2007Jun Trade Liberalization Agriculture 5 Present

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Besieged by Imports: Agro-Import Surges & Crisis in The Developing World: 

Besieged by Imports: Agro-Import Surges & Crisis in The Developing World Syed Qasim Ali Shah International Team Leader-Import Surges Project Action Aid international Qasim.Shah@actionaid.org

Agriculture, Import Surges & the Developing World: 

Agriculture, Import Surges & the Developing World Agriculture remains the mainstay in the developing world 40-80% employment Large chunk of GDP In 1960s, Developing World has surplus of US $ 7 Billion which Shrunk to US $ 1 Billion in 1970s Between 1990-2000, many of the developing countries turned to be NET IMPORTER Surplus turned to be Deficit, it was US $ 11 Billion in 2001 The amount spent on imports by the developing countries has increased by 1569% FAO has recorded 7132 (12167) cases of import surges in 102 Developing Countries between 1980-2003

Why ActionAid is working on Agro-Import Surges : 

Why ActionAid is working on Agro-Import Surges Valuing the deeper impacts of Agro-Import surges in the Developing world, ActionAid started a two years project in Brazil, The Gambia, Ghana, Kenya, Indonesia and Nepal with the notion to: Help farmers, laborers and other effectees in protecting their right to food, livelihoods and development as envisaged in UN Covenants To calculate the number of farmers displaced due to import surges To estimate the losses to the related industry in importing developing country and employment

Broader Objectives of Research: 

Broader Objectives of Research To inform policy makers about the extent and nature of import surges on poverty, sustainable development and livelihoods to provide appropriate policy responses Contribute to the debate on trade remedy measures both domestically and in the context of the WTO agreements, particularly to Strengthen G33 position on Special Safeguard Mechanism

Research Methodology: 

Research Methodology Both Qualitative & Quantitative Techniques are used for Studying the Relationship between Domestic & Export Markets Participatory Rapid Appraisal (PRA) for Qualitative Data Collection Rapid Market Appraisal (RMA) for Market Related Data Collection

Factors Responsible for Import Surges: 

Factors Responsible for Import Surges Some important internal factors: Tariff Reduction under Structural Adjustment Progamme Under WTO Commitments Dismantling of Market Regulating Bodies (Ghana, Gambia, Brazil, KCC in Kenya) Removal of Quantitative Restrictions Reduced Support for Domestically Consumed Crops (from Food Security to Export Oriented Policies) Exchange Rate Variations (Brazil Cotton Case) Free Trade Agreements (COMESA, Nepal-India FTA) IFI Loan Conditions (Ghana was unable to increase tariffs, Indonesian case) Lack of Investment in Farming Sector in general

Factors Responsible for Import Surges: 

Factors Responsible for Import Surges Some important external factors: Subsidies in exporting country (US Maize, Rice, EU dairy, EU Poultry in Ghana) Currency fluctuation in 3rd country (Brazilian Real Lost against US $ in 2001 which rose its exports) Food aid (95% Maize going to Tanzania is under Food aid) Policies in exporting countries (De-stocking of Indian Rice Reserves) Role of large agri-business corporations

What Happened to Brazil Cotton Due to Import Surges: 

What Happened to Brazil Cotton Due to Import Surges It is recorded that before 1992: Family farmers were the basis of the Production, highly labor intensive, with women’s work largely used in the cotton collection; State institutional support in research (high productivity, in line with agro industry needs) and extension services – modernized production system, State monopoly in seeds production and distribution, Mandatory rural insurance, State policies – export quotas (protection of textile industry) and import taxes (protection of cotton producers)

What Happened to Brazil Cotton Due to Import Surges: 

What Happened to Brazil Cotton Due to Import Surges In 1980’s, Brazil adopted liberalization of trade policies & Lint cotton customs tariff reduced from : 55% in 1986 10% in 1988 0% in 1990 US, the Major exporter who subsidizes cotton Financing system on lint cotton imports: 1993-2000: Internal interest rate – 25% to 30% a year Importers’ interest rate – 4% to 7% a year (0 to 360 days) Exchange rate flotation: 1993-2000: exchange rate directly favored imports since the higher quotations in US$ are made cheaper by the exchange rate when expressed in national currency (over-valued Real); 2000-2004: devaluation of national currency favored national cotton competitiveness;

What Happened to Brazil Cotton Due to Import Surges: 

From 1990-1997: National production of seed cotton fall more than 50%: From 1.8 million to less than 900,000 tonnes Production of fibre decreased: From 655,000 tones to 300,000 tonnes (cotton mills closed) Imports of lint rose: From 86,000 tonnes to 438,000 tonnes Exports decreased: From 110,000 tonnes to 30,000 tonnes Profound restructuring of national textile industry Fall in number of companies (cotton plants) From 5,699 in 1989 to 4,410 in 1994 (-1,289) Reduce number of employed workers From 1.08 million to 511,000 (-52% or -569,000 workers) What Happened to Brazil Cotton Due to Import Surges

What Happened to Brazil Cotton Due to Import Surges: 

Consumption of lint cotton remained practically constant Farmers occupation and income decreases Disapperance of small cotton mills – broken the link between small farmers and textile industry (no access to market) Paraná – from 400,000 casual farmhands, around 135,000 lost their cotton harvesting jobs (mainly women) Paraná – 200,000 families lost their jobs In São Paulo and Paraná, many families joined the landless movement after the cotton import surge What Happened to Brazil Cotton Due to Import Surges

What Happened to Brazil Cotton Due to Import Surges: 

Cotton Growing was Not Profitable Displacement of Farmers Loss in Domestic Production Increased Unemployment due to Closure of Industry Brazillian cotton moved to the Centre-West region of Brazil (70% of production) What Happened to Brazil Cotton Due to Import Surges

Impacts Recorded in Other Countries: 

Impacts Recorded in Other Countries Dairy Sector in Kenya: Study reveals that Kenya’s dairy industry was fairly active in the international trade in dry milk products till early 90s. However, after 1995, the processing of dry milk declined. This decline is partly attributed to liberalization, which gave rise to the use of cheaper imported dry milk products as substitutes for raw milk. Farmers problems were accentuated by crippling of KCC. It is significant to note that the imports of milk powder drastically declined after the increase in import duties in 2002 in Kenya.

Impacts Recorded in Other Countries: 

Kenya Sugar Industry: Sugar cane production account for 52 percent and 30% of employment in the Nyanza and Western rural region. Formal employment in the industry fell from 43,000 in the 1990s to 7,500 in 2004, which means 83% people had lost their jobs. Correspondingly informal and casual employment has increased. This situation has led farmers to grow new crops. In some areas, cotton production has started. Increased share of imported sugar in domestic consumption from 1.5% in 1984 to 39% in 2001. Following the import surge (2001), ex-factory prices fell by nearly 20%. Correspondingly, cane prices fell by 10% in the following year. However, Consumer did not benefited due to IS in 2001 as Consumer Prices increased faster in relative terms. Impacts Recorded in Other Countries

Impacts Recorded in Other Countries: 

Rice in Gambia After 1997 Import Surge, share of rice in total cereal consumption has declined by an annual margin of 0.7%, Whereas rice consumption in absolute terms have grown by an annual rate of 6% Commercial rice imports have grown at an alarming rate of 10% during 1985 to 2000. In 2004, imported rice constitute about 25.50% where as it’s share in 1986 was 17.20% Share of domestically produced rice has decreased from 9.50% in 1986 to 6.56% in 2004 Impacts Recorded in Other Countries

Impacts Recorded in Other Countries: 

In Nepal, IS Occurred in 2000, it surged over 798 percent of the average import of the preceding three years. Due to which share of imported rice consumption rose to 8.64 percent of total rice consumed. The main impact appears on prices. Until 99-00, domestic retail prices in Nepal were on the increase. However, average domestic prices stagnated and actually fell in the following three years. The more evident impact was felt in the Nepalese districts bordering India. In these districts, coarse grain rice prices fell much faster (-17.4%) than the national average (-12.4%) between 1999/2000 and 2000/1. Data also demonstrate decline in production in the two years following the surge; the FAO suggests a fall from 1,560,000 hectares in 2000 to 1,517,000 hectares in 2001. Government data also corresponds and suggests a 2.76 percent negative growth in 2001/02. Impacts Recorded in Other Countries

Impacts Recorded in Other Countries: 

In Ghana Rice imports increased from 250 000 tonnes in 1998 to 415 150 tonnes in 2003, an increase of 70 percent Domestic rice market decreased from 43 percent in 2000 to 29 percent in 2003 Between 2002 and 2004, 66 percent of rice producers recorded negative returns Impacts Recorded in Other Countries

Summarizing the Impacts: 

Summarizing the Impacts Loss of employment and Displacement of farmers Factories were closed or went into receivership Increased Share of imports in domestic markets Fall in prices after import surge Local production has decreased or remain Stagnant Shift in Cropping Pattern Due to loss of employment, poverty has increased in regions where particular crop was main source of livelihoods

How the Government has Responded to Import Surges : 

How the Government has Responded to Import Surges National Policy Responses were important to deal with the Problem Protection to Local Industry through Tariff Hikes Quantitative Restrictions Investment in Agriculture Sector Tariff Protection is most oftenly used instrument to stop import surges In cases, where Tariff Protection alone failed to stop import surges, Quantitative Restrictions were applied which proved more effective In some other cases, complete Import Bans were used to check the menace

Limitations of the Research: 

Limitations of the Research Paucity and authenticity of data related to production, consumption, imports, pricing etc Presence of informal trade Incapability of local administration in understanding the import surges Incapability to prove negative impacts due to very diverse nature and large population involvement in agriculture sector Time consumption in implementing Safeguard provisions Lack of institutional mechanism to administer the disciplines on safeguard & import surge

What we had Learnt: 

What we had Learnt 30% Moving Average based on Three Years Data” was taken as reference definition which has its own limitations therefore it is suggested that determination of threshold level to invoke SSM should be left with the national governments Tariffs as well as Quantitative Restrictions should be an integral part of any SSM The presence of import surges in a broad range of agro-products, SSM should be available for all agro-products SSM should be easy and simple to operate; from Kenya (COMESA Safe Guard) we had learnt that it took Kenya 2 years to actually use SSM for sugar industry protection State trading enterprises are extremely important for developing countries in terms of managing imports and exports, determining prices, ensuring market for small holders, and distributing supplies to ensure food security. These institutions should be strengthened, not weakened in WTO or any other trade rules

What we had Learnt: 

All developing countries, to a greater or lesser extent, struggle with monitoring and trade surveillance, particularly when entry points for imports are many, are administratively impossible to accurately monitor, and informal trade is high. For these reasons, government records of imports are almost always below the actual import levels. Therefore, where data is unavailable or inaccurate, governments should be allowed to invoke the SSM when it is perceived that the domestic sector is being threatened Any WTO/FTA negotiations, should not undermine the right of developing countries to protect its agriculture sector through the use of SSM or any other mechanism What we had Learnt

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