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Differential Export Taxes Along the Oilseeds Value Chain: A Partial Equilibrium Analysis

This paper studies the implementation of Differential Export Tax (DET) rates along value chains, in particular in the oilseeds chain (seeds/vegetable oils/biodiesel): this trade policy consists in relatively high export taxes on raw commodities and relatively low taxes on processed goods. This policy may generate public revenues and benefit final consumption by lowering domestic prices of vegetable oils and biodiesel, and also promotes production at more processed stages of transformation, particularly in response to tariff escalation by importing partners. We first study the theoretical justification of this trade policy with a simple international trade model. It shows how implementing a tax on exports of raw agricultural commodity in a country exporting seeds and vegetable oils, augments the sum of profits and final consumers' surplus in the processing sector, of farmers' surplus, and of public revenues. Then we develop a world partial equilibrium model of the oilseed value chain that illustrates these theoretical conclusions. We simulate: (i) the elimination of DETs in Argentina, Indonesia and Ukraine; (ii) the elimination of import tariffs applied by the EU and the US on the same goods; (iii) the elimination of DETs in Argentina, Indonesia and Ukraine and of import tariffs applied by the EU and the US. According to our estimates, both consumers and producers throughout the world benefit from the removal of export taxes in these value chains, respectively 931 million USD and 2.2 billion USD. The third scenario leads to a significant expansion of world production of all activities along the value chain, including the production of biodiesel for which world output would expand by one percent.