide for payment of cash bonuses to exporters upon delivery of commodities to the countries and within the scope established by the Foreign Agricultural Service. These payments allowed the American farmers to sell agricultural products in the external market at a price below total production costs. For the purpose of fulfilment of obligations to the WTO, the subsidies were partially eliminated in 2011 and 2013. However, according to the WTO [18], 13 export subsidy (XS) programs aimed at support of competitiveness of certain types of dairy products, eggs, meat (pork, chicken, beef), oil, rice, and wheat are still in effect in the US today.
Moreover, the US offers the export credit guarantee programs, with the first ones being introduced under the Agricultural Trade Act in 1978, to facilitate financing of operations related to export and increase in production volumes [13; 14]. To date, there are two programs of this category, including:
- Export Credit Guarantee Program (GSM-102). The US Commodity Credit Corporation (^Q provides guarantees for export credits issued by private banks using the irrevocable dollar letter of credit for purchase of the American agricultural products and supplies by the importer;
- Facility Guarantee Program (FGP) for export credits to establish the agricultural infrastructure. The program is aimed at expansion of export of agricultural products to the developing countries. The program involves provision of guarantees for export credits for supply of goods and services produced in the US, which are aimed to provide the exporter with the required infrastructure, such as storage facilities, refrigeration equipment, etc. This program requires the importer to provide an obligatory initial payment amounting to 15% of the export delivery cost. Further payments are made semi-annually for 1 to 10 years. The FGP guarantee covers 95% of the principal loan and interest amount.
Various direct payments and state support of farmers are crucial for development of the agricultural sector's export in the US. Particularly, the budgetary subsidies include a set of reforms, such as compensation payments under the programs of livestock reduction and change of cropping structure; subsidising of investments for consolidation of agricultural productions; payments to agricultural commodity producers per unit of area or head of livestock; reimbursement of expenses on water supply, irrigation, gasification; various compensations and tax allowances (turnover tax), etc.
The measures of general state support of the sector aimed at structural changes include [9; 13; 14] the following: 1) Agricultural crediting; 2) Scientific support of the agricultural sector development. There are programs aimed at increase of efficiency of agricultural production through development of agricultural science and education; 3) Infrastructure development. Farms in rural areas are supported with loans, grants as well as housing construction, powering, water treatment loan guarantees. The Rural Development implements its programs through the extensive network of representative offices that includes 47 regional (state level) and 450 local offices; 4) Environmental measures. A number of technical support programs are aimed at protection and preservation of the national natural heritage and environment. For instance, in 2013, the land conservation programs covered 358 million ha of the US lands, and the total conservation budget was USD 6.2 billion.
Thus, in spite of strategic goals for increasing export volumes, the US agricultural policy is also aimed at development of rural areas, preserving small farms and providing them with equitable access to production resources, as well ensuring low footprint of farming.
With their agricultural sector being strongly export-oriented, the Latin American policies are somewhat different from the US policies due to numerous factors. The financial support is a major tool for intensifying agricultural production, adapting agriculture to the capital accumulation needs and increasing export potential in these countries. In particular, the first step in Brazil was the creation of the national rural crediting system (Sistema Nacional de Crédito Rural). The system had given rise to changes in Brazil's agriculture. The use of new technologies and advanced materials was encouraged. Subsidies for agricultural production stimulated increase in demand for agricultural equipment and supplies, which, in its turn, contributed to increased employment in agriculture [3]. To date, Brazil also has 16 programs of direct export subsidies for agricultural and food commodities. The main beneficiaries of state support programs were medium and large-scale agro-industrial producers, who received large grants and loans, with small businesses also benefiting in some ways [11]. However, in view of the number of economic crises that the Latin American countries have faced, the main goal of state policies was to achieve full capacities of rural areas and reorient traditional agriculture with focus on monoculture cultivation based on global exports. This policy was particularly large-scaled in Argentina, where mass cultivation of genetically modified organisms (primarily soybeans) was launched, and millions of hectares of the agricultural heartland have been bought up by banks and then further sold to foreign corporations and private investors. Apart from the seed itself, the chemicals for growth and pest control were actively used, which negatively affected the environment. The state's unsound interference with agricultural production, driven by global trends and desire to maximize benefits of the industry's export potential, resulted in structural transformations in Argentina, which put numerous production lines at threat of disappearance and could lead to the loss of food self-sufficiency.
Another model to ensure sustainable export of the agricultural sector's products has been implemented in the EU countries. It is developed on the platform of the socially-oriented market economy and within the framework of the Common Agricultural Policy of the EU (CAP), which aims to ensure multifunctionality, sustainable development and high competitiveness of agriculture. The main principles of the CAP are the increase in productivity of the agricultural sector by promoting technological progress; ensuring optimal use of
production factors; ensuring a decent standard of living for the workers involved in agriculture; stabilisation of agricultural markets; protection of producers and consumers from external factors; ensuring supply of high-quality food to the EU Member States at the expense of their domestic production [2]. In the course of implementation of the relevant policy, through the creation of preconditions for fulfilment of primary obligations
of the food and social and economic nature to society, the state regulations both contribute to the saturation of internal market with quality and affordable food and create conditions for building competitiveness and export potential of the industry. Fig. 1 shows the evolution of the current model to ensure sustainability and export potential of agriculture in the EU.
Model of state support of agriculture in the EU under the Common Agricultural Policy before the MacSharry reforms
(1958 to 1992). ................................................ ............................................. .
1. Agricultural market regulation
2. Structural funds
price regulation
export subsidies
Model of state support of agriculture in the EU under the Common Agricultural Policy after the MacSharry reforms
(1993 to 1999).
1. Agricultural market regulation
......I
price regulation
export subsidies
2. Structural funds
for cultivated areas
3. Direct payments
Model of state support of agriculture in the EU as part of the Common Agricultural Policy under of the Agenda 2000
(2000 to 2004).
■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■:»:■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■:■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■: :■:
1. Agricultural market regulation
2. Development of rural areas
price regulation
export subsidies
cultivated areas
3. Direct payments for:
livestock number
Model of state support of agriculture in the EU under the Common Agricultural Policy after the MacSharry reforms
(2005 to 2012).
1. Agricultural market regulation
2. Development of rural areas
3. One-off payments on the regional or historic basis
price regulation
export subsidies
3. Direct payments for:
SS
cultivated areas
livestock number
Model of state support of agriculture in the EU as part of the Common Agricultural Policy after the reforms of 2013
(2014 to 2020).
..........................................*..........................................
3. Direct payments:
...........t...........
1. Agricultural 2.
market Developme
nt of rural
prices
subsidies
4. Food safety
5. Food assistance to the low-income population
6. EU funds for adaptation to globalisation
for cultiv ated areas
green payments" for meeting requirements facilitating the optimal use of resources
young farmers (up to 40 y.o.) after 5 years of work in the industry
households in unfavourable conditions and under certain natural restrictions
7. Scientific research and innovations in support of food safety, bioeco-nomics and sustainable agricultural development
Fig. 1. Evolution of the current model to ensure sustainability and export potential of agriculture in the EU Source: formed by the author based on the sources [1; 5; 7; 8; 9; 10; 15].
According to the basic stages of development, the current model has not been challenged dramatically since its creation, undergoing only certain optimisation. In particular, the current model of state support, provided for establishing a European intervention agency to purchase surpluses formed in the market and further arrange their temporary storage or export outside the EU member states; as well as for export subsidies. There are 20 export subsidy programs for the agri-food producers currently in effect in the EU. All the policies to ensure the agricultural sector's sustainability are funded by the European Agricultural Guidance and Guarantee Fund (EAGGF) established in 1962 to finance the CAP.
In terms of forms of incorporation, unlike the US and Latin American countries, the family farms, which unite themselves in cooperatives, are prevalent in the EU. 60% of agricultural enterprises use logistics and
sales services of such cooperatives to facilitate the export. The CAP reforms are focused on stimulating the efficient use of resources, facilitating the exchange of best practices and innovations in the agricultural sector, facilitating establishment of food supply chains, restoring and strengthening ecosystems, promoting social integration, which will make inevitable impact upon stabilization and further development of the export-oriented activity, ensuring development of the highly competitive environment and saturation of internal market with high-quality products. This is confirmed by the leading positions of the Western European countries in the world market of agricultural products.
Polish experience in maintaining high competitiveness and leadership in international food markets is of interesting to Ukraine. Fig. 2 shows the model of development of export-oriented agricultural sector in Poland under the CAP.
General concept
Long-term policy for development of farms, maintenance of the global competitiveness of the in-FN dustry, ensuring self-employment among the population and addressing social issues of rural areas. Export-oriented development is ensured under the CAP and additional state programs
Finances
Labour
Subjects
Spécialisation | ^
Private property and land market Mortgages for farmers
A wide selection and availability of lending resources due to high competitiveness in the banking sector, special-purpose credits for exporters
17.5% of the working population is employed in the agriculture
m
90% account for family microfarms cultivating 5 to 10 ha of land. 9% are owned by large-scale agricultural households cultivating land plots over 100 ha.
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Ensures production efficiency and product quality
30% of all the Polish agricultural sector's export products accounts for the groups of producers. Cooperation facilitates improvement of logistics and receiving funds from the EU
H
"Producer-processor" relations ensure continuous lending and permanent sales and compete with cooperation
All the tools regulated by the Common Agricultural Policy of the EU
The state reimburses for 50% of the interest rate in the loans issued by the banks for the
period of up to 1 0 years
Concessional lending 3% of the credit are paid by the farmer, 97% are paid by the state. A certain budget is allocated annually for concessional lending of agricultural households requiring support for various reasons. The absence of corruption allows to distribute
lending funds for fairly.
17 state export subsidy programs for agricultural producers
i 1 Uj i 3 p i i i____i
1 st in the world for concentrated apple juice export. 2nd in the world for the export of apples. 3rd in the world for goose meat export. 4th in the world for ham export. 5th in the world for pork export. High competitive positions for the export of vegetable juices, frozen berries, and dairy products.
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Fig. 2. Current model of development of export-oriented agriculture in Poland Source: formed by the author based on the sources [4; 7; 12; 16; 17].
This model indicates the successful combination of fundamental principles of the Common Agricultural Policy of the European Union and the national experience of export-oriented development of the agriculture in Poland. While meeting the EU requirements and regulations concerning the CAP implementation, this country has managed to preserve its own experience in governance of the sector and adapt it to the global requirements. The focus on development of microecono-mies, effective state support, extensive experience of specialisation in certain types of products, competitive banking market, availability of loans that use land for collateral, efficient production ties and low corruption levels allowed Poland to achieve high competitive positions globally in the export of agricultural products.
Conclusion. The analysis of the best global practices shows that today there is no universal formula of efficiency for the developing countries creating their own export-oriented model of the agricultural sector. Experience of the US indicates that the agricultural sector's exports there have been mostly focused on large-scale increase of volumes, taking on new sales markets while implementing consolidated governance of the agricultural sector. The experience of the European Union, particularly Poland, provides for a number of features related to narrow specialisation, high quality standards, significant level of state support of agricultural productions, absence of corruption, focus on social and environmental components of society development. A fundamental instrument of support specific to the agricultural policies of all the economically developed countries is price regulation and export subsidies, which can both provide producers with a decent standard of living and gradually build competitive advantages through investment of the released funds in new production technologies and improvement of the product quality.
The policy of export stimulation should not be separated from the general policy of sustainable development in the agro industry. Its top priority should be to saturate the internal market with domestic products at an affordable price. This process should be accompanied by the state financial and organisational support, which would allow to create a highly competitive environment and to develop competitive advantages in the global market. The overall development strategy should be based in the short term on a sectoral approach, which is focused on regulation of agricultural sector with the use of integrated support measures, and in the long term, on the development of rural areas, food security, and environmental priorities.
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tip.wto.org/goods/Forms/TableViewDetails.aspx?mod e=modify
