On the 7th of august 2014, Russia announced a ban off food from western countries. The ban included a boycott of all meat, diary, fruits and vegetables originated from the United States, European Union, Canada, Australia and Norway. The boycott is imposed for a period of one year.
The Russian Federation announced that these import restrictions were imposed in order to ‘ensure the security of the Russian Federation’. However, the boycott was announced during the escalated political crisis between Russia and the Ukraine. The timeline below describes the leading events, which can be seen as an indirect cause of the Russian import boycott.
On the 21st of November demonstrations arise on the square of independence in Kiev when the Ukraine declines to sign the association agreement with the European Union. This turmoil evolves to a series of more organized violent actions and demonstrations against the Ukrainian government, lead by the pro EU movements. In February 2014 these riots move to the Ukrainian peninsula, Crimea. In March of 2014 Crimea declares itself independent and after a referendum Crimea joins Russia. Quickly after the referendum Russia starts the annexation process, which compels the Ukraine military to retreat from Crimea.
The European Union and USA react on these events by imposing a first set of sanctions on Russia and Crimea on the 17th of March 2014. These sanctions include mainly political restrictions such as travel restrictions for Russian officials.
After continuing violence and little sign of improvements in the crisis area and the involved countries, the EU and USA impose new sanctions against Russia on the 23rd of June. (describe sanctions)
On the 17th of July 2014, Malysia Airlines flight MH17 crashes in the conflict area in east-Ukraine. All the 298 passengers die in the crash. 193 of the passengers had a Dutch Nationality. The VN safety board unanimously stated on 21st of July 2014 that flight MH17 was violently downed.
As a reaction on the flight crash, the EU and USA imposed new, heavier sanctions on Russia. One week later, on the 7th of August, Russia imposed the ban of agricultural products from the EU and USA.
Export relation NL ‘ RUS
Before analysing the influence of the boycott on the Dutch export market, it is vital to establish insights in the Netherlands and Russia as export nations and their relationship.
The Netherlands is well known as export nation. In the past five consecutive years the country has been the fifth or sixth biggest export nation of the world (http://comtrade.un.org/pb/downloads/2014/ITSY2014VolI.pdf), based on US dollars per year.
As shown in graph XX this also means that the Netherlands is highly dependant on the trade with other nations. The export accounts for almost one third of the countries GDP. Caused by the financial crisis of 2008/2009 the export had a steep decrease in that period. However, the overall trend from 2003 shows that export is becoming increasingly important based on the percentage of the GDP of the Netherlands. In particular, because the exports consist for a largely of transit goods which are first imported and then exported again. As shown in graph XX, as the Dutch export grows over the past ten years, the share of transit export grows. One could argue that by this growth, the dependency on (trade) relations with other nations grows with it.
However, when looking at the distribution of the Dutch export portfolio, it shows that in 2014 the Netherlands had active export relations with 230 nations (EXPLAIN ‘ including small island groups etc). Graph XX displays the export partners who represent 1% or more of the total export. It shows that neighbouring countries (Germany and Belgium) represent the largest export partners. Putting those two countries aside, the Netherlands owns a diversified export portfolio which can provide a certain flexibility and stability in terms of income certainties for the nation.
Analysis of the trade in Russia
Structure of analysis (just for me)
Influence of Russian boycott on Dutch export market
As described in the introduction of this thesis, Russia introduced a ban of agricultural products on the 7th of august 2014. In this part of the research the impact on the Dutch export market will be analysed. The goal of this analysis is to gain a thorough overview and insight in the effects of the boycott and therefore the flexibility and stability of the Dutch export market.
The total export of agricultural products as defined in SITC 1 in 2013 was ‘992 million. In 2014 this number decreased with nearly 23%, to a number of ‘765 million. As shown in graph XX this means that after a positive impulse in 2013, where the total export increased by 26%, the export in 2014 is back on the 2012 level.
Include 2015 numbers in analysis
When taking a further look into the banned categories it shows the development of the export over the past four years per product group. The graph immediately displays that there has been some significant influences on the total export over the past years.
Export of meat:
The export of meat shows a drastic decrease of nearly 85% in the year 2014. In graph XX it suggests that this change was likely caused by the boycott but when taking a closer look it appears to be different. In graph XX the monthly export figures of meat in 2014 are given. Here it shows that the steep decrease originates from January 2014, while the boycott subject to this research originated from august 2014. Research tells us that the events shown in the graph are caused by an earlier ban of pork meat by Russia.
After two cases of the African swine fever where discovered in Lithuania, Russia decided to directly close their borders for any pork imports. The Dutch export market was hit quite heavily, since in 2013 the Netherlands exported around 55.000 tons of pork meat to Russia. The direct damage for the Dutch pork industry in the first months of 2014 was estimated at 2 to 3 million euro’s a week. http://www.ad.nl/ad/nl/5597/Economie/article/detail/3586911/2014/01/30/Russische-boycot-kost-varkenssector-wekelijks-miljoenen.dhtml
In the second half of 2014, the graph shows the influence of the boycott of the 7th of august. In this month the export figures further decrease to an absolute minimum of 0. It is notable that even in the first months of 2015, the meat export does not recover. ARE THERE REASONS?
The diary market is the second market that shows to suffer a direct hit from the boycott. In the month of august in 2014, the export decreases to a level of 5 million. The reason there is still an export to Russia in this market despite the boycott is the fact that the 5 million is mainly egg export, which are not subject to the boycott.
When looking to the pattern in the graph, it shows that in 2013 there is a peak in exports starting in June until the end of the year. In 2014, the pattern shows to be the same in the first six months but gets abruptly stopped when the boycott is introduced. This would mean that the diary market has missed its peak of the yearly export. This peak accounted for 60% of the total yearly export to Russia in 2013. This could therefore very well have a significant impact on the total Dutch diary export.
In graph XX it shows the development of the Dutch diary export market. In the boycott period in 2014, the graph shows a relatively small dip in the graph. In the period of July, August and September in 2013, there was a small increase of export. The dip in that period in 2014 is XX%. As the graph indicates the market quickly recovered itself, where in October the export was on the same level as the year before again. BE MORE SPECIFIC
In contrast to the two preceding markets, the Dutch vegetables export markets experienced an overall increase in the year 2014. When analysing this part of the Dutch export it displays a significant pattern each year. In the spring of each year, the export gets an impulse and reaches its yearly peak. In 2014, this pattern is clearly there. Figures actually show that 2014 had a higher peak with XX% more export in the first six months of 2014.
In the months of the boycott the export to Russia was at its yearly low. In 2013 the HY2 months stabilized at around 5 million of export value each month. In 2014 this number decreased by XX% in the lowest month (October). Remarkable, since the previous two markets show a steep decrease in the months after the boycott was announced.
There are several reasons who contribute to the relatively small effect on the vegetables export market to Russia. Througput & roebol
Influence on products
Now the direct effect on the Dutch export market is established, this research addresses the influence on the total (worldwide) export of specific Dutch export products. This is done in order to determine whether the boycott has had influence on specific export products in general.
The export to Russia
The export of tomatoes to Russia experienced a rapid growth over the past four year. As given in graph XX, the peak of the export in 2014 is nearly five times the peak in 2010. The seasonal production of tomatoes is clearly showing in the yearly export pattern. This pattern is no different in 2014, the year of the boycott. As mentioned on page 17 of this research, the boycott has had less influence on the vegetables export due to the peak of export in the spring of each year while the boycott was activated in August. In august 2014 the total tomato export rapidly decreased, following the pattern. One difference with the year before is that in 2013 the tomato export experienced an extra peak in September/October. This peak was not experienced in 2014.
The export to the world
Looking at the total tomato export of the Netherlands to the world, graph XX shows an upward trend. This is not caused by yearly increasing peaks, as is the case with the export to Russia, but more through longer export seasons. However the uprising trend continuous in 2014, the graph does show a lower peak in the months August, September and October.
When zooming in to this period in comparison with the years before, graph XX shows that the tomato export has experienced a slight decline in August 2014. In the months September and October there however is no sign of any decline and the export level seems normal to the years before. When analysing the total export in these three months is shows that the 2014 export is XX% lower than the year before.
Rounding up the analysis on the export figures one can conclude the boycott did not have an effect on the Dutch tomato export market. One of the expected effects on the market(SOURCE) was an increased competition on the European market due to many countries who had a surplus of products due to the boycott. Although the export figures do not indicate that there has been an effect on the total sales of tomatoes it might have influenced the price of the tomatoes. In graph XX the price trend is shown.
The tomato prices know to be highly volatile during the season. Naturally the prices are high during the high season and low during the summer months when there is a dip in export. In 2014 tomato prices follow the yearly seasonal trend and do not seems to be lower in comparison to the year before. In the months after the boycott, August till November, the prices actually are higher than the year before.
Combining the analysis on the Dutch tomato export it shows that the Russian boycott has had no significant influence on the export and price. The reason for the higher prices in the end of 2014(and start of 2015) can be related to the belated tomato season of Spain. Due to the lower prices for the Spanish tomato growers and the Russian boycott (Russia being a large export market for Spain) the Spain producers decided to start their production season later. This has a positive effect on other producing countries, like the Netherlands.
The export to Russia
Unlike the vegetable market, the peak of the apples export starts already in October. As graph XX shows, the apple export to Russia has experienced a steep decline in the period of 2010 till 2012. This decline is the result of a strongly decreasing demand from Russia. In the end of 2013 the export level was recovering and kept increasing till May 2014. The effects of the Russian boycott are clearly showing when looking at the months August, September and October where the export level decreased to zero.
The export to the world
Similar to the export to Russia, the export of apples to the world displays an equal downward trend over the past years. When looking at the boycott period it shows that there has been significant impact on the total apple export. Starting in August 2014 there is a dip of almost XX% compared to that period in 2013. It is likely that due to the Russian export there was an increased effect on the European market. Nations like Poland, who depend largely on Russia as apple export partner, had to find a new market to sell their apples after the boycott. The increased supply of apples on the market would have led to an increased competition and effects on the price developments.
In graph XX these price developments are clearly given. As expected the prices suffered from the increased competition. In the months August, September and October there is a significant price drop. Here the prices are XX% lower than in that same period in 2013. This brings the prices back to almost the same level as in 2011. But in this year the enormous price drop was caused by a surplus of apples due to a very successful season.
Export of dutch apples export to Russia (compared to total dutch export)
‘ Price developments
Diary: Milk or cheese
‘ Export of product export to Russia (compared to total dutch export)
‘ Price developments
Effects on Russian domestic market
FOA research; main points for this chapter:
– effects on customers
o domestic market to small for domestic demand
o Price changes domestic market
– Table of products affected by ban
– Implementation of state programme
o Effects of state programme
New markets for Dutch export
Main points in this chapter:
– Increasing export to Poland, Saudi Arabia, Brazil, Turkey, Senegal, Ivory Coast, Israel & Malaysia (CBS)
– Prices developments
– Total Dutch export to world developments past years
Other elements of influence on Dutch export
Euro ‘ Dollar rate
Since the summer of 2014 the Euro decreased in value against the dollar. This made the EU market interesting for non-eu countries which lead to an increase of EU export due to the low prices.
As shown in the graph below the euro/dollar rate started to decline from the start of the summer in 2014.
Dutch Government support program
– Flower boycott
– Renewal of export ban?
– Small impact fruits & vegetables
– Bigger impact on meat and diary
– Recovery signs
– Elasticity of dutch export market
– Learning points:
o Is food export a good strategy on the long term?
o Food market maturity
o Dutch expertise on technological developments for agriculture