Since 2010, various trade measures have been imposed to protect South African producers. These measures vary from targeted industry approaches, such as increasing import tariffs in accordance with the Most Favoured Nation standards, to broader and often more severe anti-dumping and safeguarding policies, which redirect trade between preferential trade partners. While these measures focus on stimulating production and supporting South Africa’s economy in achieving its industrial policy goals, less attention is given to how these measures impact consumers and domestic prices.
This presentation explains the impact that increased tariffs and protection on staple foods have had on consumer prices. Specific attention will be given to three goods: frozen chicken, frozen chips and pasta, because they are relatively important items in the household food consumption bundle (accounting for a combined 14% of the consumer price index (CPI) weight for food products).
- What are the trade flows and trade policy measures applied to the frozen chicken, pasta and chips industries?
- How do import barriers (such as normal duties, tariff increases, safeguarding measures and anti-dumping measures) affect consumer prices at the retail level? And what does this mean for monetary policy?
- What is the pass-through of the various trade measures to consumer prices at the retail level?
- How is this burden distributed? And what does this mean from a welfare perspective?
The research upon which this discussion is based highlights some key takings for policy makers interested in monetary policy and industrial policy. How does South Africa’s participation in a free trade agreement with a large industrial region such as the EU influence the effectiveness of tariffs as an instrument for industrial policy purposes? And how does the interplay between the trading measures and arrangements (such as normal duties, tariff increases, safeguarding measures and anti-dumping measures) by ITAC and MFN influence aggregate price levels?
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