Tariff and Tariff Rate Quota Liberalization in the South African Livestock Industry: Approaches to Welfare Measurement

The liberalization of the agricultural sector and phasing out of past protection mechanisms in South Africa saw the introduction of a process of tariff reform. Furthermore, a system of tariff rate quotas was introduced in compliance with WTO regulations. This study uses a partial equilibrium comparative static model to measure the welfare effects of further liberalization in the livestock industry of South Africa, particularly in meat products using four policy scenarios. The traditional method of welfare analyses using the CS and PS was applied, while the EV was used to integrate a well-behaved objective function. Although the CS and PS could have over-estimated welfare due to the fact that the demand system used in this study is non-linear, they still gave useful information sufficient to compare the impact of trade liberalization on consumers and producers of livestock products. Furthermore, the EV explains the income change necessary to attain the welfare level resulting from trade liberalization given the current prices. When expressed as a percentage of the real gross national income and real disposable income, the values are quite marginal. The results from both methods of welfare measurement suggest that it is worth considering the effects on producers if further trade liberalization is envisaged in the South African livestock industry.