An Economic Assessment on Nicaraguan Agriculture of FTA between Nicaragua and Taiwan
Date Issued
2012
Date
2012
Author(s)
CACERES, FATIMA
Abstract
Nicaragua historically has been dominated by the Agricultural Sector, which always has been a key sector in the national economy. The Nicaragua’s Agricultural exports have become progressively more significant to the economy due to the increasing contribution to the national GDP. The country began its trade liberalization since early 90s, where initially the national trade policy was based on unilateral liberalization and after its revision, adjustment and complementation follows a pattern to expand trade within bilateral, regional and multilateral negotiations for both goods and services.
Within the framework of international trade, the Republic of China (Taiwan) and the Republic of Nicaragua adopted a Bilateral Agreement since June 16, 2006, but entered into force on January 1 of 2008. Taiwan represents the main partner in the Asian region, due to the increasing population and preferences to Nicaraguan agricultural products, and thus, during this decade this is one of the most remarkable progresses of the country’s economy that ensure continuity of the FTAs and expansion of national production to cover other important markets.
This study focuses to investigate the Agricultural products (HS code 01-24) included in this FTA in order to show if comparative advantage is revealed or not, for Nicaragua and Taiwan perspectives. The methodology that will be implemented is Balassa Index (1965) - Revealed Comparative Advantage. Data used for this study is based mainly on the Trade Map database, using annual information over a period 2001 – 2011, from both perspectives of Nicaragua and Taiwan.
The availability of data was obtained at six-digit level of the Harmonized System (HS Code) which shows most accurate information in terms of international trade, as well as, was “reporting data” from United Nations COMTRADE, General Customs Bureau of Nicaragua (DGA) and Directorate General of Custom – Department of Statistics of Taiwan province of China (Taiwan side), also, is measured in US$ Thousand Dollar. The FTA includes 768 agricultural commodities from Taiwan perspective, as well as, for Nicaragua perspective incorporates 682 agro-exports.
The results obtained include two different scenarios, before and after analysis of the agro-export, which is described as: scenario 1 represents year 2006 and the scenario 2 is based on year 2011.
Nicaragua in the first scenario presents 9 commodities that revealed a comparative advantage and scenario 2 showed 10 commodities, the main commodities highlighted the 01-05 Animal and Animal Products, such as the most significant trading goods within this FTA, and next two HS codes of Vegetable Products and Foodstuffs ranking in the last position.
Taiwan in the first and the second scenario present 15 commodities that revealed a comparative advantage; the main trading goods are found in the HS code 16-24 Foodstuff. Taiwan demonstrates a higher degree of efficiency and specialization within this FTA.
The Agro-export from Nicaragua’s perspective remains the same goods among the period of 2001 – 2011, so their future performance depend on the specialization and diversification of producers to maintain quality, fulfill with the regulations established in this treaty, provide new products according to the preferences of the Taiwanese market, among other factors, in order to will help and increase this trade flow. Moreover, Taiwan is an important global power that Nicaraguan producers must consider to increase their potential in agribusiness to reach this significant market.
Subjects
Nicaragua
Taiwan
Free Trade Agreement
Agricultural Sector
Revealed Comparative Advantage
Type
thesis
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