A dynamic analysis of the impacts of export taxes: The case of Argentinean soy and beef markets

• Author: Jeff Luckstead,William Ridley,Stephen Devadoss
• Date: 01 August 2019
• DOI: http://doi.org/10.1111/twec.12799
• Published date: 01 August 2019

World Econ. 2019;42:2427–2451. wileyonlinelibrary.com/journal/twec

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2427

© 2019 John Wiley & Sons Ltd

Received: 7 May 2018

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Revised: 25 September 2018

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Accepted: 24 February 2019

DOI: 10.1111/twec.12799

ORIGINAL ARTICLE

A dynamic analysis of the impacts of export taxes:

The case of Argentinean soy and beef markets

StephenDevadoss1

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JeffLuckstead2

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WilliamRidley3

1Texas Tech University, Lubbock, Texas

2University of Arkansas, Fayetteville, Arkansas

3University of Colorado, Boulder, Colorado

KEYWORDS

Argentina, export taxes, livestock, soy, value chains

JEL CLASSIFICATION

F13; F14; F17; Q17

1

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INTRODUCTION

As one of the world's largest exporters of soybeans and processed soy products (soymeal and soyoil),

Argentina plays a critical role in global markets for these commodities. The soy sector is a major

component of Argentina's agricultural economy, accounting for $37.5billion in revenues accruing to

producers of raw and processed soy products in 2013 (FAO, 2017), which eclipses the value of other

Argentinean agricultural sectors by a wide margin. Argentinean soy industry has expanded at a rapid

pace in recent decades, with the amount of cropland devoted to soybean production expanding by

136% (from 20.2 to 47.6million acres) between 1999 and 2014 (FAO, 2017).

In an effort to shift its agricultural sector's focus away from raw primary commodity exports to-

wards value‐added processed goods, Argentina's government has maintained a regime of differential

export taxes wherein relatively higher export taxes are imposed on raw commodities, and relatively

lower taxes are imposed on processed final goods.1 The ostensible goal of these policies is to bolster

domestic availability of primary commodities for processing, but they are also used as a major source

of government revenue (Piermartini, 2004). Given Argentina's robust oilseed export sector, the bulk

of these taxes have fallen on commodities such as soybeans, sunflower seeds, and peanuts. For soy-

beans, the initial 2002 ad valorem tax rates of 10% on raw soybeans, 5% on soymeal and 4.3% on

1 Differential export taxes in oilseed production chains have been studied in a variety of contexts. Williams and Thompson

(1984) studied differential export taxes and their effect on encouraging domestic processing. Meilke, Wensley, and Cluff

(2001) also found that trade liberalisation in oilseed export markets would primarily benefit North American processers, who

would gain easier access to raw commodities from abroad. Toulan (2002) simulated a CGE model of the Argentinean

economy, finding that trade liberalisation (with respect to both export and import taxes) would lead to an increase in

Argentinean exports.

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DEVADOSS EtAl.

soyoil (USTR, 2013) have risen steadily, and as of 2015, the tax on soybeans had increased to 35%,

while the tax on meal and oil stood at 32%.

In addition to soy products, Argentina is a major producer, consumer and exporter of beef. Beef

production is a multibillion dollar industry, with over $9billion of revenues in 2013 (FAO, 2017).

Argentina's per‐capita beef consumption has long been among the highest in the world, despite annual

consumption per person declining from over 55kg in 1990 to just over 40kg in 2017 (OECD, 2017).

Since 2006, in an effort to bolster domestic availability and curb rising food prices, the government

has periodically imposed a ban on beef exports and has also maintained an export tax of 15% (USTR,

2013). The imposition of these trade restrictions was met with vociferous opposition from beef pro-

ducers because of lost export sales. Despite Argentina's historical status as one of the world's largest

beef producers, over the last decade it has relinquished much of its world market share as its exports

have dwindled.

Figure1 illustrates the changes in Argentina's soy and beef trade. The numbers adjacent to the lines

indicate Argentina's rank in world exports of the given commodity for the given year. The solid blue

line shows that processed soy exports have expanded unabated in recent decades, as Argentina has

maintained its position as the world's largest exporter of processed soy‐products even in the face of

sizable trade restrictions. When it comes to raw soybean exports, however, the upward trend is much

more muted. Despite its persistence as the third leading exporter of unprocessed soybeans, the pres-

ence of the significant differential export tax has stifled export volumes relative to processed com-

modities. Beef exports exhibit an even starker contrast.2 Total real export values in 2014 were

effectively unchanged from their level in 1999, as Argentina's relative prominence in the global market

for beef has steadily eroded.

The export restrictions have created numerous unintended consequences in both the soy and beef

sectors. The export taxes have had two immediate effects on the soy industry: the first is that the tax

2 Figures for beef include both fresh and frozen beef exports.

FIGURE 1 Argentinean soy and beef exports and exporter rank, 1999–2014 (real billion US$, 2013 base year)

Source: Constructed with data from UN Comtrade (2017) [Colour figure can be viewed at wileyonlinelibrary.com]

1st

1st

1st

1st

1st

1st

1st

3rd

3rd

3rd

3rd 3rd

3rd

3rd

8th 10th 9th 8th 9th 12th 12th

0 3 6 9 12

1999 2002 2005 2008 2011 2014 2017

Soymeal & soyoil Soybeans Beef