Hey,
Any approach or idea to get the domestic market price of one commodity based on its import and export prices?
Highly appreciate if you could give some hints or recommend any paper or handbook? Thanks.
Dear Quirui Li, I must first clarify that I suppose you want to know how to build an accounting equivalence of the value in the domestic market of a product that is traded. It is not the same as the price, since the domestic price will be determined in part by that value and partly by the domestic market. Clarified this I tell you the following. In order to obtain the value of an imported product placed outside the customs or available to you, you must keep in mind that the imported good is counted as cif (starting price, plus freight rates and insurances). At the cif price you must add the customs duties of the country (import tariffs) and to that value you must add the impact of the national tax on the sale (for example the VAT) and if there are others that are charged internally by the type of product (Alcohol, perfumes, etc.) you must also add it. That value is the equivalent of what you would have for a local product on ex-factory. The export price is f.o.b. (Free on board) or is it in line with the ship of the exporting country and does not include port handling, insurance or freight. I hope I've helped. Good luck!
Dear Prof. Duiuk,
Thank you very much for your kind reply.
It is a question raised by one of my colleagues which confuses me quite much so far. For me, as maybe the same logic as yours, the price of one product in a domestic country is determined by domestic production and market as well as influenced by trading. They are entirely two different terms for two different markets, right?
It seems a bit ridiculous to simulate the domestic price by trading (import or export) prices, or?
Thanks again.
Thank you very much.
At what prices do you mean in that phrase "Are they entirely different terms for two different markets, right"?
As for: "It seems a bit ridiculous to simulate the domestic price by trading (import or export) prices, or?". I do not know if I call it ridiculous, but it is only an approximation that can be close or very different. Tariff, para - tariff (eg phytosanitary) barriers and market sizes and intellectual protections, etc., make them very different, especially in monopoly cases. Not to mention if it is about prices of products that end their cycle (commercial or seasonal) and are finished at values lower than the real cost.
Thank you very much.
At what prices do you mean in that phrase "Are they entirely different terms for two different markets, right"?
As for: "It seems a bit ridiculous to simulate the domestic price by trading (import or export) prices, or?". I do not know if I call it ridiculous, but it is only an approximation that can be close or very different. Tariff, para - tariff (eg phytosanitary) barriers and market sizes and intellectual protections, etc., make them very different, especially in monopoly cases. Not to mention if it is about prices of products that end their cycle (commercial or seasonal) and are finished at values lower than the real cost.
Pedro Dudiuk describes all of the adjustments for obtaining an equivalence between import prices and domestic producer prices. For a comparison with domestic purchaser prices, one must also add the wholesale and retail trade margins that are included in the final purchase price.
Changes in import prices or export prices can be used to approximate changes in domestic production/purchase prices, but it would be best to use this approach for products that are very similar and thus close substitutes.
Thank you Robert Yuskavage,
This is correct: "For a comparison with domestic purchaser prices, one must also add the wholesale and retail trade margins that are included in the final purchase price".
But I have clarified that the price adjustment corresponds to the ex-factory (local) price, and that is why the commercial margins were not included.
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