THE IMPACT OF A REDUCTION IN TARIFFS ON THE SOUTH AFRICAN RED MEAT INDUSTRY: A SPATIAL PARTIAL EQUILIBRIUM APPROACH

Abstract

In this article a spatial partial equilibrium (SPE) model is used to quantify the effects of a reduction in tariffs on the red meat industry. This model is used to determine spatial equilibrium prices, consumption, production and geographical flows from a multi-commodity point of view, provided that linear functions are acceptable approximations of regional demand and supply functions. The results show that prices of livestock and meat will drop substantially, whilst increased demand will be met largely by imports from overseas. In total welfare gains by consumers due to a total reduction of tariffs will amount to R2 829 million. This translates into a 0.49 per cent increase in the real gross national income. In respect of real disposable income, a total reduction of tariffs would add 0.75 per cent. The total loss in producer welfare would amount to R868 million. The loss in producer welfare amounts to 2.71 per cent of real gross farm income and 10.72 percent of real net farm income, which is substantial.