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The Fruit and VegetablesThe Fruit and Vegetables Import Regime :Import Regime :
The Entry Price SystemThe Entry Price System
Principles, Issues and ImpactsPrinciples, Issues and Impacts
Charlotte EmlingerInstitut Agronomique Méditerranéen de Montpellier/UMR MOISA
Emmanuelle Chevassus LozzaInstitut National de la Recherche Agronomique Nantes/LERECO
May, 2nd 2007Bruxelles
EUMED AGPOL
Restricted dissemination
2
The Entry Price SystemThe Entry Price System Outline of the talkOutline of the talk
Introduction
1. Principles and motivation
2. Theoretical impacts of the Entry Price System
on Imports
3. Four main issues to be discussed in the
perspective of the removal of the Entry Price
System
3
• The level of protection depends on the import price of the
product on the European market : the so-called «entry price»
• Objectives of the system:
– To limit competition from the RoW
– To guarantee a certain level of price in the EU market
– To avoid the transmission of world market fluctuations
Introduction : Introduction : The Entry Price System (EPS)The Entry Price System (EPS)
4
• Only 15 products are concerned :
Tomatoes, Cucumbers, Artichokes, Courgettes
Oranges, Mandarines, Clementines, Lemons
Apples, Pears, Grapes
Apricots, Cherries, Peaches, Plums
(Also fruit juice : Oranges, Grapes)
But : • A High share in European production, especially for southern
EU countries:
- 69.7% of total EU F&V production
- 82% for Italy, 80 % for Greece, 72% for Spain and 76 % for France
• A high share in F&V European consumption : 48,3%
Few products are concernedFew products are concerned but they are important for the EU but they are important for the EU
5
• A high share in Fruit and Vegetables European Trade
EU imports 47,91%
EU exports 42,70%
FAO 2003-2004 - COMTRADE 2004
Few products are concerned, Few products are concerned, but they are important for the EUbut they are important for the EU
• High share of intra-EU trade for these F&V:80% of Imports come from the EU (66% for other Fruit and Vegetables)
•The major extra-EU suppliers of these products are:- Mediterranean Countries (27.3%) : tomatoes, citrus
( «Entry price products» represent 55% of their F&V production)
- South American Countries (29%) : citrus, apples( «Entry price products» represent 22% of their F&V production)
6
1.1. Principles and Principles and motivations motivations
of the systemof the system
7
Maximum Specific duty
SPEMax
(€/kg)
1.1. Principles of the Entry Price System (EPS)1.1. Principles of the Entry Price System (EPS)
Specific dutySPE (€/kg)
Ad Valorem Duty t (%)
(t*PE)
2. 92% Ptrig <PE<Ptrig
PE
3.
PE <92% Ptrig
PE
PE
1. Ptrig <PE
Trigger price
PE
92% Trigger Price
8
• according to objectives of protection :- Seasonal protection of high perishable products
(Apricots, Cherries, Peaches, Plums)- Protection of most expensive production (greenhouse)
(Tomatoes, Courgettes, Cucumbers and Artichokes)- Off season Protection
(Apples, Pears, Lemons)- In Season Protection
(Grapes, Oranges, Clementines, Mandarines)
• according to trade patterns:Off/In Season competitionLow/High share of extra-EU trade
Necessity of a « product by product » approach in the discussion about removal of EPS
1.2. Different cases among the products1.2. Different cases among the products
9
Cherries: competition between EU and extra Suppliers on a brief periode
0
10000
20000
30000
40000
50000
60000
70000
80000
1 2 3 4 5 6 7 8 9 10 11 12
0
20
40
60
80
100
120
140
160
Extra EU Imports
Intra EU Imports
Trigger Price
Ad valorem Duty
Grapes : off season trade
0
20000
40000
60000
80000
100000
120000
140000
1 2 3 4 5 6 7 8 9 10 11 12
0
10
20
30
40
50
60
Also for Apricots, Peaches and Plums (but less extra-EU imports)
- Higher ad valorem duties during period of production
Also for Oranges, Clementines and Mandarines (but less extra-EU imports)
EPS applied only during European production
10Extra EU Imports
Intra EU Imports
Trigger Price
Ad valorem Duty
- Competition between EU and extra-EU suppliers during this period
-Higher ad valorem duty in summer
Also for Cucumbers (but less extra-EU imports) and Courgettes
-Low seasonality of intra EU import
- Higher trigger price when Extra-EU import
Also for Lemons and Pears
EPS applied the whole year
0
50000
100000
150000
200000
250000
1 2 3 4 5 6 7 8 9 10 11 12
0
20
40
60
80
100
120
Apples: Lower trigger price during EU production
0
20000
40000
60000
80000
100000
120000
140000
160000
1 2 3 4 5 6 7 8 9 10 11 12
0
10
20
30
40
50
60
Tomatoes: Higher trigger price in winter and spring
11
• Reduction or removal of ad valorem duty
• Preferential Trigger Price for some countries, products and months :
Morocco : Tomatoes, Cucumbers, Artichokes, Courgettes
Clementines, Oranges
Israël: Oranges
Egypt: Oranges
Cyprus (before 2004): Oranges
But only inside Quotas
• The maximum specific duty never changes
1.3. Preferences granted by trade agreements1.3. Preferences granted by trade agreements
12
2. Theoretical impacts of 2. Theoretical impacts of the the
Entry Price SystemEntry Price Systemon Importson Imports
13
d3
Ptrig
If PE≥Ptrig : EPtP )1(
)1()1( tQ
tPE
PE
d2
If PE ≤ 92%Ptrig :
MaxE SPEPtP )1(
)1(
)(
)1( t
SPEQ
tP MaxE
92%Ptrig
If 92%Ptrig≤PE ≤ Ptrig :
SPEPtP E )1(
)( Etrig PPSPE
t
PQ
tP trigE
)(
avec
Q
P
0
d1
European Excess demand : QP
14
d2
)1(
)(
)1( t
SPEQ
tP MaxE
92%Ptrig t
PQ
tP trigE
)(
d3
Ptrig
)1()1( tQ
tPE
Q
P
0
d1
European Excess demand : (price in the EU Market=f(Q))
QP
European Import Demand if EPS:(import price=f(Q))
Discontinuity of the European Import demand function :« Break » when PE=92%Ptrig
PE
15
What if the Impact of EPS on Imports? a. If PE≥Ptrig
PE1*t
d2
92%Ptrig
d3
Ptrig
Q
P
0
d1
PE1
Q1
P1
Imports if EPS =Imports if ad valorem duties only =Q1
With :PE1 = import priceP1 = final price on EU market
Q’1
Import if free trade =Q’1With :
PE1 = import and final price
16
PE2*t + SPE
d2
92%Ptrig
d3
Ptrig
Q
P
0
d1
PE2
P2
Q2
Imports if EPS = Q2
With :PE2 = import priceP2 = final price on EU market
Q’2
Imports if free trade = Q’2With :
PE2 = import and final price
What if the Impact of EPS on Imports? b. 92%Ptrig≤PE ≤ Ptrig
17
92%Ptrig
Ptrig
Q’2
P’’2
PE2
PE2*t + SPE
P2
Q2 Q’’2
d1
d2
d3
Q
P
0
Imports if ad valorem duties only = Q’’2With :
PE2 = import price P’’2 = Final price on EU market
What if the Impact of EPS on Imports? b. 92%Ptrig≤PE ≤ Ptrig
18
PE3*t + SPEmax
Q3
PE3
P3
Imports if EPS = Q3
With :PE3 = import priceP3 = final price on EU market
Q’3
Imports if free trade = Q’3With :
PE3 = import price and final price
Q’’3
P’’3
Imports if ad valorem duties only = Q’’3With :
PE3 =import price P’’3 =final priced2
92%Ptrig
d3
Ptrig
Q
P
0
d1
What if the Impact of EPS on Imports? c. PE ≤ 92%Ptrig
19
What are the impacts of EPS on Imports?What are the impacts of EPS on Imports?
Discontinuity of the Import demand Function
Below 92 % of the trigger price, imports are suddenly reduced
The application of the Maximum Specific Duty SPEMax can
make the level of duty prohibitive
To sell products on the European market with a price lower than the trigger price, the import price (i.e. production price + transportation costs) has to be very low
20
Example of TomatoesExample of Tomatoes
PE
Ad Valorem Duty Specific DutyImport Price (PE)
P
Ptrig
Import price
0
20
40
60
80
100
120
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
€/100kg
€/10
0kg
21
Impact of Preferential Entry Price: example of TomatoesImpact of Preferential Entry Price: example of Tomatoes
MFN Trigger Price
0.461
0.424
MoroccanTrigger price
january Tomatoes
0.846
0.778
€/100kg
0.65
0.55
Moroccan Production
Costs
TurkishProduction
Costs
No Duties
SPEMax
Existence of a rent for exporters ?
22
3. Four main issues 3. Four main issues to be discussed to be discussed
in the perspective in the perspective of the removal of the removal
of the EPSof the EPS
23
• Four questions raises:
- EPS Effectiveness : does the system work?
- EPS Relevance: is the system useful?
- EPS Efficiency : are the objectives achieved at a reasonable cost?
- Preferential margin of Preferential EPS: to what extent countries that benefit from preferential trigger price are advantaged?
On going work: comments and discussion are wellcome !On going work: comments and discussion are wellcome !
Main Issues to be discussed Main Issues to be discussed in the perspective of the removal of EPSin the perspective of the removal of EPS
24
1. We compare import price with trigger price :
the system is effective if import price are higher than
the trigger price
2. We compare the EU supply price with the trigger price :
the system is effective if internal prices are above
trigger price
Two ideas :Two ideas :
25
- We use the Standard Import Value as a proxy for import price
after paying the specific duties
- We count the number of occurences where SIV<Ptrig
Important variation of SIV among years, months and
suppliers
Frequency of occurrences [SIV<Ptrig] depends on
products, months and years
1. Trigger price and SIV1. Trigger price and SIV comparison comparison 1995 to 2005
26
4 groups of products may be distinguished:
- no SIV<Ptrig :
Peaches, Mandarines, Courgettes, Grapes
- few « crisis » for some year, suppliers or month :
Apples (China, Poland, Hungary), Pears (China), Oranges (Turkey, Cuba, Brasil), Cherries (Bulgaria, Romania, 96), Apricots (96)
- several cases of SIV<Ptrig: Artichokes (winter 03-06), Lemons (june july 03,04), Cuncumbers ( march april 03-06), Clementines (december 97-06)
- the EPS doesn’t seem to work :
Plums and Tomatoes
1. Trigger price and SIV1. Trigger price and SIV comparison comparison 1995 to 2005
27
Example of Peaches: SIV Above Trigger PricesExample of Peaches: SIV Above Trigger Prices
0,00
50,00
100,00
150,00
200,00
250,00
Trigger price
MFN SIV
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
€/100kg
28
Example of Apples : some problematic originsExample of Apples : some problematic origins
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
€/100kg
0
50
100
150
200
250
300
SIV Autralia
SIV China
SIV NewZealand
SIV Poland
TriggerPrice
29
Example of Artichokes : Problems since 2002Example of Artichokes : Problems since 2002
0,00
100,00
200,00
300,00
400,00
500,00
600,00
Trigger price
SIV MFN
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
€/100kg
30
Example of Tomatoes : lot of SIV<Trigger PriceExample of Tomatoes : lot of SIV<Trigger Price
0,00
50,00
100,00
150,00
200,00
250,00
300,00
Trigger Price
SIV MFN
SIV Israël
SIV Morocco
SIV Turkey
1 2 3 4 5 6 7 8 9 10 11 12
€/100kg 2004
31
How How SIV<PSIV<Ptrigtrig isis possible ?possible ?
Clearing Methods (SIV, Deduction or FOB Method)?
Does SIV represent market prices?
Difference of quality/price inside consignement?
T1 T2
SIVThe application of EPS
and the use of SIV leads to SIV higher than
the trigger price at T2
Ptrig
92% Ptrig
T3
32
0,00
100,00
200,00
300,00
400,00
500,00
600,00
15-juin-94 28-oct-95 11-mars-97 24-juil-98 06-déc-99 19-avr-01 01-sept-02 14-janv-04 28-mai-05 10-oct-06
Trigger price
SIV Turkey
€/100kg
Case of Turkish Cherries : high SIV Case of Turkish Cherries : high SIV
Have EPS impact on the quality of the exchanged product?
33
South West Price
Loire price
Wholesaler price
Trigger price
Apples
0
0,2
0,4
0,6
0,8
1
1,2
1,4
1,6
Septe
mbr
e
Octobr
e
Novem
bre
Décem
bre
Janv
ier
Févrie
r
Mar
sAvr
ilM
aiJu
in
€/kg
0
0,5
1
1,5
2
2,5
30 31 32 33 34 35 36 37 38 39 40
Plums
€/kg
Week
2.Comparison between P2.Comparison between Ptrigtrig and EU supply prices and EU supply prices
Does EPS guarantee a high level of internal prices?Does EPS guarantee a high level of internal prices?
For Most of products, EU supply prices are
above the Trigger price:Price guarantee for
producers
2004 French cotation SNM
34
Cucumbers 2004
0
0,2
0,4
0,6
0,8
1
1,2
1,4
Janv
ier
Févrie
rM
ars
Avril
Mai
Juin
Juille
t
Août
Septe
mbr
e
octo
bre
nove
mbr
e
déce
mbr
e
South West Price
Loire price
Wholesaler price
Trigger price
chateaurenart
€/kg
2.Comparison between P2.Comparison between Ptrigtrig and EU supply prices and EU supply prices
Does EPS limit competition ? Does EPS limit competition ?
Supply price <Ptrig
isolation from international Competition :
Few extra EU imports for this product
35
ConclusionConclusion
• What is efficiency / what is relevance?
How to measure them?
• Discussion about impacts of a removal of EPS, studies to
carry on :
- Comparison of production costs between EU and extra EU suppliers (+
transportation costs, logistic…)
- Measure of European sensitivity: location of production area of « entry
price products »
- Calculation of preferential margin : possible erosion of preferences
36
ConclusionConclusion
• Question of quality of products :
different issues of removal of trigger prices
• Entry Price System may also be an important administrative
burden and may limit the access to the EU market for new
exporters
Hard to estimate
37
SIV : « official » price calculated each day by the SIV : « official » price calculated each day by the commissioncommission
Wholesalers- RetailersPrice Level
Importers – WholesalersPrice Level
Exporters – ImportersPrice Level
SIVPrices sent by members states
Wholesaler margin : 9%Handling Charges 0,7245€/100kg
Importers Margin : 8% ou 15%Transport and Insurance costs 4.12€/100kg
Weighted by representative market within the country
5€/100kgad valorem dutiesWeighted by countries
38
d2
92%Ptrig
d3
Ptrig
Q
P
0
d1