The consumer price effects of specific trade policy restrictions in South Africa
Lawrence Edwards, Zaakirah Ismail, Godfrey Kamutando, Simbarashe Mambara, Matthew Stern, Fouche Venter
Last Modified Date:
2022-11-18, 03:44 PM
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This paper examines the implications for consumer prices of three consumer goods – frozen chicken, frozen chips and pasta – that have experienced rising protection from 2010 in the form of general, anti-dumping and safeguard duties. We find that tariffs and other import duties have a powerful impact on import volumes and, in the case of frozen chicken, on consumer prices. Foreign suppliers do not absorb any of the tariff increase by lowering their prices and pass the full tariff increase onto importers. However, the aggregate impact on landed import prices and volumes is reduced by the diversion of imports towards preferential trade partners, most notably, the European Union. Using disaggregated product price data at the outlet level, we estimate that tariff increases have contributed to rising domestic consumer prices, but the pass-through depends on how the different tariff measures reinforce each other in restricting imports from preferential trade partners. In the case of frozen chicken products, import-weighted average applied tariffs rose by 40% from 2012 to 2021 and are estimated to have raised consumer prices by 16.2%. The reduction in welfare of rising trade protection on the three products is calculated to be equivalent to 2.1% of food expenditure for households in the lowest consumption decile and 1.1% for households in the top consumption decile. Our results highlight the influence of preferential trade areas in mediating the impact of tariffs on prices and illustrate how aggregate price and welfare impacts are influenced by the sequencing, targeting and ultimate combination of trade measures.