Economic and legal determinants of export competitiveness of the food industry of Serbia

Transcription

1 Orgnal Scnetfc Paper Economc and legal determnants of export UDK 339.5: (497.11) Summary: Most authors agree that countres try to specalze n nternatonal trade. Among most mportant factors, they menton: dfferences n producton costs, demand, producton factors moblty, nterest rates, wages, trade balance, ncome, technologcal nnovatveness and progress. Therefore, the subject of ths research paper s the analyss of comparatve advantage and export specalzaton of the food ndustry, usng the Balassa ndex (RCA), Lafay ndex (LFI) and modfed ndex of comparatve advantage (Sm) and specalzaton n nternatonal trade usng Grubel Lloyd s ndex (GL), n order to measure the comparatve advantage and specalzaton and suggest economc and legal measures for the mprovement of compettveness and comparatve advantage n nternatonal markets. Key words: Balassa ndex, comparatve advantage of export, compettveness, food ndustry, nternatonal trade economc and legal measures Rezme: Većna autora se slaže da zemlja nastoj da se specjalzuje u međunarodnoj trgovn. Kao najvažnje faktore međunarodne trgovne navode: razlke u prozvodnm troškovma, tražnju, moblnost prozvodnh faktora, kamate, nadnce, trgovnsk blans, dohodak, tehnološku novatvnost progres. Upravo z ovog razloga predmet stražvanja ovog rada je analza komparatvne prednost specjalzacje zvoza prehrambene prerađvačke ndustrje prmenom Balasa ndeksa (RCA), Lafay (LFI) modfkovanog ndeksa komparatvne prednost (Sm) specjalzacja u međunarodnoj trgovn prmenom Grubel Lloydovog ndeksa (GL), sa cljem da se zmer komparatvna prednost specjalzacja predlože ekonomske pravne mere za unapređenje konkurentnost komparatvne prednost na međunarodnom tržštu. Ključne reč: Balasa ndeks, ekonomske pravne mere, komparatvna prednost zvoza, konkurentnost, međunarodna trgovna, prehrambena ndustrja 201 Industrja, Vol. 40, No. 1, 2012

2 1. INTRODUCTION Competton s the process n whch market partcpants compete and the process whch enables natonal economes to acheve sustanable growth and long-term prosperty [29]. Global compettveness, measurng mcro-economc and macro-economc ndcators of natonal compettveness, s defned as the aggregate of nsttutons, polces and factors whch determne the degree of a country s economc prosperty [29]. Market compettveness s the result of the most effcent method of resource management amng at productvty ncrease. Compettveness stmulates cultural, economc and management development and represents a unque contrbuton to the domestc product, lfe standard and employment [22]. Accordng to Rutkauskas [27] compettveness mples the process of dentfyng the producer, compettveness factors and crcumstances whch wll lead to reachng the necessary level of compettveness. The process of determnng compettveness factor levels, fnancal resources and costs, as well as nteractons among the antcpated results s a serous and demandng task. The mprovement of compettveness, accordng to Agulera-Enrquez, Gonzalez-Adame and Rodrguez-Camacho [2] s possble to acheve through the modernzaton of management and producton utlzng new technologes. Whle dscussng the mprovement of compettveness and shortenng the lfe cycle, Jovanovć and assocates [15] emphasze that busness operatons ncreasngly depend on ntellectual property (Intellectual Property, IP). Economy based on knowledge and non-materal goods, such as ntellectual property, human captal and organzatonal sklls play a key role n busness admnstraton and economc growth. We beleve that educaton s an mportant factor for the mprovement of compettveness, as hghly educated ctzens can quckly and effectvely acqure new knowledge and master new technologes [10]. By dong so, producton processes wll be able to compete n the future, ncrease ther results and become more productve. As Savć and assocates beleve [28], a fast recovery from the world economc crss s possble through the adopton and consstent mplementaton of a development strategy completely dfferent from the current one, where the key role s played by the ndustry based (among other thngs) on the avalable agrcultural resources. However, because of the lack of new technologes and producton processes, ndustral producton performances (food processng ndustry ncluded) are sgnfcantly reduced and lead to the potental danger of losng a compettve poston and nche n the nternatonal market. Accordng to Račevć, competton should be understood as a legal and economc category whch encompasses market structure, economc condtons, as well as number and behavor of market partcpants. Some people wll refer to t as the most benefcal phenomenon n economy; others mght refer to t as an mportant precondton for a democratc and poltcal communty system order, whle others could call t the freedom of entrepreneurshp whch deserves consttutonal value [25]. 202 Industrja, Vol. 40, No. 1, 2012

3 If we wsh to create compettve products, we need creatve management wth specfc sklls and competences and applcaton of new technologes. Companes should contnuously mprove productvty levels of the exstng sectors, whle addng some desrable characterstcs to them and developng producton technology and ncreasng ts effcency. Bg companespredomnantly orented towards the producton of food, tobacco and alcohol- use sophstcated marketng technques to ncrease sales [6]. Technologcal structure represents a new class and new producton factor and, as such, entals a number of manageral, techncal, scentfc, legal, engneerng, accountng and marketng actvtes. The ncrease n productvty s an exceptonally mportant determnant of economc development and countres can make a postve move by enactng a set of laws and regulatons promotng nvestments and ncreased producton effcency. Doubts regardng the best grounded nsttutonal rules are wdely spread, but there s also general agreement that the mprovement of productvty s possble through the openng of economy, development of effcent fnancal markets, as well as mplementaton of propretary rghts. Recent research papers by many authors emphasze the mportance of publc nvestment n nfrastructure and human captal. The ncrease of productvty requres a transparent rule of law [33]. Among many research projects nto compettveness and comparatve advantage there are dfferent approaches: classcal, whch are focused on natonal economy as a whole, and modern- wth companes n the very center of analyss. A conventonal approach to sources of compettveness puts the external factor control n the center of attenton, ncludng natural resources, work and captal. Thus, the competton s won by those who have the so-called comparatve advantage,.e. the cost advantage. Nevertheless, n nformaton economes the focal part of compettveness s shfted from external factors towards the nternal ones (knowledge, nformaton, strateges, busness envronment [23]. To sum up, sustanable compettveness thus emphaszes the need for macro-economc compettveness, rule of law, favorable nvestment condtons, ncreased effcency levels n the work of publc nsttutons and technologcal development. 2. AN OVERVIEW OF LEGAL DETERMINANTS OF COMPETITIVENESS Law, gven ts nature, has to specfcally defne the economc competton relatons and approaches of economc theory n ths regard. Law theory thus defnes ts own concept of competton, but so does the legslatve body, as well, when passng a legslaton act n ths area. We cannot but menton that the prncples of legal and legslatve aspect are extremely sgnfcant, gven the fact that they regulate competton protecton n the market of the Republc of Serba, amng at economc development and prosperty of the socety as a whole, and 203 Industrja, Vol. 40, No. 1, 2012

4 especally targeted at customer satsfacton. Ths s also very mportant for the effects created by the food ndustry of Serba. The postve-legal aspect entals ssues related to volaton of competton, concentraton of partcpants n the market, status of the Commsson for competton protecton (ts poston, jursdcton, organs, statutory questons and fnancng ssues), procedure before the Commsson, as well as the judcal montorng of all actvtes [34]. Gven that the area of competton and comparatve advantages of the busness process and busness sectors are consdered a system n whch all economc and legal enttes act upon ther own economc ntatve, t s clear that among them we wtness a pecular economc competton whch has to be seen and analyzed as a dchotomy.e. together wth both economc and legal aspects and vewponts. Competton Act s the basc prncple whch presents the grounds for free market economy and a predomnant method n today s economc systems. We beleve that Competton Act s mpossble to acheve wthout the state nterventon (state regulaton) snce every busness has a naturally nclnaton towards a hgh degree of domnance, neglectng general publc nterest. Gven that Serba s strvng to become a rghtful member of the EU and that the EU s a domnant partner n foregn trade, one of the mportant determnants of export compettveness should be the development of real economc sector. As far as ths development s concerned, specal attenton should be gven to the food ndustry, whch requres the knowledge of non-dscrmnaton prncples and man provsons of the EU legslaton concernng competton protecton, entalng four mportant factors [24]. EU contracts Regulatons and gudelnes of the Councl and EU Commsson A number of rules and recommendatons whch are not bndng but show how the European Commsson sees and mplements competton polcy Decsons and verdcts of the European Court of Justce referrng to cases between ndvdual companes and states In order to speed up the process of Serba s ntegraton nto the EU, the government of Serba adopted the Natonal program for ntegraton of the Republc of Serba nto the EU as of 9 October Ths offcal document specfed the dynamcs of EU law transposton nto the natonal legslaton of Serba untl 31 December 2012, when the natonal legslaton should be n full conformty wth that of the EU. In order to speed up the process of transposton, all EU regulatons have been grouped nto 35 chapters, correspondng each to the structure of one polcy area dealt wth n the negotaton process. The Mnstry of Agrculture, Trade, Forestry and Water Management s responsble for chapters related to agrculture and rural development, as well as veternary, phytosantary and food safety polcy. 204 Industrja, Vol. 40, No. 1, 2012

5 Serba needs to secure the poston of EU canddate country and so elmnate part of the negatve aspects of food export nto the EU market. Export would brng a much bgger nflux of foregn currency, decrease of the current account defct, as well as fnancal resources from the EU pre-accesson assstance funds. In that regard t s necessary to jon the World Trade Organzaton, to smplfy the admnstratve procedures concernng lcenses and certfcates, to deregulate busness operatons by establshng the system for regulatons management, to mprove ntellectual property protecton whch s at a very low level (although the relevant legslaton has been adopted, the problem les n ts enforcement and mplementaton) and also ntroduce nternatonal qualty standards. In short, t s necessary to mprove busness condtons. Accordng to the World Bank, those condtons have been mproved and postve reforms have been carred out n the area of grantng loans, busness startups and property regstraton. However, problems appeared wth ssung lcenses, tax payment and foregn trade [12]. There are substantal problems wth foregn trade, n the sense that costs are hgh and export and mport procedures are complcated. To remedy that, t s necessary to harmonze legslatve measures across Serba and then harmonze Serban legslaton wth that of the EU, so that the legal system gets the role t deserves n overall socal envronment, helpng nvestors brng decsons regardng nvestments n Serba [26]. Competton s not possble wthout market recognton, snce through prce mechansms t gets effcent allocaton of goods and servces. Lmtatons of loyal competton resultng from monopolstc and olgopolstc postons should be resolved wth prce agreements and government nterventons. Regulatons on EU compettveness allow for exceptons only n cases when goods and servces are of specal publc nterest. Our natonal legslature has nstruments n the form of legslatve authorty of the Commsson for protecton of competton, but they have to be wthn the scope of competton polcy entalng effcent prohbton of cartels, fuson control and control over state subventons. 3. HISTORICAL DEVELOPMENT OF THE COMPARATIVE ADVANTAGE CONCEPT When thnkng about competton between countres, we can conclude that t s not some knd of a sport contest, but competng n trade whch s supposed to put a country nto a much better poston. Trade gves a possblty for one country to specalze n areas n whch that country shows the best results, be that farmng, sewng or buldng a house. If you trade goods wth other people, you wll be able to choose among a great varety of thngs or servces at a much lower prce. Just lke famles, countres also beneft from ther ablty to trade wth other countres. Trade enables countres to specalze n what they do better 205 Industrja, Vol. 40, No. 1, 2012

6 than other countres and to use more versatle ranges of goods and servces [18]. In nternatonal trade some countres wll specalze n the producton of certan goods and/or servces based on the absolute dfferences n producton costs. Absolute advantage mples a more effcent producton process, measured n the form of nvested labor per one unt or a sngle product. The author beleves that naturally gven and acqured advantages of a country affect the process of achevng the absolute advantage. All economc actvtes of one country are defntely not cleverly engaged f they are focused on the producton of somethng that can be bought for cheaper than t s produced [30]. Accordng to Smth (1937), whenever a certan country has some advantages whle another country s lackng them, t wll always be more benefcal for the latter to buy those goods and/or servces from the frst one, rather than to produce them on ts own [30]. Smth s theory of absolute advantages, accordng to whch there are some advantageous partcpants n nternatonal trade, was later complemented by Rcardo who proposed the theory of relatve advantages. Absolute dfferences n producton costs of exchangeable goods are not a precondton; t s enough to have relatve or comparatve dfferences. Wth hs theory of relatve advantages, Rcardo proved that even n crcumstances when one country (of the observed two countres, comparng two products) produces both products more effcently than the other country, there can be the economcally justfed tradng and exchange of products (mentoned by [14]). Rcardo s theory shows that even the undeveloped countres partcpate n trade. In other words, they trade goods and servces wth developed countres, except when one country s absolutely more effcent n producton than the other country. Nevertheless, Mll complemented Rcardo s assumpton of fxed offer and mmovablty of producton factors wth hs analyss of the nfluence of demand on nternatonal exchange. Accordng to Mll s theory, a country wll have an unfavorable poston n nternatonal trade f the ntensty of demand for ts products s smaller than the ntensty of demand for the products of the other country [20]. Taussg concludes that the prevously mentoned authors dd not take nto account the moblty of producton factors. In hs vew, the key factors are producton costs, nterest rates and wages. A hgher or lower nterest rate are not ndependent factors/varables whch exert nfluence on ther own, but rather have nfluence n as much as they are ncluded n one product to a greater degree than n the other [31]. Taussg tred n hs works to show that workforce costs (wages) have nfluence on nternatonal trade and specalzaton to a greater degree than nterest rates as producton costs. Ohln (1933) tred to defne the scope of one country s specalzaton n nternatonal trade. The author beleves that foregn trade happens n the same way as nternal trade and ponts to the exstence of connecton between offer and demand for factor-ntensve products. A dfferent degree of product factors s present n products and precsely that s what makes the dfference among 206 Industrja, Vol. 40, No. 1, 2012

7 countres. Ohln concluded that n the process of nternatonal trade there are equalzatons or balancng of the prce of producton factors. Due to the moblty of producton factors between countres and regons there wll not be a complete levelng of producton factor prces. Wth tme, foregn trade leads to the tendency of ncreasng the prces of producton factors whch are present n relatve abundance, and also to the decrease n the prces of those producton factors whch are relatvely scarce [21]. Accordng to Kravs [16], a country mports those products for whch the offer on the nternal market s relatvely less elastc.e. n whch the relatve elastcty of foregn offer s bgger than t s the case wth domestc producton. Accordng to Lnder [17], the level of trade wth secondary goods between countres s hgher f the degree of smlartes n the demand structure between the mentoned countres s hgher. The scope of trade wth secondary products between countres s hgher f they have a more smlar value of GDP per capta, due to greater smlartes n spendng, demand and customer behavor, n general. Therefore, the structure of domestc demand determnes the exportng characterstcs of a product. In countres wth a greater dversfcaton of export, there s a possblty of a greater scope of trade. Hgher GDP s contngent upon technologcal nnovatons and progress. From ths premse we can conclude that f the level of GDP s hgher n two countres, the potental and actual scope of ther trade s bgger (p.103). The theory of comparatve advantage was further developed by Balassa [4]. Wshng to defne comparatve advantage, Balassa started from export share and export-mport rato. The author defned the concept of export performances, usng whch we can compare the ndustral export of a certan country relatve to the global export of that product/product group. The orgnal coeffcent of the revealed comparatve advantage (RCA - revealed comparatve advantage) goes as follows: RCA 2 = (X j /X t ) / (X nj /X nt ), where: X stands for export, - exportng country, j - product, t group of products, and n group of countres. The orgnal/source model of comparatve advantage dd not take nto account the nfluence of mport, whch s a problem n a stuaton when a country s sze s not neglgble. Precsely the nfluence of mport or the possblty of smultaneous trade s what Greenaway and Mlner [8] observed when measurng comparatve advantage. The orgnal RCA comparatve advantage coeffcent was then transformed nto: RCA 3 = (X j -M j ) / (X j +M j ), where: X stands for export, M mport, stands for the country of export and j stands for the product. The corrected verson of the Balassa ndex of comparatve advantage was presented by Vollrath [32]. 207 Industrja, Vol. 40, No. 1, 2012

8 RCA 4 = (X j / X k ) / (X n / X nk ) (M j / Mk) / (M nj / M nk ) RCA 5 = ln (X j / X k ) / (X nj / X nk ), RCA 6 = ln (M j / M k ) / (M nj / M nk ) In the above formulas X j and X k represent the export of product j of the country and total export of other products k; X nj and X nk represent the export of product j of the rest of the world n and total export of other products of the rest of the world. Postve values of RCA 4, RCA 5, and RCA 6 ndexes pont to the presence of a postve comparatve advantage, whle negatve values pont to the lack of comparatve advantage n nternatonal trade. The Balassa ndex s most frequently used and represents the logarthmc value of the coverage of mports by export n certan sectors or products, relatve to the coverage rato at the level of a country s economy. Ths ndex was created to determne comparatve advantage of a product when export s bgger than mport. 4. RESEARCH METHOD The subject of our research s the analyss of comparatve advantage and specalzaton of export of the food ndustry, wth the am to measure comparatve advantage and specalzaton and suggest economc and legal measures for the mprovement of compettveness and comparatve advantages n the nternatonal market. The data used n research was obtaned from the Statstcal Offce of the Republc of Serba and UN COMTRADE for the respectve years. The research was based on qualtatve- quanttatve analyss, wth the methodologcal framework bult on the usage of scentfc ndcators of nternatonal trade and ncludes the ndcators of comparatve advantage: Balassa and Lafay ndexes, a modfed model of comparatve advantage (Sm) and the ndcator of specalzaton n ntra-ndustral exchange (GL). The Balassa formula for calculatng the revealed comparatve advantage [5]: RCA Where: ln X M n 1 n 1 X M 100 RCA stands for revealed comparatve advantage for the year t, the sector of the country j for the year t, X - export of M - mport of sector of the country j 208 Industrja, Vol. 40, No. 1, 2012

9 for the year t, n M 1 n X 1 - total export of all sectors of the country j for the year t and - total mport of all sectors of the country j for the year t. In the gven formula, X represents the value of export, whle M stands for the value of mport. Index represents the specfc sector of Serban economy. When a country specalzed n the producton of those products whch t produces cheaper than the rest of the world, the RCA values pont to the comparatve advantages n those sectors where the RCA ndcator shows postve values. The hgher the value of RCA ndex, the more revealed the comparatve advantage of that country s sector s. Recent theores of comparatve advantages developed as the result of dsproporton between a large number of economes and analyzed factors. It was mpossble to dvde and group a large number of exstng countres n such a way that each country acheves absolute advantages n producton based on the explotaton of only one or two man factors. A large number of countres whch do not have any absolute advantages but stll actvely partcpate n nternatonal trade affrmed the concept of comparatve advantage [7]. When calculatng the comparatve advantages of export for the dfferent sectors of the food processng ndustry n Serba, we used the modfed Sm model, so that we calculated the export of the food processng ndustry sector relatve to the total export of agrcultural and food products of Serba. The obtaned values n the modfed Ѕm model (Author s model) represent a specfc model of comparatve advantage of export of the food processng ndustry sector. The revealed comparatve advantage usng the Ѕm model s calculated usng the followng formula: Sm ln X M p p n 1 n 1 X M p p 100 Where: Sm - stands for revealed comparatve advantage of the food processng ndustry sector for the year t. X p - export of the sector of the food processng ndustry of the country j for the year t, M p year t, - mport of the sector of the food processng ndustry of the country j for the 209 Industrja, Vol. 40, No. 1, 2012

10 n 1 X p - total export of the sector of the food processng ndustry of the country j for the year t and: n 1 M p - total mport of the sector of the food processng ndustry of the country j for the year t. For the analyss of the degree of specalzaton n ntra-ndustral exchange (export and mport) we used the Grubel Lloyd s ndex. GL represents the value of Grubel Lloyd s ndex for the product group. t t X represents the value of t export, whle M s the value of mport. The ndex can be n the range between 0 and 1. Intra-ndustral exchange s defned as smultaneous mport and export of the same product groups wthn the same sector. Hgher ndex values pont to the hgher degree of specalzaton n ntra-ndustral exchange, whereas lower GL ndex values pont to the fact that foregn trade s closer to nter-ndustral trade. The GL ndex s calculated usng the followng formula: GL t Where: (( n 1 X t M t GL - ndex of ntra-ndustral exchange of sector n the year t, t X - export of product group n the year t, t M - mport of product group n the year t. t n 1 X t For the analyss of comparatve advantage we used the Lafay ndex (LFI). Lafay ndex s defned as follows [1]: M t ) / n 1 X t M t Where x j and m j are the export and mport of the product J n the country, to and from the rest of the world, and n s the number of tems. Comparatve advantage n the country n the producton of products j measures the dvergence of product J from the total trade balance. Postve values of the Lafay ndex pont to the exstence of comparatve advantage, whereas a hgher value 210 Industrja, Vol. 40, No. 1, 2012

11 ponts to the hgher degree of specalzaton and negatve values pont to the exact opposte. The Lafay ndex, as opposed to the Balassa ndex, takes nto account the dfference between values of export and mport and tres to overcome certan shortcomngs of the Balassa ndex, takng nto account nternal trade flows and GDP. 5. COMPARATIVE ADVANTAGES OF THE FOOD INDUSTRY OF SERBIA Compettveness of the processng ndustry of Serba n nternatonal context depends on usng the techncal- technologcal engneerng and transfer of foregn and domestc technologes. Furthermore, utlzaton of techncaltechnologcal engneerng made technology placement and placement of producton machnery possble Foregn trade of the Serban processng ndustry was not accompaned by changes n the structure of producton, modernzaton and ncreased employment fgures. Nevertheless, n the total export of Serba n 2009, the export of agrcultural products has a share of 24.33%, and food has a share of 22.83%. In the total mport, agrcultural products have a share of 9.15%, and food 7.81% [11]. In the export structure of processng ndustry n 2009, products from four sectors account for 49.9% of export. These are: Food products and beverages (17.89%), Basc metals (15.28%), Chemcals and chemcal products (8.08%), other machnes and applances (8.62%). Successful results of foregn trade n agrcultural products were acheved thanks to the preferental status n the EU market and acheved lberalzaton n trade wth the countres from the West Balkans. Postve foregn trade balance n trade wth EU n the perod after 2004 s the result of abolshng customs duty on agrcultural and food products from Serba. Agrcultural products are exempt from payment of customs duty when beng placed on the EU market. The bggest surplus n trade wth EU countres s obtaned n trade wth: Hungary, Austra, Romana and France. Besde EU, the most sgnfcant busness partner of Serba n foregn trade wth agrcultural products s the whole market of the free trade regon CEFTA. A large number of countres n the free trade regon are characterzed by a focus on agrculture and complementary products. From the perspectve of compettveness n the world market, cooperaton wth ths group becomes ncreasngly mportant [13]. Our task n ths paper was to dynamcally analyze and observe comparatve advantages of export for the food processng ndustry of Serba and to provde a quanttatve llustraton of results for the perod between 2005 and In the perod between 2005 and 2009, the processng ndustry export was ncreased by 80.7%. Wth the ncrease of total foregn trade and market openng, 211 Industrja, Vol. 40, No. 1, 2012

12 export and mport of the processng ndustry, food products, beverages and tobacco ndustry ncreased. Table 1. Value of the comparatve advantage ndex (RCA) of the processng and food ndustres for 2005 and 2009 n Serba Value (mllons of dollars) 2009 Value (mllons of dollars) Export Import Export Import RCA RCA Processng ndustry Food products and beverages Tobacco products Source: Author s calculaton based on the foregn trade statstcal data for years 2005 and 2009, Statstcal Offce of the Republc of Serba, Belgrade The conducted research nto comparatve advantage of the processng ndustry export revealed a negatve value for the year 2005, whch was also evdent n The comparatve advantage of the food and beverage ndustry mproved n 2009 (compared to 2005), whle the tobacco ndustry dd not sgnfcantly change ts poston. In the export of food processng and beverage ndustry there s a potental whch should be used n order to mprove compettveness n the world market. The analyss of comparatve advantage for dfferent sectors of the food processng ndustry, showed the followng values n Table 2. Of the 37 analyzed sectors of the food processng ndustry, 21 sectors have postve comparatve advantages for years 2005 and The hghest (postve) values of comparatve advantage were obtaned n the followng sectors: Producton of sugar (RCA 2005 = 0.97, RCA 2009 = 2.34); Producton of mneral water (RCA 2005 = 1.18, RCA 2009 = 1.48); Producton of beer (RCA 2005 = 0.67, RCA 2009 = 1.39); Extreme negatve values of comparatve advantage were obtaned n the followng sectors: Producton of ready-made pet feed (RCA 2005 = -2.25, RCA 2009 = -2.57); Processng of tea and coffee (RCA 2005 = -1.47, RCA 2009 = -1.79); Producton of other non-dstlled fermented beverages (RCA 2005 = -0.61, RCA 2009 = -2.20); Products of the food processng ndustry wth postve comparatve advantage were dfferentated and they are n demand n the nternatonal market. The mentoned sectors wth comparatve advantages n nternatonal trade brng a surplus. 212 Industrja, Vol. 40, No. 1, 2012

13 Table 2. Value of the comparatve advantage ndex (RCA) of the dfferent food processng ndustry sectors for years 2005 and 2009 n Serba Sectors of the food processng ndustry RCA RCA LFI LFI PRODUCTION, PROCESSING, COOLING AND FREEZING OF ANIMAL MEAT PRODUCTION, PROCESSING, COOLING AND FREEZING OF POULTRY AND RABBIT MEAT PROCESSING OF ANIMAL MEAT AND POULTRY PROCESSING AND CANNING OF FISH AND FISH PRODUCTS PROCESSING AND CANNING OF POTATO PRODUCTION OF FRUIT AND VEGETABLE JUICES PROCESSING AND CANNING OF FRUIT AND VEGETABLES PRODUCTION OF CRUDE OILS AND FATS PRODUCTION OF REFINED OILS AND FATS PRODUCTION OF MARGARINE AND SIMILAR EDIBLE FATS PRODUCTION OF DAIRY PRODUCTS PRODUCTION OF ICE-CREAM AND OTHER FROZEN PRODUCTS PRODUCTION OF GRAIN MILL PRODUCTS PRODUCTION OF STARCH AND STARCH PRODUCTS PRODUCTION OF READY-MADE LIVESTOCK FEED PRODUCTION OF READY-MADE PET FEED PRODUCTION OF BREAD AND BAKERY PRODUCTS PRODUCTION OF BISCUITS PRODUCTION OF TOAST, CANNED PASTRY, CAKES AND OTHER CANNED PASTRY PRODUCTS PRODUCTION OF SUGAR PRODUCTION OF COCOA, CHOCOLATE AND CHOCOLATE PRODUCTS PRODUCTION OF CANDY AND OTHER CONFECTIONERY PRODUCTS PRODUCTION OF SPAGHETTI OND OTHER PASTA PRODUCTS PROCESSING OF TEA AND COFFEE PRODUCTION OF SPICES AND OTHER CONDIMENTS PRODUCTION OF HOMOGENIZED NUTRITIONAL PRODUCTS AND DIETARY SUPPLEMENTS PRODUCTION OF OTHER FOOD PRODUCTS PRODUCTION OF DISTILLED ALCOHOLIC BEVERAGES PRODUCTION OF WINE FROM FRESH GRAPES PRODUCTION OF APPLE WINE AND WINE FROM OTHER FRUITS / PRODUCTION OF OTHER NON-DISTILLED FERMENTED / 0.00 BEVERAGES PRODUCTION OF BEER PRODUCTION OF MALT PRODUCTION OF MINERAL WATER PRODUCTION OF NON-ALCOHOLIC REFRESHING BEVERAGES Source: Author s calculaton based on the foregn trade statstcal data for years 2005 and 2009, Statstcal Offce of the Republc of Serba, Belgrade 213 Industrja, Vol. 40, No. 1, 2012

14 Table 3. Change n value of the comparatve advantage ndex of the food processng ndustry for the perod between 2005 and 2009 n Serba Sectors of the food processng ndustry PRODUCTION, PROCESSING, COOLING AND FREEZING OF ANIMAL MEAT PRODUCTION, PROCESSING, COOLING AND FREEZING OF Δ of the RCA ndex POULTRY AND RABBIT MEAT PROCESSING OF ANIMAL MEAT AND POULTRY PROCESSING AND CANNING OF FISH AND FISH PRODUCTS PROCESSING AND CANNING OF POTATO PRODUCTION OF FRUIT AND VEGETABLE JUICES PROCESSING AND CANNING OF FRUIT AND VEGETABLES 0.34 PRODUCTION OF CRUDE OILS AND FATS 0.86 PRODUCTION OF REFINED OILS AND FATS PRODUCTION OF MARGARINE AND SIMILAR EDIBLE FATS PRODUCTION OF DAIRY PRODUCTS 0.44 PRODUCTION OF ICE-CREAM AND OTHER FROZEN PRODUCTS 0.94 PRODUCTION OF GRAIN MILL PRODUCTS 0.51 PRODUCTION OF STARCH AND STARCH PRODUCTS PRODUCTION OF READY-MADE LIVESTOCK FEED PRODUCTION OF READY-MADE PET FEED PRODUCTION OF BREAD AND BAKERY PRODUCTS PRODUCTION OF BISCUITS 0.40 PRODUCTION OF TOAST, CANNED PASTRY, CAKES AND OTHER CANNED PASTRY PRODUCTS 0.20 PRODUCTION OF SUGAR 1.37 PRODUCTION OF COCOA, CHOCOLATE AND CHOCOLATE PRODUCTS 0.34 PRODUCTION OF CANDY AND OTHER CONFECTIONERY PRODUCTS PRODUCTION OF SPAGHETTI OND OTHER PASTA PRODUCTS 0.36 PROCESSING OF TEA AND COFFEE PRODUCTION OF SPICES AND OTHER CONDIMENTS 0.15 PRODUCTION OF HOMOGENIZED NUTRITIONAL PRODUCTS AND DIETARY SUPPLEMENTS PRODUCTION OF OTHER FOOD PRODUCTS PRODUCTION OF DISTILLED ALCOHOLIC BEVERAGES 0.07 PRODUCTION OF WINE FROM FRESH GRAPES PRODUCTION OF OTHER NON-DISTILLED FERMENTED BEVERAGES PRODUCTION OF BEER 0.72 PRODUCTION OF MALT PRODUCTION OF MINERAL WATER 0.30 PRODUCTION OF NON-ALCOHOLIC REFRESHING BEVERAGES 0.97 Source: Author s calculaton based on the foregn trade statstcal data for years 2005 and 2009, Statstcal Offce of the Republc of Serba, Belgrade 0.03 There s a sgnfcant ncrease of the comparatve advantage ndex for export n the followng ndustres: producton of sugar, mneral water, refreshng non- 214 Industrja, Vol. 40, No. 1, 2012

15 alcoholc beverages, ce-cream, crude ols and fats, gran mll products, bscuts and beer. Our research shows the ncreased comparatve advantage n the export of sugar. Sugar s an mportant exportng agrcultural and food product, wth a hgh value of comparatve advantage ndex (RCA= 2.34). Sgnfcant export and comparatve advantage s explaned by the obtaned preferental postons on the EU market. Wshng to acheve prce compettveness n the nternatonal market, t s necessary to ncrease productvty n the producton of sugar cane and decrease processng costs. Wheat flour and other gran mll products have a hgh value of comparatve advantage ndex. In the analyzed perod, there was a sgnfcant ncrease of export and obtaned exportng prce, whch gave postve results n the changes of comparatve advantage ndex. The comparatve advantage of crude ol n 2009 ncreased compared to 2005, due to ncreased export n qualty products of ths sector of food processng ndustry. In the export of meat- cooled, frozen, as well as meat products n the analyzed perod, the comparatve advantage ndex mantaned approxmately the same value. In the ten-year perod ( ) there was a decrease n the export of beef, and the export quota was not flled. Serba lost the status of an mportant exporter of beef and became the mporter of pork meat as a result of the contnuous decrease n the number of lvestock. Beer and confectonery were n the sad perod present n export and compettveness mproved, whch s also sgnaled by the ncrease n the value of comparatve advantage ndex. Mneral and carbonated water wth and wthout sugar show a postve value of comparatve advantage ndex and thus have a favorable compettve poston. An ncrease n compettve advantage came as a result of a sgnfcant ncrease n the value of export. In the producton of fsh n Serba, there s potental whch has not been fully used. Agro-ecologcal condtons, market needs and export possbltes show that the focus of attenton should be on nvestments nto buldng new fsheres, usng the exstng ones, ncreasng fsh supples n rvers, lakes, and accumulatons, as well as mplementaton of new producton systems, development of processng methodology and fnal range of products, professonal development and employees educaton [3]. Wthn the overall strategy of agrcultural development, we need to defne measures for the development of fshng, to ntroduce qualty standards, expand product assortments wth the offer of fresh, frozen, canned and smoked fsh. By dong so, t would be possble to correct the extremely negatve coeffcent of comparatve advantage and Serba would acheve a compettve poston n the domestc and nternatonal market. 215 Industrja, Vol. 40, No. 1, 2012

16 Producton, processng, coolng and Producton of crude ols and fats Processng and cannng of frut and Producton of bscuts Producton of gran mll products Processng and cannng of potato Producton of non-alcoholc refreshng Producton of beer Producton of ce-cream and other Producton of mneral water Producton of sugar RCA ndex Source: Author s calculaton based on the foregn trade statstcal data for years 2005 and 2009, Statstcal Offce of the Republc of Serba, Belgrade Graph 1. Revealed comparatve advantage ndex for the food ndustry of Serba n the perod between 2005 and Source: Author s calculaton Graph 2: Bar Chart. Dstrbuton of RCA ndex values for dfferent sectors of the food processng ndustry of Serba n 2005 and Industrja, Vol. 40, No. 1, 2012

17 Graph 2 represents the relatonshp between the number of sectors of the food processng ndustry and the value of RCA ndcator. The x- axs represents the values of RCA ndcator, whle the y- axs represents the number of sectors wth the correspondng value of the RCA ndcator. After havng analyzed comparatve advantages, we can conclude that n the years 2005 and 2009 the largest number of sectors had a postve value of RCA ndcator n the range between 0.01 and Comparatve advantages measured usng the Lafay ndex have the followng values: Hgh postve values are present n the followng sectors: Producton and cannng of frut and vegetables (LFI 2005 = 1.56, LFI 2009 = 1.64); Producton of sugar (LFI 2005 = 1.50, LFI 2009 = 0.88); Producton of crude ols and fats (LFI 2005 = 0.08, LFI 2009 = 0.44); Sgnfcant negatve values of comparatve advantage were obtaned for the followng sectors: Processng and cannng of fsh and fsh products (LFI 2005 = , LFI 2009 = -0.23); Processng of tea and coffee (LFI 2005 = , LFI 2009 = ); Producton of ready-made pet feed (LFI 2005 = -0.02, LFI 2009 = -0.04) Graph 3: Bar Chart. Dstrbuton of LFI ndex values for dfferent sectors of the food processng ndustry of Serba n 2005 and ,5-2 -1,5-1 -0,5 0 0,5 1 1,5 2 2, ,5-2 -1,5-1 -0,5 0 0,5 1 1,5 2 2,5 3 Source: Author s calculaton 217 Industrja, Vol. 40, No. 1, 2012

18 Graph 3 represents the relatonshp between the number of sectors of the food processng ndustry and the values of LFI ndcator. The x- axs represents the values of LFI ndcator; whereas the y- axs represents the number of sectors havng the respectve LFI values. When analyzng the comparatve advantages we can conclude that n the years 2005 and 2009 the largest number of sectors were those wth the comparatve advantage value n the range between 0.01 and Strategy for the ncrease of export of agrcultural and food products, besde the stable and sustanable growth of producton and qualty of products, also entals the adjustment of exportng structure to the requests of mportng demand. Flour products are present n mport. Serba mports pasta, bscuts, cookes, toast, crossants and other pastry. Wth the more versatle assortment of processed wheat, corn and flour, as well as by usng varous new producton technologes, Serba could satsfy the domestc demand and provde quanttes suffcent for export. Thanks to the reached quantty n the producton of frut, Serba acheved a hgh qualty n the producton of frozen fruts, whch s the key exportng product, especally frozen raspberres. Wshng to get hgh qualty exportng frut products, we need to frst have hgh qualty raw frut and further work on selecton and development of new frut sorts, whle modernzng processng capactes, ncreasng the explotaton of equpment and the degree of product fnalzaton. Wth an ncrease n vegetable producton, expanson of product assortments (e.g. especally dehydrated and frozen vegetables), as well as ntroducton of packng and packages n accordance wth the European standards, Serba would sgnfcantly ncrease the domestc supples and ncrease export. Serba s also characterzed by the balance defct n lvestock products, low usage per capta and decreased export. Usng certan stmulatng measures n lvestock breedng and rasng, changng the producton structure and mprovement of qualty and safety and santary standards of anmal meat and meat products, we could use Serba s farmng potentals both for the supply of domestc market and export. Specfc qualty characterstcs, especally n the producton of certan agrcultural and food products have to become a matter of protecton, usng the ndcaton of geographcal orgn. Organc products and home-made products bearng the ndcaton of geographcal orgn wll become a unque guarantee of qualty and authentcty of products, ther safety and complance wth qualty related standards. The analyss of current stuaton shows that the mage of an authentc Serban product has remaned completely wthout adequate valorzaton. The bggest loss for Serba s not the neglect of certan producton technologes, but the loss of adequate speces and breeds (e.g. lvestock breeds) wth authentcally Serban orgns [25]. Low explotaton of capactes s contngent upon the exstence of qualty raw materals/resources. Food producton capactes are unequally equpped. The goal s to use the exstng and new knowledge, ntroduce nnovatons, develop new bo-technologes and create versatle and certfed product assortments, whle mprovng busness management and marketng and fully use comparatve 218 Industrja, Vol. 40, No. 1, 2012

19 advantages of ecologcal resources to acheve comparatve advantages of fnal products n the nternatonal market. In modern market envronments, our compettors are orented towards product brand names and logos. These market trends affect economc, socal and cultural changes, whle the decsve factor s the added value generated through servce and experences related to products, rather than those generated through the physcal process of producton [19]. There are many clams that the developng countres are not able to meet the requred food safety and qualty standards of the European market [9]. In smaller countres and developng countres the provson of qualty standards, especally n the producton of agrcultural products, requres substantal fnancal resources. In order to mprove the exstng condtons and protect the nterests of small prvate enterprses, certan authors pont to the mportance of prvate standards as catalysts for the mprovement of compettveness and placement on the nternatonal market. Despte the opnon that the protecton of domestc producton contrbutes to the ncrease of compettveness, Serban companes have not used the possblty of placement wth new products, whle at the same tme satsfyng domestc demand and wnnng foregn markets. Ths confrms the theory of nternatonal trade sayng that closed markets trgger the decrease n compettveness for companes and the whole economy. 6. SPECIALIZATION IN INTRA-INDUSTRIAL EXCHANGE OF THE SERBIAN FOOD INDUSTRY Research results analyzng specalzaton n nternatonal trade usng Grubel- Lloyd s ndex show that ntra-ndustral specalzaton prevals and that t s more sgnfcant n the producton of frut and vegetable juces, margarne, ready-made lvestock feed, cocoa and chocolate. Research results lead us to conclude that there s a correlaton between comparatve advantage and ntra-ndustral specalzaton n foregn trade. Intra- ndustral exchange wth products of the food processng ndustry shows that there s smultaneous export and mport and ndcates that there s the openness of ndustry towards foregn trade. We can observe the export and mport of dfferent dfferentated products, whch are not complete substtutes. A hgh value of the ntra-ndustral exchange ndex ponts to the specalzaton n nternatonal trade. The analyss of ntra-ndustral exchange (GL) for 2009, at the level of dfferent sectors of the food processng ndustry ndcates the followng facts: Intra-ndustral exchange s present n the followng sectors (the presence of export and mport: Producton of anmal and chcken meat, frut and vegetable juces, margarne, refned ols and fats, ready-made 219 Industrja, Vol. 40, No. 1, 2012

20 lvestock feed, cocoa and chocolate, spces and other condments, candes and other confectonery, bread and bakery products, dary products, as well as Producton, processng and coolng of anmal meat Inter-ndustral exchange s present n the followng sectors (the presence of export or mport): Producton of fsh and fsh products, cannng of frut and vegetables, crude ols and fats, ce-cream, starch, ready-made pet feed, bscuts, sugar, tea and coffee, non-dstlled fermented beverages, beer, malt, mneral water and non-alcoholc refreshng beverages. Table 4. GL ndcator for the food processng ndustry of Serba for years 2005 and Sectors of the food processng ndustry GL GL PRODUCTION, PROCESSING, COOLING AND FREEZING OF ANIMAL MEAT PRODUCTION, PROCESSING, COOLING AND FREEZING OF POULTRY AND RABBIT MEAT PROCESSING OF ANIMAL MEAT AND POULTRY PROCESSING AND CANNING OF FISH AND FISH PRODUCTS PROCESSING AND CANNING OF POTATO PRODUCTION OF FRUIT AND VEGETABLE JUICES PROCESSING AND CANNING OF FRUIT AND VEGETABLES PRODUCTION OF CRUDE OILS AND FATS PRODUCTION OF REFINED OILS AND FATS PRODUCTION OF MARGARINE AND SIMILAR EDIBLE FATS PRODUCTION OF DAIRY PRODUCTS PRODUCTION OF ICE-CREAM AND OTHER FROZEN PRODUCTS PRODUCTION OF GRAIN MILL PRODUCTS PRODUCTION OF STARCH AND STARCH PRODUCTS PRODUCTION OF READY-MADE LIVESTOCK FEED PRODUCTION OF READY-MADE PET FEED PRODUCTION OF BREAD AND BAKERY PRODUCTS PRODUCTION OF BISCUITS PRODUCTION OF TOAST, CANNED PASTRY, CAKES AND OTHER CANNED PASTRY PRODUCTS PRODUCTION OF SUGAR PRODUCTION OF COCOA, CHOCOLATE AND CHOCOLATE PRODUCTS PRODUCTION OF CANDY AND OTHER CONFECTIONERY PRODUCTS PRODUCTION OF SPAGHETTI OND OTHER PASTA PRODUCTS PROCESSING OF TEA AND COFFEE PRODUCTION OF SPICES AND OTHER CONDIMENTS PRODUCTION OF HOMOGENIZED NUTRITIONAL PRODUCTS AND DIETARY SUPPLEMENTS PRODUCTION OF OTHER FOOD PRODUCTS PRODUCTION OF DISTILLED ALCOHOLIC BEVERAGES PRODUCTION OF WINE FROM FRESH GRAPES PRODUCTION OF APPLE WINE AND WINE FROM OTHER FRUITS PRODUCTION OF OTHER NON-DISTILLED FERMENTED BEVERAGES / 0.03 PRODUCTION OF BEER PRODUCTION OF MALT PRODUCTION OF MINERAL WATER PRODUCTION OF NON-ALCOHOLIC REFRESHING BEVERAGES Source: Author s calculaton based on the foregn trade statstcal data for years 2005 and 2009, Statstcal Offce of the Republc of Serba, Belgrade 220 Industrja, Vol. 40, No. 1, 2012

21 Results of the analyss of foregn trade wth products of the food processng ndustry usng the Grubel- Lloyd s ndex show that of the total number of 37 analyzed sectors 11 have ntra-ndustral character, whereas 14 have nterndustral character. A hgh value of the Grubel Lloyd s ndex (0.98 and 0.99) ndcates that mport and export are conducted to approxmately the same degree. Graph 4: Bar Chart. Dstrbuton of GL ndex values for dfferent sectors of the food processng ndustry of Serba n 2005 and ,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0, ,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 Source: Author s calculaton Graph 4 represents the relatonshp between the number of dfferent sectors of the food processng ndustry and the values of GL ndcator. The x- axs represents the values of GL ndcator, whle the y- axes represents the number of sectors wth the correspondng value of the GL ndcator. After havng analyzed the specalzaton n ntra-ndustral exchange, we can conclude that n the year 2005 the largest number of sectors had the value of ntra-ndustral exchange ndex n the range between 0.50 and Sgnfcant s the partcpaton of sectors wth nter-ndustral character whch s characterzed by a more sgnfcant export than mport. In 2009 the stuaton dd not change much; we could only observe the hgh partcpaton of extremely nter-ndustral and ntra-ndustral sectors. 7. COMPARATIVE ADVANTAGES OF THE FOOD INDUSTRY USING THE MODIFIED Sm MODEL Research nto the comparatve advantages of the dfferent sectors of food processng ndustry was also carred out usng the modfed Ѕm model. In accordance wth the research am and usng the Balassa ndex as a model, the author developed another model of comparatve advantages. Consderng the sgnfcant share of agrcultural and food products export n the total export of Serba, the author performed a qualtatve and quanttatve assessment of 221 Industrja, Vol. 40, No. 1, 2012

22 certan sectors of the food processng ndustry of Serba, comparng t to the total export of agrcultural and food products. Table 5. Comparatve advantage model for dfferent sectors of the food processng ndustry usng the Sm model for years 2005 and 2009 (author s comparatve advantage model) Sectors of the food processng ndustry Sm Sm PRODUCTION, PROCESSING, COOLING AND FREEZING OF ANIMAL MEAT PRODUCTION, PROCESSING, COOLING AND FREEZING OF POULTRY AND RABBIT MEAT PROCESSING OF ANIMAL MEAT AND POULTRY PROCESSING AND CANNING OF FISH AND FISH PRODUCTS PROCESSING AND CANNING OF POTATO PRODUCTION OF FRUIT AND VEGETABLE JUICES PROCESSING AND CANNING OF FRUIT AND VEGETABLES PRODUCTION OF CRUDE OILS AND FATS PRODUCTION OF REFINED OILS AND FATS PRODUCTION OF MARGARINE AND SIMILAR EDIBLE FATS PRODUCTION OF DAIRY PRODUCTS PRODUCTION OF ICE-CREAM AND OTHER FROZEN PRODUCTS PRODUCTION OF GRAIN MILL PRODUCTS PRODUCTION OF STARCH AND STARCH PRODUCTS PRODUCTION OF READY-MADE LIVESTOCK FEED PRODUCTION OF READY-MADE PET FEED PRODUCTION OF BREAD AND BAKERY PRODUCTS PRODUCTION OF BISCUITS PRODUCTION OF TOAST, CANNED PASTRY, CAKES AND OTHER CANNED PASTRY PRODUCTS PRODUCTION OF SUGAR PRODUCTION OF COCOA, CHOCOLATE AND CHOCOLATE PRODUCTS PRODUCTION OF CANDY AND OTHER CONFECTIONERY PRODUCTS PRODUCTION OF SPAGHETTI OND OTHER PASTA PRODUCTS PROCESSING OF TEA AND COFFEE PRODUCTION OF SPICES AND OTHER CONDIMENTS PRODUCTION OF HOMOGENIZED NUTRITIONAL PRODUCTS AND DIETARY SUPPLEMENTS PRODUCTION OF OTHER FOOD PRODUCTS PRODUCTION OF DISTILLED ALCOHOLIC BEVERAGES PRODUCTION OF WINE FROM FRESH GRAPES PRODUCTION OF APPLE WINE AND WINE FROM OTHER FRUITS PRODUCTION OF OTHER NON-DISTILLED FERMENTED BEVERAGES / PRODUCTION OF BEER PRODUCTION OF MALT PRODUCTION OF MINERAL WATER PRODUCTION OF NON-ALCOHOLIC REFRESHING BEVERAGES Source: Author s calculaton based on the foregn trade statstcal data for years 2005 and 2009, Statstcal Offce of the Republc of Serba, Belgrade 222 Industrja, Vol. 40, No. 1, 2012