THE COMPETITIVENESS OF THE EGYPTIAN AGRICULTURAL EXPORT IN THE EU MARKET;
SHOULD EGYPT DIVERSIFY ITS TRADE PATTERN?
TORAYEH, Neveen M.1 Abstract: This paper analyzes the export competitiveness of Egypt's agricultural exports (EAE) in the European Union between 1998 and 2010. The Revealed Comparative Advantage (RCA) index and Comparative Export Performance (CEP) index are applied. An analysis is done to the major subgroups of EAE (fruit & vegetables). The competitiveness of EAE in the EU markets is compared with those of its main rivals, particularly Mediterranean countries (MEDC) that are likely to become more accessible and attractive than Egypt. The findings show that although Egypt’s exports of fruit & vegetables to the EU are growing, it is limited to the competition from other MEDC which has grown dramatically in the last years. One of the largest problems facing the Egyptian exporters of agricultural product is food safety (FS) and sanitary and phytosanitary (SPS) measures applied by the EU which impose severe restrictions on Egyptian farmers. The competitiveness of EAE in other markets is inquired using the comparative advantage indices. The results reveal that Egypt is losing its comparative advantages in Saudi market in exporting fruit and vegetables in favor of some main competitors. The results in Russian and Ukrainian markets are found to be more optimistic. Egypt experienced a progressive trend in gaining a comparative advantage in exporting agricultural products in comparison to the main rivals. Despite the fact that underdeveloped transportation infrastructure and poor delivery systems are the most prevalent NTBs hindrance to EAE in some alternative markets, the EU decisions about imposing bans on the importation of several kinds of fruit and vegetables (F & V) from Egypt have likely to motivate many countries such as Russia, Ukraine and Saudi Arabia to impose the similar bans. The EU food safety standards also have important implications for exporters in Egypt as they open up opportunities to export more quality products in several markets.
JEL Codes: Q13;Q17, Q18,F13, F14.
Keywords: Agriculture exports, Fruit and Vegetable, Competitiveness, Egypt, Ukraine, Russia, Saudi, EU, sanitary and phyto-sanitary standards (SPS), Food Safety (FS).
1. Introduction
The Egyptian economy, including agriculture is increasingly integrated into world markets with about 13% of agricultural production exported. It is among the world's leading exporters of agro-food products such as fresh fruit, vegetables, cotton, and rice. The EU is Egypt’s biggest partner and currently accounts for about 40% of Egyptian exports and 34%
of its imports. By the end of 2010, the exports of Egyptian agricultural products to EU totalized 637.5 million Euros in value, 2% more than in 2009.2 Although the market access for many agricultural products has been improved in the EU markets under the EU-Egypt Partnership Agreement which has been entered into force in June 2004, the EU agricultural market is showing signs of saturation with other Mediterranean markets which are becoming more accessible and attractive than Egypt.
1 Neveen M. Torayeh, Helwan University. Department of economics and international trade, Egipt. E- mail: [email protected]
2 EUROSTAT (Comext, Statistical regime 4); World excluding Intra-EU trade and European Union: 27 members.
This fierce competition Egypt may face will contribute to further erosion of Egypt's export competitiveness in the EU in favor of new suppliers (particularly Mediterranean countries).3 In addition, the competitiveness of Egyptian exports in the EU agricultural market may be hampered by nontraditional barriers to trade in the form of border measures, non-tariff barriers as well as aspects related to product standards, technical regulations and requirements. One of the most important factors that have the potential to affect the long-run competitiveness of Egyptian agricultural exports in the EU markets is food safety (FS) and sanitary and phytosanitary (SPS) issues related to exporting agricultural and food products to EU.
Although, most Mediterranean countries are criticized for their lack of ambition with regard to technical regulations and conformity assessment systems, they are in different stages in response to food safety challenges. Some countries have undertaken positive efforts and made a faster progress than Egypt to comply with EU food safety measures.
Though complying with such measures has certainly added extra compliance costs for exporters, it contribute to undermine the competitiveness of Egypt's agricultural exports to the EU market.4 Accordingly, diversifying markets away from the EU may be a successful choice in response to food safety compliance. p to now, few empirical studies have sed the light on the Egyptian competitiveness of agricultural export in a certain market. Most of investigated the determinants if agricultural exports, or the competitiveness of certain product in world agriculture market.
Accordingly, the main contribution of this paper is to compare the competitiveness of agricultural exports of Egypt with its main Mediterranean competitors in the EU in terms of the dominant agricultural products exported by Egypt in the EU market. The focus then turns to an assessment of the competitiveness of Egypt's agricultural exports in principal market-other than EU- followed by a consideration of the effectiveness of Egypt’s agricultural export market diversification.
The paper decomposed as follows: In section 2, some major trends in Egyptian agricultural trade are described with special focus on the exports trends to the EU market;
section 3 is covering brief theoretical review about the concepts and indices of International competitiveness with special reference to agriculture. This section also reviews some empirical studies. Section 4 provides an analysis of the competitiveness of EAE using some indices such as Revealed Comparative Advantage (RCA) and Comparative Export Performance (CEP), the analysis focuses on the competitiveness of major agricultural exports of Egypt in the EU markets. This is followed by a comparison of the competitiveness indicators of agricultural exports to the EU with those indicators of the selected competitors in the EU markets. Section 5 focuses on measuring the competitiveness of Egyptian agricultural exports in other Egypt's principal markets. Finally, Section 6 summarizes major findings as a policy strategy to enhance Egypt's agricultural export competitiveness in the EU market and as well in international markets.
3 EUROPEAN COMMISSION, Country Report: Egypt, {COM(2011) 303}. From 2005 to 2010, the share of total agricultural exports from Egypt to the EU made up by vegetables, fruits, cereals, sugars and oil seeds dropped from 1%
to 0.8%. On the other hand, the share of exports of the same products from Turkey, Morocco and Israel to EU reached at 3.8% 1.4% and 1.3% respectively during the same period. see; EUROSTAT (Comext, Statistical regime 4); World excluding Intra-EU trade and European Union: 27 members.
4 See Ghoneim, A. F. ( 2009).
2. Background on Egyptian Agricultural Exports with special reference to the EU market.
The new international changes, especially after signing the GATT Agreement and establishment of the World Trade Organization created a wider international market for agricultural sector in Egypt. Furthermore, coincided with the agreement between Egypt and the European Union besides other international and regional blocs have raised the importance of international trade in agricultural.5
The evolution of Egypt’s agricultural exports to the World: As illustrated in Table A1 of Appendix the total agricultural export of Egypt climbed from roughly $528 million during 1998-2000 to about $1.1 billion during 2001-2004, and then it increased considerably to$2.8 billion during 2005-2010. Regarding the share of agricultural exports in Egypt’s total exports as Table A1 reveals, there are notable fluctuations over time. During the period 1998-2000, the share averaged at 13.4%, and then it dropped to 11.5% in 2005-2010.This share has fluctuated over 1998-2010; it ranged from a minimum value of 5.2% in 2006 to its best by hitting nearly 18% in 1998. Table A1 exhibits that the period 1998-2000 witnessed negative growth rate of agricultural exports, this value turned into a positive growth in 2001-2004, this growth again changed into a negative growth rate of -11.8% between the two years 2004-2005,and then turned to an extremely high positive values in the following two years reached a peak of 140% during 2005-2007. The year 2009 also seems to be a significant one in terms of the performance of Egyptian agricultural exports; the growth rate reached about 50.5%. This remarkable performance may be attributed to the recent policy that has been conductive to export development and promotion the crops where Egypt has competitive advantage through deepening the free trade agreements. The annual growth of world agricultural import from Egypt has reached only 2.8% in 2010 indicating more eligible increase than 2009. This means that even though preferences have remained largely existence for Egyptian agricultural trade under the proliferation numbers of FTAs in which Egypt is member, it seems that Egyptian agricultural exports are likely to face challenges.In order to describe the global trend of Egypt’s agricultural exports, the analysis should be going further in terms of the dominant export products. The two digit classification in terms of the Harmonized System code (HS code) system is used. Table A2 in Appendix clearly reveals that over the period 1998-2010, five product categories contributed more than 80%
of Egyptian agricultural export earnings; namely, Edible fruit, nuts, peel of citrus fruit, melons (29.2%), Edible vegetables and certain roots and tubers (24.7%).,Cereal (9.7%), Cotton(8.2%), and Oil seed grain, seed, fruit(5.7%). As illustrated in Table 2A the Egypt’s top exports of agricultural products increased marginally between 2005 and 2010 compared to the period 1998-2004.In relation to the geographic distribution, during 1998-2010, EU was the largest importer, representing 33.6 percent of Egypt’s agricultural exports. The exports are mainly concentrated in a limited number of markets, Italy, France, Germany and Spain. Arab countries ranked second, especially Saudi, followed by Russia market. Given the importance of EU's market to Egypt's agricultural products, it is imperative that an analysis be made on the ground of Egypt's agricultural products being exported to EU.
Additionally; as shown earlier, in the period 1998-2010, almost 41 percent of Egypt's fruit and vegetables products destined for the foreign markets are going to EU, the analysis is carried out for fruit & vegetables
5 U.S. Agency for International Development: Egypt under the Rural and Agricultural Incomes with a Sustainable Environment (RAISE) in association with Development Alternatives, Inc. (DAI) , June 2002.
The evolution of Egypt’s agricultural exports to the EU: The EU-Egypt Association Agreement which was entered into force on 1 June 2004 has opened up the prospect for greater liberalization of trade in industrial goods, services, and agricultural products. Based on the ongoing negotiations on further liberalization of agricultural crops and processed agricultural in 2008, Egypt was implementing a gradual abolition of customs duties for some agricultural products over an implementation period. The Agricultural Agreement of the European Union-Egypt Free Trade Agreement was ratified into force in June 2010 and has already included negotiating for further liberalization of trade in processed agricultural goods.6 Under the agreement, 70% in value terms of Egyptian exports of agricultural goods to the EU already benefit from full liberalization. Meanwhile, there continue to be some Egyptian agricultural products that have not yet been fully liberalized. These include strawberries, rice, several fresh fruits and vegetables as well as processed agricultural products which have a high content of sugar.The evolution of Egypt’s agricultural exports to EU, (Values, structure of export, the share in total import of EU) during the period 1998- 2010 is presented in Tables A3-A5 of Appendix. In addition, the analysis has taken into consideration the main agricultural products Egypt exports to EU (fresh fruits and vegetables).The total period 1998-2010 would be classified into two sub periods; 1998-2003 and 2004-2010 to reveal the impact of the Association Agreements (AA) that has been entered into force with the beginning of 2004. Table A3 in Appendix shows that during the six years prior to the agreement, Egypt’s exports of agricultural products increased by over 61% from €213.45 million in 1998 to €344 million in 2003. In the six years following the implementation of (AA), the annual rate of growth in Egypt’s exports of agricultural goods to EU increased substantially. Between 2004 and 2010, total Egyptian exports grew by of 40.2%, on the average.7 The share of vegetables in Egypt's agricultural exports to EU went up from 31% in 2000 to 37.6% in 2010. Between 2000 and 2010 the share of fresh fruit in total agricultural exports from Egypt to EU market increased by more than 31 percent. Fruit were only 6 percent of total agricultural export of Egypt to EU before 2000; this share has risen to 37.6% in 2010. With the implementation of cooperative agreement between Egypt and the EU started on 1 June 2010, Egypt expects a considerable increase of the export of fruit and vegetables to EU.8 Turkey, Israel, Morocco, Egypt, Tunisia represent the main markets for agricultural products imported by The EU.9 On the other hand, Egypt is still one of the main exporters of agricultural product to The EU in comparison with other southern Mediterranean countries namely Algeria, Tunisia, Lebanon, Jordon and Syria. Nevertheless, some caution must be taken that Egypt may lose its competitiveness in the EU market in some of its agricultural products contrary to its main rivals. Then, the analysis will carried out for the two major agricultural groups (fruits and vegetables) that Egypt and the main competitors export to the EU during the period 1998-2010. The share of fruits and
6 USDA, foreign agricultural services, Gain report, Egypt, Egypt-EU FTA and U.S. Agricultural Exports to Egypt ( 2011).
7 According to EUROSTAT at the end of 2011 the value of EAE to the EU market went down to €503 million.
8 Unexpectedly, Egypt exports of vegetables have dropped from €221 billion in 2010 to about €187 billion at the end of 2011, but represent 37.2 per cent of the total EAE. Further, Egypt was found to have reduced its exports of fruit to the EU markets with values declining from €232 billion in 2010 to €196.8 billion in 2011 However, this value makes up 39.14% of total EAE to the EU markets in 2011. see' Eurostat 2011.
9While EU absorbed more than 40% of Egypt’s total agricultural exports during 2000-2010, the higher shares are found for Tunisia (70%), Morocco (62%), Turkey (48%) and Israel (45%).see' European Commission , Agriculture and Rural Development, 2011.
vegetables in total agricultural export of Egypt and its main rivals to the EU remained consistently around 40- 50% during the considered period.
As Table A4 in Appendix reveals Morocco is the main exporting market of fresh vegetables to EU, followed by Israel, Turkey and Tunisia during the period 1998-2010. For edible fruits and nuts, the values in Table A5 clearly reveals that over the period 1998-2003, Turkey, Morocco, Tunisia, Israel, are the major competitors to Egypt. The Egyptian share of the EU total imports of fruit increased from 0.18 percent to 0.56 percent during the two periods, though Turkey, Morocco and Israel overtook Egypt as the largest supplier of fruit to the EU, capturing 8.3 percent of the market. The present trend seems to exhibit that Egypt's status as one of the main exporter of fruit and vegetables products in the EU remained unabated throughout 1998-2010, nevertheless, a downward trend is detected in some years in favor of other competitors those have likely to improve their position at a much rapid pace. Given the current status, the future of Egypt's agricultural export in the EU market is determined by competitiveness that enables it to enjoy a significant comparative advantage relative to the main rivals.
3. International Competitiveness of Agricultural Trade (Concepts, Measurements
&Literature review)
The concept of comparative advantage is widely used in economic literature to evaluate the patterns of trade and specialization of countries in commodities which they have a competitive edge. The classic concept of international competitiveness is based on the comparative costs principles formulated by Ricardo in 1817. He pointed out that the basis of international trade is the differences among countries in comparative costs among commodities. At the same field another group of Economists adds other determinations (Heckscher-Ohlin, Mill), they stated that the difference in the comparative advantage of the factors of production between two countries is a prerequisite for the difference in comparative costs. comparative advantage of a country cannot be directly measured since relative prices. This approach is based on the notion that even though the theoretical in autarky are not observable; a country’s observable pattern of trade “reveals” its comparative advantage. New framework has been formulated in the latest decades referring that international competitiveness explained by other forces than factor prices and endowment.
Porter’s Competitive Advantage of nations: (Diamond Model) helps to understand the competitive position of a nation or geographic regions in global competition.10 However, for agricultural sector, the competitiveness will depend largely on the extent to which the country is able to increase its share in global markets. Among the factors most likely to impact the long-run competitiveness of international trade in agriculture are; the growing number of bilateral trade agreements between the country and its trade partners; food safety and sanitary/phytosanitary issues; several other potentially important policies that could reduce production and marketing costs through more efficient customs services. The policy environment plays also a critical role in allowing the exporters to be able to aim at new market opportunities and to be able to compete with foreign competitors that benefit from more efficient supporting industries (transport services, quality control, certification services, packaging).11
Several measures are used in assessing the country competitiveness. most of them are based on the concept of revealed comparative advantage. The indicators that are used
10 Lançon. F. (2011)
11 Goldin. I. (1990), Masters, W.A., and A. Winter-Nelson. (1995).
widely in this method are12; Revealed Comparative Advantage (RCA) index explores whether the country has a comparative advantage over the rival countries.(RCA) index is measured by this formula;
RCA = ln ( (XiB/XB))/(XiA//XA)), where XiB;: country’s exports of good i to specific country/region/block. XB: country’s total exports to specific country/ region/block. XiA/: the rival country’s exports of good i to the specific country/ region/block. XA the rival country’s total exports to specific country/region/block. A positive value of RCA is interpreted as an indication of country’s comparative advantage against a rival country in i to specific country/region/block. Another index used to measure comparative advantage is the Comparative Export Performance (CEP) index. It measures the export specialization of a country for particular product group using the formula; CEP = ln ( (XiB/XB))/(XiW//XW), where;: XiW world exports of good i.: XW total world exports. CEP greater than 0 indicates that a country has a comparative export advantage in the specific markets, relative to the world, while RCA of less than 0 indicates that a country has a comparative export disadvantage in the specific markets, relative to the world. Relative Prices index: The relative price is considered as one of the main determinants that influence the competitive position of a commodity in the international market. When the relative price of a product is low, this indicates the powerful competitive position of the country in the face of competing countries in the commodity market. It is calculated as follows: PAj= Pc/Pe, where PAj is the relative price index, Pc ; is the export price of a given country, and Pe is the export price of competing country. If the value of this indicator declines this indicates that a country has a price advantage in exporting the product.
The constant market share analysis is used to explore the factors that affect a country’s export performance. It is calculated by the following equation; Mk = Ma +
Mb+Mab. The first term of the above equation represents Ma “structural effect”, the second term Mb represents "competitiveness effect” and the third term represents Mab
“secondary effect" (combination of both effects).13 Based on the different measures of competiveness, several studies have been conducted on the performances of agricultural trade at the global or specific market. Although many empirical studies have been done on the ground of the competitiveness of agriculture exports for a given country to a specific region or block, it was found that very limited studies have been conducted regarding Egypt14. The study of Helmy, Omneia (2010) is one of the most important studies that assess the competitiveness of Egypt in the EU fruit and vegetable market relative to nine Southern Mediterranean Countries (SMCs) over the period 2004-2008, by adopting the Constant Market Share Analysis (CMSA). Export flows from Egypt to the EU are examined and Egypt’s revealed comparative advantage in exporting fruits and vegetables is illustrated during 2004-2008. The findings reveal that Egypt has a revealed comparative advantage in exporting fruits and vegetables and could use the EU trade concessions more efficiently to further promote its exports to the EU. The paper suggests facilitating the credence and implementation of the new agricultural agreement between Egypt and the EU; enhancing the efficiency of trade facilities and logistics services.
12 See; Serin, V. & Civan, A. (2008), Carraresi, L. & Banterle, A. 2008.
13 Barbaros R.F., Akgüngör S. et Aydoğuş O. (2007).
14 most of studies for Egypt and also for any other country have used the comparative advantage approach to assess the competitiveness of agricultural sectors See;Hamdi A. El- Sawalhy, et al (2008), Hatab, Assem Abu ( 2009), and Ahlam A.
Hassan, and etel (2010).
In the next section some of competitiveness indices are applied in the context of the relevance literature to explore Egypt’s export competitiveness in agricultural products in the EU market against its major competitors of MEDC.
4. The Competitiveness of Agricultural Export of Egypt and its Rival Countries in the EU market..
Data and Methodology: The analysis has been done to a consideration of the competitiveness of Egypt's exports of fruit & vegetable in EU markets and also to major competitors of Egypt in the EU market. As we mentioned before, the main competitors of Egypt within Mediterranean area in the EU market of fruit and vegetables are, Turkey, Morocco, Israel, Tunisia, Jordan, Lebanon, Algeria and Syria.15 The export data concern the intra trade between EU and both the rival countries and Egypt were obtained from Eurostat trade data. The data on exports of selected agricultural commodities for Egypt and other major exporting countries were collected from various issues of COMTRADE and Trade map.
Measure the competitiveness of fruit & vegetables exports of Egypt and its rivals in the EU market: Export competitiveness indices that are used in the context of the paper are
“revealed comparative advantage index RCA” and “comparative export performance index CEP”. These indices provide more precise information about competitive advantage concept - the ability of country to survive and gain large market shares relative to other countries.16 The period under consideration will be divided into two sub periods 1998-2003 and 2004- 2010. Tables 1 and 2 summarize the RCA and CEP indices for Egypt and selected rival countries for vegetables and fruit.
Revealed Comparative Advantage (RCA) Index of Egypt and its rival countries: A summary of the results is presented in Table1 below. For the period 1998-2003, Egypt was found to have a comparative advantage in exporting vegetables over most the rival countries, as was obvious from the positive values of RCA, but Morocco and Israel have always been superior. With regard to Algeria, Lebanon, Syria, Jordan and Tunisia, it is found that the computed RCA values for Egypt were positive for all the years indicating its comparative advantage. Regarding the second period (2004-2010), although Egypt has increased its share in the EU market for fresh vegetables due to the deeper concessions given to Egypt under Association Agreement (AA) with the EU, it is notable that Egypt experienced a decline in RCA against most of its rivals from 2008 to 2010. The value of RCA was depicting a clear downward trend compared to Tunisia, Algeria and Lebanon.
Moreover; although Egypt had higher competitiveness than Jordan for the period 1998- 2004, the reverse is true after that. Jordan has begun to be more competitiveness than Egypt for fresh vegetables during the last three years.17
15 A particular attention should be given to south Mediterranean region that have the similar structure agricultural trade with Egypt. Further, the EU has entered into preferential trade agreements with those countries to encourage free exchanges between them and the EU for the period 2004-2012. Countries that have signed an Association Agreement with the EU are : Algeria, Egypt, Tunisia, Israel, Jordan, Lebanon ,Morocco. Syria has a Cooperation Agreement with the EU and a Customs Union has launched between Turkey and the EU in 1995. W. Stephen (2007).
16 Although these indices are not satisfactory as a cardinal or ordinal measure but provides a useful tool in detecting comparative advantages of a state in particular sectors. Government subsidies, supporting industries, strategy and structure of domestic firms, technological advances and regulations are among the factors considered in competitive advantage. See;
Parcon,Hazel, Run Yu, Matthew K. Loke, and PingSun Leung (2010).
17 As a deeper negotiations between Jordan with EU on further liberalization for agricultural, processed agricultural and fisheries products have been concluded in 2005. De Wulf, Luc and Maryla Maliszewska (eds.) (2009).
Table 1; Revealed Comparative Advantage Index for vegetable
Table 2; Revealed Comparative Advantage Index for fruit
RCA of
Egypt versus 1998-
2000 2001-
2003 2004-
2007 2008-
2010 Turkey 1.45 1.44 1.45 1.32 Morocco -0.11 -0.33 -0.42 -0.32 Israel -0.92 -0.74 -0.41 -0.24 Tunisia 2.83 2.99 2.98 1.75 Syria 1.76 1.65 1.54 1.43 Jordan 0.09 0.04 0.001 -0.65 Algeria 2.76 3.21 1.94 0.98 Lebanon 1.98 2.87 3.29 1.76
RCA of Egypt versus
1998- 2000
2001- 2003
2004- 2007
2008- 2010 Turkey -1.75 -1.10 -0.42 -0.39 Morocco -1.47 -2.65 -0.98 -0.12 Israel -1,12 -0.77 -0.88 0.09 Tunisia -1,14 -0.34 0.53 0.44
Syria 2.09 1.76 1.45 0.98
Jordon 0.22 0.67 1.44 0.87
Algeria 1.12 2.14 1.09 0.98 Lebanon 0.24 0.99 1.43 1.34 Source: ITC Trade Map, Eurostat and own calculations
This means that Egypt faces some threats due to signing or implementing further liberalization negotiations between the EU and some MEDC whose vegetable export structures are quite similar to Egypt resulting in easier preferential access conditions for these rivals to the EU vegetable market.18
In terms of fresh fruit (08), Table 2 below shows that between 1998 and 2003, Egypt had a comparative disadvantage over Turkey, Morocco, Israel and Tunisia. The results reveal that Egypt has a significant comparative advantage over that of Algeria, Lebanon, Syria and Jordan during the study period. Moreover, the results suggest that Turkey and Morocco stayed superior over that of Egypt in the EU market of fruit during 2004-2010. Nevertheless, Egypt became stronger over Tunisia in terms of these products from 2004. Mixed results are seen for Israel, it stayed stronger in most years except in 2008 and 2010. However, although Egypt’s competitiveness in the EU market for fresh fruit increased at a higher rate than those of Lebanon, Algeria, Syria and Jordan. These countries have gained a higher market share in EU during the last three years.
This indicates that it remains critical for Egypt to maintain its competitiveness in the EU in faces of European agricultural preferences to other MEDC, which enable them a greater access to the EU market of fruit.
Comparative Export Performance indices (CEP) of Egypt and its rival countries
From the results reported in the table 3 when the overall period are considered;
some interesting aspects emerge; most of the selected countries characterized by a positive CEP, even though the index is in considerable decline between 1998 and 2010. The exception here is Tunisia, Lebanon and Algeria. For these countries the indices show negative values over the period 1998-2010. For Algeria the index witnessed an improvement toward a positive value during 2008-2010. The results in Table 3 show a more competitive advantage for Turkey, Morocco and Israel than Egypt in exporting vegetables to the EU market in the average of 1998-2000. However the picture has changed for Turkey after that. For other rivals, they are penalized by less comparative advantage relative to Egypt which appears to have been superior over Tunisia, Syria, and Lebanon and also over Algeria.
18 Although, the preferences access obtained for MEDC agricultural commodities to the EU market under the Euro-Mediterranean Partnership, the size of trade preferences can vary across the partners. Indeed some partners receive significant tariff reductions, their preferences are generally restricted by tariff-rate quotas (TrQ) limit, some Mediterranean partners also negotiated significant entry prices reductions for some of their most important commodities in addition to tariff preferences. This is for instance the case of fresh tomatoes and courgettes originating in Morocco. Laforce. C.V.,(2011).
Table 3; Comparative Export Performance Index (CEP) for vegetables
Table 4; Comparative Export Performance Index (CEP) for fruit
1998- 2000
2001- 2003
2004- 2007
2008- 2010 Egypt 1.67 1.76 1.84 1.79 Turkey 1.75 0.38 0.32 0.44 Morocco 1.76 1.92 1.99 2.45 Israel 1.98 1.82 1.89 1.85 Tunisia -0.98 -0.89 -0.86 -0.13 Syria 0.33 0.34 0.48 0.86 Jordon 0.87 1.12 1.50 2.11 Algeria -1.12 -1.43 -0.94 0.11 Lebanon -0.93 -1.09 -1.12 -1.23
1998- 2000
2001- 2003
2004- 2007
2008- 2010 Egypt -0.18 0.22 1.54 1.22 Turkey 1.65 1.47 1.58 1.43 Morocco 1.31 1.30 1.64 0.99 Israel 1.03 0.99 0.89 0.96 Tunisia 0.94 1.37 0.74 0.99 Syria -1.45 -1.23 -1.1 0.68 Jordon -0.19 -0.09 -0.01 0.07 Algeria -1.68 -2.32 -1.45 0.57 Lebanon -1.11 -0.99 -106 -0.99 Source: ITC Trade Map, Eurostat and own calculations
Although Egypt has always been superior than Jordon in exporting vegetables to the EU along the period 1998-2007, the results reveals that Jordon had performed well compared to Egypt from 2008. Interestingly, the CEP for Syria and Algeria climbed steady between 2008 and 2010 suggesting some improvements in their competitiveness, while the competitiveness of Egypt has slightly declined over the last three years with the index gradually eroding from 1.82 in 2004 to 1.63in 2010.
The findings from the CEP index are consistent with the findings from the RCA index.
Although, Egypt exhibited a clear comparative advantage in the EU market in vegetable products against some rival countries during the last years, it has witnessed a short declining in its comparative advantage in this product, while some other rivals have improved their competitiveness. Again Morocco and Israel enjoyed the upper hand over Egypt in the EU vegetable market.
In terms of fruit, the results show that from the period 1998-2000 to the following periods Egypt experienced a position of comparative disadvantage to comparative advantage, with its CEP score raising from (-0.18) to a positive value until 2010 as Table 4 reveals. Beside Egypt, Turkey, Morocco, Israel and Tunisia have a comparative advantage in the EU market, while Jordan has a comparative advantage only in the years from 2006 to 2010. Although Israel and Tunisia stayed superior over that of Egypt until 2004, Egypt enjoyed a relative comparative advantage over them from 2004 to 2010.
Moreover, while the CEP values were found to be less than zero suggested a comparative disadvantage for Algeria, Syria and Jordan in almost all the years under study, a reverse was observed from 2008, when the CEP values turned positive. Morocco and Turkey stayed stronger over Egypt with regard to the fruit export in EU during 1998-2010, except in 2008 and 2010 Egypt is more competitive than Morocco. But, Egypt was always found to have outsmarted Lebanon during the study period.
Overall, in relation to world, Egypt has been competitive in the EU-market in terms of fruit and vegetables as it increased its export share in the EU fruit & vegetables market over the period 2004-2010, but its competitiveness may be threatened by the probable competition from some Mediterranean Countries, whose fruit and vegetables exports started to gain a greater markets shares in EU during the recent years.19
19An agreement with Israel regarding progressive liberalization of trade in agricultural and processed agricultural goods, and fish and fishery products agreements have been entered into force in 2010, and negotiations on the matter are also ongoing
The findings show that Egypt's exports of fruit and vegetables to the EU market are growing. However this growth is limited to the competition from other MEDC which has grown dramatically in the last years. While Morocco and Turkey have dominated in fresh fruits exports, Israel and Morocco have been dominant in fresh vegetables. Further, Egypt did not maintain a consistent level of competitiveness over the years. Many other rivals were found to have improved their status by faster steps.
Given the current status, many factors could be explained as constraints against Egypt's exports of fruits and vegetables to EU and should be cured to make Egypt a competitive exporter of fresh fruits and Vegetables in the future; opening the EU market to imports from Southern Mediterranean Countries through bilateral preferential trade treatments has created growing competition in the EU markets for Egyptian vegetables and fruits. These countries have great similarities with Egypt in terms of the magnitude of agricultural products and its share of EU countries.20 Moreover, the agreement implemented in 2010 affirms that Egypt should solve any problems, in particular SPS or technical barriers to trade hindering the implementation of this agreement. In terms of SPS measures, it seems based on the review of Rapid Alert System for Food and Feed (RASFF) that, a number of notifications have identified high aflatoxin content of some ground nuts, and other exports from Egypt to the EU. Introducing these measures, especially during the recent years, and the large number of interceptions coincident with a notable drop in Egyptian agricultural exports to EU.21 The situation is further complicated by the emergence of private voluntary standards which go beyond international requirements including HACCP, GAP. These standards consist of a set of general regulations and an auditing system with a checklist.
Additionally, the major current and future constraints to Egypt’s horticultural export competitiveness in EU are the shortage of adequate transportation.22
Accordingly, Egypt attempts to diversify its export as a means of gaining competitiveness and reducing dependence on the EU markets -the most strict food safety compliance challenges- toward other markets apply less strict food safety requirements.
5. The Competitiveness of EAE in some alternative markets.
Although little evidences prove that Egypt has made a particular headway in intensifying its agricultural export through the FTAs that it has negotiated, the potential evidences remain at the level of some individual countries.23 The assessment will focus on Russia, Ukraine and
with Tunisia and Morocco. This situation imposed on Egypt a new challenge to speed up the process of implementation the AA. See; Raymond J. Ahear (2010).
20 Mediterranean countries appear to be highly differing in their advantages granted by the EU in the agricultural sector. What each country can progress in its bilateral negotiations explains its preferential gains from one Mediterranean country. Countries which primarily export products with low MFN duties, such as Turkey or Lebanon, already pay few or no duties when entering the European market. The room for liberalization is therefore limited in these countries: a reduction in EU customs duties would have only a very limited impact on their exports. An increase in tariff concessions would have a greater impact in countries which, despite their preferences, currently pay the highest duties for access to the European market, i.e. Israel, Algeria and Tunisia as well as Jordan, Morocco and Egypt. see; Charlotte, Emlinger, Emmanuelle Chevassus-Lozza, and Florence Jacquet. 2008.
21 EU required that in order to import potatoes from Egypt, each “lot” of Egyptian potatoes (or every 25 tons) should come from a “qualified area and should subject to measures that dealt with harvesting, labeling, packaging, testing, and certification Furthermore, sanitary authorities in the EU member states rejected a number of other Egyptian agricultural consignments such as oranges, coriander seeds, red pepper, onions, jams, honeybee. The European Commission’s Food and Veterinary Office (FVO) carried out three missions to Egypt on pesticide residues in fruit and vegetables (see EU RASFF).
22 NEPAD–CAADP Bankable Investment Project Profile (2005).
23 Under the Greater Arab Free Trade Area (GAFTA) signed in 1998, the Egypt share of GAFTA imports of vegetables (07), has exhibited a consistent upward trend from 2007, reaching nearly 47% of the total exports of Egypt's vegetables in 2010.
However, about 38% of the total value of Egypt's vegetables exports is directed to Saudi. The GAFTA share of total Egyptian
Saudi Arabia that become very important markets for Egypt's agricultural exports during the recent year. We use the indices of competitiveness similar to those used in the previous analysis to detect whether Egypt's agricultural export has competitiveness in those markets, and whether the competitiveness exhibits a significant increasing trend relative to the main rivals. In particular, we interested in finding out whether the diversification in recent years stands a better chance to thrive in the long run. Hence, while the previous analysis focused on assessing the competitiveness for 1998 to 2010, the current work investigates the competitiveness over the period 2005 to 2010.
The Competitiveness in Saudi Arabian market; Egypt is the most important market for Saudi. Oranges, citrus, and fresh or dried lemons and limes, Potatoes, fresh or chilled nes, onion fresh represent the main agricultural products Saudi imports from Egypt. The statistics show that the import of vegetables in Saudi Arabia from Egypt jumped from US$
37.9 million in 2005 to US$ 139.3 million in 2010. Egypt had the biggest market share in 2010 followed by Syria and then Netherlands, Yemen and Morocco. In the case of fresh fruit, Egypt had the biggest market share into Saudi Arabia during the period 2005-2010, followed by Philippines, South Africa, Chile, and Yemen. Turkey has increased its market share of fruit exports to Saudi Arabia sharply from 3% in 2005 to 15.2% in 2010.Table 5 and 6 display the values of RCA and CES indices for Egypt and the major competitors in Saudi's vegetable market of (07) for 2005-2010.
Table 5; Egypt RCA index in Saudi market of vegetables versus the main rivals
Table 6; CEP Index for vegetables in Saudi
RCA Egypt versus
2005- 2007
2008- 2010 Syria -0.09 -0.22
Yemen 1.29 0.78
Morocco 1.19 0.14 Netherlands 1.89 0.98
2005-2007 2008-2010
Egypt 2.18 1.19
Syria 2.60 2.89
Yemen 1.29 1.78
Morocco 1.01 1.54
Netherlands 1.30 1.65 Source: ITC Trade Map, COMTRADE and own calculations
Egypt, Syria, Netherlands, Yemen and Morocco are the fifth top destinations of Saudi’s vegetables exports, Syria capturing 30%, while the share of the other countries together is 25%. Though the Morocco share of the Saudi's import increased from 0.06 percent in 2005 to 2.16 percent in 2008, its share declined to 0.78 percent in 2010.
Table 5 reveals that over 2005-2010 Egypt has a comparative advantage over that of Netherlands, Morocco and Yemen. On the other hand, Egypt has a comparative disadvantage over that of Syria. Egypt reveals a negative RCA index value from 2007.
Nevertheless, from 2005 to 2010, Egypt experienced a position of comparative advantage to comparative disadvantage relative to Morocco, with its RCA score falling to (- 0.29) in 2009 from (1.29) in 2008, but by 2010, the RCA score has turned again to a positive value. Moreover, Egypt has exhibited a bite falling in RCA relative to Netherlands and Yemen during 2008-2010. This means that although Egypt stayed superior over Yemen, Netherlands and Morocco, starting from the last two years Egypt has lost a bit of its competitiveness.
fruit exports (08) also increased from 30% in 2006 to 38.7% in 2010. The share of Saudi represents alone 45.7% (Based on AMF statistics). Only about 4.2% of the total value of Egypt agricultural exports (of F&V) is directed to the COMESA despite that Egypt is a member in 1998. The most prevalent NTBs hindering regional trade are the underdeveloped transportation infrastructure, poor delivery systems, customs procedures. see; Viljoen(2011)
Table 6 shows the CEP indices results for Egypt and the main selected rivals during 2005-2010. The results affirm that all the top exporter have a comparative advantage in Saudi's vegetable market between 2005 and 2010. The results further suggest that Egypt has higher competitiveness than Yemen, Morocco and Netherlands. However, it has been relatively inferior when compared to Syria. Although, Egypt has still been superior to most of its rivals during 2005-2007, the value of CEP has started to decline since 2008 while it has risen to other competitors.
The results of RCA and CEP affirm that Egypt is more competitive in Saudi Arabian market than most of the top rivals in terms of vegetables, only Syria stayed stronger. Egypt has begun to lose some of its competitiveness in the Saudi's market due to the existences of nontariff barriers imposed by Saudi. Then in order to reduce the time and cost of trade cross the border Saudi prefers to import from Syria and Yemen.
Table 7 and 8 display the RCA and CEP indices of fruit products during 2005-2010 for Egypt and the selective rivals. In term of RCA, the results show that between 2005 and 2010, Egypt has a comparative disadvantage over most of Chile, South Africa, Syria and Philippine. On the other side Egypt has an advantage over Yemen. However, from the beginning of 2009, the comparative advantage trends for Egypt exhibited a decline relative to Yemen.
Table 7; Egypt RCA index in Saudi market of fruit versus the main rivals
Table 8; CEP Index for fruit in Saudi
RCA Egypt versus 2005- 2007
2008- 2010
Syria -1.11 -1.19
Chili -1.04 -1.01
South Africa -0.67 -0.98
Yemen 0.58 0.03
Philippine -1.97 -0.98
2005-2007 2008-2010
Egypt 1.22 1.03
Syria 1.65 1.78
Chili 3.89 2.98
South Africa 1.98 1.25
Yemen 1.08 1.32
Philippine 2.89 2.95
Source: ITC Trade Map, COMTRADE and own calculations
The results in Table 8 suggest that during 2005-2008 Egypt and all rival countries have a comparative advantage in terms of exporting fruit to Saudi relative to the world.
Chile and Philippine enjoyed the upper hand. Egypt has a smaller value of CEP compared to all the rival countries under assessment except Yemen. On the other hand Egypt has quietly lost some of its competitiveness in exporting fruit to Saudi a market relative to its rivals. It is notable that during the last few years Egypt has been outperformed by Yemen in enhancing its competitiveness in Saudi's market for fruit relative to the global market.
The main finding of the previous analysis is that while Egypt has a comparative advantage in exporting fruit and vegetables to Saudi, it has lost some of its comparative advantage in this market compared to other rivals. The competitiveness of Egypt in Saudi market is more solid for vegetables product rather than fruit products.
Recently Saudi applies food safety requirements and quality control which seem to be biased against imports from middle and lower income countries.
It is worth mentioning to say that during the last two years, Saudi threatened to cease some of its imports of fruit and vegetables from Egypt as an abiding to Saudi health regulations.24
24Saudi Arabia is likely to ban the import of Egyptian green peppers and strawberries after they were found with insecticides exceeding permissible limits. There is a great fear and concern over the possible ban it would lead to a knock-on price hike.
However, based on the results of regional and international surveys, the underdeveloped trade- related transportation facilities in Egypt were considered to pose thigh limitations to the current and future export competitiveness in Saudi market. 25
Hence, substantial penetration of Saudi Arabia market by Egypt will be difficult to continue over time -primarily due to cross impediments & safety conditions which constrained intra regional trade in many sectors especially in vegetables and fruit.
The competitiveness in Russian market;
Agricultural products became a very important component of Egypt's exports to Russia since the last four years. According to trade statistics citrus fruits are at the top of the agricultural products Egypt export to Russia, with an estimated 150,000 tons exported annually. Turkey, Ecuador, Poland, Spain and Morocco gained the biggest shares in Russian fruit market. From 2008, Egypt became one of the main important suppliers of fruit to Russia, capturing 3.5 percent of the market. The major competitors of Egypt in Russia's vegetables market are Turkey, Netherlands, Israel, Spain and Ukraine. The shares of these five countries in Russia's vegetables market are 21%, 12.1%, 6.1%, 4.2 and 3.8%
respectively.
Table 9; Egypt RCA index in Russia's market of vegetables versus the main rivals
Table 10; CEP Index for vegetables in Russia
RCA Egypt versus
2005-2007 2008-2010
Turkey 0.32 -0.87
Spain 1.09 1.32
Israel 0.46 -1.13
Netherlands 0.98 1.01
Ukraine 0.76 1.11
2005-2007 2008-2010
Egypt 1.78 1.86
Turkey 2.99 2.67
Spain 1.29 1.78
Israel 1.98 2.91
Netherlands 1.37 1.66
Ukraine 1.65 1.75
Source: ITC Trade Map, COMTRADE and own calculations
The results in Table 9 illustrate that despite Egypt has captured a smaller share relative to the main rivals, it has a revealed comparative advantage in importing vegetables products to Russia during the average of 2005-2007. From 2008 to 2010, Egypt has exhibited an upward trend in RCA relative to Netherlands, Spain, and Ukraine. However, Egypt exhibited a strong and significant trend in losing RCA from 2008 to 2010 relative to Turkey and Israel. As a result, the RCA reveals negative values indicating that Turkey and Israel have been significantly superior over Egypt in exporting vegetables to Russia.
The calculated values of CEP for vegetables clearly indicate a comparative advantage for all the rivals in Russian market. Egypt shows a higher value than Netherlands, Spain, and Ukraine. However, Turkey and Israel have exhibited a stronger value than Egypt in terms of CEP. Although Egypt supplies a share less than all other rivals under consideration in Russian market of vegetables, it started to gain not only a greater markets shares in recent years, but also has experienced progress in gaining a comparative advantage. The calculated RCAs and CEP for (07) products indicate a steady improvement in competitiveness of Egypt in comparing to other rivals. Turkey and Israel are still outperforming Egypt in exporting vegetables to Russian market.
Egyptian companies export not only peppers and strawberries but also other vegetables and fruits. So any action against them would affect the market. Saudi Arabia Trade and Business Directory, 2011, available at www.the Saudi.net.
25The agricultural exports to Arab countries may not face the same level of problems that they face in the EU market. At the level of Arab countries transport-related infrastructure and real trade costs (trade facilitation) were ranked as the most important constraints. See;Hoekman B and Zarrouk J (2009),
The results in Table 11 reveal that in the case of fruit (08), Egypt has been significantly superior over that of Turkey, Poland and Spain, however, the values of RCA tend to decline a bit starting with the year 2009 in favor of those three countries indicating that those rival countries have improved their competitiveness into Russian market more than Egypt has done. On the other side, Egypt has a comparative disadvantage over that of Ecuador and Morocco. Egypt has a negative RCA index value between 2005 and 2010 regarding those countries.
Table 12; CEP Index for fruit in Russia Table 11; Egypt RCA index in Russia's market of fruit
versus the main rivals
RCA Egypt versus 2005-2007 2008-2010
Turkey 1.34 1.01
Spain 1.29 1.11
Poland 1.76 1.08
Morocco -7.20 -3.31
Ecuador -6.98 -9.78
2005-2007 2008-2010
Egypt 2.25 2.10
Turkey 1.89 2.08
Spain 1.24 1.86
Poland 1.56 1.59
Morocco 5.89 4.89
Ecuador 6.89 7.32
Source: ITC Trade Map, COMTRADE and own calculations
In terms of CEP, table 12 reveals that Egypt, Turkey, Spain, Poland, Ecuador and Morocco have a comparative advantage in Russian market. While Ecuador and Morocco enjoyed the upper hand over Egypt during 2005-2010, Egypt had a relative comparative advantage over Turkey, Spain and Poland during that period. Although Egypt has a clear comparative advantage in exporting fruit to Russia more than Turkey, Spain and Poland, the CEP index has been declining marginally over the last years, but the index has been increasing for Turkey and Spain. Morocco and Ecuador still dominate the top in their global competitive in Russia's market of fruit relative to other rivals.
Although the results confirm that Egypt's competitiveness in exporting vegetables appear to be maintained or even improved in Russian market, the calculated RCA and CEP suggests that Egypt was losing some of its comparative advantage in of fruit in favor of some rivals, then caution should be used in interpreting this result. This means that growing access of Egypt’s exports of fruit and vegetables to Russia should be attributed to the potential of Egypt in maintaining and improving its competitiveness.
Transport distances, poor logistic system for agricultural exports, and the pricing competition with Egypt from other CIS represent the most factors that limit the speed of Egypt's access to Russia. Among those factors that likely to have the greatest impact over the long-run is the food safety and SPS issues.Indeed, Russia is less strict in applying food safety regulations in its agricultural import, it follows the EU announcement to impose bans on its agricultural imports from partners. As a result of Russia's ban on vegetable and fruit imports from Egypt, many CIS countries have started to intensive their fruit and vegetable exports to Russia.26
The competitiveness in the Ukrainian market; The last decade showed rapid growth in Ukrainian trade of agricultural products. Ukraine represents one of the major markets for Egypt exports of fruit & vegetables. Although the share of Ukraine in Egypt's total exports of vegetables represents less than 1.5 percent during 2006-2010, Egypt represents sixth importer of Ukraine's total imports of vegetables. In the period 2006-2010, Egypt's share
26 For example; Russia banned a wide range of Egyptian food products following a European Union report that some of the products might contain E coli bacteria, even as Egypt refuted the claims of being the source of E.coli.. FAO, "Regional office for near east; Egypt's agricultural exports; a mixed blessing", Issues 12, January 2012.
represented about 5.7% in Ukraine's imports of vegetables. Further, Ukraine is one of the main destinations for Egypt's exports of fruit. Egypt share of Ukrainian imports of fruit increased rapidly from 4.8% in 2006 to 7.5% in 2010. Egypt represents the fourth agricultural importer to Ukraine. Given the importance of Ukraine's market to Egypt's agricultural products, it is imperative that an analysis be made on the competitive advantages of Egypt's fruit and vegetables products being exported to Ukraine.Table 13 &
14 display the RCA and CEP values for Egypt and its major competitors in Ukrainian market in vegetables products during 2005-2010.
Table 14; CEP Index for vegetables in Ukraine Table 13; Egypt RCA index in Ukrainian vegetables
market versus the main rivals
RCA Egypt versus 2005-2007 2008-2010
Netherlands -0.93 -0.56
Poland 1.12 0.76
Syria -0.45 -0.91
Spain -0.76 -0.65
Turkey 0.89 0.56
2005-2007 2008-2010
Egypt 1.47 1.56
Netherlands 2.67 2.89
Poland 1.22 1.54
Syria 2.08 2.51
Spain 1.89 1.90
Turkey 1.09 1.21
Source: ITC Trade Map, COMTRADE and own calculations
Spain, Netherlands and Syria have always been superior over Egypt in terms of vegetables exports to Ukraine. Egypt has a comparative advantage over Turkey during 2005-2010. Compared to Poland, apart from the years 2007 and 2009, Egypt has always been superior. Based on CEP index, Spain, Syria and Netherlands have always had higher competitiveness than Egypt, whereas Egypt was superior to both Turkey and Poland
Table 16; CEP Index for fruit in Ukraine Table 15; Egypt RCA index in Ukrainian fruit market
versus the main rivals
RCAEgypt versus 2005-2007 2008-2010
Turkey 1.59 1.97
Poland 1.33 1.39
Ecuador -0.78 -0.83
Spain 1.29 1.54
2005-2007 2008-2010
Egypt 1.11 1.26
Turkey 1.09 0.89
Poland 1.87 1.60
Ecuador 2.89 3.23
Spain 1.23 1.19
Source: ITC Trade Map, COMTRADE and own calculations
The calculated RCAs for fruit in table 15 clearly indicate a comparative advantage for Egypt except for Ecuador which has the edge on Egypt during 2005-2010. The calculated values of CEP index are reported in table 16 below. The results are very similar to the RCA index, and reveals that Egypt has always performed better than the other rivals with the exception for Ecuador.Moreover, the RCA and CPE values reveal a relatively stronger improvement in the competitiveness of Egypt in exporting fruit to Ukraine compared to Turkey, Poland and Spain from 2008 until 2010 suggesting that Egypt has gained a comparative advantage in fruit exports to Ukraine.
In summary, Egypt has a strong comparative advantage in fresh fruit and relatively less advantage in fresh vegetables in the Ukrainian market during the recent years. But it is worth mentioning that the success of Egypt in gaining that pattern of competitiveness in the Ukrainian market may be attributed to the appropriateness of the Egyptian product in terms of price and quality of the taste of Ukraine.
Nevertheless, it should not be forgotten that the SPS and FS requirements represent one of the most important regulatory non-tariff barriers that Egyptian exporters are encountering in the Ukrainian market. Recently, Ukraine aggressively follows Europe's
