Perspectives of the Serbian Dairy Sector in the Process of Integration Into Global Markets
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Academic year 2010 – 2011 Perspectives of the Serbian dairy sector in the process of integration into global markets Nevena Kokovic Promoter: Prof. Dr. Dr. h.c. Dieter Kirschke Thesis is submitted in partial fulfilment of the requirements for the joint academic degree of International Master of Science in Rural Development from Ghent University (Belgium), Agrocampus Rennes (France), Humboldt University of Berlin (Germany) and University of Cordoba (Spain) in collaboration with Wageningen University (The Netherlands), Slovak University of Agriculture in Nitra (Slovakia) and the University of Pisa (Italy). This thesis was elaborated and defended at Humboldt University, Berlin within the framework of the European Erasmus Mundus Programme “Erasmus Mundus International Master of Science in Rural Development " (Course N° 2004-0018/001- FRAME MUNB123) Certification This is an unpublished M.Sc. thesis and is not prepared for further distribution. The author and the promoter give the permission to use this thesis for consultation and to copy parts of it for personal use. Every other use is subject to the copyright laws, more specifically the source must be extensively specified when using results from this thesis. The Promoter(s) The Author X X Prof. Dr. Dr. h.c. Dieter Kirschke Nevena Kokovic Thesis online access release I hereby authorize the IMRD secretariat to make this thesis available online on the IMRD website The Author X Nevena Kokovic I Abstract This thesis examines current state of the Serbian dairy sector and impact agricultural trade liberalization has on the sector. Therefore, thesis investigates Serbia’s current competitiveness and potential for further development, especially pertaining to the process of integration into global markets and enrollment into the EU affairs. Serbian government established protectionist price policies (import tariffs and export subsidies) in order to support domestic production and to increase self-sufficiency, which gave positive results. It resulted in change from being a net importer of the dairy products to the state of being net exporter from 2006 onwards (BOZIC et al., 2009: pp. 14). However, current trends in international market go towards trade liberalization, which means that distorting policies should be eliminated, or at least decreased at reasonable levels. That is way this thesis investigates impact of reduction of protectionist price policies on the Serbian dairy sector. Furthermore, to be able to conclude on the perspectives of the Serbian dairy sector in the process of integration into global affairs, situation in the sector has been confronted to the situation in world dairy sector. Model confirmed microeconomic theory postulate that liberalization leads to increase in social welfare of the country. Despite positive overall results, Serbian farmers are those who lose the most in this case. While they have been the weakest link in the dairy chain, biggest concern should be indicated towards increase of their competitiveness in order to prepare the entire chain for international competition (POPOVIC et al., 2008: pp. 67). In order to better prepare for smooth integration into the EU dairy sector and international affairs, government should consider different policy options that are allowed by the WTO and are in line with the EU policy framework. Main focus should be on technical and institutional improvement within the sector, promotion of Serbian brand and local autochthonous dairy products in international market, support development of new higher value-added dairy products and on increase in application of the instruments from the Rural Development scheme, through measures from Axis One and Axis Two (BOZIC et al., 2009: pp. 35). II Acknowledgment I would like to express my sincere gratitude to my thesis promoter, Prof. Dr. Dr. h.c. Dieter Kirschke for his invaluable advice and golden time in preparation of this thesis. I am especially grateful to IMRD program coordinator, Prof. Dr. Ir. Guido Van Huylenbroeck and Management Board who organized this master program, especially to Ms Martine de Witte, IMRD secretary and Ms Renate Judis, local IMRD program coordinator at Humboldt University of Berlin for their lively administrative support. Thanks are also extended to my IMRD/Atlantis collogues for all support and friendship during this master program and whose company have made my stay in Europe an unforgettable experience. My gratitude also extends to people from the Statistical Office of the Republic of Serbia, Ministry of Agriculture, Trade, Forestry and Water Management and IMLEK dairy plant for giving me valuable information, documents and data base, without which this thesis could not be written. Last but not least, I would like to express my deepest gratitude to my family, whose affection, sacrifice, wisdom and encouragement brought me to this position and always gave me energy and strength to overcome difficult moments in my life. Nevena Kokovic, Berlin, Germany III Table of Contents Abstract ............................................................................................................................. I Acknowledgment ............................................................................................................. II Table of Contents ............................................................................................................ III List of Tables ................................................................................................................... VI List of Figures ............................................................................................................... VII List of Abbreviation ........................................................................................................ IX 1 Introduction ................................................................................................................ 1 1.1 Problem statement .............................................................................................. 1 1.2 Research objectives ............................................................................................ 3 1.3 Research questions ............................................................................................. 4 1.4 Structure of the thesis ......................................................................................... 4 2 Overview of the world’s and Serbia’s dairy sector .................................................... 5 2.1 World’s dairy sector ........................................................................................... 5 2.1.1 Overview of the world’s dairy production .................................................. 5 2.1.2 World’s major dairy products ................................................................... 11 2.1.3 Consumption of the dairy products at the global level ............................. 12 2.2 Serbian dairy sector .......................................................................................... 13 2.2.1 Overview of the Serbian dairy production ................................................ 14 2.2.2 Overview of the Serbian dairy processing ................................................ 19 2.2.3 Main products in Serbian dairy production ............................................... 22 2.2.4 Consumption of the dairy products in Serbia ............................................ 24 3 Overview of the world’s and Serbian trade of dairy products ................................. 25 3.1 Trade of the dairy products in the global market ............................................. 25 3.1.1 World’s biggest importing and exporting countries of the dairy products 26 IV 3.1.2 Prices of the dairy products at the global level ......................................... 31 3.2 Trade of the Serbian dairy products ................................................................. 32 3.2.1 Serbian domestic dairy market .................................................................. 33 3.2.2 Overview of trade of the Serbian dairy products ...................................... 35 3.2.3 Serbian dairy prices ................................................................................... 37 3.3 Serbian trade agreements .................................................................................. 39 3.3.1 Multilateral trade agreements .................................................................... 39 3.3.2 Bilateral trade agreements ......................................................................... 42 3.4 Serbian negotiations with the WTO ................................................................. 45 4 World’s and Serbian dairy policy framework .......................................................... 47 4.1 The WTO trade regulation ................................................................................ 47 4.2 The EU dairy policy framework ....................................................................... 49 4.2.1 The EU dairy production policies ............................................................. 50 4.2.2 The EU trade policy instruments ............................................................... 53 4.3 Serbian dairy policy framework ....................................................................... 54 4.3.1 Domestic dairy production support ........................................................... 55 4.3.2 Domestic dairy trade policy instruments ................................................... 56 5 Trade model of the Serbian