Vegetable Trade Flows and Chain Competitiveness Linkage Analysis Based on Spatial Panel Econometric Modelling and Porter’s Diamond Model

Abstract

The vegetable sector plays an important role in ensuring food security. Vegetable trade flows in Romania have become a major concern due to constant trade balance deficits despite the country’s agricultural potential. Taking into account the paradox between what could be considered an abundance of factor endowments and poor trade balance results, the objective of this research was to study the linkage between vegetable trade flows and chain competitiveness. Spatial panel econometric methods were used to study the impact of the international vegetable market on the demand in Romania, while the Balassa index and Porter’s diamond modelling techniques were used to study the competitiveness of the vegetable chain at both county and national levels. By applying the spatial regression method to the international trade and national production panel data, it was found that an increase in the quantity of vegetables imported into Romania would cause an even greater decrease in national vegetable production. The results show that Romanian vegetable production is highly and negatively influenced by the growing appetite for imports—therefore leading to a national dependence on the global vegetable chain. Porter’s diamond model results confirm that: (a) growing vegetables is profitable in Romania and the average profit margin is higher in this economic sector than in many others; (b) there is a lack of competitiveness caused by the post-communist excessively fragmented agrarian land structure and poor performance of the irrigation, warehousing, and transportation sectors; (c) the national production of vegetables is generally self-sufficient with the exception of three counties that resort to importing and account for more than 70% of Romania’s total vegetable imports; (d) factor endowments cannot be fully harnessed, and this contributes to the deepening of the trade balance deficits. Improvement is possible by fostering competitiveness through increasing the performance of supporting industries and the logistics infrastructure, as well as removing market access barriers for the many small farmers.

Deliver Smart, Not More! Building Economically Sustainable Competitiveness on the Ground of High Agri-Food Trade Specialization in the EU

“…Fischer and Schornberg [86] proposed an industrial competitiveness index as a measurement technique for the economic performance of EU food and drink manufacturing industries based on the profitability, productivity and output growth factors. Besides the body of literature consisting of composite indices designed to measure the level of agricultural competitiveness, the literature also consists of papers dealing with the measurement of agricultural competitiveness through the lens of Porter's Diamond model [87][88][89], which focuses on at least four attributes, as described by Michael Porter [90]: (a) firm strategy, structure and rivalry; (b) factor conditions; (c) related and supporting industries; and (d) demand conditions. Besides those four attributes, Porter also acknowledged the influence of governmental forces, as well as luckboth considered impactful in terms of fostering national competitive advantage.…”

Managing Agricultural Value Chains in a Rapidly Urbanizing World

“…Constantin et al (this issue) [18] note that while vegetable consumption is increasing in Romania, even in the presence of a favorable temperate climate, domestic vegetable production is decreasing, with imports, particularly during the winter months, securing an increasing share of the market. Using Porter's [19] diamond model, the lack of competitiveness is attributed to the fragmented nature of the industry, where most farmers are smallholders and indeed, even within Europe, many are subsistence farmers.…”

“…Hoang (this issue) [23] discusses how the renewed interest in short food supply chains is not only reconnecting consumers to food producers, but also providing smallholder farmers with a more fair and equitable proportion of the retail price, increasing their profitability, revitalizing local communities, and supporting farmers in their efforts to adopt more sustainable and ethical food production systems. However, the participation of smallholder farmers in these short food supply chains is constrained by many impediments, including the small scale of production; the higher costs of sustainable production; a smaller output market; a lack of credit; the lack of capacity; and, just as Constantin et al [18] noted, with a gradual shift in the political regime in Viet Nam, farmers' unwillingness to cooperate.…”

The Resilience of Agricultural Comparative Advantage During the COVID-19 Pandemic

“…In Porter's view (1990), agricultural competitiveness is linked to productivity, as it is produced more output with the same resource input. In this regard, Porter's diamond model for the assessment of competitiveness has seen a viable and practical application in the agricultural sector (Constantin et al, 2022). Agricultural competitiveness could be measured by taking into consideration costs, prices, the quality of the commodities commercialized, as well as their suitability as input for other production processes in different, yet connected economic sectors (Cepoi, Bran and Dinu, 2020).…”