The competitiveness of Cypriot exported commodities has been
deteriorated following GATT implementation and EU accession. Competition
has even become stronger in the local market and affects seriously certain
commodities.
6. International Competitiveness of the Mediterranean Fruits, Vegetables
and Olive Oil Sectors
In comparing one country’s agricultural sectors competitiveness to
another country a certain methodology and tools are needed. The sectors’
competitiveness will be measured through the selection of similar specific
products they produce and will be an analysis of price competitiveness.
Quality is a variable not of concern in this segment despite its obvious
importance. In the relevant paper by Gorton and Davidova (2001), a specific
methodology is adopted which is used here in order to demonstrate the
competitiveness of three products grown in Cyprus: tomatoes, oranges and
olive oil.
The thrust of the above arguments by the two researchers dwells on
the derived indicator of a country’s international competitiveness Domestic
Resource Cost (DRC). It is basically a measure of comparison of a country to
produce a specific product with a cost advantage over others producing the
same product in a different territory. It essentially compares a good’ s real
opportunity cost with its aggregated value at international prices and
constitutes thus an excellent tool of international competitiveness. The DRC
of a specific product, i.e. tomatoes produced in Cyprus is obtained by
dividing the cost of domestic factors of production (plus other
considerations) by the value added in social prices. It is thus, a measure of
efficiency or comparative advantage emanating through a core competence
available to the Cypriot producers not available to their competitors if they
are proven more price competitive because of that specific advantage. A
DRC value greater than one (DRC>1) simply means that the country
examined does not possess a comparative advantage in producing the
commodity in question. A value less than one (DRC<1) means that the
producing entity have a definite cost and price comparative advantage in
producing the commodity vis a vis other international competitors.
In order to avoid drawing erroneous conclusions the following a priori
statements should be established.
1. Cyprus joined the EU on May 1 st, 2004 and thus data are yet not
available on the specific products. All data used are ‘infected’ with
subsidies and substantial PSEs (Producer Support Estimates)
handsomely given out by the Government as a permanent feature to
producers over the years. This creates a bias and an anomaly in the
calculus of social cost vs. private cost for tradable inputs.
2. A high proportion of workers in the fields are foreign workers who
are paid (in reality) lower wages than natives.
3. No differentiation is made between export/import prices through the
central assumption of parity.
4. The best way to neutralize adverse effects of local irregularities
weighted averages of the variables in question were used.
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