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The export duty’s impact on the sunseed market in Ukraine

The export duty’s impact on the sunseed market in Ukraine. Serhiy Demyanenko Victoria Halushko. Reasons for the duty introduction. Increased crushing volumes in Ukraine Smaller planted areas under sunseed Greater government revenues.

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The export duty’s impact on the sunseed market in Ukraine

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  1. The export duty’s impact on the sunseed market in Ukraine Serhiy Demyanenko Victoria Halushko

  2. Reasons for the duty introduction • Increased crushing volumes in Ukraine • Smaller planted areas under sunseed • Greater government revenues

  3. Market situation before the duty introduction (1996-1999) • 45% of sunseed output was exported, including 31% to the EC • Domestic price for sunseed was equal to its world price • Crushers bought sunseed for world price

  4. Positive consequences of the duty introduction • A 50% rise in Ukraine’soil output • Shrinking of sunseed production in the long-term outlook • A 50% drop in sunseed export • Increased public revenue • Greater investments in sunoil production and improved access to credit resources

  5. Negative consequences of the duty introduction • Falling domestic prices for sunseed • Redistribution of profits from sunseed producers in favor of crushers • Appearing of giver raw material schemes to elude the duty payment

  6. Impact of the duty introduction on the world sunseed market • Ukraine’s share in the world sunseed market • Rising of world sunseed price • Slackening of elastic sunseed demand in the world market

  7. Establishing the optimum sunseed duty rate (12%) • Taking into account both seasonal (October-February) and off-seasonal (March / September) sunseed sales • Taking into account world prices for both rapeseed and soybeans as sunseed substitutes • Domestic demand elasticity = -1.81 • Price elasticity = 0.24 • Foreign demand elasticity = -9.53

  8. 1999/00 2000/01 2002/03 2003/04 Free trade PEXW, $/MT Free trade PFOB, $/MT Partial liberalization PEXW, $/MT Actual price PEXW, $/MT Actual price PFOB, $/MT 137.00 158.62 126.71 120.34 171.58 151.30 166.42 138.24 129.38 174.53 210.00 235.41 196.40 193.21 254.48 210.00 261.08 195.23 191.00 277.00 Export under the free trade conditions, KMT Export under the partial liberalization conditions, KMT Actual export, KMT 865.98 610.00 411.90 1629.00 308.10 1040.10 698.00 416.00 330.80 1403.00 979.00 800.00 Domestic consumption under free trade conditions, KMT Actual domestic consumption, KMT 1682.51 2136.09 1814.00 2403.12 2467.63 2869.72 2950.00 3500.00 Price under the conditions of free trade, partial liberalization* and actual prices * - Partial liberalization means introduction of an optimum tariff (12%).

  9. Changes in benefits resulting from the export duty introduction* 1999/00 2000/01 2002/03 2003/04 Trade policy (duty) 23% 23% 17% 17% Consumer benefit (testers), $Th Producer benefit, $Th Budget revenue, $Th +31513 -42451 +13215 +45795 -75491 +33914 +44672 -53745 +12232 +61063 -82555 +32198 Net change in the national benefit, $ Th +2277 +4218 +3159 +10706 Partial liberalization (12% export duty rate) Consumer benefit (testers), $Th Producer benefit, $Th Budget revenue, $Th +18579 -26219 +10759 +25703 -44978 +23870 +35654 -43535 +11079 +46539 -64176 +28440 Net change in the national benefit, $ Th +3119 +4594 +3198 +10803 * - compared with free trade conditions

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