The Domestic Supply/Demand Percentage says that if you grew the local grain industry from 43% to 100%, you COULD supply all area demand with area production. But isn’t this is only theoretical, because much of the existing local grain industry is going to export? Wouldn’t this imply allocating some production for export to local demand?
Answer: The supply/demand percentage is the maximum possible. The RPC represents the amount of local demand coming from local supply. “Export to local demand”?? – I’m not sure I understand the question. The software allocate all production needed for local demand – the remaining balance of production then goes to domestic export.
Does the RPC coefficient of 8% mean that 8% of the 43% is sold locally and 92% of the 43% is IN FACT exported (domestic and foreign)?
Answer: If the RPC is 8% (8% of local demand comes from local supply), then 1-.08 (92%) of the demand is supplied by import. If you increased the supply from 43% of demand to 100% (supply/demand pool ratio) then it would be possible to meet the entire demand with local supply – but the trade-flow data that is part of the data set is fixed to a set amount based on a gravity model using the ‘historical’ 2008 data. You would have to physically edit the trade flow to increase local consumption of local demand.
And am I right to imply that a completely successful effort at import substitution would move RPC from 8% to 100%? And am I right to interpret this that this would allocate NEW domestic production to fill all local demand, while not reducing production for exports?
Answer: Yes. If you force existing production to go to local demand – you will cause exports to fall (the balance). If you increase production and force the new production to go to local demand, the export does not have to decrease.
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