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Foreword – 3
FOREWORD The OECD Global Forum on Agriculture is a regular event, bringing together OECD countries and non-member economies to share experiences on how policies can more effectively achieve stated government objectives. Recent themes for the Global Forum on Agriculture have revolved around the linkages between domestic policy reform, trade liberalisation, economic growth and poverty reduction but the focus has been on agricultural policy. The focus was broadened for this year’s Forum to include development aid under the theme “Policy Coherence for Development” and provided a good opportunity for policy dialogue between the agricultural and development communities, government and the private sector; and developed and developing countries. These proceedings bring together papers and presentations from the 30 November – 1 December 2005 OECD Global Forum on Agriculture, introduced by a brief summary of the main issues and policy messages. Participation in the Forum was widespread in terms of geographical coverage and diversity of stakeholders. In addition to the OECD countries, there was representation from 17 non-member economies, some 15 intergovernmental organisations and international NGOs and from multinational agribusiness and academia. The main objective of this forum was to arrive at a better understanding of the kinds of policy reforms required in both developed and developing countries to enhance global agricultural trade and to reduce poverty and alleviate hunger. This focus on trade and poverty/hunger goals is particularly appropriate as both OECD and developing countries struggle to achieve the stated commitments of the Doha development round of multilateral trade negotiations (DDA) and the Millennium Development Goals (MDGs). As the DDA negotiations continue to unfold post Hong Kong, the onus will be on the negotiators to come through in realising the promises of a truly development agenda. Agriculture continues to be the focal point of worldwide expectations – a kind of litmus test of credibility. Policy coherence for development features prominently as a central goal of international millennium undertakings at the highest level. Contributing to development is a key objective of the OECD. As an intergovernmental agency bringing together nearly all areas of policy-making, the OECD is ideally placed to provide analysis and promote dialogue that can motivate governments to align policies in support of the development objectives to which they have all agreed. Recognising this, the OECD Ministerial Council of 2002 mandated the Organisation specifically “to enhance the understanding of the development dimensions of member country policies and their impacts on developing countries”. The Council stipulated that “Analysis should consider trade-offs and potential synergies across such areas as trade, investment, agriculture, health, education, the environment and development goals”. In taking on this mandate, the OECD has gone beyond the basic notion of “do no harm” in terms of avoiding counterproductive or contradictory policies. It has adopted, in addition, the broader definition of policy coherence used by the Development Assistance Committee, known as the DAC. The DAC definition of coherence calls for the systematic promotion of mutually supportive policies across government to help achieve mutually TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
4 – Foreword agreed international goals. This has been the point of departure for OECD policy coherence work, using a four-pronged approach: institutional, sectoral, regional/country case studies and assessing progress. Bringing together policy makers from various government policy-making sectors to focus on coherence issues at the OECD implies that they will also do so at the national and regional levels. In this respect, it was particularly encouraging to see the decision taken by the European Council in November 2005 on policy coherence at the level of the European Union in many different areas - a decision closely followed by concrete action in the sensitive and difficult area of sugar policy. A number of OECD countries are providing examples of what can be achieved with adequate political will backed by analytical capacity. The work at OECD will continue to contribute to examples of action on policy coherence while the policy dialogue at Forums such as this can bring forward concrete recommendations to reform government policies in a constructive manner to achieve internationally agreed development objectives.
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Avant-Propos – 5
AVANT-PROPOS Organisé régulièrement par l’OCDE, le Forum mondial sur l’agriculture fournit aux pays membres de l’Organisation et à des économies non membres l’occasion d’échanger des informations sur les expériences qu’ils mènent dans l’optique d’atteindre plus efficacement leurs objectifs. Les thèmes abordés récemment dans ce cadre tournaient autour des liens entre la réforme des politiques internes, la libéralisation des échanges, la croissance économique et la réduction de la pauvreté, mais la politique agricole est toujours au centre des débats. Pour l’édition de cette année, la thématique a été étendue à l’aide au développement, comme en témoigne l’intitulé « cohérence des politiques au service du développement », et a permis de faire dialoguer des représentants des agriculteurs, des acteurs du développement, du secteur public, du secteur privé, des pays développés et des pays en développement. Ces actes rassemblent les articles et communications présentés au Forum mondial sur l’agriculture des 30 novembre et 1er décembre 2005, précédés d’une brève synthèse des principaux thèmes abordés et des enseignements à retenir. Venus d’horizons géographiques très divers, les participants représentaient des intérêts variés. Outre les pays de l’OCDE, étaient représentés 17 économies non membres, une quinzaine d’organisations intergouvernementales et d’ONG internationales, ainsi que des multinationales de l’agroalimentaire et le monde universitaire. Le principal objectif de ce forum était de mieux cerner les réformes nécessaires, aussi bien dans les pays développés que dans les pays en développement, pour stimuler les échanges agricoles mondiaux et réduire la pauvreté et la faim. La thématique des échanges et de la pauvreté/faim se justifie en particulier par le fait que les membres de l’OCDE et les pays en développement s’efforcent de respecter les engagements pris dans le cadre du cycle de négociations commerciales multilatérales de Doha (Programme de Doha pour le développement), ainsi que les Objectifs du millénaire pour le développement (OMD). Les négociations sur le Programme de Doha se poursuivront après le sommet de Hong Kong et ce sera aux négociateurs qu’il incombera de faire le nécessaire pour que soient tenues les promesses d’un véritable programme de développement. L’agriculture reste au centre des attentes dans le monde entier – une sorte de test de crédibilité décisif. La cohérence des politiques au service du développement figure au premier plan des initiatives internationales prises au plus haut niveau dans le cadre des objectifs du millénaire. Contribuer au développement est l’un des buts essentiels de l’OCDE. Celle-ci, en tant qu’organisation intergouvernementale s’intéressant à presque tous les domaines de l’action publique, est idéalement placée pour procéder à des analyses et stimuler un dialogue susceptibles d’encourager les gouvernements à adhérer à des politiques favorables à la réalisation des objectifs de développement auxquels ils ont tous souscrits. C’est pourquoi le Conseil de l’OCDE au niveau des ministres de 2002 a chargé l’Organisation de « mieux mettre en évidence la dimension développement des politiques des pays Membres, et leurs retombées pour les pays en développement ». Il stipulait en outre : « Il conviendrait d’analyser les arbitrages à opérer et les synergies possibles entre des domaines tels que les échanges, l’investissement, l’agriculture, la santé, l’éducation, l’environnement et les objectifs de développement ». TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
6 – Avant-Propos Dans les travaux qu’elle a engagés à ce sujet, l’OCDE ne s’est pas contentée d’étudier les actions qui « ne nuisent pas », autrement dit les mesures contreproductives ou contradictoires : elle a fondé sa réflexion sur une définition plus large, employée par le Comité d’aide au développement (CAD), selon laquelle la cohérence des politiques consiste à promouvoir systématiquement l’adoption, par tous les services et instances de l’administration, de politiques dont les effets se renforcent mutuellement au service de la réalisation de nos objectifs internationaux. Tel a été le point de départ des activités de l’OCDE sur la cohérence des politiques, qui comprennent quatre volets : études de cas institutionnelles, sectorielles et régionales/nationales, et évaluation des progrès. Réunir les responsables de différents domaines de l’action publique pour évoquer les questions de cohérence à l’OCDE suppose qu’ils fassent de même aux niveaux national et régional. A cet égard, il a été particulièrement encourageant d’apprendre la décision prise par le Conseil européen de novembre 2005 concernant la cohérence des politiques au niveau de l’Union européenne dans de nombreux domaines différents (décision rapidement suivie d’une action concrète dans le domaine sensible et délicat de la politique sucrière). Plusieurs pays membres de l’OCDE fournissent des illustrations de ce qu’il est possible de faire moyennant une volonté politique appropriée, assortie d’une capacité d’analyse adéquate. Les travaux conduits à l’OCDE continueront de donner des exemples d’action en faveur de la cohérence des politiques, tandis que le dialogue, dans le cadre de forums comme celui-ci, peut aboutir à des recommandations concrètes sur des réformes constructives de l’action publique, dans la perspective d’atteindre les objectifs de développement définis à l’échelon international.
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Acknowledgements – 7
ACKNOWLEDGEMENTS This OECD Global Forum on Agriculture, held 30 November – 1 December 2005 in Paris, was organised by Wayne Jones with the assistance of Darryl Jones in the initial stages of preparation. This Forum benefited from financial support of the World Bank which is greatly appreciated. Thanks are extended to all those who provided papers and contributed to the animated discussions, to Neil Fraser for his very able Chairmanship and to Anita Lari, Stefanie Milowski and Florence Mauclert for meeting logistics and management. These proceedings were edited by Uma Dixit. Anita Lari assembled and formatted the final publication with assistance from Michèle Patterson.
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Table of Contents – 9
Table of contents Executive Summary........................................................................................................................ 11 Résumé............................................................................................................................................. 15 Part I. Setting the Scene ................................................................................................................. 21 Chapter 1. Policy Coherence for Development: Distilling Lessons from OECD Work Alexandra Trzeciak-Duval................................................................................................................ 23 Chapter 2. Policy Coherence for Development: Issues in Agriculture Alan Matthews and Thomas Giblin .................................................................................................. 39 Chapter 3. Policy Coherence for Development: Making it Work Pertti Majanen .................................................................................................................................. 55 Chapter 4. Policy Coherence for Development: What it Means for Farmers Raul Q. Montemayor ........................................................................................................................ 69 Chapter 5. Policy Coherence for Development: What it Means to the Poor Ibrahim Assane Mayaki .................................................................................................................... 81 Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System.............................................................................................. 89 Chapter 6. Enhancing Global Agricultural Trade: A Status Report Carmel Cahill ................................................................................................................................... 91 Chapter 7. How can Policy Coherence Enhance Global Agricultural Trade? Joachim von Braun and Tewodaj Mengistu.................................................................................... 105 Chapter 8. Policy Coherence for Development: Issues for Brazil Fabio R. Chaddad and Marcos S. Jank .......................................................................................... 129 Chapter 9. Policy Coherence for Development: Issues for China Xiaoshan Zhang .............................................................................................................................. 149
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
10 – Table of Contents Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger................................................................................. 165 Chapter 10. Eradicating Extreme Poverty and Hunger: Towards a Coherent Policy Agenda Prabhu Pingali, Kostas Stamoulis and Randy Stringer.................................................................. 167 Chapter 11. How can Policy Coherence in Agriculture Contribute to the Eradication of Extreme Poverty and Hunger? Tom Arnold ..................................................................................................................................... 183 Chapter 12. Food Grain Surpluses, Yields and Prices in India Raghav Gaiha and Vani S. Kulkarni .............................................................................................. 201 Chapter 13. Coherence of International Trade Liberalisation Policy with the Objectives of Rural Poverty Reduction: Listening to the Views of the Rural People in Sub-Saharan Africa Mohamed Beavogui ........................................................................................................................ 221 Annex. Agenda and List of Participants..................................................................................... 241 Agenda............................................................................................................................................ 243 Liste des Participants / List of Participants..................................................................................... 248
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Executive Summary – 11
EXECUTIVE SUMMARY The OECD Global Forum on Agriculture, held on 30 November – 1 December 2005, covered a wide range of issues under the theme of “Policy Coherence for Development”. This summary attempts to highlight some of the main points of the discussion, including those addressed during a final wrap-up panel discussion. A more comprehensive and representative overview of the issues covered during the two-day Forum can be obtained by reviewing the short abstracts provided for all presented papers. The slide presentations delivered at the Forum are available at: www.oecd.org/ccnm/agriculture. In his closing remarks as Chair of the Global Forum, Neil Fraser emphasised the message that policy coherence for development means much more than “do no harm” in terms of policy approaches; it means “doing the right things with the right people in the right sequence”. He stressed that trade liberalism was a key factor in agricultural development; in particular the removal of developed country trade distortions, but that it was not a “silver bullet”. There was a strong consensus that freer trade in agriculture alone cannot solve problems of poverty and hunger and may, in some cases, have to be accompanied by adjustment assistance to help overcome any negative immediate implications. Pro-poor agricultural growth strategies need a broader role in development aid combined with greater national level responsibility for such basics as macroeconomic stability, dialogue with civil society, research and development, infrastructure, etc. Several OECD countries (e.g. Finland, Ireland, The Netherlands, Sweden) have adopted this whole-of-government approach to policy coherence for development. It was clear from the many experiences discussed that solutions need to be context and country specific; that no one size fits all in terms of policy approach. The Finnish government, for example, is working closely with trade partners like Uganda and Zambia to develop a better understanding of the markets and trade environments in these countries. In terms of policy coherence for agricultural trade enhancement, the point was made that developing countries, in general, are not major players in world agricultural trade. In fact as a group, developing countries are net agriculture and food importers and this trend is increasing. However, agriculture is still very important to their economies, involves a high proportion of the labour force and accounts for most of the poverty. Equally important, agriculture is generally a sector where developing countries can cultivate a comparative advantage, particularly in labour intensive production. Clearly, a lack of market access to developed country markets is one problem, due to such OECD country agricultural policies as domestic price support, border protection and tariff escalation. These issues are the major focus of the current round of multilateral trade negotiations and there is an international commitment to reduce these distortions. But participants strongly emphasised that market access is not the only issue. For most developing countries, supply capacity is an even more serious constraint. Trade facilitation needs to be a major component of any development strategy. The constantly changing and increasingly complex food safety regulations, growing demands of private standards and evolving multinational food chains, and the inadequate infrastructure and institutional organisations were just some of the factors limiting the ability of developing countries to benefit from emerging market opportunities. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
12 – Executive Summary Turning to the goals of poverty reduction and hunger alleviation, it was pointed out that there are an estimated 850 million undernourished – an increase of 18 million over the last 5 years. Sub-Saharan Africa in particular is unlikely to achieve the Millennium Development Goals (MDGs) for 2015 related to poverty reduction and hunger alleviation. While it was noted that trade can help reduce poverty and hunger, it was stressed that increased investment is critical if agriculture is to play a greater role. Aid to agriculture has been falling in real terms since the mid 1980s with the world’s poorest – Sub-Saharan Africa and South and Central Asia bearing the brunt of the decline (OECD official development aid statistics). Conflict has interrupted the programmes to some countries while governance concerns prompted reductions in aid to others. Domestic policies that effectively tax agriculture are often more distorting than those of the international community. Development aid will not be effective if the domestic environment is not appropriate. Cotton production, involving some 16 million people in West Africa, was given as one example where aid was withdrawn or withheld because expected policy reforms in developed countries, that would open markets, failed to materialise. OECD area agricultural policies clearly limit growth opportunities and provide both good and bad examples of “policy practice” for developing countries. Major donors argue that a lack of predictability and profitability in agriculture has caused investors to turn elsewhere, but that if conditions improve funds would once again flow to agriculture. Many national governments have also reduced support for agriculture for the same reasons and the sector’s performance has declined accordingly. However, there is some room for optimism. Current donor targets, if achieved, would see an increase in ODA from USD 80 to USD 130 billion, the largest increase in history. Similarly, African governments through NEPAD have committed to increase the share of domestic budgets allocated to agriculture. The wrap-up panel at the end of the Forum essentially confirmed the messages in the earlier sessions by providing personal experiences and country specific examples. Pinit Korsieporn (Deputy Secretary-General, Ministry of Agriculture and Cooperatives, Thailand) stressed that policy coherence for development was an issue for both developing and developed countries which required strong leadership to minimise conflicts among stakeholders. The multisectoral approach initiated in Thailand was offered as a good example of policy coherence aimed at poverty reduction while developed country agricultural policies, including market access, export subsidies, domestic support, food aid and preferential treatment, were all noted as factors limiting development. Jeremy Hobbs (Executive Director, Oxfam) argued that trade liberalism is not a panacea; that it must be linked to ODA, debt relief (a third of ODA goes for debt repayment) and effective domestic policies to formulate a coherent strategy for development. Citing the success of poverty reduction in East Asia, effective domestic policies, good governance, sequencing of reforms and the role of private sector were all seen as key factors. More country case study analysis was recommended to better understand the interplay and relative importance of these factors, as was greater mutual accountability between recipients, donors and international organisations. Kevin Cleaver (Director, Agriculture and Rural Development, World Bank) underlined the importance of good infrastructure and institutions in order to attract necessary foreign direct investment (FDI) and attract donor funds as well as to better integrate poorer countries into regional and international markets. OECD countries TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Executive Summary – 13
account for over 90% of global official development assistance (ODA) and 80% of FDI. Agriculture needs to be profitable to attract both private and public sector investment but in many cases this is not the case. Many developed country agricultural policies seriously compromise the profitability of farmers in developing countries (again cotton is an example). Low income countries will need help adjusting to take advantage of more open markets, in particular investment in infrastructure and rural development. Mohammed Karaan (Chair, National Agricultural Marketing Council, South Africa) agreed that institutional reform must precede trade integration while noting that FDI is also often constrained by political economy issues. Increased market access was identified as the main trade issue with more analysis required of winners and losers and the distributions of the benefits of trade liberalism. The importance of improving access to comprehensive social services in rural and marginal areas with the aim of improving the quality of life, coupled with the need to put in place food-based safety nets was highlighted as an integral part of a policy coherent domestic agricultural programme. Coming back to the question of sequencing, land reform and land tenure (markets) were noted as fundamental policy coherence issues in South Africa. It would be useful to share the experiences of other developing countries such as China, Brazil and India in this regard. Richard Manning (Chair, OECD Development Assistance Committee) echoed the message that the benefits of trade liberalisation should not be over sold; that there is a need for coherent aid policies to achieve development goals. A whole of government approach to PCD is needed – macroeconomic stability, land and labour market reforms, infrastructure improvements, good governance systems, active stakeholder groups. Food aid, for example, is often more expensive than commercial food imports, in some cases could be purchased locally and can negatively impact on domestic food production and local nutritional habits. Market reforms undertaken by many Sub-Saharan African countries during the 1980s to reduce government intervention and to promote the private sector did not have the desired effects because of institutional deficiencies. A forthcoming DAC policy document on enabling pro-poor growth through agriculture is intended to provide a framework for donors and domestic governments alike. The importance of enhancing co-operation between multilateral and bilateral donors was underlined as was the need for greater accountability and co-ordination between donor-countries, recipient countries, and international organisations. In this regard, as part of OECD’s evolving partnership with Africa, the Mutual Review of Development Effectiveness which studies a range of themes of mutual accountability between African and OECD countries including policy coherence was highlighted. Jack Wilkinson (President, International Federation of Agricultural Producers) stressed the need for increasing international assistance and questioned the current decline in aid for agriculture. Key issues are the on-going structural changes around the reorganisation of supply chains, increasing downstream concentration, new scientific breakthroughs, etc., and how smaller farms will be able to cope. He supported a business approach to agriculture based more closely on actual farmer’s needs, with direct farmer input in developing sector business plans and programme design. In most cases, the farming community was not adequately represented in the decision-making process. He also encouraged more impact analysis of current policies on both intended beneficiaries and third parties, for example, the actual benefit for West African farmers of lifting subsidies on cotton. Tariff escalation, and its dehabilitating impact on the development of a value-added sector in developing countries, was of particular concern.
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
14 – Executive Summary Willem-Jan Laan (Unilever and Vice Chair, Sub-committee on Food and Agriculture, Business and Industry Advisory Committee to OECD) added that the creation of agribusiness opportunities had a follow-on effect of creating further economic stimuli for local rural communities. Trade and value-added processing can foster such opportunities in developing countries but development aid is also required. Micro-credit and other forms of financing are often absent from development strategies and a major limitation to poverty reduction. Capacity building is essential to help the poor help themselves and the private sector has a stake and important role in ensuring the resulting economic growth is sustainable. Once trade reforms have taken effect, some developing countries may need additional help to integrate into global markets. One area where assistance is already required is in adjusting to the higher costs and greater complexity associated with international Sanitary and Phyto-Sanitary (SPS) Standards. Stefan Tangermann (Director, Agriculture, Food and Fisheries Directorate, OECD) agreed with the need for rigorous impact analysis of agricultural and trade policies, including the identification of winners and losers from reform at the national, regional and household level. The OECD has developed a very strong set of instruments for the evaluation of subsidies and monitors, on an annual basis, policy developments and levels of support for all OECD countries and a growing number of non-member economies. More emphasis needs to be placed on the implications of OECD agricultural policies for developing countries, with a suggestion that perhaps the annual monitoring exercise should explicitly evaluate the “policy coherence for development” aspect of all new OECD agricultural policy developments. He pointed out that mechanisms should be put in place to deal with any negative effects of trade liberalisation, for example possible losses resulting from preference erosion. Also, more guidance should be made available to developing countries in the tailoring of their agricultural and trade policies to better achieve domestic policy objectives. In this context, research and development, extension services, education and training, creation of effective institutions and infrastructure, adjustment assistance are clearly more effective and efficient than traditional price support and input subsidies but there must first be the political will to reform.
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Résumé – 15
RÉSUMÉ Le Forum mondial sur l’agriculture, qui s’est tenu les 30 novembre et 1er décembre 2005, a abordé toute une série de questions axées autour du thème de la « cohérence des politiques au service du développement ». Ce résumé a pour but de mettre en évidence quelques-uns des principaux points débattus, notamment lors de la séance-bilan qui a clos la rencontre. On trouvera un exposé plus complet et représentatif des problématiques traitées pendant ces deux journées de réunion du Forum dans les résumés succincts établis pour chacun des documents présentés. Les communications présentées sous forme de transparents peuvent être consultés à l’adresse : www.oecd.org/ccnm/agriculture. Dans ses remarques de clôture, Neil Fraser, Président du Forum mondial, a rappelé que la cohérence des politiques au service du développement était loin de se limiter à des stratégies « ne nuisant pas », mais qu’elle consistait « à prendre les bonnes décisions impliquant les bonnes personnes au bon moment ». Si la libéralisation des échanges, en particulier la suppression des distorsions générées par les pays développés, est un facteur essentiel au développement de l’agriculture, elle ne constitue en aucun cas la solution miracle. Les participants se sont très largement accordés à penser que la libéralisation des échanges agricoles ne saurait à elle seule résoudre les problèmes de la pauvreté et de la faim et qu’elle devrait dans certains cas s’accompagner d’une aide à l’ajustement pour en pallier les répercussions négatives immédiates. Les stratégies de croissance agricole favorables aux pauvres méritent de jouer un rôle plus grand dans l’aide au développement en les combinant avec un accroissement des compétences nationales dans des domaines essentiels comme la stabilité macroéconomique, le dialogue avec la société civile, la recherche-développement, les infrastructures, etc. Plusieurs pays de l’OCDE (Finlande, Irlande, Pays-Bas, Suède, entre autres) ont adopté cette approche globale de la cohérence des politiques au service du développement. Il est clairement ressorti des nombreuses expériences évoquées que les solutions sont nécessairement fonction du contexte et du pays et qu’il n’existe pas de stratégie passe-partout. En Finlande, par exemple, les pouvoirs publics travaillent en étroite relation avec des partenaires commerciaux tels que l’Ouganda et la Zambie, afin de mieux appréhender la situation des marchés et l’environnement commercial de ces pays. En ce qui concerne les échanges agricoles, il est à noter que les pays en développement ne sont généralement pas des acteurs majeurs du commerce international. En fait, ce groupe de pays est importateur net de produits agricoles et alimentaires, et cette tendance va en s’accentuant. L’agriculture demeure néanmoins un secteur primordial pour ces économies ; elle emploie une grande part de la main-d’œuvre et concentre l’essentiel de la pauvreté. Autre aspect tout aussi important : l’agriculture est en général un secteur dans lequel les pays en développement peuvent cultiver un avantage comparatif, en particulier dans les secteurs productifs à forte intensité de main-d’œuvre. Il est évident que ces pays sont notamment pénalisés par un accès insuffisant aux marchés des pays développés, qui est imputable à des politiques agricoles des pays de l’OCDE comme le soutien des prix intérieurs, la protection aux frontières et la progressivité des droits de douane.
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
16 – Résumé Toutes ces questions sont au cœur du cycle de négociations commerciales multilatérales en cours, et la communauté internationale s’est engagée à réduire les distorsions engendrées. Toutefois, les participants au Forum ont insisté sur le fait que si l’accès aux marchés constitue effectivement un obstacle à lever, la capacité de production est, pour la plupart des pays en développement, un handicap beaucoup plus lourd encore. Toute stratégie de développement doit absolument comprendre un volet « facilitation des échanges ». Au nombre des facteurs limitant la capacité des pays en développement à tirer parti des nouveaux débouchés commerciaux figurent l’évolution permanente et la complexité croissante des réglementations relatives à la sécurité des aliments, l’augmentation de la demande de normes privées et l’évolution des chaînes alimentaires multinationales, ainsi que l’inadéquation des infrastructures et des organisations institutionnelles. En ce qui concerne les objectifs de réduction de la pauvreté et de lutte contre la faim, il est rappelé qu’on estime à 850 millions les personnes souffrant de sous-nutrition – soit une augmentation de 18 millions au cours des cinq dernières années. L’Afrique subsaharienne, en particulier, n’est pas en mesure d’atteindre les Objectifs du Millénaire pour le développement (OMD) d’ici 2015 en ce qui concerne la réduction de la pauvreté et la lutte contre la faim. Certes, le commerce peut contribuer à réduire la pauvreté et la faim, mais il n’en demeure pas moins que si l’on veut accroître le rôle joué par l’agriculture, il est impératif d’augmenter les investissements dans ce secteur. L’aide à l’agriculture a chuté en termes réels depuis le milieu des années 80, et tout particulièrement dans les régions du monde les plus pauvres, en l’occurrence l’Afrique subsaharienne, l’Asie du Sud et l’Asie centrale (statistiques de l’OCDE sur l’aide publique au développement). Les programmes ont été interrompus dans le cas de plusieurs pays en raison de conflits, tandis que des problèmes de gouvernance ont amené à réduire l’aide destinée à d’autres pays. Les politiques internes taxant de facto l’agriculture ont souvent des effets de distorsions plus importants que celles adoptées par la communauté internationale. L’aide au développement ne saurait être efficace si le contexte national ne s’y prête pas. La production cotonnière, qui occupe quelque 16 millions de personnes en Afrique de l’Ouest, est citée comme exemple de retrait ou de suspension de l’aide faute de concrétisation des réformes attendues dans les pays développés, qui auraient conduit à une ouverture des marchés. Les politiques agricoles des pays de la zone de l’OCDE limitent manifestement les possibilités de croissance des pays en développement et sont pour ces derniers à la fois des exemples positifs et négatifs de « pratiques d’action ». Les grands donneurs estiment que la raison pour laquelle les investisseurs se sont détournés de l’agriculture est son manque de prévisibilité et de rentabilité, mais que, les flux de capitaux vers ce secteur reprendraient si la situation venait à s’améliorer. De nombreux gouvernements nationaux ont par ailleurs réduit le soutien accordé à l’agriculture pour ces mêmes raisons, entraînant parallèlement une baisse des performances du secteur. Cependant, l’optimisme est encore de mise. S’ils étaient atteints, les objectifs actuels des donneurs feraient passer l’APD de 80 milliards d’USD à 130 milliards d’USD, ce qui constituerait une hausse record. De même, les gouvernements des pays africains se sont engagés, dans le cadre du NEPAD, à accroître la part des budgets nationaux allouée à l’agriculture. La séance-bilan qui a clos le Forum a pour l’essentiel confirmé les conclusions des sessions précédentes et apporté des exemples d’expériences individuelles et nationales. Pinit Korsieporn, Secrétaire général adjoint, ministère de l’Agriculture et des TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Résumé – 17
Coopératives de la Thaïlande) a fait observer que la cohérence des politiques constitue, tant pour les pays en développement que pour les pays développés, une impulsion politique forte destinée à limiter le plus possible les conflits entre parties prenantes. C’est ainsi que l’approche multisectorielle adoptée par la Thaïlande est un bon exemple d’une cohérence des politiques axée sur la lutte contre la pauvreté, tandis que les politiques agricoles des pays développés, notamment concernant l’accès aux marchés, les subventions à l’exportation, le soutien interne, l’aide alimentaire et le traitement préférentiel, sont toutes considérées comme limitant le développement du pays. Jeremy Hobbs (Directeur exécutif, Oxfam) indique pour sa part que la libéralisation des échanges n’est pas une panacée et que, si l’on veut une stratégie en faveur du développement véritablement cohérente, la libéralisation doit être conjuguée à des mesures relatives à l’APD, à la restructuration de la dette (un tiers de l’APD servant au remboursement de la dette) et à des politiques internes efficaces. Évoquant les succès remportés en Asie de l’Est en matière de lutte contre la pauvreté, il précise que l’efficacité des politiques internes passe principalement par une bonne gouvernance, une mise en œuvre séquentielle des réformes et le rôle joué par le secteur privé. Il recommande de faire davantage appel aux études de cas par pays, afin de mieux appréhender les interactions et l’importance relative de ces différents facteurs, mais aussi de renforcer les principes de responsabilité mutuelle des bénéficiaires, des donneurs et des organisations internationales. Kevin Cleaver (Directeur, Agriculture et Développement rural, Banque mondiale) souligne combien il est important de disposer d’infrastructures et d’institutions adéquates pour attirer l’investissement direct étranger nécessaire (IDE) et les ressources des bailleurs de fonds et, par ailleurs, de mieux intégrer les pays pauvres aux marchés régionaux et internationaux. Les pays de l’OCDE versent plus de 90 % de l’aide publique au développement (APD) et 80 % de l’IDE. Pour attirer les investissements, qu’ils soient publics ou privés, l’agriculture doit être rentable, ce qui n’est que rarement le cas. Nombre des politiques agricoles adoptées par les pays développés compromettent gravement la rentabilité des exploitations agricoles des pays en développement (le coton est là encore un bon exemple). Pour pouvoir tirer parti d’une plus grande ouverture des marchés, en particulier des investissements dans les infrastructures et le développement rural, les pays à bas revenu devront donc bénéficier d’une aide à l’ajustement. Mohammed Karaan (Président, National Agricultural Marketing Council, Afrique du Sud) est d’accord pour dire que la réforme des institutions doit précéder l’intégration commerciale, mais il fait observer que l’économie politique a souvent une incidence négative sur l’IDE. Selon lui, l’amélioration de l’accès aux marchés est au cœur de la problématique commerciale, et il faudrait multiplier les analyses relatives aux gagnants et perdants de la libéralisation des échanges, ainsi qu’à la répartition des avantages qu’elle procure. Si l’on veut qu’un programme agricole national soit cohérent avec les autres politiques, il faut impérativement accroître l’accès à des services sociaux complets dans les zones rurales et marginales, l’objectif étant d’améliorer la qualité de vie des populations et, simultanément, de mettre en place des filets de sécurité basés sur l’accès à la nourriture. Revenant à la question de la mise en œuvre séquentielle des réformes, il note qu’en Afrique du Sud, la réforme agraire et les marchés fonciers font partie des enjeux majeurs de la cohérence des politiques. A cet égard, il serait utile de confronter les données acquises aux expériences d’autres pays en développement tels que le Brésil, la Chine et l’Inde.
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18 – Résumé Richard Manning (Président, Comité d’aide au développement, OCDE) est lui aussi d’avis qu’il ne faut pas surestimer les avantages de la libéralisation des échanges et que pour être cohérentes, les politiques d’aide doivent remplir des objectifs de développement. Il faut impérativement définir une stratégie gouvernementale globale de la cohérence des politiques au service du développement – stabilité macroéconomique, réformes du marché foncier et du marché du travail, amélioration des infrastructures, systèmes de bonne gouvernance et groupes d’acteurs actifs. A titre d’exemple, l’aide alimentaire est souvent plus coûteuse que les importations commerciales de produits alimentaires, elle pourrait dans certains cas être achetée sur les marchés locaux, et elle peut avoir un impact négatif sur la production alimentaire nationale et les habitudes nutritionnelles de la population. Les réformes engagées par de nombreux pays d’Afrique subsaharienne au cours des années 80, qui avaient pour objectif de réduire l’intervention publique et d’encourager le secteur privé, n’ont pas abouti en raison de carences institutionnelles. Un document du CAD à paraître, qui portera sur les perspectives de croissance favorable aux pauvres grâce à l’agriculture, devrait fournir un cadre pour les donneurs et les gouvernements nationaux. Richard Manning souligne l’importance de renforcer la coopération entre donneurs multilatéraux et bilatéraux, de même que la nécessité de développer la responsabilité et la coordination entre pays donneurs, pays bénéficiaires et organisations internationales. Il rappelle à cet égard que dans le cadre du partenariat qui se met en place entre l’OCDE et l’Afrique, l’Examen mutuel de l’efficacité du développement explore toute une série de thèmes concernant la responsabilité mutuelle entre pays d’Afrique et pays de l’OCDE, et notamment la cohérence des politiques. Jack Wilkinson (Président, Fédération internationale des producteurs agricoles) souligne la nécessité d’accroître l’aide internationale et s’interroge sur la baisse actuelle de l’aide dans le domaine de l’agriculture. Les principaux défis à relever sont : l’évolution structurelle en cours autour de la réorganisation des filières d’approvisionnement, la concentration croissante des secteurs d’aval, les nouvelles avancées scientifiques, etc. et les moyens dont disposent les petites exploitations pour y faire face. Jack Wilkinson est favorable à une approche économique de l’agriculture reposant plus concrètement sur les besoins réels de l’agriculteur, ce dernier participant directement à la définition des plans commerciaux sectoriels et des programmes. La plupart du temps, le monde agricole n’était pas suffisamment représenté dans le processus décisionnel. Jack Wilkinson recommande par ailleurs de réaliser davantage d’analyses de l’impact des politiques en vigueur, tant sur les bénéficiaires visés que sur les tierces parties, par exemple en ce qui concerne l’avantage réel, pour les agriculteurs de l’Afrique de l’Ouest, d’une suppression des subventions au coton. La progressivité des droits de douane est particulièrement préoccupante, notamment à cause du frein qu’elle impose au développement d’un secteur à valeur ajoutée dans les pays en développement. Willem-Jan Laan (Unilever et Vice-Président, Sous-comité sur l’alimentation et l’agriculture, Comité consultatif économique et industriel auprès de l’OCDE) ajoute que la création de débouchés agroalimentaires a eu pour conséquence d’apporter de nouvelles incitations économiques aux communautés rurales locales. Si les échanges et le secteur de la transformation peuvent effectivement encourager ces débouchés dans les pays en développement, il n’en demeure pas moins que l’aide au développement est indispensable. Le microcrédit et d’autres formes de financement sont souvent absents des stratégies de développement, ce qui restreint considérablement la lutte contre la pauvreté. Le développement des capacités est essentiel si l’on veut aider les pauvres à s’en sortir, et à cet égard, faire en sorte que la croissance économique enclenchée soit durable constitue TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Résumé – 19
pour le secteur privé un véritable enjeu dans lequel il a un rôle important à jouer. Une fois les réformes commerciales en place, certains pays en développement risquent d’avoir besoin d’une aide supplémentaire pour s’intégrer aux marchés mondiaux. Il est cependant d’ores et déjà indispensable d’apporter une aide dans un domaine particulier, à savoir aider les pays en développement à s’adapter à l’augmentation des coûts et à la complexité croissante qu’imposent les normes sanitaires et phytosanitaires internationales. Stefan Tangermann (Directeur, Direction de l’alimentation, de l’agriculture et des pêcheries, OCDE) pense lui aussi qu’il est nécessaire de procéder à une analyse rigoureuse de l’impact des politiques agricoles et commerciales, et plus particulièrement de déterminer les gagnants et perdants de la réforme à l’échelle nationale et régionale, ainsi qu’au niveau des ménages. L’OCDE a mis au point un ensemble très robuste d’instruments d’évaluation des subventions et assure un suivi annuel de l’évolution des politiques et du niveau du soutien pour l’ensemble des pays de l’OCDE, ainsi que pour un nombre croissant d’économies non membres. Il apparaît important d’accorder davantage de place aux conséquences des politiques agricoles des pays de l’OCDE pour les pays en développement, peut-être en intégrant dans l’exercice annuel de suivi une évaluation explicite de la prise en compte de la « cohérence des politiques au service du développement » dans l’évolution des politiques agricoles de la zone de l’OCDE. Stefan Tangermann souligne qu’il conviendrait de mettre en place des mécanismes permettant de faire face aux effets négatifs de la libéralisation des échanges, par exemple aux pertes qu’est susceptible d’entraîner l’érosion des préférences. En outre, il serait judicieux de fournir davantage d’orientations aux pays en développement afin de les aider à définir des politiques agricoles et commerciales leur permettant d’atteindre les objectifs qu’ils se sont fixés au plan interne. Dans ce contexte, la recherche-développement, les services de vulgarisation, l’éducation et la formation, la création d’institutions et d’infrastructures efficaces, et l’aide à l’ajustement sont à l’évidence plus efficaces et efficients que les traditionnels soutien des prix et subventions aux intrants, mais il faut avant tout qu’il existe une volonté politique de réforme.
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PART I. SETTING THE SCENE
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Chapter 1. POLICY COHERENCE FOR DEVELOPMENT: DISTILLING LESSONS FROM OECD WORK1 Alexandra Trzeciak-Duval Policy Co-ordination Division, Development Co-operation Directorate, OECD and Horizontal Project on Policy Coherence for Development Abstract This paper introduces the rationale, definition and approach for work on policy coherence in support of development at the OECD. The paper is organised according to the four main avenues through which coherence issues have been examined, i.e. through institutional, sectoral, regional and country based approaches. The main parts of the paper sketch the key policy-relevant issues and lessons that can be gleaned from an examination of these approaches. It discusses the need for more systematic monitoring and evaluation of progress on policy coherence for development, suggests future areas of work, and highlights the challenges which need to be addressed moving forward. . The forthcoming WTO ministerial meeting in Hong Kong provides the next headline opportunity for OECD countries to show that policy coherence for development (PCD) is more than a rhetorical formulation.
Mandate, meaning and method Why the OECD? Contributing to development is a key objective of the OECD. As an intergovernmental agency tying together nearly all areas of policy-making, what better forum to provide the analysis and promote the dialogue to motivate governments to coordinate policies in order to support development? With policy coherence for development (PCD) featuring prominently as a goal of international millennium undertakings at the highest level (Box 1), the OECD Ministerial Council of 2002 mandated the OECD specifically “to enhance the understanding of the development dimensions of member country policies and their impacts on developing countries. Analysis should consider trade-offs and potential synergies across areas such as trade, investment, agriculture, health, education, the environment and development cooperation, to encourage greater policy coherence in support of internationally agreed development goals” (OECD, 2002). An operational definition: Achieving policy coherence for development means ensuring that the objectives and results of an OECD member government’s development are not undermined by other policies of the same government that impact on developing countries. At a minimum, this implies the Hippocratic commitment to do no harm. The OECD’s Development Assistance Committee (DAC) has adopted a more ambitious, synergistic interpretation: policy coherence for development calls for the systematic 1.
This paper serves a background for the introductory comments of Deputy Secretary-General Kiyo Akasaka who will present an overview of OECD’s work on policy coherence for development to introduce the Global Forum on Agriculture.
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
24 – Part I. Setting the Scene promotion of mutually supportive policies across government to help achieve mutually agreed international goals (OECD, 2001). Box 1. International commitments to PCD • • • • • •
Millennium Declaration (September 2000) Millennium Development Goal 8: Develop a Global Partnership for Development Doha Development Round (2001) Monterrey Consensus (March 2002) Addressing systemic issues: enhancing the coherence and consistency of the international monetary, financing and trading systems in support of development OECD Ministerial Meeting (May 2002) OECD Action for a Shared Development Agenda UN Summit: 2005 accountability checkpoint EU Treaty and EU Council decision of 22 November 2005
Due to the wide range and the complexity of policy areas which need to be considered, the experience of OECD countries suggests a need to define the different systemic levels at which governments and institutions can seek greater policy coherence. A useful PCD typology that breaks down the notion of coherence into four types, illustrated by examples of harmful policies, is presented in Box 2. Box 2. PCD typology and illustrative examples of incoherent policies Type 1. Internal coherence: the consistency between goals and objectives, modalities and protocols of a government’s development policy (e.g between state-to-state bilateral aid, bilateral aid channelled through NGOs or the private sector, and multilateral aid). Examples of internal incoherence: • Reduced value of aid through tying = USD 2-7 billion in 2002 • Tied in kind food aid carries substantial efficiency costs, estimated at least at 30% over less restrictive procurement methods. Type 2. Intra-country coherence: the consistency among aid and non-aid policies of an OECD government in terms of their contribution to development. Examples of intra-country incoherence: • Total support to agriculture = circa 5 x aid • Military expenditure = circa 20 x aid and rising • Fishing subsidies USD 15-20 billion per year • More Malawian doctors in one of Europe’s cities than in all of AIDS-ravaged Malawi • National or regional regulatory standards more stringent than the international standards of Codex Type 3. Inter-donor coherence: the consistency of aid and non-aid policies across OECD countries in terms of their contribution to development. Examples of inter-donor incoherence: • Of 200 average yearly missions to 14 survey countries in 2003, fewer than 10% were joint • Low or no representation of countries with 85% of world population in international financial bodies Type 4. Donor-recipient coherence: the consistency of policies adopted by rich and poor countries to achieve shared development objectives. Example of donor-recipient incoherence: • Aid is rarely aligned with recipient countries’ budget cycles Source: Picciotto, 2005a; OECD, 2003; OECD, 2005a; OECD, forthcoming a.
How to approach PCD? The OECD’s horizontal programme is guided by the DAC definition and takes a four-pronged approach. This overview paper is structured along the same lines. •
Institutional approach: No single analytical approach can address all aspects of the complex process of government policy-making that seeks to meet multiple and often TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Part I. Setting the Scene – 25
competing objectives. For this reason, it was essential to address the institutional aspects of PCD. This has been done by analysing and drawing lessons from the good practices of OECD members, which have been distilled into a framework that is consistently applied to DAC peer reviews and could be used more widely. •
Sectoral approaches: In parallel, different parts of the OECD Secretariat have addressed inter-linkages between development and a range of sectoral policies, including agricultural, trade, migration, health, fisheries, environmental, macroeconomic and security policies. The relevant OECD Committees or their subsidiary bodies have been associated with this work to varying degrees – from taking note of the issues, to full endorsement and active participation. The Global Forum on Agriculture is a major opportunity to take the sectoral approach forward in examining the linkages between OECD country agricultural policy impacts and the development commitments they have taken.
•
Regional and country-based approaches: In order to test the analytical validity of the sectoral work and make it more context specific, the OECD has also applied regional (East Asia, Sub-Saharan Africa) and country-specific case study approaches. They examine the impacts of OECD country policies and pairs of policies on individual or groups of countries. A special effort to understand and improve policy coherence for development in fragile states is part of that approach.
•
Assessing progress: A fourth dimension of OECD work on PCD seeks to increase the monitoring of OECD country efforts to take developmental impacts into account in their policy making through peer review and mutual review. Some quantification of policy impacts is being attempted and a few proxy indicators to support PCD work exist already. More needs to be done to assess progress and measure results.
Institutional approaches to PCD The political economy of PCD: Given the general acceptance of PCD as a critical factor in attaining internationally agreed development objectives, why is it so hard to achieve? The OECD has initiated some reflection on the reasons. The analysis has found relatively strong support for the hypothesis that those countries tending to give more foreign assistance as a share of GNI and to demonstrate a relatively strong commitment to promoting PCD are countries with high levels of income distribution. It also unearthed some inconsistencies between professed support for the PCD agenda and actual behaviour on aid and trade (Kapstein, 2005). The work has highlighted the need better to understand and take into account special interest groups that interfere in domestic political-economic policy making in order to preserve rent-seeking benefits that are a cost to the society at large. In the case of agriculture, particularly, even though most agricultural policies fail to meet their stated objectives efficiently, reform has been modest. There must therefore, be a gap between officially articulated policy objectives and implicit ones (OECD, 2005a). The political economy approach highlights the central role of politics, politicians and special interests, which may have received too little attention to date in efforts to understand and change policies that impact developing countries negatively. Lessons of good practice: Joining up policies across government is a complex process, but there is a useful body of recent institutional experience which can be drawn upon. Much of this experience has been reviewed as part of the DAC peer reviews and brought together for discussion at a series of workshops in 2003 and 2004 (OECD, 2005b). It shows the value of carefully prepared policy frameworks based on wideTRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
26 – Part I. Setting the Scene ranging consultative processes and careful dissemination strategies. The list of countries adopting such public policy statements on PCD is growing. DAC member experience offers a variety of instruments which can ensure political commitment and accountability. Cabinet rank for the development portfolio manager and engagement with national legislatures appear to be of the highest importance. Sweden is the first country in the world whose Parliament has ratified a Government Bill on a coherent, whole-of government development policy, while The Netherlands have used joint ministerial protocols addressed to their Parliament. What works in one national context is not necessarily transferable to others, but certain basic elements related to politics, capacity, institutional structures, and results assessment are indispensable, as captured in ‘shorthand’ in Box 3. Box 3. Indispensable institutional “C”s of coherence • • • •
Clout: Political will to adopt coherent policies that are supportive of development. Capacity & Co-ordination: Good analytic capacity and co-ordinated policy-making to ensure coherent policies. Concreteness: Specific, concrete actions for quick results in key areas, especially trade and agriculture. Coequality: Better balance in the global governance architecture
An analytical framework: Based on specific examples and the evolving body of good practice, the OECD has developed a detailed analytical framework for institutional approaches to policy coherence for development, which helps assess the progress of DAC members, while offering recommendations for improvement (Box 4. summarises the framework). Some OECD member countries have already embraced strategic actions for institutional change by adopting this analytical framework for assessing political will and institutional capacity; by drawing lessons from recent analytical work and experiences with institutional reform, by tackling issues in specific action areas according to a firm schedule, and by monitoring results on a regular basis. The recommendation to apply the framework systematically to DAC peer reviews is already being implemented. Subsequent monitoring and possible application to other peer review processes are also recommended.
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Part I. Setting the Scene – 27
Box 4. Analytical framework: institutional mechanisms to promote policy coherence for development (1) Managing the politics and policy Political context: Does the structure, form and system of government, the interaction of its different parts and the designation of responsibilities facilitate or hinder achievement of policy coherence? Political commitment and leadership: What priority is given to development and coherence issues and raising public awareness of these issues on an ongoing basis at the highest level of government? Policy frameworks: Does the government have clear, integrated policy or legal frameworks to set out and ensure implementation of commitments to development, poverty reduction and policy coherence?
(2) Building capacity in the policy-making process Stakeholder consultation: Is the government able and willing to identify, consult and balance the interests of all possible stakeholders in a policy decision or change? Analytical capacity: What is the capacity of the government to define the development issues at stake, gather data to fill information gaps, analyse it effectively and feed results into policy processes on time? Policy co-ordination mechanisms: How effective are cross-institutional co-ordination mechanisms to consult on policy options, negotiate policy, anticipate and resolve policy conflicts or inconsistencies? Informal working practices: Does the administrative culture promote cross-sectoral co-operation and systematic information exchange between different policy communities in day-to-day working? Negotiation skills: What is the ability of the development ministry/agency to build strategic alliances, persuade and engage others and create ownership of the policy coherence for development agenda? Building capacities in developing countries: What efforts were there to build the institutional capacities of developing country actors in analysis, consultation, policy making, co-ordination and negotiation and their institutional and productive capacities in specific policy areas?
(3) Overcoming institutional challenges in different policy areas Context: What are the major national and international forums for discussion? Do these adequately represent development perspectives? Efforts: What studies, consultation and negotiation took place during the policy process? Actions: What were the policy changes or coherence initiatives in specific areas?
(4) Assessing the results of policy coherence efforts Monitoring and evaluation mechanisms: Are there policy monitoring mechanisms or specific studies in different policy areas that analyse impacts on development? How are coherence efforts evaluated? Results: How did the policy changes affect developing countries? Source: OECD, 2005b.
Sectoral approaches to examining PCD Given the numerous forms of assistance to partner countries, the diverse government ministries responsible for various aspects of development assistance, the sheer number of actors at the supra-national level and the multiplicity of decision-making forums, the need for co-ordination and coherence in policy making is easily recognised - but still difficult to implement. The 2001 DAC Guidelines on Poverty Reduction introduced overall coherence between the different policies of OECD governments as a key factor influencing the effectiveness of development co-operation policies on poverty reduction, with a specific checklist against which to gauge performance. The checklist illustrates the significant number of policy areas that affect development. Thus, to help policy makers achieve PCD, a better understanding of sectoral issues and the development of analytical frameworks are needed to complement the institutional mechanisms. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
28 – Part I. Setting the Scene This paper touches upon a number of sectoral work-streams at various stages of completion within the OECD, including the agricultural sectoral work that is the focus of the Global Forum discussions. It is meant to illustrate key issues, as well as summarise the state of play as of November 2005. Tied aid: The tying status of aid has long been considered a key test of donors’ commitment to coherent policies and effective aid delivery (type 1. internal coherence). Partners have consistently identified tying as one of the principal procedures that undermine aid effectiveness. It raises the cost of many goods, services and projects by 15 to 30% on average and 40% or more for food aid (see below). Even by conservative estimates that ignore indirect costs, tied aid reduced the value of total bilateral aid by USD 5 billion to USD 7 billion in 2002. Tied aid often results in higher transaction costs for recipients and is a serious barrier to harmonising donor procedures (OECD, 2005c). Many donors have increased the share of untied aid in their bilateral programmes. A few have untied all or large parts of their programmes, to improve aid effectiveness and strengthen local ownership of the development process. The share of untied aid in total bilateral aid increased from 40% in 1984 to 55% in 1994 with some intermittent fluctuations, but since 1997 it has stabilised at around 40 to 45%. The DAC continues to keep this issue on its agenda and to seek progress in untying. Building on its 2001 Recommendation to untie aid to the least developed countries, the DAC, meeting at senior level in December 2005, will consider removing the size thresholds below which aid did not have to be untied. If agreed, this will add an additional USD 300 million in untied aid. It will also seek to strengthen efforts to support local and regional procurement of aid funded activities, to the benefit of developing country suppliers. Beyond that, the DAC has agreed to explore further possibilities to untie more aid, including untying to a wider range of countries and activities than are presently covered by the Recommendation. Tied food aid: A recent OECD study has helped to quantify the costs of tied food aid. The study shows that, in most circumstances, financial aid is the preferable option. Food aid in-kind is overwhelmingly tied. This makes it at least 30% more expensive than financing commercial imports and, on average, 50% more expensive than local food purchases. The relative efficiency of local and third country purchasing also suggests that untying food aid and opening it up to much broader sourcing would clearly benefit agricultural development in many low-income developing countries (OECD, forthcoming c). Aid effectiveness: The DAC is actively engaging the international community of donors and partners on several additional fronts related to both inter-donor (type 3.) and donor-recipient (type 4.) coherence. Commitments were taken in Rome (2003), Marrakech (2004) and Paris (2005) to align development assistance with partner-country strategies, to harmonise donor policies and procedures, to implement principles of good practice in development co-operation, and to track progress and assess outcomes by relying on partner countries' monitoring and evaluation systems. Progress has been made on both harmonisation (e.g. simplified procedures and practices, joint analytical work, delegated co-operation, common procurement and financial management procedures, and common arrangements for sector wide approaches and budget support) and alignment behind country strategies and more joint support of these strategies. The Paris Declaration on Aid Effectiveness, a landmark agreement signed by nearly 100 countries in March 2005, featured prominently in the conclusions of the UN Summit of September 2005. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Part I. Setting the Scene – 29
Agriculture: The work of the OECD’s Directorate for Food, Agriculture and Fisheries has been groundbreaking in terms of quantifying member country and, increasingly, nonOECD country agricultural support. This public good has been effectively and creatively mined to argue against OECD member country agricultural support policies and their trade-distorting effects. Yet, this compelling information has not dissuaded policy makers from continuing to provide high levels of support. The political economy reasons for this have already been evoked. In order to take the work a step further, as part of its horizontal PCD programme, the OECD commissioned an analysis by Professor Alan Matthews (OECD, 2005a). The study has been discussed by the Committee on Agriculture and in various seminars and workshops, including those held at ministerial levels. This 2005 Global Forum on Agriculture, meeting back-to-back with the OECD Committee on Agriculture and with policy coherence for development as its central theme, is a timely opportunity to discuss analytical findings and subsequent work. It is important here to underscore the useful contribution of this work to the PCD agenda in several respects. Its starting point is the achievement of the Millennium Development Goals (especially the elimination of extreme poverty and hunger), to which all OECD members have subscribed. It provides an analytical tool to enable the policy maker to approach each type of agricultural policy and policy instrument with a development perspective. This perspective has not been offered before in a systematic way to agricultural policy makers. The study also recalls the gains, as quantified by a number of analysts, from removing agricultural protection. The timeliness of the study – and the Global Forum discussions of the issues it raises – as the WTO Ministerial meeting approaches, should be highlighted. Box 5. The impact of OECD agricultural policies on poverty reduction in East Asia The case of Vietnam East Asia has been studied as a special regional case in OECD work on policy coherence for development. This regional case study is discussed in Section III of this paper. Given that East Asia, over the past two decades, holds the best record of all regions in reducing poverty, it is of special interest to examine the impacts of OECD agricultural policies on poverty alleviation there. The study recalls that OECD country domestic support, export subsidy or inhibited market access policies have the most distorting effects if the developing exporting country has world market power in a given commodity, if the policy or policy combination will shift aggregate excess demand or excess supply and affect world market prices and if the developing country’s agricultural sector is linked to those world market prices. On this basis, the study finds that Vietnam is likely to be affected, as it has commodity overlaps with OECD countries mainly in rice and sugar. Thus, world price effects on Vietnam’s domestic prices are likely. The effects of these prices on rural wage rates are likely to be pronounced in Vietnam due to the low degree of integration between industrial and agricultural labour markets. Based on this observation, OECD country policies in rice and sugar are likely to have negative effects on Vietnamese poverty reduction, including poverty of the lowest income rural poor. Source: Barichello, 2005.
Trade: OECD work has been focusing on the gains from tariff liberalisation, liberalising non-tariff measures, trade facilitation, and liberalising trade in services. It underscores the importance of developing country access to developed-country markets, recalling that one of the many benefits of market access is the anticipated positive impact on domestic and foreign investment. Under a number of scenarios for multilateral tariff cuts, the findings uniformly point to the fact that half or more of the potential welfare TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
30 – Part I. Setting the Scene gains originate from increased developing-country exports to the OECD area (OECD, 2005c). OECD estimates of global annual welfare gains from tariff liberalisation range between USD 117 billion under a proportional tariff reduction of 50% to USD 174 billion under a scenario with full tariff removal. Close to half of these gains accrue to developing countries. Most of them arise from liberalisation of market access in manufacturing. Developing countries as a whole reap welfare gains of around USD 50 billion from tariff reductions on manufactures and USD 19 billion from agricultural tariff reductions. This suggests that tariff reductions for both manufactures and agricultural products can contribute to enhancing welfare in developing countries. Developing countries benefit when the liberalisation focuses primarily on the developed countries, but they benefit even more when they cut their own tariffs too. Roughly two-thirds of these gains come from the removal of tariff-related distortions in just three sectors, namely motor vehicles and parts, textiles and clothing, and processed agricultural products. In South-North trade, studies suggest that customs and administrative procedures and behind-the-border sanitary and phytosanitary (SPS) and technical barriers to trade (TBTs) particularly concern developing countries. In SouthSouth trade, cumbersome or otherwise difficult customs and administrative procedures, including problems with import licensing, also rank very high among the market-access concerns reported by developing countries. They may be more pervasive than in SouthNorth trade. There are also many complaints about fees and charges on imports and other para-tariff measures, which appear to have become more frequent as countries have lowered their import tariffs. A combination of examples, case studies and empirical studies indicate that developing countries often have special difficulties and higher costs in showing compliance with technical regulation and these can adversely affect firms’ propensities to export in developing countries. Lengthy inspection and testing procedures especially have been shown to reduce developing-country export shares by four per cent and nine per cent respectively. Efforts to rationalise these non-tariff policies further and to help exporting countries build up the infrastructure and capacity needed to show compliance with foreign regulatory requirements could significantly enhance developing country exports and welfare. Studies further suggest that the transaction costs generated by inefficient procedures at the border may range from one to fifteen per cent of the traded goods’ value, depending on the countries, types of goods and types of traders. The same studies note that a mere 1.5% uniform reduction in these costs could result in global welfare gains of USD 72 billion. The OECD has estimated that 65% of these worldwide income gains would accrue to non-OECD countries, whatever the assumption on the extent of trade facilitation. To illustrate, the welfare gains as a percentage of GDP in Sub-Saharan Africa are more than twelve times the OECD average in relative terms. These benefits would accrue primarily to countries that actively engage in trade facilitation, while those who do not would lose out through trade diversion. The OECD’s work in estimating the welfare effects of services trade liberalisation suggest that under certain assumptions, projected gains from unilateral services trade reform can significantly exceed those from unilateral reform in agriculture or manufacturing. Aid for trade: Much of OECD’s coherence work has focussed on sectors outside of development co-operation. Yet, the results have put the spotlight back on the “two-way street” aspect of coherence, namely that development co-operation policies need to TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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integrate issues, lessons and techniques that arise through linkages with other government policy sectors. One of the policy areas brought out in the sectoral PCD work on agriculture, as well as in several other sectors, revolves around the coherence of development co-operation policies in relation to the specific sector under review. For this reason, in the trade area, the priority of using aid for trade is rising in international discussions. Enabling partners to benefit from open markets goes beyond market access itself and beyond building expertise in trade negotiating techniques. It encompasses help to secure a wide range of capacities and infrastructure needs, including reliable roads and energy supply, technical improvements, training for managerial and technical skills. Migration: Many coherence issues arise in relation to migration, notably in relation to OECD policies that target skilled workers to leave their countries to come and fill gaps in critical sectors, especially in the health area. This contributes to brain drain, but under the right policy environments possibly to brain circulation and brain gain. As for unskilled workers, it is the restrictions on their entry into OECD countries that raise issues of policy coherence for development. A central theme linking most issues of migration is related to the growing transfers of resources through remittances and the links between migrants, remittances and the economic development of sending countries. The OECD has a long experience of migration issues, including the role that remittances have played in the development of sending countries, such as Italy, Portugal, Greece, Spain and more recently Turkey and Mexico. It has analysed the current magnitude of remittances, the characteristics of the migrants in question and the transmission channels used to send their savings back to their countries of origin. Due to the substantial impacts of remittances in supporting living standards and economic development in the countries of origin, OECD work has focused on measures that help reduce transaction costs associated with transfers and enhance transparency. There are numerous examples of how greater competition between banking and other money-transfer-saving intermediaries, combined with the use of information and communication technologies (ICT), have contributed to reducing formal fees and to quickening the process of remittance. This is less apparent with respect to transparency, as it is often unclear which exchange rates are used for the transactions. It is important to continue to share OECD member country experiences with non-member economies, to optimise the use of money transferred by emigrants, to explore ways of increasing the use of new technologies in order to reduce further costs of transfers and help to modernise the formal fund transfer system (OECD, 2005d). Health: The MDGs explicitly include providing access to affordable essential drugs and making available the benefits of new technologies. Rapid advances in science and technology open new opportunities for fighting poverty. Greater synergies between development policies and science and technology for sustainable development, access to medicines, and eradication of “neglected diseases” are critical to efforts to reduce poverty. The issue of availability, accessibility and affordability of medicines for emerging and neglected diseases (including but not limited to HIV/AIDS) is a thorny topic that is a source of friction between the developed and developing world. Disease burden is undeniably a major stumbling block to economic and social progress in many developing countries, notably in Africa. The OECD is seeking to address in a more concerted fashion how member countries might encourage innovation that meets the health needs of developing countries. This will include availability, affordability and access to medicines as well as the need to address more explicitly the threat posed by emerging and neglected TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
32 – Part I. Setting the Scene diseases. The latter is a serious economic issue. Several developing countries have seen decades of slow, painstaking improvement in standards of living wiped out in just a few years by the ravages of disease. Fisheries: Policy coherence for development in the fisheries sector has implications for the livelihoods and poverty status, economic performance, social conditions, and food supply and nutrition of millions of people throughout the world. An analytical study on fisheries coherence issues concludes that policy coherence work in general, including the work on fisheries, has tended to focus on qualitative and descriptive aspects and needs to be deepened through analysis of political, economic and social issues. In the fisheries sector, issues of coherence arise in relation to five major domains: environment, technology, economic, social and governance. These are developed into a typology for policy analysts and decision makers and illustrated by a series of case studies (OECD, forthcoming c). This analytical study has been discussed several times by the OECD Committee for Fisheries with significant elements integrated into the Committees future work. A meeting planned between development and fisheries experts in April 2006 will take up issues such as access agreements, trade, income effects and development co-operation policies in the fisheries sector. Environment: An OECD project, begun in 2002, has been examining ways of mainstreaming climate change policy objectives into the development assistance efforts of OECD donors, as well as into the national planning activities of developing countries. National level case studies in six developing countries (Bangladesh, Egypt, Fiji, Nepal, Tanzania and Uruguay) have been completed. The main emphasis is on delivering costeffective adaptation to climate change in developing countries, using sectoral and aid policies as vectors for doing so. Policy guidance to aid agencies is currently in preparation (OECD, forthcoming d); the work is also examining ways of mainstreaming climate policy objectives into specific development instruments, such as the Poverty Reduction Strategy Papers (PRSPs). The work has contributed significantly to the World Bank-led Multi-agency Report on Poverty and Climate Change (2003), endorsed by the heads of participating development agencies, including the OECD. The current phase of this work focuses on intensive preparations for the first ever Ministerial level meeting of the Development Assistance and Environment Committees of the OECD. It is expected that these two policy communities will adopt a common plan of action that envisages joint work to help developing countries.
Security: The OECD DAC Guidance on Security System Reform (SSR) and Governance (OECD, 2005e) has been influential as a catalyst for policy discussions within aid agencies on the role of security and SSR in creating the necessary environment for sustainable development to take place. A December 2005 SSR practitioners workshop is a major initiative that brings together relevant actors from both partner and OECD member countries. It is a whole-of-government event, with practitioners from the military, intelligence, police, customs, immigration, justice and prison sectors represented. This broad-ranging participation will help ensure a cross-cutting approach to OECD’s SSR work. Most of the practitioners have worked or are working on SSR within field missions and bring to the table SSR experience from Latin America, Asia, the Balkans, Central Asia and Africa. The workshop aims to bring together SSR practitioners to: (i) examine and identify concrete examples of sector-specific (e.g. police, judiciary, military) approaches by TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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practitioners and experts; and (ii) begin the process of developing a system-wide implementation framework based upon shared knowledge, hands-on experience, emerging best practices and lessons learned. The goal of this work is to develop an Implementation Framework on Security System Reform (IF-SSR) to help guide, co-ordinate, align, monitor and evaluate SSR activities in the field. This will in turn help strengthen the coherence of donor government and multilateral organisation practice by facilitating the formulation of a joined-up plan for their own individual engagement.
Regional and country case-based approaches A regional case study of East Asia’s development examined a range of OECD policy vectors - trade, investment, migration, aid and others - and their impacts on Asian economies. The central findings of this study show that policy coherence in OECD countries can bear fruit only when partner economies have the capacity to respond: coherent policies are necessary, but not sufficient. As previously discussed, the regional and country-specific work is important not only in its own right but also to test the validity of findings under the sectoral approaches of the PCD work. The East Asia regional case has indeed confirmed the validity of the sectoral priorities that have been singled out for OECD work and the findings of the sectoral work. The study suggested policy lessons in a number of areas, but the central, generalised challenges highlighted for OECD countries are considered to be: •
To ensure the fundamental enabling conditions of security and political stability.
•
To pay greater attention to the impacts of macroeconomic policies on developing country growth.
•
To increase both market access and capacity building for developing economies.
•
To assure government structures that help maintain financial stability.
•
To improve aid effectiveness and its complementarity with host country strategies and policies (Fukasaku et al., 2005). A series of regional studies of coherence are underway to focus on the impacts of OECD policies on Sub-Saharan Africa, Latin America and Asia and are being informed by country-specific cases. As part of the OECD’s evolving partnership with Africa, the Mutual Review of Development Effectiveness takes up a range of themes of mutual accountability between African and OECD countries, including policy coherence (ECA, OECD, 2005).
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34 – Part I. Setting the Scene Box 6. The impacts of OECD cotton support policies on West Africa and Central Asia The horizontal PCD programme has stimulated a work-stream on cotton in the Sahel and West Africa Club (SWAC) of the OECD. Up to 3 million families in the region are estimated to produce cotton in West Africa and up to 16 million people are involved in some way in cotton production, processing and trade. The SWAC proceeded with an analysis of cotton production in the context of dynamic change in West African agriculture supplemented by extensive consultations with the economic agents involved. The results focus on the strategic importance of this sector in production and trade in West Africa and to the role of cotton in livelihoods and access to services. Despite the numerous consultations and international meetings since 2004 to help resolve the distortions created by high export and production subsidies to producers in OECD countries, the issue remains unresolved in the run-up to the WTO Hong Kong Ministerial. Consultations with a range of West African actors from producers, NGOs, governments, private sector representatives, and regional organisations showed strong consensus around the need for greater public awareness in wealthier nations of the importance of policy coherence in order to support development and poverty reduction efforts. They suggested that targeted protection and support may be needed for strategic commodities or sub-sectors such as cotton in order to support the development of West African agriculture and identify areas of comparative advantage in increasingly competitive markets. The use of WTO provisions for special and differential treatment may need to be applied in this situation. The development of regional markets and processing capacities is considered an important way forward (Sahel and West Africa Club Secretariat, 2005). In reviewing the impact and coherence of OECD country policies on Asian developing countries and the lessons for central Asia in particular, cotton stands out as the main channel through which OECD country policies have an economic impact on that region. The analysis finds OECD textile trade and farm support policies extremely harmful and considers that they significantly outweigh any developmental benefits from aid or other channels (Pomfret, 2005).
Monitoring and evaluation Through DAC peer reviews and the Mutual Review of Aid Effectiveness in the context of NEPAD, monitoring elements are in place for policy coherence. However, a more systematic monitoring system across countries, as well as an evaluation of efforts to date to improve PCD are warranted. A framework for such evaluation already exists (Picciotto, 2005b) and should be put into operation. In addition, the development of indicators and other quantitative tools would also be important and could raise the profile and impact of the work.
Concluding remarks: future challenges Much information is coming out of PCD work in the OECD and elsewhere. This initial analytical phase of work has been necessary and is already the basis for joint meetings of several policy communities. The policy lessons need to be synthesised from various streams of work and presented to policy makers in a concise, digestible fashion. This step will have the added advantage of helping think through the priorities for the next stages of work. Policy coherence in OECD countries can bear fruit only when developing countries have the capacity to respond. Regional and sectoral work-streams have repeatedly brought out this issue. Therefore, the scaling up of aid over the coming decade provides an opportunity to include capacity development as a central focus of coherence. The case for supporting aid for trade is being made in a forceful way and is likely to feature prominently at the WTO Ministerial meeting in Hong Kong. This is only one, albeit a most critical, area that needs long-term consistent focus on capacity development.
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Coherence is most effective when it is practiced by both developing and developed countries in tandem. This has been brought out on numerous occasions by the developing country partners themselves. Any and all support from OECD countries and the OECD itself to achieve that will be a sound investment. As for new areas of work, the pressure must remain on trade and agriculture reforms by OECD member countries. Much remains to be done with respect to policy coherence issues related to several dimensions of migration. In the realm of anti-corruption, there are OECD country supply-side issues on which greater attention should be focused. With globalisation, there will continue to be increasing linkages and inter-linkages that will keep the coherence of policies between the wealthier and poorer countries in the spotlight.
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REFERENCES Barichello, R. (2005), “Economic Development and Poverty Reduction in East Asia: The Impact of OECD Country Policies”, in Fukasaku K., M. Kawai, M. G. Plummer and A. TrzeciakDuval (eds.) (2005), Policy Coherence Towards East Asia: Development Challenges for OECD Countries, Development Centre Studies, OECD Development Centre, Paris. ECA, OECD (2005), Development Effectiveness in Africa – Promise and Performance: Applying Mutual Accountability in Practice, A joint report by the ECA and the OECD at the request of the NEPAD Heads of State and Government Implementation Committee, Addis Ababa. Fukasaku, K., M. Kawai, M. G. Plummer and A. Trzeciak-Duval (2005), Policy Coherence Towards East Asia: Development Challenges for OECD Countries, Policy Brief No. 26, OECD Development Centre, Paris. Fukasaku K., M. Kawai, M. G. Plummer and A. Trzeciak-Duval (eds.) (2005), Policy Coherence Towards East Asia: Development Challenges for OECD Countries, Development Centre Studies, OECD Development Centre, Paris. Kapstein, E. (2005), “The Politics of Policy Coherence”, in OECD Fostering Development in a Global Economy: A Whole of Government Perspective, The Development Dimension series, OECD, Paris. OECD (2001), Poverty Reduction, The DAC Guidelines, OECD, Paris. OECD (2002), OECD Action for a Shared Development Agenda, Council Meeting at Ministerial Level, www.oecd.org/development/policycoherence. OECD (2003), Policy Coherence: Vital for Global Development, Policy Brief, July 2003, OECD, Paris. OECD (2004), Survey on Harmonisation www.oecd.org/dataoecd/31/37/33981948.pdf.
and
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OECD (2005a), Agriculture and Development: The Case for Policy Coherence, The Development Dimension series, OECD, Paris. OECD (2005b), Policy Coherence for Development: Promoting Institutional Good Practice, The Development Dimension series, OECD, Paris. OECD (2005c), Making Poverty Reduction Work: OECD’s Role in Development Partnership, OECD, Paris. OECD (2005d), Migration, Remittances and Economic Development, The Development Dimension series, OECD, Paris. OECD (2005e), Security System Reform and Governance, DAC Guidelines and Reference Series, OECD, Paris. OECD (forthcoming a), The Development Effectiveness of Food Aid: Does Tying Matter?, The Development Dimension series, OECD, Paris. OECD (forthcoming b), Miracle, Crisis and Beyond, A Synthesis of Policy Coherence Towards East Asia, The Development Dimension series, OECD, Paris. OECD (forthcoming c), Policy Coherence for Development in Fisheries, The Development Dimension series, OECD, Paris. OECD (forthcoming d), Bridge over Troubled Waters, Linking Climate Change and Development, OECD, Paris. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Picciotto, R. (2005a), “Key Concepts, Central Issues”, in OECD (2005a), Fostering Development in a Global Economy: A Whole of Government Perspective, The Development Dimension series, OECD, Paris. Picciotto, R. (2005b), “Policy Coherence and Development Evaluation”, in OECD (2005a), Fostering Development in a Global Economy: A Whole of Government Perspective, The Development Dimension series, OECD, Paris. Pomfret, R. (2005), “The Impact and Coherence of OECD-Country Policies on Asian Developing Economies: Development Lessons for Central Asia”, in OECD (2005), Fukasaku, K., K. Kawai, M. Plummer and A. Trzeciak-Duval (eds.), Policy Coherence Towards East Asia: Development Challenges for OECD Countries, Development Centre Studies, OECD, Paris. Sahel and West Africa Club Secretariat (2005), “Economic and Social Importance of Cotton in West Africa: Role of Cotton in Regional Development, Trade and Livelihoods”, OECD, Paris.
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Chapter 2. POLICY COHERENCE FOR DEVELOPMENT: ISSUES IN AGRICULTURE Alan Matthews and Thomas Giblin Institute for International Integration Studies, Trinity College Dublin Abstract This paper discusses issues raised for OECD agricultural and agriculture-related policies by the policy coherence for development perspective. These issues are organised in a five-fold typology covering OECD domestic agricultural policy, agricultural trade policy, regulatory policies, development co-operation policy as well as the coherence of developing country policies. Changes in OECD agricultural policy have varying impacts on different groups of developing countries, and on different groups within developing countries. The message for policy coherence for development analysis is that specifics count, and that impacts need to be assessed on a country-specific basis. Bringing a policy coherence perspective to the debates on OECD agricultural policy reform requires a careful classification of the various channels whereby developing countries are impacted by this reform, not least so as to identify ways in which development assistance can be used in order to maximise the opportunities it creates but also to help to mitigate adverse impacts where they occur. The paper concludes with a checklist of actions which might be taken by the development policy community to improve the coherence of agricultural and development policy with development objectives.
Introduction Policy coherence for development is a process whereby a government, in pursuing its domestic policy objectives, makes an effort to design policies that, at a minimum, avoid negative spillovers which could adversely affect the development prospects of poor countries and, more positively, seek to maximise synergies. This paper takes stock of the extent to which agriculture and agriculture-related policies of OECD countries are incoherent with their stated development objectives. Policy coherence is of particular importance in the case of agriculture, given the first Millennium Development Goal target of eradicating extreme poverty and hunger, and also in light of the fact that three quarters of the world’s poor live in rural areas. OECD agricultural policies have a significant impact on the trade and development opportunities available to developing countries, and it is important to bring a development perspective to the debates on OECD agricultural policy reform. This impact is a nuanced one. Changes in OECD agricultural policy have varying impacts on different groups of developing countries, and on different groups within developing countries. Bringing a policy coherence perspective to the debates on OECD agricultural policy reform requires a careful classification of the various channels through which developing countries are impacted by such reform, not only to identify ways in which development assistance can be used so as to maximise the opportunities it creates by agricultural policy reform but also to help mitigate adverse impacts where they occur.
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
40 – Part I. Setting the Scene This paper builds on an earlier overview paper prepared for the OECD Horizontal Project on Policy Coherence, Policy Coherence for Development: Issues in Agriculture (OECD, 2005). We first review the typology used in that paper to discuss agriculturerelated issues and policy coherence. We then draw some lessons based on empirical and other work in the literature concerning the relationship between OECD agricultural policies and development. Based on recent work we are conducting with partners in two African least developed countries, Tanzania and Uganda, we conclude with a checklist for development agencies wishing to pursue a policy coherence agenda with respect to agricultural policy.1
What we are discussing Table 1 presents a typology of agriculture and agricultural-related policies relevant to the policy coherence debate. Five policy domains are identified. Domestic agricultural policy objectives in OECD countries include those concerned with equity or distributional issues, such as support for the incomes of farm households, and those designed to correct market failures (OECD, 2003). Support for domestic agricultural production is also justified as a way of achieving social objectives such as the protection of family farming, the maintenance of a dispersed rural population or support for preserving the cultural heritage of farming areas. Many argue that these non-food outputs reflect the multifunctional nature of agricultural production. Social and income objectives of the agricultural sector in OECD countries have been addressed largely through market price support and, to a lesser extent, through income transfers. Market price support policies require that the domestic market is insulated from the world market. A country which seeks to maintain a domestic market price above the world market price will find it necessary to impose a trade barrier, as otherwise cheaper imports would undermine the domestic policy. Thus both trade and domestic policies designed to support agricultural output and incomes in OECD countries are jointly considered under the first policy domain. Table 1. Policy coherence between agriculture and development policies – a framework Policy actor
Policy domain
OECD countries
Domestic agricultural policy
OECD countries
Agricultural trade policy
OECD countries
Regulatory policies affecting agricultural production and trade Development co-operation policy Developing country policies concerning trade and agriculture
OECD countries Developing countries
Examples of policy instruments affecting agricultural development in developing countries Market price support, direct payments, export subsidies, income support, risk management measures, investment and structural adjustment assistance Regional trade agreements, trade preferences, tariff escalation, attitudes to developing country demands in international trade negotiations, international commodity agreements Non-tariff measures addressing food safety, food quality, environmental protection and conservation, intellectual property protection, geographical indications Development aid to the agricultural sector, food aid, trade capacitybuilding, trade compensation measures Agricultural trade policies, institutional reform, exchange rate policies, investment and infrastructure policies
Source: OECD, 2005.
1.
This project, the Policy Coherence project being carried out at the Institute for International Integration Studies at Trinity College Dublin, is supported by the Advisory Board for Development Cooperation Ireland. Further details at www.tcd.ie/iiis/policycoherence. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Part I. Setting the Scene – 41
Agricultural trade policy is the second policy domain where policy coherence issues arise. This recognises that agricultural trade policy is not only designed to play a supporting role to domestic agricultural policy, but may also be used to pursue other objectives. Trade policy may be used to promote regional integration objectives, as a development instrument through the award of trade preferences, or to protect the domestic food processing sector through tariff escalation. Trade policy is also concerned with the international architecture of trade rules. Policy coherence questions arise in examining the stance which OECD countries take in international trade negotiations on agricultural trade issues of relevance to developing countries, or with respect to problems in international commodity markets and the difficulties these cause for commoditydependent developing countries. This is the ‘foreign policy’ aspect of agricultural trade policy, as distinct from its use as an adjunct to domestic agricultural policy which is discussed in the first domain. A characteristic of OECD country food systems is the growing importance of regulatory interventions aimed at ensuring food safety, consumer protection, environmental protection and intellectual property protection. The requirement to meet specific regulatory standards before a product can be sold on the domestic market is not usually aimed specifically at imported products. Nonetheless, even where this is not the case, standards have an indirect influence on agricultural output and trade. Policy coherence analysis must take account of the growing importance of these non-tariff measures in OECD countries and their implications for development. The fourth relevant OECD policy domain is development co-operation policy and the extent to which it is used to help minimise conflicts and maximise synergies between agricultural policy reform and development objectives. To what extent does development co-operation policy provide support for the agricultural sectors of developing countries in helping them integrate with global markets? PCD issues here include the magnitude of aid flows to promote agriculture in developing countries, aid co-ordination and the role of specific types of aid flows such as food aid and trade capacity-building. Another relevant issue in this context is potential compensation measures to address problems of preference erosion arising from agricultural policy reform. Finally, policy coherence also places an obligation on developing countries to pursue policies which take advantage of the opportunities that arise as OECD countries improve the developmental coherence of their own policies. The need to ensure adequate incentives for farm production, to provide adequate budgetary support for growthpromoting agricultural policies and rural infrastructure, to pursue consistent agricultural and agricultural trade policies, and to support institutional development and involving the private sector and civil society in decision-making are relevant issues to consider in this context.
Channels of impact Policy coherence analysis in agriculture requires an understanding of the ways in which OECD agricultural policy impacts developing countries. The primary mechanism is through the world market impacts of the policy, particularly through the level and stability of world prices. World price changes influence the terms of trade of developing countries, and will have an initial positive or negative impact depending on whether these countries are net exporters or importers of the product in question. Further indirect effects will occur as these changes in border prices are translated through national trade policies TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
42 – Part I. Setting the Scene and the domestic marketing system into changes in domestic market prices for producers and consumers. In turn, through consequential changes in factor market conditions resulting from the impact of the reforms, and by decisions made by the government on how it responds to changes in its revenue base. Households will be affected by these domestic price changes depending on whether they are net producers or net consumers of these commodities. These channels are summarised in Figure 1 and provide the framework for the analysis which follows. Figure 1. Analysing the impact of OECD agricultural policy reform on developing countries
Source: Adapted from Brooks, 2003.
The status of agricultural policy Any discussion of policy coherence for development and agricultural policy must begin from an analysis of OECD agricultural policy and how it is changing over time. OECD has developed the PSE/CSE methodology to provide a summary indicator of the magnitude of policy interventions in agriculture. Transfers to farmers since the mid-1980s have changed relatively little in absolute terms but have declined when expressed as a proportion of the value of agricultural output.
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Table 2. OECD indicators of support to agriculture Indicator PSE Billion USD Percentage PSE CSE Percentage CSE NPC (producer) NAC (producer) TSE Billion USD Percentage TSE in GDP
1986-88
1993-95
2002-04
243 37
269 33
254 30
-32 1.57 1.60
-26 1.40 1.50
-21 1.29 1.44
306 2.3
364 1.7
346 1.2
Source: OECD PSE/CSE database, Paris, 2005.
Looking only at the magnitude of PSE transfers is not necessarily a good measure of their trade-distorting effect. Transfers are generated by a wide variety of policies, some of which impact trade opportunities more than others. This is recognised in the WTO Agreement on Agriculture in the distinction between amber, blue and green box policies. Market price support is generally recognised as the most trade-distorting element in the PSE. OECD countries have been gradually changing their policies in a less tradedistorting direction. Nonetheless, market price support still constitutes 60% of the total support provided to OECD farmers (Figure 2). Figure 2. Changing composition of OECD producer support
Source: OECD, PSE/CSE database, Paris, 2005.
Developing country impacts of OECD agricultural country policies It is then an empirical question to determine the impact which these domestic OECD transfers have on developing countries. There is now a wealth of empirical studies available which have tried to analyse these effects (see Charlton and Stiglitz, 2004 for studies up to 2003, and Ackerman, 2005 for a review of more recent GTAP and World Bank results) All studies agree that the removal of trade-distorting agricultural policies TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
44 – Part I. Setting the Scene would generate global welfare gains, but two conclusions can be highlighted here. First, differences in model methodologies, assumptions, parameter estimates and policy simulations mean that there is considerable variation in the estimates obtained. One exercise undertaken by the World Bank modelling team illustrates the fragility of these estimates and the difficulty which policy makers have in interpreting them. Five scenarios were run using the same database but with varying model assumptions. The initial scenario, the 2015 base case, compares the results in 2015 from a base run using the Bank’s dynamic computable general equilibrium (CGE) LINKAGE model with a scenario in which all support to agricultural production is eliminated. Because the global economy in 2015 will be approximately one-third bigger than in 2001, scaling back these effects to the impact such a scenario would have in 2001 reduces these estimates. Removing the dynamic element of the model eliminates the cumulative reinvestment from a larger economy each year and further reduces the estimated impact. Replacing the behavioural and trade elasticities used in the base case by those recommended for use in the GTAP model, a widely-used CGE model for trade policy analysis, results in a further reduction. Finally, making the assumption that all factors including land are fixed and using the GTAP elasticities produces the lowest estimate of global welfare gains, and the estimated impacts on Sub-Saharan Africa turn negative. Table 3. Effect of varying model assumptions on welfare gains from global merchandise trade liberalisation USD billion World Dev countries Sub-Saharan Africa South Africa Selected SSA countries Rest of SSA
2015 Base case
2001 Scaled dynamics
287.3 85.7 4.8 1.3 1.0 2.5
156.4 43.9 2.8 0.8 0.6 1.4
2001 Comparative static 127.4 23.7 0.7 0.7 0.3 -0.2
GTAP elasticities 88.5 10.6 0.2 0.5 0.4 -0.6
GTAP elasticities + fixed land 77.8 2.0 -0.1 0.4 0.3 -0.8
Source: Anderson, Martin and Van der Mensbrugge, 2005.
Second, more recent estimates of global gains tend to be more modest than earlier ones. For example, early World Bank numbers based on dynamic as well as static gains suggested overall gains from agricultural trade liberalisation of USD 280-630 billion of which USD 110-250 billion would accrue to developing countries (World Bank, 2003). This compares to more recent World Bank estimates of USD 182 billion of which USD 56 billion would accrue to developing countries (Anderson et al., 2005) and lower estimates from the GTAP model of USD 56 billion of which just USD 12 billion would accrue to developing countries (Hertel and Keeney, 2006). The lower estimates come about because some liberalisation occurred following the Uruguay Round Agreement on Agriculture; because studies now use applied tariff rates which are often much lower than bound tariffs; and because studies now take better account of agricultural trade under preferences. Furthermore, we should be careful to avoid the fallacy of identifying the potential gains of developing countries from agricultural trade liberalisation with the damage caused by OECD agricultural policies. All studies agree that the main beneficiaries from agricultural policy reform are the countries which undertake the reform. Developing countries provide high levels of nominal support to their agricultural sectors, and much of the estimated gain from reform comes from their own liberalisation. The direct impact of TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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OECD agricultural policy reform on these countries is more modest. In the more recent World Bank study, developing countries gain USD 26 billion from OECD agricultural policy reform alone, just half of the overall gain they would get from global agricultural trade liberalisation (Anderson et al., 2005). Hertel and Keeney (2006) using the GTAP model without dynamics find a figure of USD 9.5 billion as the damage to developing countries caused by the all OECD agricultural policies.2 These figures compare to net ODA flows of around USD 60 billion, and aid to agriculture in 2003 of USD 3.9 billion (OECD, 2005). Figure 1 highlighted that the primary way in which OECD country agricultural policies affect developing countries is through their impact on the level and stability of world agricultural prices. If developing countries with a comparative advantage in producing those products protected in OECD countries are to gain substantially, then OECD agricultural policy reform should lead to a significant increase in world market prices for agricultural products. Very few studies report directly the impact of OECD country agricultural policy reform on world prices. Examining the predicted impact of global agricultural policy reform (that is, including liberalisation by developing countries themselves) reveals large variation in projected world price changes (see Table A1-D in Morrissey et al., 2005). The results of the study by Bouet et al. (2005), albeit reporting only a partial liberalisation, suggest that the changes may not be that significant for most commodities. This is not to argue that agricultural policy reform is not worth pursuing, but it does suggest that, for developing countries in aggregate, unrealistic expectations have built up regarding the likely benefits of more open OECD agricultural markets.
Gainers and losers These aggregate results reported for developing countries as a whole conceal the fact that the impact of OECD agricultural policy reform will be felt very unevenly among these countries. The main gainers will be competitive agricultural exporters (such as Brazil, Argentina, Thailand, China) while least developed countries are likely to lose out and may be made worse off as a result of reform, for two reasons – they are largely net importers of commodities protected by OECD agricultural policy, and those countries which are exporters often benefit from preferential access to OECD country markets, the value of which will be eroded by further trade liberalisation (see Panagariya, 2005 for a trenchant critique of the argument that OECD country agricultural protectionism hurts the poorest countries most and that it is the principal barrier to the latter’s development). The importance of preferences is demonstrated in Table 4 which shows average applied bilateral tariffs between different country groups. Applied tariffs on imports from Sub-Saharan Africa (and, in the case of the EU, for imports from Mediterranean countries) are less than half those applied to imports from other countries. Preferences are often criticised as being of little use to developing countries. However, agricultural preferences are well used, and confer benefits of two kinds. One kind is a competitive advantage in OECD markets vis-à-vis other suppliers. The other – and more important – kind is the possibility of obtaining rents. This is the most important effect of quotaconstrained access where there is no possibility of additional trade creation. These rents are, in effect, a form of trade-tied aid. However, while it is wrong to overlook the gains some developing countries derive from preferences, they cannot be an alternative to a 2.
This estimate is very consistent with those from previous studies quoted in Matthews, 2005a.
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
46 – Part I. Setting the Scene multilateral reduction in trade barriers. They are fundamentally a short-term solution, often benefit an arbitrary group of countries and, by locking countries into uncompetitive lines of production, may have detrimental impacts on them in the long run. Preference erosion is not the only reason why some developing countries may lose from further agricultural trade liberalisation. Net food-importing countries are also vulnerable and there is a need to address their concerns. Putting teeth into the Marrakesh Decision is one possible route. Making a commitment to the world’s poorest countries that their food import needs would be met and that their import bills are kept under control would remove one real source of concern that developing countries have about embarking on further trade liberalisation. Table 4. Average applied bilateral tariffs, agricultural sector, per cent, 2001 Tariffs applied by → Applied to ↓ EU25 US Asia developed Cairns developed Mediterranean Sub-Saharan Africa Cairns developing China South Asia Rest of World Average
EU25
US
Asia developed
Cairns developed
16.2 12.5 25.9 7.3 6.7 18.3 13.5 14.4 15.1 16.7
5.8 3.7 3.4 4.0 3.0 3.8 5.1 1.8 2.1 4.7
22.2 28.9 24.9 14.1 12.0 24.0 21.7 33.7 17.4 22.5
15.7 5.1 6.2 3.7 0.7 5.9 8.7 1.8 2.6 10.8
Source: Bouet et al., 2005.
These concerns can be illustrated by examining the likely impact of OECD country liberalisation on some Sub-Saharan African countries. Six countries which are programme countries for Development Co-operation Ireland (DCI) are selected: Ethiopia, Uganda, Tanzania, Zambia, Mozambique and Lesotho (referred to as DCI programme countries in the Figures below). Figures 3 and 4 illustrate the composition of their food trade with the EU-15, which is their major market although it does not represent all their trade. Fully three-quarters of their food exports comprise tropical beverages and fish, both of which are exported free of duty to the EU with the aid of a preferential margin against third country exporters. Almost half of their imports are cereals or cereal products, whose price is projected to increase following OECD agricultural policy reform.
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Figure 3. EU-15 imports from the DCI programme countries by value, 1995-2003 average
Source: Chaplin and Matthews, 2006, based on Eurostat.
Figure 4. Distribution EU-15 exports to DCI countries by product for the period 1995-2003 RESIDUES AND WASTE TOBACCO ETC 1% LIVE ANIMALS 4% MISCELLANEOUS 1% BLE PREPARATIONS COTTON 9% 1% BEVERAGES 13%
EDIBLE ANIMAL PRODUCTS 5% EDIBLE VEGETABLES 1%
CEREALS 31%
PREPARATIONS OF VEGETABLES 3% PREPARATIONS OF CEREALS 5% SUGARS AND CONFECTIONERY 2%
OIL SEEDS ETC 2%
MILLING INDUSTRY PRODUCTS 14%
ANIMAL OR VEGETABLE FATS AND OILS 6%
Source: Chaplin and Matthews, 2006, based on Eurostat.
It is thus not hard to understand that these countries have little to gain and indeed much to lose from OECD agricultural trade liberalisation. Table 5 presents the results of a specific simulation of the Harbinson proposals using the ATPSM model.3 This exempted least developed countries such as Tanzania and Uganda from making tariff reductions and thus the results represent the impact of OECD plus developing country liberalisation on these two countries. The figures suggest that, overall, partial agricultural liberalisation will have little overall impact one way or the other on these countries. Indeed, as the ATPSM model cannot take account of preferences, the outcome in practice is more likely 3.
ATPSM, the Agricultural Trade Policy Simulation Model, was jointly developed by UNCTAD and FAO. Details can be found on the UNCTAD ATPSM website http://192.91.247.38/tab/ATPSMabout.asp.
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
48 – Part I. Setting the Scene to be negative than positive. For the rest of Sub-Saharan Africa, the simulations are even more definite that this is the more likely outcome. Table 5. Welfare effects of the Harbinson proposal, USD million
Producer surplus Consumer surplus Government revenue Total welfare
EU -41 258 +27 834 +20 462 +7 038
US -2 293 +106 +2 050 -136
Tanzania +47 -53 0.8 -6
Uganda +42 -42 0.2 0
Rest of SSA +656 -992 -9 -345
Source: Giblin and Matthews, 2005.
Poverty impacts Just examining the aggregate welfare impacts on developing countries may underestimate the impact which OECD agricultural policy reform might have on poverty in these countries. As is clear from Table 5, aggregate impacts net out the gains to producers and losses to consumers from higher farm prices. These distributional effects of trade liberalisation are usually far greater than the aggregate impacts, whether in OECD countries or in the developing world. Where poverty is concentrated among rural food producers, as in much of Africa, it might be expected that OECD agricultural trade liberalisation will have a pro-poor effect. However, this may not be the case, if there is also preference erosion which hurts rural producers. As importers of supported products, these producers also have the option of using tariff protection to capture the benefits of cheaper food imports (to increase government revenue) while protecting the incomes of the rural poor. Also, in many least developed countries, poor market infrastructure means that border price changes never get transmitted to the rural poor in the first place. The immediate poverty impacts in middle-income countries are also ambiguous – may of the poor are urban food consumers who also may pay a higher price for their food. Agricultural structures in middle-income countries are also more differentiated, with a greater concentration of production on larger holdings. Thus, a large part of the benefits of higher world prices may go to larger landowners. The longer-term impacts will depend, in part, on how once the economy has become more buoyant, the government distributes additional resources. Empirical attempts to quantify the poverty effects of trade liberalisation are still relatively recent (see Hertel and Winters, 2005 for a comprehensive discussion and series of case studies, and Ackerman, 2005 for a critique of one of these studies). Hertel and Winters find mixed outcomes for their near term analyses, with poverty rising in some cases and falling in others. The largest poverty reductions, in both absolute and relative terms, are in countries with agricultural export potential to the markets which liberalise most (i.e. East Asia and Europe). On the other hand, they find that poverty tends to increase in countries which are net importers of agricultural products and which may presently benefit from preferential market access. The message for policy coherence analysis is that specifics count, and that impacts need to be assessed on a country-bycountry basis.
Sequencing of reform Given the potentially conflicting nature of OECD agricultural policy reform for developing countries, it is worth asking whether it is possible to identify particular policy TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Part I. Setting the Scene – 49
measures or particular commodities where the development pay-off is highest and to seek to accelerate these reforms. It is striking, for example, how virtually all developing countries condemn export subsidies even where, based on narrow economic analysis, subsidised exports would appear to benefit net-importing countries. On a commodity basis, it would be useful to rank commodities according to the absolute levels of damage caused by OECD agricultural policies although few studies report their results in this way. The scope for influencing the sequencing of reforms in multilateral trade negotiations where the modalities are based on formula reductions may be limited, but there are exceptions. For example, the WTO July 2004 Framework Agreement reiterates the call for ‘full implementation of the long-standing commitment to achieve the fullest liberalisation of trade in tropical agricultural products and for products of particular importance to the diversification of production from the growing of illicit narcotic crops’. Another important example is the Cotton Initiative. This follows the proposal made by four West African cotton producing countries to the WTO in May 2003 seeking a system for the reduction with a view to the elimination of cotton subsidies and compensation for LDC cotton producers while the subsidies remain in place. Among the proposals under consideration are an earlier elimination of export subsidies and reduction of domestic support in the particular case of cotton as opposed to a reduction on support for other agricultural products under the terms of any Doha Round agreement. The negotiations on this issue are being guided by the July 2004 Framework Agreement commitment that “Cotton” will be addressed ambitiously, expeditiously, and specifically, within the agriculture negotiations’.
Regulatory barriers As traditional trade barriers are reduced, regulatory barriers are on the increase and may now be more important obstacles to increased food exports from developing countries. Consumers are demanding higher food safety standards and importing countries impose detailed sanitary and phytosanitary (SPS) protection measures in order to secure human, animal and plant health. Developing countries will be expected to meet these standards like other exporters. The WTO’s Agreement on Sanitary and Phytosanitary Standards (SPS) is designed to reduce the trade-distorting effects of SPS measures, but many developing countries have concerns about the way in which the agreement has been implemented to date. Particular concerns are that developed countries take insufficient account of the needs of developing countries when setting SPS requirements, that insufficient time is allowed between the notification and implementation of SPS requirements, and that insufficient technical assistance is given to developing countries (Henson et al., 2002). Regulatory authorities should be made aware of developing country perspectives in the design of food safety, environmental protection, consumer protection and intellectual property protection measures. For example, the sheer complexity of regulations may itself be an important factor, and it may be possible to guarantee the same outcomes for human, animal and plant health with more transparent legislation. While it will be important to monitor the use or abuse of regulations for protectionist purposes, the longer term objective must be to assist developing countries in reaching a position where they can meet the requirements of ever more demanding consumers. Increasingly, food standards are set by private agents (supermarket buyers) rather than by governments. Preferred and exclusive partnerships (based on trust and audits) between supply chain partners are increasing. Chain transparency, including tracking and TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
50 – Part I. Setting the Scene tracing systems, is increasingly required both to safeguard consumer health and safety of food, as well as to use as a marketing tool to maintain consumer trust and confidence in a brand name. For developing countries, meeting these standards requires investment in education, infrastructure, and hardware. The additional costs of audit and certification can be substantial, especially if they have to be carried out by foreign experts. The move to preferred suppliers may favour those developing countries with more advanced infrastructure, making it even more difficult for new entrants and less advantaged developing countries.
Development co-operation policy Examination of trade statistics often reveals that developing countries do not appear to be taking advantage of market access opportunities which are open to them. Developing countries with preferential access to an OECD country export market often appear to lose market share to their less preferred competitors. Thus, even where poorer countries gain market access opportunities, turning these opportunities into additional trade flows will require support. Furthermore, where countries or population groups within countries may be potential losers, for example, from the unravelling of preferential access arrangements, there is a need to find ways to compensate them or to assist them to diversify. Awareness of these issues has led to a growing interest in trade-related development assistance (TRA). TRA covers four categories of actions: assistance for trade policy formulation and participation in negotiations, assistance for trade development including actions aiming at relieving supply side constraints which prevent developing countries from exploiting their international trading potential, assistance for trade adjustment, including measures to mitigate the adjustment costs of trade liberalisation, and assistance to support trade-related infrastructure. The WTO July 2004 Framework Agreement reiterated the need to further increase TRA. OECD countries have indicated their support for this objective at various opportunities, including at the G8 Summit in Gleneagles in July 2005 and at the Development Committee meeting of the IMF and World Bank in September 2005. The WTO Hong Kong Ministerial Declaration in December 2005 invited the Director-General to create a task force that shall provide recommendations on how to operationalise Aid for Trade (WTO WT/MIN(05)/W/3/Rev.2). Despite these positive signs, questions remain about the extent of the coherence between aid and trade in agriculture. The global volume of assistance to agriculture in 2002 (expressed in 2002 prices) was at its lowest level for the past thirty years even if it recovered somewhat to EUR 2.9 billion (in 2002 prices) in 2003 (Matthews, 2005). Greater priority for assistance to global public goods important for the livelihoods of poor people is warranted, such as generating productive new technologies for the sustainable management of land and water, forest and marine resources; controlling trans-boundary pests and diseases; conserving agro-biodiversity and rehabilitating degraded lands. New and more innovative ways of providing aid to agricultural sector development need to be created, including through involving the private sector and voluntary groups. Under the SPS Agreement, developed countries are to provide technical assistance to developing countries, to help them meet SPS requirements, but there is some evidence that this aid is poorly focused (Wiig and Kolstad, 2005). Assistance for trade adjustment, especially where this is due to preference erosion, is also contentious. One issue in this debate is whether the provision of compensation for TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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preference erosion is a bilateral or multilateral responsibility. Because the most important preferences originate in unilateral trade policy decisions by OECD countries, it is argued that it is up to those countries responsible for preference erosion to bear the burden of offsetting it. On the other hand, because trade liberalisation is a global public good, proposals have also been put forward for a multilateral preference erosion compensation fund. These issues have a particular resonance in the policy coherence and agriculture debate because the existence of tariff peaks makes preferences in this sector particularly valuable.
Developing country policy coherence Developing countries too have a responsibility to ensure that their domestic policies are consistent with the Millennium Development Goal objectives and to facilitate adequate supply responses. Specifically, in the case of agriculture, this requires developing countries to follow consistent and credible economic policies which encourage private investment, to adopt trade policies that are not biased against primary production and exports, and to make the public investment in infrastructure, technical development, and credit which is necessary for modernising production and improving competitiveness. Much progress has been made in reducing the negative bias against agriculture in macroeconomic and trade policies, but it still does not get the attention it deserves as the main source of livelihoods for poor people, particularly in the world’s poorest countries. Government investment in agriculture as a percentage of GDP remains very low in many developing countries.
Policy coherence analysis for agriculture Based on ongoing research to investigate the impact of EU and OECD agricultural policy reform on the six partner countries of Ireland’s aid programme in Sub-Saharan Africa, the following checklist of actions is suggested to the development policy community seeking to bring about greater policy coherence between domestic agricultural policy and development objectives. 1.
Create institutional mechanisms to ensure that the development perspective is taken into account when agricultural policy or policy reform is being formulated. As the discussion in this paper makes clear, this means more than links with agricultural Ministries, but also requires links with trade ministries and agencies concerned with setting and monitoring food safety standards, intellectual property rights issues, and environmental protection.
2.
Undertake empirical study of the impacts of higher world food prices for the developing country partners of your development assistance programme. While the more sophisticated studies now use general equilibrium modelling for this purpose, for policy purposes it may often be sufficient to adopt a more direct and transparent approach using partial equilibrium modelling or even impact analysis applying price changes derived from published studies.
3.
Trace through the likely impact of border price changes on the distribution of rents among developing country partners. Our research in Tanzania and Uganda shows that there is very limited price transmission of border prices to domestic farm gate and consumer prices within these countries, suggesting that changes in world prices are absorbed in the marketing chain. Thus the initial impacts on producer and consumer
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
52 – Part I. Setting the Scene surplus, as shown in Table 5, would need to be modified to take into account the way in which changes in border prices are dissipated along the marketing chain. 4.
Examine the feasibility of potential export increases in the light of known SPS barriers. For example, projected livestock or meat export increases to high-value markets may not be feasible if the country’s disease status does not allow it. This may suggest measures to relax these constraints, for example, by assisting in disease eradication, or by helping to upgrade slaughtering capacity to meet OECD country standards.
5.
Undertake a poverty profile using household budget survey data to identify the households and producers likely to be affected by the modified agricultural price changes. Commodity price changes from published studies will provide some of the required data to estimate the impacts on consumption bundles, but poverty researchers stress in addition the importance of factor market changes and changes in government revenue which will usually require output from general equilibrium models. The purpose of the poverty profile is to identify households which are specialised in producing particular crop combinations or in consuming food products likely to be affected either positively or negatively by agricultural policy reform.
6.
Trade-proofing of development assistance activities in relation to the impacts of agricultural policy reform. What investments need to be supported if the recipient country is to be helped to take advantage of new trade opportunities? Is there a need to strengthen social safety nets to prevent an increase in the number of households living in poverty? How is policy dialogue with recipient countries being used to encourage aid recipients to develop policies more coherent with the new trading environment?
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REFERENCES Ackerman, F (2005), “The Shrinking Gains from Trade: A Critical Assessment of Doha Round Projections”, Global Development and Environment Institute Working Paper No. 05-01, Tufts University. Anderson, K., W. Martin and D. Van der Mensbrugge (2005), “Would Multilateral Trade Reform Benefit Sub-Saharan Africans?”, CEPR Discussion Paper No. 5049, London. Bouët, A., J.C. Bureau, Y. Decreux and S. Jean (2004), “Multilateral Agricultural Trade Liberalization: The Contrasting Fortunes of Developing Countries in the Doha Round”, CEPII Working Paper No. 2004-18, Paris. Brooks, J. (2003), “Overview Paper: Agricultural Trade Reform, Adjustment and Poverty: Mapping the Linkages”, in OECD, Agricultural Trade and Poverty: Making Policy Analysis Count, OECD, Paris. Bureau, J.C., S. Jean and A. Matthews (2005), “The Consequences of Agricultural Trade Liberalization for Developing Countries: Distinguishing Between Genuine Benefits and False Hopes”, CEPII Working Paper, No. 2005-13, forthcoming in World Trade Review. Chaplin, H. and A. Matthews (2006), “Food Trade with Ireland’s Development Assistance Priority Countries”, IIIS Discussion Paper, Trinity College Dublin. Charlton, A. and J. Stiglitz (2004), “A Development-Friendly Prioritization of Doha Round Proposals”, Working Paper, Initiative for Policy Dialogue, New York and Oxford. Giblin, T. and A. Matthews (2005), “Global and EU Agricultural Trade Reform: What is in it for Tanzania, Uganda and Sub-Saharan Africa?”, IIIS Discussion Paper No. 74, Trinity College Dublin. Henson, S.J., R.J. Loader, A. Swinbank, M. Bredahl and N. Lux (2002), Impact of Sanitary and Phytosanitary Measures on Developing Countries, Centre for Food Economics Research, University of Reading, UK. Hertel, T. and A. Winters (2005), Poverty Impacts of a WTO Agreement, World Bank, Washington, DC. Hertel, T. and R. Keeney (2006), “What Is at Stake: The Relative Importance of Import Barriers, Export Subsidies, and Domestic Support”, in Anderson, K. and W. Martin, eds., Agricultural Trade Reform and the Doha Development Agenda, Palgrave Macmillan, New York and the World Bank, Washington, DC. Matthews, A. (2005), “Development Assistance to Agriculture: Can the Decline be Reversed?”, Eurochoices, 4, 1, pp. 24-25. Morrissey, O., D. Willem te Velde, I. Gillson and S. Wiggins (2005), Sustainability Impact Assessment of Proposed WTO Negotiations, Mid-Term Report for the Agriculture Sector Study, London, Overseas Development Institute in association with the International Institute for Environment and Development and the Institute for Development Policy and Management, University of Manchester. OECD (2003), Agricultural Policies in OECD Countries: A Positive Reform Agenda, OECD, Paris. OECD (2005), Policy Coherence for Development: Issues in Agriculture: An Overview, OECD, Paris.
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54 – Part I. Setting the Scene Panagariya, A. (2005), “Agricultural Liberalisation and the Least Developed Countries: Six Fallacies”, The World Economy, pp. 1277-1299. Wiig, A. and I. Kolstad (2005), “Lowering Barriers to Agricultural Exports Through Technical Assistance”, Food Policy, 30, pp. 185–204. World Bank (2003), Global Economic Prospects, World Bank, Washington, DC.
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Chapter 3. POLICY COHERENCE FOR DEVELOPMENT: MAKING IT WORK Pertti Majanen Finnish Ambassador to the OECD Abstract In today’s world, people and states depend upon each other and influence each other’s well-being in many different ways. As a responsible member of the international community, Finland promotes development and a more equitable division of the benefits of globalisation. Developing countries themselves bear primary responsibility for their own development. However, developed countries have an important role to play in this regard as well. Joint commitment to poverty reduction means that that the policies of industrialised countries will have to be considered in a more comprehensive manner. The main goal of Finland’s development policy is to contribute to the eradication of extreme poverty worldwide. These activities address policy coherence in the areas of development and trade policies, development and environmental policies and development and agricultural policies. Activities that help to achieve these goals also include the promotion of equality, human rights, democracy and good governance as well as increasing worldwide security and economic interaction, which originally became part of Finland’s policy in development co-operation during the 1990s. Part of Finland’s development policy is also to strengthen the multilateral system, to increase the operational capabilities and to improve the opportunities of developing countries to have an impact. To achieve these goals, work will be required in Finland, in the partner countries and within the EU, the UN and other international forums. The Finnish Ministry for Foreign Affairs has overall responsibility for implementing the policy and for the co-ordination this necessitates. Other key parties are also involved, including various other ministries, government agencies and institutions as well as the private sector and NGOs. Continuous and comprehensive monitoring and evaluation are needed to implement the policy.
The development policy of Finland - focus on coherence Common goals for the common good In today’s world, people and states depend on each other and influence each other’s well-being in many different ways. As a responsible member of the international community, Finland promotes development and a more equitable division of the benefits of globalisation. This is our responsibility, but in this way we also construct the security, economic growth and the fundamental well-being of our own society. Since the beginning of the 1990s, the international community has been shaping a common understanding of development problems and of the means to solve them. This process culminated in the UN Millennium Summit and the resulting Millennium Declaration. The WTO’s Doha ministerial meeting, the Monterrey International Conference on Financing for Development and the Johannesburg World Summit on TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
56 – Part I. Setting the Scene Sustainable Development as well as New York World Summit 2005 further specified common goals and means and promoted the implementation of the Millennium Declaration. Developing countries themselves bear primary responsibility for their own development. The Monterrey Conference examined financing for development in a more comprehensive perspective than before. Development financing includes developing countries’ domestic financing, private sector investment, trade, the question of debt, and conventional development co-operation funding. At Monterrey, the developing countries committed themselves to economic and political reforms, and the industrialised countries, on their part, to improving access to markets for developing countries’ products, to resolving the debt problem and to increasing development aid. Joint commitment to the reduction of poverty means that the policies of the industrialised countries will have to be considered in a more comprehensive manner. New types of international indicators are being developed in order to compare different countries. This comparison is based on factors such as the level of development aid and the harmonisation of procedures, trade with developing countries, investments in developing countries, protection of the environment, immigration policy and contributions to the promotion of peace and security.
New concept of development policy Development policy refers to coherent activity in all sectors of international cooperation and national policy that have an impact on the status of developing countries, including security, human rights, trade, environment, agriculture and forestry, education, health and social, immigration, and information society policies. Development co-operation is a key instrument of development policy. It can be used to promote the strengthening of an environment conducive to development in the poorest countries in order to improve the premises for investments and trade and to achieve economic growth.
The following are the main principles of the new development policy: •
Commitment to the values and goals of the UN Millennium Declaration.
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Broad national commitment and coherence in all policy areas.
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Commitment to a rights based approach. This means that the realisation of the rights of the individual as defined by international human rights agreements is taken as the starting point in Finland’s development policy.
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The principle of sustainable development.
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The concept of comprehensive financing for development.
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Partnerships for development. Partnerships based on participation by the public and private sectors and civil society, both at the national level and internationally, are a sine qua non for development.
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Respect for the integrity and responsibility of the developing countries and their people. States themselves bear responsibility for their own development. Finland’s contributions are directed towards supporting each country’s own efforts.
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•
Long-term commitment and transparency. Finland adopts predictable long-term solutions, and communicates all activities and plans in a transparent manner. This applies both to the financing and the contents of policy. Finland uses the instruments of development co-operation, trade and security policy, as well as other national policies in a coherent manner. The activities of the public sector alone are not sufficient; there is also a need for co-operation and partnerships with the private sector, civil society, expert organisations and interest groups. Finnish people give their strong support to improving the circumstances of people in developing countries. The best way to ensure this support also in the future is to continue to improve the quality, efficiency and effectiveness of Finnish development policy. The foremost threats to security today are armed conflicts, crises and instability with all the eventual repercussions; terrorism, the spread of weapons of mass destruction, cross border crime, drugs, HIV/AIDS, environmental destruction and uncontrolled migration. Development policy instruments can be used to help avert these threats. In line with the Government Programme, Finland seeks to take the interests of developing countries better into consideration in the WTO’s Doha round of trade negotiations, while also seeking to promote the position of developing countries with the instruments of trade policy. Trade is important for economic growth in developing countries, and thereby for the reduction of poverty. In bilateral and multilateral cooperation Finland stresses that improving the necessary conditions for trade should be one of the main components of poverty reduction strategies. All this is also in Finland’s own long-term trade interests.
Finland’s responsibility and goals The main goal of Finland’s development policy is to contribute to the eradication of extreme poverty from the world. Activities that help to achieve this goal include prevention of environmental threats; promotion of equality, human rights, democracy and good governance as well as increasing worldwide security and economic interaction, which originally became part of Finland’s policy in development co-operation in the 1990s. Finland is committed to a rights based approach and to the principles of sustainable development in its development policy. Finland bears its own share of the responsibility for creating the global partnership called for by the Millennium Declaration, in which developing countries are committed to the reduction of poverty and in which they themselves bear the main responsibility for developing their own societies, while industrialised countries are committed to supporting this process by means such as development aid, trade and private sector investment.
Thus, in practice, the Government of Finland will: •
Increase funds for development co-operation in accordance with its programme so that based on the present estimation of national income growth, they will be at the level of about 0.44% of GNI in 2007.
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Develop the content, quality and administrative framework of development cooperation so that it will be possible to achieve a level of 0.7% of GNI by 2010.
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Increase the efficiency, effectiveness and impact of development co-operation by concentrating activities and working for the harmonisation of donor procedures.
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Encourage people in Finland to support the values and goals of the Millennium Declaration and the fulfilment of Finland’s obligations.
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Promote economic growth in developing countries together with an equitable distribution of income.
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Support endeavours to help the poorest developing countries gain influence in international forums, particularly emphasising co-operation with African countries.
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Work to strengthen the multilateral system and to increase the effectiveness of the UN.
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In accordance with the Government Programme, give more consideration to the interests of the developing countries in WTO trade negotiations and help to enhance the developing countries’ bargaining position by improving their trading capacity and promoting the inclusion of trade issues in their own poverty reduction strategies.
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Support the effective implementation of debt management programmes for developing countries, with special interest in ensuring the sustainability of debt and aid received by developing countries.
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Improve co-operation between public institutions in Finland to increase the coherence and effectiveness of Finland’s development policy.
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Urge Finnish companies to participate in achieving the Millennium Development Goals, and encourage them to direct their interests and activities towards the poorest developing countries, and, with a view to this, promote co-operation and partnerships between the public and private sectors.
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Promote the access of developing countries to new technologies including information technologies, and identify, together with the private sector, solutions in information and communications technologies which are appropriate for the poorest developing countries.
Finland’s strengths and the focus of activities Our own experience of the development of Finnish society in five decades from a poor country with small production capacity, and recovering from two wars, into one of the world’s most competitive welfare and information societies, also provides a firm foundation for involvement in international development policies. Finns have learned that security and stability, both inside the country and in the surrounding regions, are prerequisites for development. Respect for human rights, democracy and good governance create a social environment that enables well-balanced development. Equal participation of women and men in the functions of society are important contributors to our own success, as is care for the environment. Responsible economic growth led by the private sector in conjunction with an equitable distribution of income provides society and its members with resources for economic development. Sustained long-term investment in education, health, social services and the wellbeing of children and young people has borne fruit in our country. With regard to its own participation, Finland must consider the value that it can contribute to international development. On the one hand, this value added arises from Finland’s own cultural history and experiences as outlined above, as well as the values rooted in them, and, on the other hand, from the special strengths and skills that Finland has acquired in certain sectors. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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The cross-cutting themes in the implementation of the Finnish development policy are: •
Promotion of the rights and the status of women and girls, and promotion of gender and social equality.
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Promotion of the rights of groups that are easily marginalised, particularly those of children, the disabled, indigenous peoples and ethnic minorities, and promotion of equal participation opportunities for them.
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Consideration of environmental issues. Finland’s support for developing countries in implementing the Millennium Declaration in individual countries is guided by the poverty reduction strategies of the partner countries. Hence, Finland ensures that its inputs are channelled into development work that the partner countries manage themselves, and which is based on a deep understanding of each country’s situation. Implementing the goals set requires creating an environment conducive to development. Primarily, it is the developing countries themselves that are accountable to their own citizens for the socio-economic development programmes aiming at economic growth and reduction of poverty. Private-sector-driven economic growth and equality-promoting income distribution are fundamental to the reduction of poverty. Success requires true political will to create an operating environment that makes development possible. Respect for human rights, promotion of gender equality, social equality and democracy, good governance and sound economic management are essential cornerstones of development. Peace and security are prerequisites for achieving sustainable results. Eradication of poverty calls for an environment in which public resources can be put to work together with the skills and resources of the private sector and civil society. It is becoming increasingly clear that development in individual countries depends on global and regional environments. Finland contributes at all levels and in all sectors to create an environment that is favourable to development and to private sector operations. Finland particularly directs its support to strengthening democratic institutions and the civil societies in developing countries, to developing local government, and to helping combat corruption. Finland promotes co-operation between government bodies, employers and labour organisations in creating jobs and improving labour market regulations. By participating in conflict prevention, peacekeeping and civilian crisis management we take part in creating the basic necessities for the reduction of poverty.
Implementing, monitoring and evaluating development policy The goals set in this development policy are ambitious. To achieve them will require work in Finland, in the partner countries and within the EU, the UN and other international forums. The Ministry for Foreign Affairs has overall responsibility for implementing the policy and for the co-ordination this necessitates, but other key parties are also involved, including various other ministries, government agencies and institutions as well as the private sector and NGOs. Continuous and comprehensive monitoring and evaluation are needed to implement the policy. Development policy is a part of Finland’s foreign policy. The goals and implementation of the development policy are part of the strategy and operational plan of TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
60 – Part I. Setting the Scene the Ministry for Foreign Affairs, in which the main tasks of the Ministry are seen as the promotion of the security and well-being of Finnish people, the creation of a common international sense of responsibility and the reinforcement of peace, together with the responsibility for preparing and implementing Finnish foreign policy, including coordination of shaping the national principles of action. The implementation of the development policy is monitored as part of the Ministry’s overall goals using the Ministry’s internal monitoring systems. Co-operation within the Ministry for Foreign Affairs and among the authorities will be further improved to promote coherence in the development and monitoring of the policy. The Ministry’s internal systems for implementing and monitoring development policy will be consolidated. A separate action plan has been prepared, specifying the targets and areas of responsibility. The Department for Development Policy monitors the implementation of the plan to ensure that the development policy is directly linked with framework and results budgeting and appropriation decisions. The need for new strategies connected to certain sectors, themes or procedures has been considered when the implementation plan was prepared. The implementation is guided by the approved Strategy and Action Plan for Promoting Gender Equality 20032007 and the Strategy for Rural Development. In planning co-operation, more systematic use will be made of the results of independent evaluations. Exceptionally comprehensive and varied independent evaluation material that was produced by the Ministry’s own evaluation and research services and by international bodies was available for the preparation of the present resolution. Review and evaluation will be developed so that up-to-date information is always available to support policy and implementation. The Development Policy Committee assesses the implementation of the policy. Its work is directed particularly to the achievement of policy coherence. The Committee reports annually to the Government on the implementation of Finland’s development policy and the factors affecting it. The Committee’s proposals are taken into account in the annual planning of the implementation of the policy. To help it in its tasks, the Committee calls on representatives from different ministries to serve as permanent experts. The UN reviewed the implementation of the Millennium Declaration in September 2005 and Finland made its first interim review of work for the achievement of the goals. At the end of its present term of office in 2007, the Government will arrange for an independent assessment of the realisation of the aims of its development policy. In international co-operation, Finland takes an active part in developing the contents, quality and effectiveness of the development policy especially within the framework of the OECD Development Assistance Committee (DAC). Finland’s next OECD/DAC review of development co-operation is expected to take place in late 2007.
Achieving the goals of development policy by increasing coherence The development policy perspective affects many areas of policy Achieving the aims of development policy requires improved policy coherence in national policies, multilateral co-operation and EU policies. Coherence in practical implementation also needs to be increased through better co-operation among authorities.
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The development policy perspective needs to be included in all the programmes and reports in which Finland’s policies in issues affecting development are defined. Together with the drafting of this policy, work was started in the Ministry for Foreign Affairs, amongst various public sector institutions, and with other stakeholders, to deal with the challenges posed by the need for coherence. This work shall be continued. Government officials are well acquainted with the Millennium Declaration, and its goals are considered important. This common commitment should lead to a systematic analysis of the challenges of coherence. The policy changes required in each area of activity are to be mapped out and specified with the aim of: •
Finding mutual interests of Finland and the developing countries and adopting effective ways to promote them, and
•
Identifying potential conflicts. Awareness of the existing contradictions in the national policy will create opportunities to deal with them and to draw up new operational guidelines. Exchange of information, co-operation and interactive mechanisms among officials must be strengthened further. There are already regular theme-based groups in which officials from different ministries work together. More and more of such arrangements will now be made to deal with development policy issues which are inter-ministerial in nature. The Ministry for Foreign Affairs shall also investigate how the overall harmonisation of development policy amongst official bodies can be achieved effectively without unnecessarily increasing the administrative burden.
Finland supports the multilateral system Part of Finland’s development policy is to strengthen the multilateral system, to increase its operational capabilities and to improve the opportunities of developing countries to have an impact. Through the multilateral system, norms and guidelines are created for international co-operation, environments conducive to development are strengthened at global and regional levels, and support is given to the efforts made by developing countries themselves. The multilateral system secures the position of small countries and improves their prospects for exerting an influence. The multilateral system provides the best forum for dealing with international development issues in a comprehensive, cross-sectoral and pluralistic way. The multilateral system has become increasingly significant through globalisation. There is a strong international consensus about the Millennium Declaration and the Millennium Development Goals. This consensus was further reinforced at the Doha ministerial conference as well as at Monterrey, Johannesburg and New York summits. Finland considers that the resources of the multilateral system should now be concentrated on activities to implement the jointly agreed goals. The credibility of the UN and of the multilateral system depends on the ability to fulfil joint commitments in practise. Naturally, responsibility for implementing decisions also lies with national actors. Finland strives to strengthen the operational capability of the multilateral system and supports the reforms set in motion by the Secretary General of the United Nations. The international financial institutions that work alongside the UN, and particularly the World Bank, also play an important part in carrying out the commitments of the Millennium TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
62 – Part I. Setting the Scene Declaration. The Asian economic crisis showed how instability in the international economic system can plunge millions of people into poverty. Thus, the International Monetary Fund has considerable direct responsibility for the reduction of poverty through the maintenance of stability in the international economic system and the prevention of crises. Finland finds it essential that the UN, the international financial institutions and the WTO work even more closely together. The chairmanship of the UN Economic and Social Council (ECOSOC) in 2004 offered Finland an excellent opportunity to address development issues in a coherent manner and to promote co-operation. Finland will also intensify its work in the OECD and its Development Assistance Committee. As a comprehensive organisation for economic co-operation and development, the OECD provides exceptional opportunities for dealing with cross-sectoral issues that promote coherence in development policy.
The Helsinki Process In today’s world, there is a clear need to facilitate and complement intergovernmental negotiations with open and equal dialogue between all stakeholders in seeking out new joint methods for managing globalisation. The Government of Finland wants to improve the conditions for managing globalisation, to extend the benefits of globalisation more equally to all, and to mitigate its negative impacts. Finland continues to co-operate with Tanzania in the Helsinki Process, promoting broad based international discussion about a more equitable management of globalisation. The Helsinki Process is a forum that brings together governments from the South and the North, international organisations, the private sector and civil society, and offers opportunities for open, unprejudiced and pluralistic dialogue. The aim is to develop concrete proposals and strategies for promoting the implementation of the UN Millennium Declaration and the results of the Doha, Monterrey and Johannesburg conferences. Finland is prepared to utilise the results of the Process in bilateral and international connections, including the EU. In the long-term, the process is to achieve a more balanced, democratic and rule-based management of globalisation within inter-governmental multilateral co-operation, particularly in international organisations. Based on the results of the second Helsinki conference organised in Finland in September 2005 the process will be carried further in the form of specific round tables supported by Finland, Tanzania and other governments. At the same time a number of governments are committed to the further implementation of some of the Helsinki Process recommendations.
The ILO World Commission on the Social Dimension of Globalisation The development perspective is one of the main features of the World Commission on the Social Dimension of Globalisation set up by the International Labour Organisation. The Commission was co-chaired by Finland’s President Halonen and Tanzania’s President Mkapa. The Commission’s point of departure is that globalisation is a process that should benefit people all over the world. The benefits and the disadvantages of globalisation should be evaluated expressly in terms of how they affect people’s daily lives.
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Globalisation is a process that can be controlled and can be guided by national, regional and international measures. The measures proposed by the Commission in its report require monitoring. The Government of Finland is prepared to promote in its activities the monitoring of the World Commission’s recommendations on the social dimension of globalisation in fora appropriate for each issue. Multilateral development work is a particularly important sector of activity in this respect. The Government will assess which measures to use to bring to the fore internationally, the themes raised by the report, and to promote the implementation of the Commission’s recommendations.
Finland promotes policy coherence in the European Union Many of the decisions that determine Finland’s policy in development-related issues are made within the EU. Finland emphasises the coherence of different policy sectors in the national preparation of EU decision-making. Comprehensive preparation in Finland creates a good basis for achieving Finland’s goal of influencing and increasing the coherence among the different areas of EU policies, and especially in its external relations and development co-operation. The European Union has vastly increased the extent of Finland’s contact with the countries of the world. As a member of the EU, Finland is involved in multi-sectoral dialogue with almost all countries, including developing countries. The EU is the major development co-operation partner of the developing countries as well as a significant trade partner. The EU also has a significant role globally. Finland works increasingly through the EU, and the EU has a direct impact on our national policies. EU membership has increased Finland’s potential to influence global development; it has also increased our visibility in the international arena and has enabled us to contribute to the quality of the relations between the EU and developing countries. Within the EU, attention has been devoted to policy coherence ever since the 1960s but it still remains a greatly challenging issue. Finland promotes increased coherence in EU’s external relations, in relations with developing countries, and among different policy sectors. This requires increasingly close co-operation at the national level in order to find areas of convergence on the issues dealt within the EU, and in order to be able to include the development policy perspective in Finland’s positions on decisions affecting global development. Since Finland joined the EU, domestic preparation in EU subcommittees has served to shape a coherent national strategy. Coherence in EU activities, effectiveness of aid and improved quality are prominent features in the three-year programme for the EU presidencies, which Finland will implement during its presidency in the second half of 2006. Along with the opportunities it offers, membership of the EU also guides Finland’s scope for making independent policy decisions for the benefit of developing countries. Trade policy and agricultural policy, for example, mostly fall within the EU’s competence. This means that Finland’s influence on various matters is through the EU and that Finland respects the fact that EU positions are defined on the basis of negotiations among all the EU member countries. Finland contributes and is committed to the compromises sought between the national interests of the member countries and that of global development.
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Coherence between development and trade policies Finland will increasingly take into account the interests of developing countries in the WTO’s Doha round of trade negotiations. Strengthening the multilateral trading system requires the full participation of the developing countries. From the point of view of the poorest developing countries, it is important that issues such as better access to markets for developing countries’ products, impartial rules that also observe the special needs of the poorest developing countries, and the promised technical aid to strengthen their trading capacity, will also be carried out. Finland targets its support towards creating an operating environment favourable to trade and to resolving supply-side problems in developing countries. Finland will extend the range of instruments in its bilateral trade and economic relations, including the promotion of import from developing countries. The globalisation and liberalisation of markets poses great challenges for developing countries, particularly for those that are least developed. On the one hand, globalisation opens international markets, enabling a rise in the standards of living and a decrease in poverty. On the other hand, the possibilities for the poorest developing countries to keep up with international competition may deteriorate considerably unless they are able to change the basic structures and institutional capabilities of their economies and societies and develop internationally competitive products and production capacity. Integrating developing countries into the international trading system can only take place if that system supports their own development goals. Finland respects the right of developing countries to resolve trade policy issues in their own interests. In the light of its own experience, Finland considers that well-managed integration into international economy, of which foreign trade is essential and promotes economic and social development in poor countries. Finland is prepared to support, by means of trade policy and development co-operation, the opportunities of developing countries to benefit from international trade. A universal, rule-based and open multilateral trading system which takes the interests of all parties into account equally, will create the framework and conditions necessary for freeing trade and enabling all countries to benefit from its favourable impact on economic growth, employment and development. The issue of integration into the international trading system should be taken up in the national development programmes or poverty reduction strategies of the developing countries so that the integration takes place in a controlled way and its impact on the reduction of poverty is ensured. To complete successfully, the WTO Doha round of trade negotiations, which started in 2001, is one of the main goals of Finland’s trade and development policy during this Government’s term of office, particularly in terms of the consideration given to the poorest developing countries. The strengthening of the multilateral trading system also requires the wholehearted participation of the developing countries. It is essential for developing countries that, as acknowledged in the Doha Declaration, access of their products to international markets is improved, balanced rules are implemented and that technical assistance is assured as well as exploited effectively. Agricultural issues are among the most important topics of the WTO Doha round of negotiations. According to the Doha Declaration, the negotiations aim at obtaining considerable improvements in ensuring access for agricultural products to international markets, a gradual reduction of export subsidies with a view to phasing them out in all their forms, and a substantial reduction in trade-distorting domestic support. The preferential treatment of developing countries is an integral part of the negotiations. Both agricultural and so called ‘non-commercial’ concerns will be taken into account. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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In the framework of the multilateral trading system, Finland works for improved consideration of the special needs of developing countries by promoting special benefits that support their integration into the trade policy system. Finland supports and finances initiatives that further implementation of the obligation to increase trade-related technical assistance and facilities. Finland supports the work of the WTO on technology transfer which aims to increase the production capacity and export product range of developing countries. Finland works on improving the effectiveness of interactive dialogue with the developing countries about trade policy issues bilaterally, through the EU, and in multilateral contexts. Finland seeks to consider the special circumstances of developing countries in the implementation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Over the past few years, the EU has improved the access of developing countries to its markets. Products originating from the least developed countries are allowed entry into the EU area duty-free, and many other developing countries also benefit from tariff preferences. For example, over 80% of Africa’s agricultural exports come to the EU. In 2004 and 2005 the EU’s Generalised System of Preferences (GSP) for developing countries has been revised. Finland is in favour of developing the system so that its benefits accrue better to the least developed countries, and is presently investigating how benefits of the type that have been granted to countries under the Cotonou agreement could be applied to all the least developed countries. Finland is looking for ways to promote its own imports from developing countries. Finland will also make use of the opportunities offered by the unit established in the EU to facilitate imports into the EU from developing countries. While supporting development of the multilateral trading system, Finland uses development co-operation instruments to support the efforts of the developing countries to create an operating environment that promotes trade and investments. Trade that brings about an increase in sustainable economic growth, employment and productivity requires, among other things, stable and functioning basic social structures, infrastructure, a functioning financial sector and the possibility to develop production technology, product quality and marketing. These form a key field of operations for development cooperation, in which the interests of trade and development converge and development cooperation acts as a catalyst for trade. In order to increase imports and trade, Finnish business and industry are kept informed about the markets of the developing countries, production structures and rules affecting trade. Efforts are made to encourage the channelling of investment to developing countries by developing a climate and an environment favourable to investment, and, particularly through bilateral agreements, promoting and protecting foreign investment.
Coherence between development and environmental policies The prevention of international environmental threats is one of the main goals of Finland’s development policy. Finland advocates change in production and consumption patterns and supports the reduction of poverty in developing countries in such ways that help avert the most serious environmental damage caused by economic growth. By promoting the implementation of multilateral environmental agreements, Finland seeks to safeguard the state of the environment. Finland includes consideration for the environment as a cross-cutting theme in all its development co-operation. Finland supports the inclusion of the principles of environmentally sustainable development in the TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
66 – Part I. Setting the Scene poverty reduction strategies of its partner countries. Finland also supports specific environmental programmes and projects. The challenges of development and of environmental sustainability are closely linked at both national and global levels. The future of Finland’s own environment will also be decisively affected by the ways in which other countries in the world, including the developing countries, take care of the environment. By implementing multilateral environmental agreements, the state of the environment can be controlled in Finland and in developing countries. The environment is a global public good and its protection is in everybody’s interests. It is impossible to achieve sustainable well-being and reduction of poverty unless the environment is taken care of. For this reason, environmental issues are a cross-cutting theme in Finland’s development policy. Environmental issues are connected today with such issues as security, trade and finance. Co-operation among various sectors of administration is essential. Finland considers multilateral environmental agreements and the enhancement of international environmental governance a good means of ensuring that both industrialised and developing countries accept joint responsibility for the environment. Finland is party to more than a hundred multilateral environmental agreements, the aims of which include the prevention of climate change, the protection of biodiversity, combating desertification and the control of international trade in chemicals and control of transboundary movements of hazardous waste. The agreements include obligations binding on the developing countries and obligations to support the developing countries. The detrimental consequences of global climate change have the worst effects on the poorest countries and hinder their efforts to reducing poverty. The developing countries will therefore play an important part in the implementation and monitoring of the Kyoto Protocol. Finland supports the developing countries in their capacity building to enable them to implement multilateral environmental agreements. Through international and development co-operation, Finland makes available to developing countries the benefit of its own expertise in managing global environmental problems and in promoting sustainable development. Factors related to the environment are decisive in achieving many development goals, such as food safety, access to clean drinking water and progress in health care. Access to affordable energy and sustainable energy solutions are of great importance in improving the standards of living and health conditions of the poor, in creating employment opportunities, but also in regard to the sustainable exploitation of natural resources and, for example, climate change. The Johannesburg Action Plan requires all countries to draw up a strategy for sustainable development by 2005. In its development co-operation, Finland emphasises that environmental issues, and the fulfilment of the obligations set out in environmental agreements, are an integral part of poverty reduction strategies.
Coherence between development and agricultural policies In its development co-operation, Finland emphasises the importance of promoting rural development and increasing the productivity of rural livelihoods. Finland supports the possibilities of the poorest developing countries to benefit from opportunities offered by international trade in agricultural products and recognises the special needs of the most
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vulnerable countries to protect and assist their farmers so that they will have sufficient time to adapt to a market-led production system. Rural living conditions in developing countries will have a crucial impact on whether the Millennium Declaration Goals are achieved, since about two thirds of the people who live in extreme poverty live in rural areas. Finland emphasises the significance of the role played by agriculture in rural areas and in society. Not only is agriculture a means of livelihood and a source of income, but it is also an essential factor in, for example, food security, regional politics and environmental issues. For almost all countries of the world agriculture is a sector of national importance, the future of which they seek to secure. The exports of many developing countries are primarily agricultural products. Hence, the entry of developing countries’ agricultural products into industrialised countries’ markets, and the subsidies of industrialised countries to agricultural production and exports, have caused disputes and disagreements between developing and industrialised countries. In this connection, the great differences among developing countries in their production and marketing capacities in agriculture and agricultural trade must also be taken into account. As a member of the EU, Finland promotes such trade policy solutions that improve the prospects of the poorest developing countries to benefit from agricultural exports and develop the competitiveness of their agriculture. The goal of greater coherence will also necessitate consideration of national perspectives on agriculture. The EU, including Finland, has long made unilateral concessions in its trade policy which have eased access for specific groups of developing countries. Finland is in favour of developing these systems further. They include, for example, the Generalised System of Preferences (GSP) and the Lomé and Cotonou agreements with the countries of Africa, the Caribbean and the Pacific. The Everything but Arms (EBA) initiative applied since 2001 has made it possible to remove duties on imports originating from almost all of the least developed countries. Duties on sugar, rice and bananas will be phased out by 2009. Since the GATT Uruguay Round, the EU has also made cuts in domestic agricultural and export subsidies; these are expected to increase the competitiveness of developing countries’ agricultural trade. Both in the EU and bilaterally, Finland promotes measures that improve the status of poor producers in the poorest countries. The prospect of poor producers to benefit from world trade can be enhanced by adjusting the rules governing international agricultural trade, but this will not resolve the whole problem. In order to improve their living conditions, Finland will increase its efforts in bilateral and multilateral development cooperation to improve the political and economic operating environment, to develop productive and income generating activities in rural areas, and to strengthen poor people’s livelihoods. Finland has many years of experience in developing rural livelihoods based on family farms and smallholdings. Finland’s own agricultural sector has also gone through great structural changes to adjust to international competition. Both in development cooperation and in other international collaboration, Finland offers to developing countries the benefit of its own experience and expertise in, for example, establishing organisations of small producers, co-operative activities and extension services. Agriculture and forestry are the key sectors in development co-operation. Individual areas of focus include support for local rural livelihood strategies, the formation of farmer associations and producer organisations, provision of staple foods, food production and diversification of income-generating activities.
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Chapter 4. POLICY COHERENCE FOR DEVELOPMENT: WHAT IT MEANS FOR FARMERS Raul Q. Montemayor IFAP Asian Farmers Committee Abstract Policy coherence is important not only for developing countries who need to optimise resource-use in their agricultural sectors, but also for developed countries whose longterm growth and progress in inextricably linked to the welfare of developing countries and the world economy as a whole. Governments in developing countries need to translate words into action by giving priority to sustained and coherent policies and programmes that provide basic support and services to their large agricultural sectors. Such policies will reverse the effects of long years of neglect and will give farmers the confidence to pursue change and to participate in development efforts. These domestic initiatives should however be complemented by reforms in international trade rules that will limit, if not eliminate, the distortion effect of domestic supports and export subsidies on global markets even as developing countries undertake reforms and prepare their farmers for global competition. Farmers must be adequately compensated for their efforts if they are to continue providing safe and healthy food to consumers while simultaneously following environmentally friendly practices. Otherwise, they may be pressured to take shortcuts that will prove harmful to consumers and to the environment. In turn, appropriate policies have to be implemented to ensure that market concentration does not have undue harmful impacts on farmers, even as trade rules are crafted so that large multinational firms do not corner the benefits of freer trade to the exclusion of developing countries and small-scale producers. Development assistance must be used to complement domestic reforms and not to fix problems created by incoherent policies. They should focus on addressing agriculturerelated issues because these are often the root causes of problems in urban areas and the economy as a whole. Likewise, the role of the private sector in the development effort needs to be defined, acknowledged, and supported. Farmer organisations in particular both have a right and a responsibility to participate in, and influence the developmental process and will need to strengthen their ranks and capacities in order to effectively speak for themselves and to contribute constructively to developmental efforts.
Introduction I would first like to thank the organisers of this conference and the OECD for giving farmers an opportunity to present their views on what I consider a very timely and important theme – Policy Coherence for Development. I speak today on behalf of the International Federation of Agricultural Producers or IFAP, which is one of the largest international networks of farmer organisations in the world. IFAP presently counts 110 national farmer organisations in 75 countries among its members. It represents TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
70 – Part I. Setting the Scene practically all farmers in the industrialised countries, and almost half a billion agricultural producers in the developing world. IFAP believes that farmers can best speak for themselves, even though it is not often that they are asked to do so, and sometimes are even prevented from voicing their point of view. So, allow me to take advantage of this opportunity to present the major development issues and concerns that farmers face today as a result of policy incoherence at the national, regional and global levels. There are of course many types of farmers living under different conditions and under varying levels of development, and their positions on certain issues may not always coincide. Today, I would like to focus on the concerns of farmers in the developing countries, which I think would be of more interest to policy makers in the OECD and its member-countries. I would also like to contribute some ideas on how farmers and their organisations can help rectify policy inconsistencies and ensure that developmental programmes and policies move forward coherently.
The need for policy coherence Farmers from developing countries may sometimes wonder why more advanced countries belonging to the OECD have to worry about development in the poorer regions of the world. One probably could presume that countries, like people, tend to be more magnanimous when they become more prosperous. Charity could also be a way to assuage hidden guilt arising from the notion that in order for advanced countries to enrich themselves, many other countries had to become poor. I would however like to believe that the concern for development on the part of developed countries transcends mere altruism or remorse. I think that the rich countries know that they will never be able to truly enjoy their wealth for as long as the billions of people living around them in the developing world are hungry, poor, uneducated, malnourished, and unemployed. For one, they will find it difficult to expand their markets for their own goods and services. In other words, their own prospects for growth in the future are inextricably linked to the development and progress of the poorer countries around them and of the world as a whole. Even in the jungles, before man interfered, nature saw to it that predators always had agile and healthy prey to eat, the logic being that predators themselves would not survive if all their prey died from hunger and malnutrition. Global poverty and hunger also lead to many problems that people in developed countries are uncomfortable with and often dread – illegal immigration, HIV/Aids, pandemics, wars, and of course, terrorism. As we have seen, these problems spread quickly in an increasingly globalised environment, and it is impossible even for people in developed countries to insulate themselves from these emerging threats. In the end, helping poor countries develop and to lift their poor populations out of extreme poverty is the only effective and permanent recipe for global health, peace and progress. With all the problems besetting countries and the world as a whole, both developed and developing countries don’t have the time to waste efforts and resources on policies and programmes that end up nullifying each other. Because development itself is a multifaceted challenge, it naturally requires a comprehensive response, the components of which must be both individually effective and collectively complementary to each other. Policy coherence therefore is not merely an embellishment. It is an urgent and critical requirement for any developmental effort to succeed.
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It goes without saying that policy coherence for development is as important, even if not more critical, for the poor developing countries themselves. To a large extent, their underdevelopment, arising from years of neglect of their agricultural and other critical sectors, corruption, weak governance, and policy inconsistencies, is of their own doing. They too have to set things right in their own backyard and carry out necessary reforms in a coherent and sustained manner if they hope to escape from chronic underdevelopment and to lift their masses out of poverty and hunger. Developed countries can augment their initiatives but will never be successful if the developing countries themselves do not assume the responsibility and accept the challenge for reform and change.
Coherence in domestic agricultural policies Perhaps the most obvious and chronic form of incoherence in domestic agricultural policy, especially in developing countries, is the disconnect between what politicians and government functionaries say in public and what they actually do in practice. Farmers have somehow grown accustomed to politicians promising them the moon and the stars during elections, and then disappearing after they have won or lost, only to reappear in the next elections, promising more moons and stars. I remember a story (probably true) where a local politician in my country was campaigning to get elected and ended up promising farmers in a village that he would build a bridge to help them transport their products to the market. When he was told that there was no need for a bridge because there was no river to cross in the village, he promised to build a river as well! In many developing countries, widespread hunger, unemployment and poverty is directly traceable to the absence of even the most basic infrastructure that farmers in developed countries often take for granted – roads, bridges, electricity, communication, ports, etc. These deficiencies eat into the already meagre incomes of many farmers in the countryside by making it expensive for them to buy the inputs they need and to market their goods. They also make it difficult if not impossible for farmers to react promptly to market signals and take advantage of emerging market opportunities. Opportunities for securing a higher price or a better market for their products in the city or even in another country are useless if farmers cannot even move their produce out of their village because of an impassable road or a broken bridge. I remember another story (probably also true) of farmers in a village complaining to a local trader why his buying price was so low compared to the price announced over the radio station. The trader, knowing that the farmers had nowhere else to go, merely shrugged his shoulders and challenged them to sell their products to the radio station! Compounding the situation are government policies that prioritise the supply of cheap food to urban consumers (and voters), whether through price controls, government market intervention, or trade and tariff policy favouring cheaper imports. In cases where governments use tariffs and import restrictions to protect farmers, the agricultural sector is also tacitly neglected. As a result, inherent problems remain entrenched, are aggravated over time, and are exposed only when governments are forced to open up their markets to foreign competition. This is what is happening as a result of the recent multilateral and regional trade agreements. Although it is clear that governments in developing countries often lack the resources to address all their problems, it is equally evident that the priority politicians (especially at election time) promise to give to agriculture and to the rural sector almost always disappears, when the time comes to allocate the limited budgets of government to priority TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
72 – Part I. Setting the Scene programmes. Typically, debt service and defence get the largest chunks of the limited government pie, while large populations in the rural areas end up with a disproportionately small share for basic services and programmes from the government. This is despite commonly accepted conclusions that investments in agriculture, particularly in agricultural research and basic infrastructure, have the largest economic multiplier effects on the economy, benefit the largest sectors, have the most significant impact on poverty incidence, and are keys to overall economic development. The long years of recurrent neglect of, and bias against, the agricultural sector in many developing countries has made the resultant problems larger, more complex, and much harder to solve. In many cases, addressing one problem such as the access to rural credit by providing microfinance services to farmers ends up a failure because other constraints are not addressed at the same time. For example, the absence of a proper transportation network forces farmers to sell their products at very low prices, and eventually prevents them from generating enough income to pay their loans. In turn, improved technology that is expected to increase yields and enhance the efficiency of farmers is often left unapplied because farmers have no money to buy modern seed varieties or appropriate fertilisers. In other instances, they are afraid to invest their money and time because of the fear or risk that typhoons or pests might suddenly come and wipe away their investments, or that the government might unexpectedly allow cheap imports to come in and depress local prices. Perhaps the most deep-rooted effect of decades of neglect and policy incoherence is the pervasive apathy, lack of motivation, and a sense of hopelessness on the part of farmers in many areas of the developing world. Many have grown to be suspicious of promises that things will get better, are wary of change, and are resigned to a life of poverty and desperation. When they earn some money, they rarely invest in their farms and instead use the money to send their brightest child to school, with the hope that he or she will someday earn a well-paying job in the city and will rescue them from their sordid fates on the farms. To a large extent, farmers themselves have become the largest and most difficult obstacle to change and progress and it will need a serious and sustained effort to get back their confidence and generate their support for any developmental effort. Realigning policies and programmes into a coherent strategy will be a necessary step in this direction.
Coherence in agricultural trade policy In many developing countries, the problems in the agricultural sector are often aggravated by external factors. The worldwide push towards trade liberalisation and globalisation for example has caught many developing countries unprepared if not flatfooted, even as it has forced them to abruptly expose their small-scale farmers to competition from well-equipped producers from the developed world. One may say that trade liberalisation is sometimes unfairly being blamed for a country’s agricultural woes, when in fact the core problem arises from biased and incoherent domestic agricultural policies that make local farmers uncompetitive and unprepared for competition. Still, experience has shown that adjustment measures have to be carefully planned out and implemented while trade liberalisation takes place. At the same time, trade reforms, especially in developed countries are important. Even as they are already well ahead in the development race, developed countries cannot continue insisting on having their cake and eating it too. One may understand their need TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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to protect and subsidise some of their agricultural producers, but to do so at the expense of large masses of poor and underprivileged farmers in many developing countries is simply unfair and self-serving. Nor does it make sense for developing countries to give in to demands to open up their markets even as the developed countries manipulate trade rules so that they can continue equipping their own producers with a huge arsenal of domestic supports and export subsidies which they can then use to ward off competition while penetrating foreign markets. It does not matter when, where and on whom these trade-distorting practices will have an impact. The point is that these price supports, export subsidies and other artificial benefits that many developed countries give to their farmers can and often do create surpluses that result in worldwide market distortions, affecting the livelihood and survival of farmers in other countries who do not have any access even to the most basic infrastructure like roads, much less to subsidies. They also allow less efficient farmers in the developed world, well-off as they already are, to displace other more efficient and self-reliant producers from less developed parts of the world. Many of these small-scale producers in developing countries have no government support or assistance programmes to fall back on when these trade distorting practices wreak havoc on their domestic and export markets. One cannot allow a person holding a bag of explosives to go scot free just because he has not detonated the bomb, or because there is no guarantee that the bomb will explode or hurt people, or because of a promise that he will make the bomb less and less destructive over time. And yet this is not so different from what the GATT rules have allowed developed countries to do in agricultural trade by effectively legalising the use of distorting subsidies, albeit at decreasing levels, while at the same time requiring other countries, most of which do not use such subsidies, to increasingly open up their markets to these subsidised foreign products. Somewhere, large masses of farmers are becoming hungry, unemployed, sickly, and desperate because a few rich countries want to protect their agriculture so that their farmers can maintain comfortable lifestyles and their citizens can continue to enjoy beautiful landscapes. Such subsidies literally and indiscriminately maim and kill innocent people, displace them from their farms, and shatter lives and livelihoods, much like the so-called weapons of mass destruction that rich countries spend billions of dollars to unearth and destroy. Clearly, there is a need to rationalise the negotiating positions of many developed countries in trade fora like the WTO with their publicly avowed commitments to help developing countries benefit from trade. Trade rules are supposed to remove distortions, level the playing field, and provide each country, big or small, rich or poor, a decent chance to compete and reap benefits from an enlarged and freer global market. They are not supposed to perpetuate inequities and unfair trading practices, especially those that work against the interests of developing countries. In this respect, it is unfortunate, to say that at the very least, developed countries have again used special and differential treatment or SDT as a bargaining chip or quid pro quo in the Doha Development Round negotiations to secure concessions that will allow them to retain many of their trade-distorting subsidies in the foreseeable future. Other developed countries in turn have insisted on reducing their subsidies only if developing countries open up their markets further and aggressively reduce their tariffs. Subsidies that distort are normally banned in international trade and reducing or removing them should not be treated as a concession that would require some form of compensation from TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
74 – Part I. Setting the Scene countries that are harmed by such subsidies. Clearly, a thief cannot demand that his/her erstwhile victims unlock and open their doors and windows wider at night in exchange for a promise that less and less will be stolen from their homes. This is not to downplay the political and economic risks that developed countries have to confront when they undertake reforms and attempt to phase out the distortive support and protection that they have traditionally extended to their well-organised farming sector. One also cannot deny the right even of developed countries to preserve and promote their own agricultural sectors and to ensure their own food security. Nor can one question the important cultural, historical, environmental and other contributions that agriculture provides in addition to producing food for their societies. However, it is equally important to remember that these rights and prerogatives are not absolute or exclusive. The larger number of developing countries have as much right and need to protect and promote their own agricultural sectors, and the problems and risks they face in undertaking their own set of reforms are as daunting, if not more serious, than those faced by developed countries. There is therefore simply no moral justification for developed countries to insist on one-sided rules in trade negotiations. Many studies have also shown that developed countries themselves will be the biggest gainers, at least in the short to the medium term, from a less distorted global marketplace. Clearly, it does not make any economic sense for them to subsidise producers, encourage surpluses, prop up falling prices that arise from the surpluses through additional subsidies, and then provide even more subsidies for exports to alleviate the resultant domestic glut, and finally, to top it all, end up hurting producers in poorer parts of the world elsewhere. Of course, developing countries should also do their share in making the global marketplace a fairer, freer and more progressive arena for trade. They cannot hide forever under the cloak of underdevelopment, unpreparedness and uncompetitiveness and use these as pretexts for again delaying necessary reforms in their agricultural and other domestic sectors. Protectionism breeds inefficiency and dependency, and eventually penalises consumers and farmers alike. Nor is it wise for farmers to perpetually place their future in the hands of politicians and government functionaries whose priorities and whims may change at any time. The most coherent approach to trade liberalisation is to make farmers competitive, efficient and profitable, so that they can supply food to the domestic market on an equal footing with imported products, and at the same time compete squarely in the export markets. This is a case where the best defence is a good offence.
Coherence in other trade-related policies Aside from the need to craft coherent, fair and responsive rules in international trade, clear and equitable policies and directions also have to be established by governments, the public at large, and the commercial private sector on various issues which are relevant to how farmers produce, process and sell their products in both domestic and export markets. In particular, coherence is needed in how issues on food safety and nutrition, market concentration, sustainability and environmental protection are addressed. Concerns over food safety, health and nutrition have become more pronounced as a result of the rise in food-borne diseases and illnesses and pronounced levels of both obesity and malnutrition in various parts of the world. To some degree, these have had trade-related effects on farmers. Many developing countries, for example, have TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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complained against the increasing use of food safety and related sanitary and phytosanitary regulations to act as disguised trade barriers and block legitimate imports. Clearly, it does not provide any benefit to a developing country to be given duty free access by a developed country on the one hand, and then to have its exports blocked on the other hand because these have not passed overly stringent chemical residue thresholds, have not undergone costly laboratory analyses, or do not carry the proper labels and health certifications. The poor country ends up not only with lost export sales but with boatloads of rejected cargoes in foreign ports. It is unfortunate that the Doha Development Agenda bypassed reforms in the SPS regulations despite clear indications that the Uruguay Round rules did not satisfactorily achieve the objective of harmonising global quarantine regulations to protect humans, plants and animals. On a much larger scale, the emerging food safety concerns have led to more rigid quarantine, food safety, labelling, and traceability regulations on food products which in turn have made it more expensive for farmers both in developed and developing countries to sell their products locally and in foreign markets. In many cases, these regulations have forced farmers to shift to new and more costly methods of production that influence the types of fertilisers or pesticides they use for crops, or hormones and antibiotics they apply to animals, and the equipment they utilise for producing and handling food products. Although it is important to ensure that food products are safe to consume, governments and the public at large should at the same time ensure that farmers are adequately compensated for their efforts. Pressuring farmers to produce better and healthier food and to supply this food at a lower price, may backfire on the health and welfare of consumers. Mad cow disease, for example, resulted from the attempts of cattle producers to reduce costs and sell their meat products more cheaply in response to consumer demands and stiff market competition. These led some livestock raisers to use offal and waste material from other dead animals as feed ingredients, without the knowledge that such ingredients would result in the spread of BSE years later. Governments and consumers must therefore be willing and ready to pay the price for safe, healthy and nutritious food. The current situation where the share of the farmer out of every dollar that a consumer spends has fallen to as low as five cents even as global prices for raw and semi-processed agricultural commodities have continued to decrease, is clearly unsustainable. Farmers are not miracle workers, and they will stop producing food if society does not give them the necessary financial and other rewards and incentives for their efforts. Otherwise, they will turn in desperation to production shortcuts that could be harmful to consumers in the end. The precarious situation of farmers is exacerbated by market concentration, or the emergence of large corporate entities that exert monopoly or excessive control over agricultural technology, inputs and markets. This is an established phenomenon in both developed and developing countries. While corporate size and breadth is arguably necessary for the huge investments in some agricultural ventures, there is the danger that farmers will eventually end up with little or no choice when it comes to where to buy their seeds and inputs and sell their products. In some cases, they may become virtual employees of these large corporations. In such a situation, farmers will not only lose their leverage in determining the prices of their products, they will also be powerless if the large firms on which they depend for most of their sustenance and livelihood simply decide to pass on to them most or all of the cost and burden of food safety, environmental protection, and other regulations that consumers are unwilling to absorb. Even worse, they will have little recourse if these firms abruptly decide to shift to other more pliant TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
76 – Part I. Setting the Scene suppliers or move their production and processing operations altogether to a more business friendly country or region. It appears however that governments and international institutions have no clear policies with regard to the increasing influence of these large multinational firms on both domestic and global markets. Although current international trade rules for example define the terms of engagement among countries, they have practically nothing to say about the potentially distorting or manipulative practices of large trans-national firms on trade in agricultural products, services and intellectual property. Some of these corporations may in fact be even larger and more influential than some large countries and economies. Hence, the push of some developed countries for the incorporation of competition policy in WTO rules has ironically been construed by other developing countries as a mere ploy to dilute the market leverage of local firms over their domestic markets and thus to make it easier for these large multinational companies, most of whom are based in rich countries, to penetrate their markets. The issue of market concentration brings to the fore the question as to who actually benefits from trade liberalisation. Clearly, freer and more open trade can be empirically shown to foster overall economic growth within countries and on a global scale. However, the benefits are not spread equally, and there will always be losers in the process. Concerns have been raised that trade liberalisation is being pursued for its own sake, without consideration for what countries and sectors need to, or should, benefit most from it, and without adequate concern for those who lose out in the process. Many developing countries for example will not be able to export more just because the global market has opened up and expanded. In fact, the very factors that make these countries uncompetitive in export markets – lack of roads, high power, input and financing charges, low yields, etc. – will make them vulnerable to cheaper imports. Hence, while more advanced and resourceful countries may benefit from trade liberalisation and improved market access, a vast majority of less developed countries will suffer or receive a disproportionately small share of the benefits if proper safeguards are not put in place and they are not given the time and space to undertake the necessary adjustment measures. In turn, one would wonder if it is to the immediate interest of the developed and advanced countries to wait for the less developed countries to catch up, considering that their market advantage to a large extent derives from the inability of these underdeveloped countries to produce as efficiently and competitively as they can. Nor can we expect large profit-driven multinational companies to concern themselves with how trade benefits are allocated. Their main concern is to be able to buy the raw materials from the cheapest producers and to sell their products to the most lucrative markets. One can therefore raise the question as to whether a trading environment that is arguably freer and more open, but which benefits only a few large companies while marginalising large masses of small producers is worth aiming for. In addition, some farmers from both developed and developing countries have raised the issue as to why international trade rules are being given so much importance over domestic agricultural policies, often to the disadvantage of small-scale producers, despite the fact that less than 10% of total global agricultural output is actually being traded internationally. Even within countries that have somehow been able to expand exports and achieve economic growth due to trade liberalisation, there are indications that the benefits have gone mostly to traders, processors, exporters, large farmers and corporate farms, and to a much lesser extent (if at all) to small-scale primary producers. In turn, small-scale farmers invariably bear most of the burden when cheap imports come into their domestic markets. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Unless these farmers are consciously allowed to benefit from free trade, trade liberalisation may ironically end up aggravating rural poverty. Concerns have also been raised as to the fate of small-scale producers in a trading environment that rewards economies of scale and places excessive emphasis on production efficiency and cost competitiveness. While large-scale producers may be able to produce food and other agricultural products more efficiently and at least cost to customers, it may in fact be more prudent to spread out production capacity to a larger base of producers than bank on a few suppliers who may suddenly decide to close or move their operations. Many policies of developed countries also run counter to publicly avowed commitments to promote sustainable development and environmental protection, issues which are critical to the long-term survival and prosperity of farmers in the developing world. While developed countries for example have pushed strongly for strict controls over gas emissions, land and air pollution, and water depletion, their trade policies often push poor farmers in other countries to adopt environmentally destructive practices like slash and burn farming and soil, water and air contamination. In several cases, these developed countries have merely exported their destructive processes and equipment to third-world countries, thereby relegating the poor countries to dumping grounds for toxic waste and pollution. As in the case with food safety regulations, farmers worldwide are also being pressured to adopt more environmentally friendly farming practices but are not being given the appropriate financial incentives to offset additional costs. Clearly, farmers can only go so far when prices are stagnant or are decreasing while costs are rising. Government should encourage and provide farmers with incentives to adopt good farming practices, instead of focusing on punitive approaches that are based on the premise that farmers abuse the environment and should therefore be controlled and disciplined.
Coherence in development aid policy Clearly, governments in developed countries first need to sort out their priorities and strategies before they start preaching and promoting development to developing countries. It would be pointless to spend time and money on development assistance only to see the gains more than offset by trade policies which have distortive impacts. Development aid must be used to promote development, and not to fix problems that result from anti-development policies and programmes. In turn, countries that receive development assistance must capitalise on such assistance to directly address their problems and deficiencies, and not use them as another pretext to retain policies biased against agriculture, scrimp on support to farmers, or postpone necessary investments and reforms in the agricultural sector. In any case, development agencies as a whole need to confront the fact that international assistance for agricultural development has consistently declined over time. Although it can be argued that it is the governments of developing countries themselves that have prioritised non-agriculture projects in requesting international aid or funding, aid agencies are also partly to blame for not clearly delineating and pursuing their programme and funding priorities. One can wonder why they often impose numerous conditions in exchange for such loans or assistance, but cannot pressure governments to give more attention to their agricultural sectors. The perception that many agricultural
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78 – Part I. Setting the Scene development projects fail or give lower returns is also not a valid excuse, given that such deficiencies are usually traceable to poor project design and implementation. To a large extent, development aid in urban areas and other sectors aside from agriculture often falls short because it does not address the root of the problem. For example, many problems like squatting, traffic congestion, sanitation, and crime arise from sordid living conditions in the countryside which force rural residents to migrate to cities. Housing projects, expanded road networks, improved water supply, and other amenities in the cities will encourage even more migration and will aggravate the problem in the urban areas for as long as income and employment opportunities remain scarce in the rural areas. Channelling development assistance to rural areas is therefore, a more logical and sustainable approach to solving urban problems and promoting economic progress as a whole. Finally, development assistance agencies must increasingly recognise the important role played by the private sector. Whereas traditional ODA has been channelled through the government bureaucracy and has focussed on supporting government-initiated programmes, relatively limited effort and initiative have been allotted to building up institutions and programmes run by the private sector, including farmer organisations that can be more results-oriented, less politically vulnerable, and more attuned to the real needs of small farmers and target beneficiaries. Such private initiatives are particularly important since many rural development assistance loans and programmes often come with conditions that require governments to phase out or privatise functions that traditionally have provided marketing, credit and other basic services to farmers. While deregulation and privatisation may have their merits, they are often pursued without putting in place alternative or substitute institutions and programmes that can provide safeguards and necessary assistance to affected farmers. As a result, farmers often end up worse off than they were before.
Role of producer organisations Because farmers are often the victims of the incoherent policies of their own governments and of the governments of other countries, they have as much right as responsibility to participate in programmes that impact their welfare. However, in order to constructively and effectively influence decisions, they have to establish credible, independent and solid farmer organisations. Only as a unified force in their countries and in the international community will they have the clout to be heard and seriously listened to. Strong farmer organisations at the domestic and international levels have become more important than ever with the advent of globalisation and the need to consolidate forces not only in the formulation of trade rules but also in conducting trade. Even in developed countries, farmer co-operatives and similar business enterprises that grew rapidly in the past when food commodities were in short supply and markets were generally supply driven are now experiencing major adjustment problems. In many cases, they face stiff competition from both large multinational firms and niche players who have assumed larger control over the processing and marketing sectors of the value chain so as to cater to the requirements of an increasingly demand-driven and consumeroriented market. In most developing countries, rarely have large masses of unorganised small farmers been able to exert market power over emerging hypermarkets and
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integrated agribusiness firms. This implies that they will need to act swiftly and effectively to establish an effective counterforce to industrial concentration. It is towards this objective that the International Federation of Agricultural Producers of IFAP has spent the last sixty or so years helping strengthen national farmer organisations and linking them together into a dynamic international farmers’ network. This has enabled national organisations to participate in local decision-making bodies, implement programmes for their members, and participate in the design and monitoring of developmental programmes funded by local sources and/or by development aid. Some farmer organisations have established large and profitable co-operative business operations that provide important economic services to their members and allow them to directly and more profitably participate in the domestic and global markets. At the same time, IFAP has developed close links with international agencies like the Food and Agriculture Organization (FAO), the World Bank, the International Fund for Agricultural Development (IFAD), the World Trade Organization (WTO), the Consultative Group on International Agricultural Research (CGIAR), and similar institutions to advocate in the international arena. IFAP maintains a keen and natural interest in development issues because its members, particularly the large masses of farmers in the developing world, will be the main beneficiaries of any developmental effort. Through their local and national networks, the farmer organisations under IFAP can play a constructive role in helping to design such development programmes, pinpointing inconsistencies based on the experience and feedback they gather from the field, assisting in the implementation of such programmes, and participating in monitoring exercises that will measure the success of such programmes against intended objectives. A case in point is IFAP’s recent collaboration with the Global Forum on Agricultural Research or GFAR and the FAO. Farmer organisations under IFAP are involved in the determination of agricultural research and development priorities in different parts of the world, are also involved in bodies that allocate budgets and set priorities for research activities and their role in technology dissemination and monitoring programmes. Similar linkages could easily be developed between IFAP and its member organisations and OECD countries which seek to implement development projects in selected areas. IFAP members in fact can provide such donor countries with independent feedback and proposals which could help in refining the design of development programmes and ensuring that such programmes complement other initiatives. There is therefore a clear case of allowing farmers to speak for themselves, making them active participants in the development process, and ensuring that development efforts are coherent, effective and responsive to the needs of farmers and the rural poor in general. As the IFAP stressed during a recent OECD proceeding: “Whether or not most of the millennium development goals are met depends on more effective and pro-poor producer organisations being engaged in all areas – from determining what should be done, to doing it, to monitoring progress”.
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Chapter 5. POLICY COHERENCE FOR DEVELOPMENT: WHAT IT MEANS TO THE POOR1 Ibrahim Assane Mayaki Platform (Hub) on Rural Development and Food Security for West and Central Africa Abstract It is a well-established fact that improved income-generating capacity and economic growth are necessary for poverty reduction. Development policies which are incoherent reduce both growth and income prospects for Third World countries. Yet, poor countries as well as developed countries continue to implement policies which are not coherent with their objectives and with the Millennium Development Goals. As regards the poor at large, policy coherence for development means that national and global governance policies should not contradict the Millennium Declaration and its Development Goals. For instance, it is policy incoherent when developed countries increase foreign development assistance while adopting domestic and trade policies that create market distortions against strategic and important commodities vital to the development of Third World countries. A case in point that is well documented is African cotton. Policy coherence for development in favour of the poor will therefore mean that all government and bilateral and multilateral donors should work towards initiating, implementing and adjusting, at both national and global levels, policies that are not only complementary but also mutually supportive – policies that reinforce poverty reduction, hunger alleviation and food security goals. In other words, to the poor, policy coherence for development means supporting, creating and nurturing synergies for the achievement of pro-poor goals, including economic growth, even if it is not clear that economic growth can be seen as automatically contributing towards improving the lot of the poor. In view of the difficulties encountered by West and Central African States in establishing “coherent” development policies, a new form of power balance is emerging with a well-structured civil society poised to defend the interests of the poor. The new trend is an integral part of a dynamic democratisation process.
Introduction The fight against poverty has been at the centre of human activities ever since man appeared on earth. Whereas human beings have been making efforts to reduce poverty over the years, the gap between the poor and the rich continues to widen, leading to social and political unrest and even wars. The situation led the international community to commit itself, at the United Nations Millennium Summit in 2000, to a series of specific development goals and to dedicate itself to achieving them through a new global 1.
The terms “poor” and “developing countries”, as used in this paper, refer mainly to the countries and peoples of West and Central Africa.
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82 – Part I. Setting the Scene partnership. In this regard, developing countries have resolved to establish sound policies, while the developed countries opted to provide additional aid and ensure that their policies worked toward supporting the development goals. These decisions were taken at the International Conference on Financing for Development held in 2002 in Monterrey, NL, Mexico. The developing countries’ commitment and the developed countries’ decision showed that the international community came to realise that policy coherence for development is a necessity, contrary to what prevailed until then. After the Monterrey meeting, the international community decided to set an agenda to promote, via policy coherence, positive changes in the conditions affecting poor countries and poor peoples in the world. With regard to the poor, policy coherence for development means that the national as well as global governance policies should not contradict the Millennium Declaration and its development goals. Policy coherence for development also implies, on the one hand, that development policies elaborated and implemented by developed countries, do not impede developing countries’ efforts to achieve the goal of reducing poverty, alleviating hunger and attaining food security. On the other hand, it means that developing countries and the poorest countries should make sure that (1) their domestic policies are consistent with the Millennium Development Goals, (2) the international aid they receive does not have a negative impact on their ability to produce domestically; (3) and the agreements they sign are not in contradiction with their own policies and strategies aimed at developing their economies and creating an enabling environment to improve living standards for their populations. That being the case, the question that arises is: “what then does policy coherence for development mean or what does it entail for the poor, i.e. poor countries, especially those of West and Central Africa and their populations? This paper will attempt to answer the question above by discussing the extent to which both developed and developing countries’ policies are coherent with, and can help them achieve the Millennium Development Goals, with particular regard to reducing poverty, alleviating hunger and attaining food security, the main concerns of the poor at large. The paper will focus on the implication of coherent development policies from the perspective of developed and developing countries and with particular regard to the cases of West and Central African countries. It will discuss the implication of the lack of coherence in governing instruments such as domestic macroeconomic policy instruments, domestic agricultural support, trade-related policy measures, non-tariff regulations, development co-operation and developing countries’ domestic policies, and their impact on the achievement of development goals aimed at accelerating growth and alleviating poverty.
Policy coherence for development: the case of the Least Developed Countries In a dynamic and globalised world, most developing countries have been striving to improve their economies through policies that are not always coherent with their domestic objectives and those of the Millennium Development Goals. This criticism is widely shared by the civil society in the Least Developed Countries (LDCs), especially by farmer organisations and professionals of the agricultural sector whose voices are being heard in international forums across the globe. The foundations, such as healthy and well-trained people, communication infrastructures and investments that would foster steady economic growth and yield wealth to combat poverty, are lacking in most of these countries. Yet their TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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macroeconomic policies often do not seem to address these problems. For instance, in West and Central Africa where most of the countries’ economies are desperately in need of capital investments, the French-speaking countries have decided - in a deal with France - to deposit up to 60% of their export earnings in an account abroad, thereby depriving their economies of these important resources. Besides, developing countries have not laid adequate emphasis on education and training as well as investment in communication and transport infrastructures whereas their economies need qualified manpower, in order to be more productive and to participate effectively in regional and world trade. Given that their economies are usually dependent on their agricultural sectors, the West and Central African countries should: •
Promote public investment in agricultural infrastructures and ensure that credit needed to modernise production and improve the competitiveness of agricultural products are available and accessible mainly to producers.
•
Follow consistent policies to encourage private investment in order to diversify and intensify production.
•
Adopt fair trade policies when it comes to agricultural activities and agricultural exports. In this regard, developing countries should strive to increase the share of agriculture in their public expenditures so as to promote and create an environment conducive to agricultural and rural development. Unfortunately, the majority of these countries have failed to adopt and implement these policy measures. Some of them have tried but they have failed to do so consistently. The lack of such policy measures has a negative impact on growth in the agricultural sector and therefore on farm income, which is essential to increasing demand for basic non-farm products and services in the rural areas. In turn, this has the potential to create employment and therefore to contribute to poverty alleviation. Secondly, these countries’ economies often rely heavily on foreign markets and aid although empirical evidence shows that development should first depend on internal market and local resources in order to be sustainable. Besides, most of the countries are exporters of primary materials and commodities, which implies that their economies are dependent on the prices of goods which also happen to be the lowest and the most volatile in the world markets. As these countries do not process their products before exporting and selling them, they deprive their economies of the added value that could be gained if the processing was done in the producing countries. The added value is often several times greater than the prices of the raw material being exported. Furthermore, in exporting raw products, Third World countries lose all the jobs that could have been created if these goods were also processed at home. The loss of such added value, coupled with job losses, could prevent economies in developing countries from growing as fast as the economies in developed countries which enjoy the benefits of added value from processing goods at home. Thus, economic growth of developing economies could continue to lag farther behind, thereby widening the gap between these economies and those of developed countries. Thirdly, while most developing countries are signatories to Regional Trade Agreements (RTA) within the framework of regional economic integration and Economic Partnership Accords (EPA), they are also engaged in the World Trade Organisation (WTO) negotiations. They have also signed bilateral and multilateral accords which impact their development policies. However, these agreements seem
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84 – Part I. Setting the Scene limited in their usefulness. It is not always obvious that these countries will gain from the accords they have signed or that they will derive tangible benefits from the outcomes of the WTO negotiations. While it is possible that the countries would benefit from a boost in trade through an integration process that could also expand the market, the fact remains that regional trade agreements implemented among LDCs during the last four decades have not lived up to expectations. In Africa, the economies of several countries involved in these trade agreements have stagnated or declined. This is a clear indication that the overall impact of the regional trade agreements and the integration processes in which these developing countries are involved are not always coherent with their development policies and strategies. During the 1980s, when African economies hit a recession, they were advised to sign a drastic Structural Adjustment Programmes (SPA) with the Bretton Woods institutions (IMF and the World Bank). As these programmes very often increased debts for developing and poor countries, most of the programmes have not yielded the expected returns. The conditions imposed by these programmes are generally incoherent with the main objectives of increasing agricultural production, generating more income in rural areas and reducing poverty. Cutting extension services and resources for research on the one hand, and taking measures which lead to an increase in the prices of inputs, on the other hand, have reduced the resources available for making improved technology packages available to farmers in countries that signed SAPs. Therefore, most agreements and accords are not coherent with the objectives of developing countries. This means that if developing countries continue to pursue their policy objectives within the framework of these accords and agreements, then they are more likely to experience relatively small or even declining growth and may therefore remain underdeveloped. The solution lies in poor countries reviewing their domestic policies as well as the agreements and accords to which they are party with bilateral and multilateral partners in order to make them coherent with their own development policies and strategic objectives. To that end, better and coherent domestic development policies should be formulated and implemented and countries should show the initiative to adjust these policies to social, natural and economic changes as they occur. This calls for good governance so that the countries can take the right decisions, set priorities, ensure better resource allocation and management, and make sure that they are on the right course to development.
Coherence of developed countries’ development policies Although in general policies followed by developed countries affect the economies of Third World countries in one way or another, agricultural policies in particular have the most significant impacts on the welfare of poor countries. In general, agricultural policies pursued by developed countries can be grouped into four categories. First, they provide domestic income and price support to their farmers, thereby providing their farmers with opportunities to manage their resources better and be more competitive. Secondly, they usually adopt regulatory measures for food safety, environmental protection, consumer safety and protection, as well as intellectual property rights that affect trade in agricultural products. Thirdly, these domestic market interventions are usually supported by trade policy measures such as border tariffs and/or export and even domestic subsidies. Finally, at the international level, they often pursue development co-operation policies, including agricultural assistance and food aid programmes, trade preference to LDCs, duty-free and quota-free access to markets and trade liberalisation. A fundamental question in this context could be: If the developed countries’ policies have the potential to influence TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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progress in the Third World countries, then in pursuing their policy objectives, are developed countries concerned about the coherence of their policies for the development of the poor countries? In this section of the paper, we will try to answer the above question and to determine the impact of coherence in developed countries’ policies or the impact of their inconsistencies on the development of poor countries. In that context, we will also assess the African countries’ chances of attaining the Millennium Development Goals. Furthermore, we will examine the coherence of agricultural policy measures (categorywise) adopted by developed countries vis-à-vis the developing countries’ objectives and the impact of these policies on both poor countries and on their rural populations in particular.
Income and price support measures These two domestic policy measures often adopted by developed countries to increase incomes for their producers are usually coupled with trade-distorting border tariffs and/or export subsidies that lower world prices and reduce both exports and welfare in developing countries. According to Mathews2, the loss in welfare incurred by developing countries is estimated between five and ten billion dollars annually. Empirical studies have shown that developing countries have the most to gain from the withdrawal of tariff barriers and that subsidies are trade-distorting, with export subsidies being the most disruptive instruments for particular commodities and in particular markets. The adverse impact of subsidies on developing countries’ cotton is a topical issue. Despite such welldocumented evidence, developed countries committed to helping the poor countries attain the Millennium Development Goals have not given up, and are not willing to abandon, at least for the time being, those policies that are not coherent with the objective of helping poor countries in their endeavours to foster living better conditions for their people. Consequently, developing countries need to negotiate with developed countries so that they progressively phase out such policy measures that are incoherent with their development objectives.
Regulatory measures Although commodity standards in general and food standards in particular are necessary and good for international trade, especially for developing countries, more and more developed countries are setting stringent standards for food and other agricultural commodities. In fact, to address their populations’ growing concern about food safety, food quality and environmental protection, developed countries, sometimes unilaterally, set new standards and adopted more regulations which the poor countries found difficult to meet. These measures have effects on the level of trade between developed and developing countries. They reduced exports and export opportunities in some cases and diverted trade from developing countries that had difficulties in meeting the required standards. In the absence of adequate infrastructures, and with their low level of resources, most developing countries find it difficult to comply with the new regulations and consequently their market shares for exports in developed countries are declining.
2.
Matthews, A. (2005), “Policy Coherence for Development: Issues in Agriculture’’, An Overview Paper prepared for the OECD Global Forum on Agriculture: Policy Coherence for Development.
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86 – Part I. Setting the Scene For example, when the European Union adopted its new regulation on Maximum Residue Limits in fruits and vegetables, two African countries, Cameroon and Côte d’Ivoire, suffered a sharp decline in their export earnings from these commodities. It took the two countries a few years to recover partially from these losses, which had a negative impact on their finances and on the welfare of their producers. Sanitary and PhytoSanitary (SPS) regulations are made to protect consumers so they are important in trade. However, SPS regulations have been and are being used by developed countries to discriminate against and limit trade in some commodities, especially from Third World countries. In those cases, the process of adopting SPS regulations becomes an incoherent policy that negatively impacts on the development objectives of Third World countries in particular.
Development co-operation policies Development co-operation policies, including agricultural assistance and food aid programmes, trade preference to LDCs, duty-free and quota-free access markets and trade liberalisation have been among the policies and strategies used by developed countries in the framework of development co-operation to assist developing countries in their efforts to the Millennium Development Goals. Although these policy measures are useful for both developing and developed countries, it is however important to note that they have not always helped the Third World countries attain the expected level of development. Development assistance is consistent with developed countries’ commitment to help developing countries pull out poverty by improving their economic growth and income generating capacity. But there is no coherence for development if developed countries increase their foreign assistance to developing countries while creating trade distortions against some of the most important commodities like cotton that could foster economic growth in the poor countries. Furthermore, developed countries have not always provided sufficient assistance, either in terms of quantity or quality, on a timely basis. Therefore, foreign assistance in most cases becomes ineffective since it does not allow developing countries to rationally invest and get positive returns on their investments. In the trade sector, developed countries have offered non-reciprocal trade preferences to developing countries so as to boost their exports and contribute to their development. They have also used duty-free and quota-free measures to provide additional assistance as a means of integrating the vulnerable economies of poor countries into the global economy. Yet, in the framework of Economic Partnership they are negotiating multilateral liberalisation that will reduce the value of the preferential marginal gains enjoyed by developing countries through non-reciprocal preferences. This will reduce income prospects for developing countries and will eventually impede their development. With food aid, developed countries have provided direct help, enhanced the availability of food in markets by lowering prices and have improved sustainability of balance of payments for poor countries facing foreign exchange shortages. Empirical evidence shows, however, that direct food aid creates distortions in developing countries and regional markets, a situation that leads to dependence on food aid, negative impacts domestic food production and changes in local nutritional habits which cannot be sustained. Several studies have demonstrated that food aid for development is more expensive than commercial food imports. Therefore, providing funds to developing countries for purchasing food on commercial terms is better than direct food aid. Nevertheless, most developed countries continue to use direct food aid as a way of helping developing countries cope with their food security problems. In some sense, this TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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strategy helps developed countries to rid themselves of their surplus even though it is not coherent with the development objectives of their partners.
Conclusion It is a well-established fact that improved income-generating capacity and economic growth are necessary for poverty reduction. Policy incoherence in development leads to actions that reduce both growth and income prospects for Third World countries. Yet, poor countries as well as developed countries continue to implement policies which are not coherent with their objectives and with the Millennium Development Goals. With respect to the poor at large, policy coherence for development means that national and global governance policies should not contradict the Millennium Declaration and its Development Goals. For instance, it is policy incoherent when developed countries increase foreign development assistance while adopting domestic and trade policies that create market distortions against strategic and important commodities vital to the development of Third World countries. A case in point is African cotton. Policy coherence for development in favour of the poor will therefore mean that all government and bilateral and multilateral donors should work towards initiating, implementing and adjusting, at both national and global levels, policies that are not only complementary but also mutually supportive – policies that reinforce poverty reduction, hunger alleviation and food security goals. In other words, where poverty allevation is concerned, policy coherence for development means supporting, creating and nurturing synergies to achieve pro-poor goals. In view of the difficulties encountered by West and Central African States in establishing “coherent” development policies, a new form of power balance is emerging with a well-structured civil society poised to defend the interests of the poor. The new trend is an integral part of a dynamic democratisation process.
REFERENCES Anderson, K. (2004), “Agricultural Trade Reform and Poverty Reduction in Developing Countries”, World Bank Policy Research Working Paper 3396, Washington, DC, World Bank. OECD (2003), “Policy Coherence: Vital for Global Development”, Policy Brief, OECD, July 2003. OECD (2004a), “Policy Coherence: Vital for Global Development”, Policy Brief, OECD, January 2004. OECD (2004b), Agriculture and Key Issues for Policy Coherence for Development, OECD, January 2004. OECD (2004c), The Impact of Coherence of OECD Country Policies on Asian Developing Economies, OECD, May 2004. OECD (2005), Making Poverty Reduction Work: OECD’s Role in Developing Partnership, OECD, September 2005.
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PART II. ENHANCING GLOBAL AGRICULTURAL TRADE THROUGH A FAIR AND MARKET ORIENTATED TRADING SYSTEM
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Chapter 6. ENHANCING GLOBAL AGRICULTURAL TRADE: A STATUS REPORT Carmel Cahill Directorate for Food, Agriculture and Fisheries, OECD Abstract This paper looks at recent trends in trade in agricultural and food products, focussing on some key changes in the direction of trade flows between developed and developing countries. It reviews the current situation with respect to levels of support and protection in the OECD region and in some key non-OECD countries that are major players in agriculture and in agricultural trade. Market access and export competition issues are also reviewed. Some preliminary results are given from a recent OECD study that examines the impact of across the board reform of domestic support and protection at global, national and household levels.
Broad trends in world trade in agricultural and food products Understanding the changing structure of trade flows in agriculture and food products is important in understanding the trade policy stance of different countries and groupings as reflected in the on-going Doha Development Round. It is also important in understanding the scale and incidence of the trade liberalisation impacts projected in trade modelling exercises and how and why they differ across regions, countries and commodities. An indication of market share of the OECD, the Least Developed Countries (LDCs) and the rest of the world is given in Table 1. Agricultural trade is still dominated by the countries that constitute the OECD area. These countries account for over 70% of world exports of agricultural products and about 75% of world imports. Although these shares are slightly lower in recent years than prior to the Uruguay Round Agreement on Agriculture, the change has been small, and does not challenge OECD’s dominance. Least Developed Countries on the other hand account for a tiny share of world agricultural trade. That share has been growing much faster for imports than for exports, but remains small. Other countries have maintained their share of world exports in the post URAA period, but their share of imports has increased. Table 1. Shares by regions of agricultural trade Share of exports OECD LDCs All Others
Share of imports
1990-1994
2001-2004
1990-1994
2001-2004
71.4 0.4 28.2
71.0 0.8 28.1
77.1 0.4 22.5
75.0 1.1 23.8
Source: UN Comtrade, 2005.
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92 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System These broad indications mask some significant changes in the composition and direction of trade flows. Trade in processed products has been growing faster than trade in commodities and trade among developing countries has been growing faster than trade between developed and developing countries [FAO (2004) The State of Agricultural Commodity Markets]. However, as seen in Table 2, with the exception of south-south trade (developing country to developing country) growth in agricultural trade flows slowed following the URAA. Table 2. Growth by region in agricultural exports* 1990-1994
1994-2004
Developed to developed
3.1
Developed to developing
8.6
4.3 5.3
Developing to developed
8.0
2.0
Developing to developing
16.3
7.5
*Average annual growth rates. Source: UN Comtrade database, September 2005.
A feature of agricultural trade developments in recent decades has been the switch in the trade status of developing countries, who as a group have become net importers. This is illustrated in Figure 1. Since the mid 1980s LDCs have consistently reported net imports of agricultural and food products, in contrast to the 1960s and 1970s when they were net exporters. Similarly for all developing countries although for this much bigger grouping, the net trade status has fluctuated between net importer and net exporter status in recent years. For this group also the contrast with the earlier period is clear. With the exception of a short period at the beginning of the 1980s, developing countries were consistently net exporters of food and agricultural products up until the early 1990s. How important are agricultural trade flows in overall economic terms for the different regions or groupings? The answer to this question helps in understanding the concerns that underpin negotiating positions. For OECD countries generally, despite overall dominance of global trade flows, agricultural imports and exports account for less than 2% of GDP. Nonetheless, agricultural exports are relatively more important for countries like Australia and New Zealand (3 and 12% of GDP respectively). In contrast agricultural trade relative to GDP is much higher for LDCs – over 4% for imports and almost 3% for exports. For remaining countries (those not belonging to OECD or to the LDCs) the share of both imports and exports is in the region of 2.5%. Among the non-OECD countries agricultural exports are particularly important in the economies of countries such as Brazil, Argentina and Chile. Table 3 summarises these indicators for the main OECD and non-OECD country groupings.
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Figure 1. DCs and LDCs Importers 20
15
10
5
Developing countries, Agricultural Products
Developing countries, Food and Animals
0
LDCs Agr Products
-5 LDCs Food and Animals
-10
19 61 19 63 19 65 19 67 19 69 19 71 19 73 19 75 19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03
-15
Source: FAOSTAT.
Table 3. Significance of trade and agricultural trade All exports as a share of GDP
All imports as a share of GDP
Agricultural imports as a share of GDP
Agricultural exports as a share of GDP
OECD
17.4
18.9
1.5
1.7
LDCs
12.6
20.0
4.3
2.7
All others
29.2
26.9
2.4
2.6
Source: UN Comtrade, 2005; World Bank.
No attempt is made here to analyse or explain these changing trade flows. However, the underlying economic drivers and their interpretation are likely to be very diverse. A switch to net-import status could be the reflection of an agriculture sector unable to supply adequate food for a growing population or unable to compete with subsidised exports from developed countries. But, it could also reflect a more positive evolution towards specialisation in a growing economy that is switching resources into production of non-agricultural goods and services and increasingly able to import food to meet the needs of a larger and better-off population. How a country fares as a result of trade liberalisation depends, inter alia, on the importance of the liberalising sectors in its economy, its net trade status for different products and on the changes in the terms of trade that result from the process. These TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
94 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System issues will be explored further in the section presenting the results of OECD work on the impacts of agricultural and trade policy reform.
Support and protection in OECD agriculture OECD estimates levels of support in agriculture for each of its member countries and for selected major non member economies, in the form of the Producer Support Estimate. The trend in this indicator for OECD as a whole and an illustrative selection of countries is shown in Figure 2. Although declining, the percentage PSE for the OECD area as a whole has remained stubbornly high, currently in the region of 30%. The variation across countries is wide, with Japan Korea, Norway and Switzerland all reporting %PSEs in excess of 50, while the reported levels for Australia and New Zealand have been below 5% for a long period. Although it fell significantly in the decade to the mid 1990s, support to agriculture in the US has been relatively high in historical terms in most recent years. The EU supports its farmers to a greater degree than the OECD average, although the overall level has been falling slowly. Major non-OECD players in world agricultural production and trade for whom the PSE has been estimated tend to fall systematically into the lower range of support levels, as evidenced by PSEs for China of 6% (2000-2003) and Brazil for 3% (2002-2004). There are many ways in which governments can deliver support to farmers. Traditionally they have chosen to support prices above market clearing levels with the help of border measures such as tariffs and quotas. More than 90% of support to agriculture was delivered in this way or through input subsidies at the time the Uruguay Round was launched. These measures have been shown to be the most distorting in terms of generating production and trade surpluses. It is also increasingly acknowledged that such measures are seriously flawed as vehicles to deliver income support to agriculture because of leakages to unintended beneficiaries outside the sector. They also have perverse distribution impacts which result in the bulk of the support going to those who already produce the most. In recognition of these flaws, and under increasing pressure resulting from the Uruguay Round and the current DDA negotiations, some OECD governments have been making significant changes in the way they deliver support to their farmers. Most noticeable has been a shift away from price supports to direct payments that are, over time, increasingly linked to historical or other fixed parameters and which as a result as likely to be less distorting in terms of production and trade. As can be seen in Figure 3 the share of this type of measure in the overall composition of support to producers in the OECD has increased significantly. It should nonetheless be noted that the most distorting measures still dominate the overall picture.
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Figure 2. How levels of support have evolved
50
40
30
EU OECD USA China South Africa Australia Brazil New Zealand
20 10
0
-10
19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 0 20 3 04 p
-20
Source: OECD PSE/CSE databases.
Figure 3. Composition of support 1986-88
2002-04
Price support
Payments based on area planted/animal numbers Payments based on historical entitlements Payments based on input use Payments based on input constraints Miscelaneous
Source: OECD PSE/CSE databases.
Governments are not able to raise farm prices above those prevailing on world markets unless border measures are in place. Since the Uruguay Round Agreement on Agriculture, only tariffs and tariff-rate-quotas have been permitted. Despite the reductions TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
96 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System in tariffs agreed and since implemented, bound tariffs in agriculture remain high. Figure 4 shows their distribution for the OECD Quad countries, comprising the US, the EU, Canada and Japan. Although shown in highly aggregated form, it is clear that a significant share of tariff lines carry tariffs that are in excess of 20%, and that the incidence of bound tariffs in excess of 100% is quite significant. Although not revealed in this graph, these high tariffs often apply to sectors of agricultural production that are important and extremely sensitive in the countries concerned – rice in Japan, dairy products in Canada, beef and dairy products in the EU, sugar and dairy in the US. In order to ensure that some degree of market opening occurred as a result of the URAA, despite the persistence of very high tariffs in many sectors, a system of tariff rate quotas was instituted as part of the agreement. Under these arrangements opportunities were to be allowed for the importation of specified shares of domestic consumption of particular products – again mainly those subject to the highest tariffs. These imports were to occur at tariffs significantly lower than the bound tariffs described in Figure 4. Again, the results of this market opening device were relatively modest. Many tariff-rate quotas have not been completely filled throughout the period since URAA implementation began, and overall, utilisation of these export opportunities has tended to decline from initial levels. Whether poor and falling fill rates relate to aspects of the way in which the TRQs are administered, or are a reflection of underlying market conditions, is difficult to determine. Figure 5 provides a snapshot of levels of import protection accorded by OECD and non-OECD countries to the main product groupings, towards the end of the period of UR tariff cuts. In contrast to Figure 4, the tariff rates used here are the applied rates (not the bound or maximum legally allowed rates under the WTO) and also reflect the preferences that are granted to some countries by others under various bilateral, multilateral, reciprocal and non-reciprocal arrangements. These aggregates confirm the existence of much higher rates of protection in both primary and processed agricultural products than for textiles or manufactures generally. They also confirm that OECD countries tend to protect their primary agricultural sectors from imports to a significant degree, while both OECD and non-OECD provide relatively high levels of protection to processed agricultural goods. An interesting feature that emerges from this figure is that developing countries generally accord much higher protection against textiles and manufacturing goods than they face themselves in trying to access OECD markets, thus potentially restricting growth in trade among non-OECD countries, across the whole range of agricultural and manufactured goods.
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Figure 4. MFN Bound tariff distribution-QUAD
60
50
40 US EU CANADA JAPAN
30
20
10
0 0 <5
5 <10
10 <20
20 < 50
50 <100
100+
Source: OECD/AMAD.
Figure 5. Average applied import tariffs by sector and region (2001)
20
%
15 OECD levied non-OECD levied
10
5
0 Primary Agriculture
Processed Agriculture
Textiles, clothing
Manufacturing
Source: OECD (2006), Global National and Household Level Effects Trade and Agricultural Policy Reforms.
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98 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System Export subsidies were disciplined in the URAA, as a result of which resort to them has declined significantly. Countries for which the export subsidy disciplines were constraining, principally the European Union, have been able to scale back their use as a result of domestic policy changes that resulted in sharp reductions in administered or policy-determined prices, accompanied by shifts to direct payments based on criteria other than output, such as area. Nonetheless, the EU, which still accounts for more than 90% of notified export subsidies under the URAA, has continued to subsidise its exports of some products up to close to the permitted limits for a number of important commodities, among them cheese and other dairy products. Overall, however, both the volume subsidised and associated expenditures have fallen dramatically [WTO(2002), Export Subsidies, Background Paper by the Secretariat, TN/AG/S/8]. Under the current Doha Development Agenda negotiations, complete elimination of all export subsidies is under discussion, conditional on satisfactory ways also being found to discipline the use of export credits, the trade distorting impacts of food aid, and the distorting effects of the activities of state trading enterprises that have monopoly control over exports of some commodities. Work undertaken by the OECD with respect to export credits has shown that they are associated with a relatively small share of agricultural trade in general – 4.4% – and that the share of the largest user – the US – is also small at around 5.2%. The subsidy element in these arrangements has also been found to be small – no more than 4% for the OECD as a whole and 6.6% for the US (OECD (2004), Agriculture and trade liberalisation: extending the Uruguay Round Agreement). Significant progress has already been made in defining and agreeing ways in which the subsidy element of export credits can be disciplined, but discussions on food aid and state trading have not yet been concluded. Irrespective of whether these export issues are mere irritants, or significant determinants of international trade in food and agricultural products, agreement to effectively discipline them in the context of the DDA will be important in locking in the progress that has already been made. It will also provide reassurance to countries that are reluctant to open up access to their markets that they will not be flooded with large quantities of subsidised exports, should they do so.
Global, national and household effects of trade and agricultural policy reform OECD has been involved in a major study designed to improve understanding of the nature and magnitude of market and welfare effects of reducing trade protection and trade-distorting domestic supports globally and in those countries implementing the reforms [for a more complete description of the models used – GTAPEM and several household models – the scenarios undertaken and the detailed results see OECD (2006 forthcoming) Global, National and Household Level Effects of Trade and Agricultural Policy Reform]. The specific policy scenario evaluates the changes that would accompany a halving of all merchandise tariffs and agricultural export subsidies worldwide and of agricultural domestic support in OECD countries. National and sectoral impacts were analyzed using a global general equilibrium model. Household level policy effects associated with these national level impacts, were evaluated using a variety of different micro-level models in five country case studies: Brazil, Italy, Malawi, Mexico, and the United States.
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Economic welfare changes as a result of reform The changes in economic welfare that result from the reform scenario already described are summarised in Table 4, in a way that allows the effects to be decomposed according to the policy category and country grouping which is the source of the change, and according to the effect on specific countries and regions, both in absolute terms and as a percentage of GDP. Table 4. Decomposition of welfare effects by broad policy category, region and country implementing the reforms, EV million USD Total Welfare
% of GDP
OECD Agriculture
non-OECD Agriculture
OECD non-Agriculture
non-OECD non-Agriculture
44 268
0.1
23 361
3 124
6 694
11 357
OECD
33 459
0.1
21 407
1 871
-248
10 680
Non-OECD
10 809
0.2
1 954
1 253
6 943
677
1 006
0.2
885
97
50
8
269
0.0
747
29
-376
-130
European Union 15
10 791
0.1
7 005
702
-1 521
4 775
Japan
10 007
0.2
5 746
-21
2 091
2 195
Mexico
452
0.1
38
-30
463
-15
Turkey
631
0.4
158
92
48
334
United States
2 995
0.0
3 071
714
-2 218
1 457
rest of OECD
7 308
0.6
3 758
288
1 214
2 054
World
OECD Australia/New Zealand Canada
Non-OECD Brazil
1 730
0.3
1 178
94
367
96
China
3 739
0.3
-73
-199
3 373
635
India
1 723
0.4
72
544
378
735
484
0.3
-35
80
308
128
Malawi
24
1.4
19
-1
1
6
Russia
8
0.0
-133
166
55
-83
1 204
1.0
190
225
237
551
253
0.2
69
25
23
137
-240
-0.1
61
65
-136
-220
1 884
0.1
607
253
2 335
-1 309
Indonesia
Thailand South Africa rest of SS. Africa rest of World
Agriculture includes primary and processed food. Source: GTAPEM simulation results.
Welfare gains overall are significant – USD 44 billion – although they are in the lower range of estimates currently reported in the literature from similar studies. This is partly because the analysis is based on more recent data but also because other studies factor in benefits from policy reform that might come through other channels such as induced improvements in productivity or complementary reductions in transactions costs. The policy changes implemented by OECD countries would contribute the lion’s share of the global gain reported here and agricultural policy reforms account for most of that. It is notable also that OECD itself captures the bulk of the benefits. This reflects several factors, mainly that the OECD dominates in terms of the overall support and protection accorded to agriculture and is therefore itself the most likely to gain from the removal of the resulting distortions and inefficiencies. Another element in the explanation relates to the continuing dominance by OECD of agricultural trade in the base period for the study.
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100 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System It should be noted also, however, that the reductions of import tariffs by non-OECD countries also yield a significant contribution to the reported OECD gains. Synthesis of Main Numerical Results ●
67% of the benefits come from OECD reforms.
●
78% of the benefit of OECD reforms comes from agriculture.
●
90% of the benefits of OECD agriculture reforms go to OECD countries.
● 70% of the gains to non-OECD countries comes from liberalisation of tariffs on textiles and industrial goods.
Non-OECD countries as a group also gain overall from the hypothetical halving of OECD farm support and protection – but not nearly so much as OECD countries themselves gain from such reform. Likewise, although not shown here, agricultural value added for the non-OECD region increases. These gains are concentrated in a comparatively small number of middle-income agricultural exporting countries, and Brazil is dominant in this group. LDCs as a group are virtually unaffected by the agricultural policy reforms. Some report overall welfare losses, but their overall magnitude is insignificant as are the gains for some other LDCs. These findings reflect the minor role that these countries play in agricultural trade and the relatively minor role of agricultural trade in their economies in the base period. In fact, findings show much larger potential gains for the non-OECD region from reduction in the trade protection that OECD countries afford their producers of textiles and other industrial products than from reduction in OECD agricultural support. The scenario reported here involved a simultaneous global reduction in import tariffs applying to both agriculture and goods trade, and a reduction in domestic support in OECD countries. The reported welfare gains derive overwhelmingly from the tariff changes. OECD gains from both agricultural and non-agricultural tariff reduction but the former dominates. In the case of non-OECD countries, virtually all the gains arise through market access improvements rather than through the reform of domestic support, but in this case it is reductions in non-agricultural tariffs that are of greatest significance for non-OECD countries. The direction and trend of the predicted changes reflect many complex factors. Among them, the relative importance of agricultural trade compared to trade in goods, the terms of trade effects that result from the reform process and the starting levels of protection are all important (Tangermann 2005, “Organisation for Economic Co-operation and Development Area Agricultural Policies and the Interests of Developing Countries” in American Journal of Agricultural Economics, 87, N°5).
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Table 5. Decomposition of global welfare gains by support category and region implementing the policy change, million USD OECD Import tariffs agriculture Capital payment
17 546 875
Export Payment
660
Intermediate input payment
181
Output payments Import tariffs non-agriculture Total
3 128
3 928
Land payment
Subtotal agriculture
Non-OECD
20 674 3 928 875
-3
657 181
-97 23 093
Total
-97 3 124
26 217
6 694
11 357
18 051
29 787
14 481
44 268
Elements do not equal exactly to the total due to errors in approximation. Agriculture includes primary and processed food. Source: GTAPEM simulation results.
Household level impacts As indicated above, household level policy effects were evaluated using a variety of different micro-level models in five country case studies: Brazil, Italy, Malawi, Mexico, and the United States. The case studies differ in their construction, reflecting the different structures of the economies as well as data availability. But, they each embed micro (household) level information in a macro (region or economy-wide) behavioural model and they each contain groups of “representative households” that collectively represent the totality of household types in the economy. The key elements in tracing out the distributional impacts of reform are household responses to policy change, products and factor market interactions, and economy-wide linkages. The detailed categorisation of households differs in each study. However, there is a broad distinction between commercial and non commercial farm households (with one or more sub categories in each case). The former tend to behave more like firms, consuming little of their own output and supplying few of their own inputs. The non-commercial category differs considerably between developing and developed countries. In poorer countries, this category corresponds to subsistence or semi subsistence households. In richer countries, the non commercial category typically equates to “lifestyle” or retirement farm households, which are characterised by high levels of off farm income. Two further broad categories of household are agricultural wage earners and urban (consumer) households. These groups may be particularly important in developing countries, where there tend to be more landless workers and the urban population spends a substantial share of its income on food. In both developed and developing countries, the immediate effects of reforms on commercial farmers tend to be greater than the incidence on non-commercial farm households. If a commodity sector stands to gain on aggregate from multilateral reform, say due to higher export prices, then commercial producers in that sector will reap the majority of those gains. Similarly, if the sector stands to lose, because lower domestic protection is not sufficiently offset by higher world prices, then commercial farmers will incur the majority of those losses. Non-commercial farms tend to have higher off-farm income, which dampens the effect of price changes on total income, and in developing countries they also consume a significant share of what they produce, which has a similar TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
102 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System effect. In some cases, non-commercial (subsistence) producers may consume more than they produce, in which case the incidence of reform is reversed. The main features of the results for the individual countries that were the subject of the case studies are as follows: •
In Brazil welfare gains are widespread across household types. Poorer categories of both urban and rural household are better off and the incidence of poverty falls but inequality among agricultural producer household increases. In addition, agricultural employees gain more than any other type of agricultural household, as demand for farm labour increases.
•
The vast majority of households in Malawi are poor. Commercial producers of the dominant cash crop, tobacco, who are less poor, gain from higher prices. The resulting increase in their demand for labour benefits poor non-commercial households who cannot grow tobacco, but lowers the incomes of poor farm households that hire in labour. On the other hand, the effects of maize price increases/decreases (the main food staple) are very context specific, depending on the range over which price increases occur, whether the household has a net surplus or deficit, and the relationship between maize prices, wages and fertiliser prices.
•
In Mexico, the principal scenario implemented involved declining prices for cash crops and livestock, and lower urban wages. The estimated real incomes of all agricultural households fall in response, but the declines are greatest for producers with more than 5 ha of land. There are similar, but much smaller impacts for landless households and smaller producers with less than 5 ha. These average impacts for Mexico could mask significant regional differences.
•
In Italy, all categories of farms post losses following global agriculture and trade policy reforms. Medium to larger family farms lose relatively more than the small, limited resource and retirement farms due to simulated falls in land rental rates due to support reductions under the global reform scenario. All categories of urban households gain from the reduced tax burden that comes with reductions in budgetary payments. Overall national welfare improves.
•
In the United States all categories of farms lose payments as a result of the reform and although the loss is greatest in absolute terms for very large farms, it is residential and “farm occupation” farms that lose most relative to value of production. Once the adjustments triggered by the reform are complete all farm types gain. This occurs because the loss of subsidies is outweighed by the benefits arising from stronger international prices, notably higher wages and improved returns to assets. The greatest income gains accrue to residential and lifestyle farms because of their greater capacity to adjust than other farm household types. The case studies reported here are illustrative. The diversity of reported impacts within any given country will be context specific. Within any given population of farm and non- farm households there will be winners and losers depending on their output and factor mix and their off-farm earning possibilities, the importance of food in the household budget and other factors. Compensation or adjustment policy may be appropriate for those negatively affected but will need to be designed for specific households and contexts. The best adapted policy may fall outside the domain of TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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agricultural policy being more properly within the domain of broader social and development policy. Measures to improve adjustment capacity include public investments in area such as education and training, research and extension and health (notably in poor countries). Such policies need to be targeted regionally, or at the household level. Models like those used in the case studies can pick up variations in adjustment capacity and thus in the relative need for adjustment assistance. Providing that assistance could be important in creating the conditions that favour reform and market opening initiatives, which would benefit the majority of countries and the majority of households in them.
Summary and conclusion OECD dominates global trade in agricultural and food products and developments in recent years have had little impact on that dominance. Additionally, OECD countries on average continue to provide high levels of protection and support to their agricultural sectors, despite reform efforts that have been on-going for two decades and recently completed implementation of URAA commitments. It is therefore not surprising that when significant reductions in global protection and support are simulated most of the resulting gains accrue to the OECD countries themselves. Non-OECD countries provide relatively high levels of protection on imports both of agricultural and manufactured goods. Reform also benefits these countries. Welfare increases as a result of nonagricultural reforms carried out by the OECD countries are the main source of their income gains, but liberalisation of agriculture in both regions is also important. Almost all individual countries or groupings gain overall although, in many cases, both gains and losses are rather small. A complex picture of the distribution and incidence of gains and losses among different types of households within affected countries emerges. This suggests that carefully planned and targeted adjustment or compensation programmes could be helpful in getting reform and liberalisation underway so that the significant benefits simulated to occur overall, as a result of the process, can be realised.
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Chapter 7. HOW CAN POLICY COHERENCE ENHANCE GLOBAL AGRICULTURAL TRADE? Joachim von Braun and Tewodaj Mengistu International Food Policy Research Institute Abstract Since trade policy is an instrument for growth and development, this paper focuses on how to incorporate the Policy Coherence for Development (PCD) agenda into domestic and international agricultural policies. Progress in coherence in select developing countries’ market and trade policy is noted. The role of coherent policy sequencing is highlighted and exemplified in the cases of China and India. Further, since trade and investment interact, the central role of such links is elaborated on. The paper concludes that sound domestic and international trade policy must be an integral part of the PCD agenda. This has implications for the global trade policy agenda.
Introduction Aiming for policy coherence is part of aiming for “good” policy.1 The purpose of this paper is three fold. Firstly, it examines some of the major policy incoherencies in global agricultural trade. Secondly, it reviews the linkages between global agricultural trade and growth and poverty reduction in developing countries while focusing on their international trade and domestic market policies. Finally, it suggests actions that would improve policy coherence, which could in turn translate into enhanced global agricultural trade that would serve development. In approaching these issues we stress that trade policies are not goals, but instruments. PCD in relation to agriculture trade has to consider goals, such as growth, poverty reduction, environmental sustainability and improvements in health. We mostly focus on these goals and on poverty in particular.
1.
An irrelevant alternative which however exists is that of a policy being coherent but “bad,” as they say in former planned economies.
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106 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System We broadly follow Picciottio (2004) coherence taxonomy with some extensions.2 The focus will mostly be on how developing country policy makers can incorporate the PCD agenda in their domestic agricultural and trade policies. Because of the dynamic and complex nature of policy making, the need for a strategic approach for achieving policy coherence will be highlighted. Moreover, because trade and private investment (including foreign direct investment) at the national level are mediated through public investments, the central role of such investments will be elaborated upon as well. At least two questions need to be considered from a conceptual perspective: •
What are the principal driving forces of agricultural trade expansion and what might be the incremental contribution of policy coherence in facilitating further growth in agricultural trade? This question should lead us to normative assessments.
•
What actual policy coherences or incoherencies stand in the way of agriculture trade expansion, and why? This question will lead us into positive assessments. The “why” question in particular requires assessment in the context of initial conditions. Quite different from an ideal world of all-inclusive policy coherence, the reality of economies operating on different time-paths with differing initial conditions must be considered. In the next section, we briefly look at some of the underlying theoretical concepts of policy coherence and examine their relevance to agricultural trade policies for development. Then, in a second part, we review the existing incoherencies in global agricultural trade. In a third part, we review the linkages between enhanced global agricultural trade, growth, and poverty reduction. Finally, we conclude by suggesting some actions towards achieving better coherence in agricultural trade policies to reflect development objectives, as stipulated in the Millennium Development Goals (MDGs).
Some underlying theoretical concepts of PCD According to the theory of economic policy elaborated by Tinbergen (1952), “economic policy systems” are distinguished and subdivided according to the targets that policy makers have set. Economic policy instruments are then used to attain these targets. Tinbergen argued that there have to be at least as many instruments as targets in order to efficiently achieve the set targets, and because of the interdependence and inter-linkages among targets, these instruments need to be co-ordinated and not used in isolation towards achieving any one target individually (Tinbergen, 1952).
2.
As summarised in Dahlsten (2005) in “Key issues for Policy Coherence for Development: Agriculture”, the Picciottio (2004) taxonomy distinguishes the following four different dimensions of policy coherence for development: a. b. c. d.
Internal coherence: Is there consistency between the goals and objectives, modalities and protocols of an OECD government development policy (between bilateral and multilateral aid, technical assistance, and aid channelled through NGOs or private sector)? Intra-country coherence: Is there consistency among aid and non-aid policies in an OECD member government in terms of its contribution to development? Inter-donor coherence: Is there consistency of aid and non-aid policies across OECD member countries in terms of their contribution to development? Donor-recipient coherence: Is there consistency of policies adopted by rich and poor countries to achieved shared development objectives? TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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In terms of development policy, the Millennium Development Goals (MDGs), which contain eight different objectives, encompass multiple targets which have gained wide acceptance. Thus, according to the Tinbergen rule, since the development policy system is composed of multiple targets, it is first necessary to have as many instruments as targets in order to effectively achieve these targets, and secondly, to the extent possible, these instruments need to be co-ordinated. Therefore there has to be some type of coherence between the different policy instruments implemented (von Braun, 2005b). In a bid to improve such coherence, the Organisation for Economic Co-operation and Development (OECD) launched the concept of policy coherence for development (PCD), which it defines as a “process whereby a government makes an effort to design policies that take into account other policy communities, minimize conflicts and maximize synergies” (OECD, 2005a). To fully understand the notion of PCD, it is important to firstly recognise the dynamic framework of policymaking and secondly, the complexity of the PCD agenda. Indeed, development policy is a dynamic concept with ever changing economic and social contexts both nationally and internationally. In effect, the PCD agenda is also constantly evolving, as different policies are implemented to deal with changing contexts. As for the complexity of the PCD agenda, as well noted by Picciottio (2004), there are several dimensions that need to be considered. In addition, the policy field involves a variety of actors at different levels of governance (international, regional, national and local) and these various actors may be advocating for different and conflicting objectives (Fresco, 2004). Policy makers have to therefore reconcile these objectives through negotiations and compromise in order to come up with a coherent system of economic policies. This operates in a “market” of supply and demand of policies. However, as Rausser and Irwin (1987) warn, policy makers can be manipulated by powerful interest groups “seeking to enhance their own benefits to the detriment of society as a whole,” as “government policies, like markets, are sometimes imperfect and incomplete” (Rausser and Irwin, 1987). Rausser (1982) further points out that there are two main forces of political economy whereby policies are motivated by either “political economic seeking transfers (PESTs),”referring to the influence of powerful stakeholders seeking to enhance their own benefits, or by “political economic resource transactions (PERTs),” referring to the legitimate role of policy makers to enhance the benefits of society as a whole. Thus, since the domain of policy making in both developed and developing countries is imperfect, the influence of PESTs cannot be entirely removed. As a result, policy incoherence is endogenous to policymaking. Therefore, the economics of (in)coherence must not only address costs of lack of coherence in a comparative static sense, but also be concerned with dynamics. Thus it should also address transactions costs of changing (increasing or decreasing) (in)coherencies. Out of such considerations of transactions costs of policy change, may result optimal (non-zero) (in)coherencies. The PCD agenda is especially important in the context of agricultural trade in that while most developing countries’ comparative advantage lies in agriculture it is the most protected sector in global trade. Reducing incoherencies between agricultural trade policies and development policies would increase developing countries’ participation in global trade, resulting in increased pro-poor growth. To that regard, the PCD agenda in agricultural trade resonates with the Millennium Development Goals (MDGs), most directly with MDG 1 of “eradicating extreme poverty and hunger,” and MDG 8 of “developing a global partnership for development.” Indeed, since most of the poor rely on the agricultural sector for their livelihoods, trade driven TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
108 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System agricultural growth can increase farm incomes through multipliers and linkage effects, and foster off-farm economic activities, resulting in enhanced job creation both on- and off-farm. As for MDG 8, its aim is to facilitate the co-ordination of the policies implemented by both industrialised and developing countries toward achieving development objectives (von Braun, 2005b; Manning, 2005).
Incoherencies in agricultural trade In this section we look at the existing incoherencies in agricultural trade policies in both OECD and developing country policies. Since the PCD issues of OECD country policies have been comprehensively documented elsewhere (see Matthews, 2005), we will only very briefly review them here. The focus will be on PCD issues in overall international trade policy trends and developing countries’ policies. In the first sub-section, when dealing with intra-country (in)coherence, we extend the concept beyond OECD countries’ domestic and development co-operation policies to include developing countries’ domestic policies. And, to illustrate how internal policy inconsistencies in developing countries can negatively affect trade and growth, we take the example of agricultural market reforms undertaken in Sub Saharan African countries in the 1980s. In a second sub-section, we look at inter-donor and donor-recipient coherence. We first address PCD issues in the current agricultural trading system by discussing the current trends of the WTO negotiations, the concurrent bilateral and regional trade agreements, preferential market access schemes, and the increased use of Sanitary and Phytosanitary (SPS) measures in global agricultural trade. Second, we address the potential PCD issues that can arise from the interaction between development cooperation policies and developing countries’ domestic policies.
Intra-country incoherencies PCD issues in OECD countries internal policies PCD issues can arise from OECD countries’ aid and other policies. Non-aid policies include trade and domestic policies which protect and support domestic producers from competition, while aid policies include provide support to developing countries through financial flows and technical assistance. In what follows, we briefly examine how some of these internal policies can conflict with development objectives.
PCD issues in OECD trade and domestic support policies The objectives of OECD trade and domestic agricultural policies include increasing agricultural productivity, ensuring distributional equity for domestic producers and stabilising domestic market prices. OECD countries use a complex set of policies to achieve these goals. These policies either directly restrict market access to competing agricultural producers through tariff and non-tariff barriers, or assist farmers through market price support payments (output and export subsidies). The underlying PCD issue associated with such instruments is that these instruments are generally in conflict with development objectives.
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In the case of market access restrictions, industrial countries maintain average tariffs on agricultural products. These tariffs are two to four times higher than tariffs on manufactured goods (World Bank, 2005). Beyond this relatively high average tariff on agricultural products, some OECD countries maintain tariff peaks3 on certain agricultural imports and apply escalated tariffs4 on processed agricultural product imports. This hinders the diversification of developing country exports towards higher value products and keeps these countries dependent on primary product exports (IMF, 2002; Aksoy, 2005). Further, in addition to tariff barriers, OECD countries are increasingly adopting non-tariff measures5 to restrict access to their markets. The PCD issue here, apart from the restriction in market access, is that developing country exporters face uncertainties when it comes to whether or not they have access to OECD markets for certain agricultural products. Domestic support policies indirectly impact development objectives by encouraging over-production in OECD countries and subsequently reducing international commodity prices, resulting in a reduction of farmer incomes in developing countries.
PCD issues in OECD development co-operation policies OECD development policy objectives include promoting economic and social development by contributing to the achievement of the MDGs, and facilitating the integration of developing countries within the world economy. Some of the instruments used include general aid flows and food aid. Aid can enhance economic growth in developing countries by expanding domestic savings, and thus promoting investments. However, there are some potential conflicts between aid flows and the export competitiveness of the recipient countries. Some of these potential problems are as follows: 1.
Aid flows may cause the appreciation of the exchange rate of recipient-countries, which would make their exports less competitive on the world market.
2.
Recipient-countries may develop an “aid induced trade dependency” if the aid funds projects that require the importation of capital goods only produced in donor countries (Suwa-Eisenmann and Verdier, 2005). One particularly contentious area of OECD development co-operation is food aid. While food aid can be effective in alleviating severe hunger and malnutrition, it is often inadequately designed to meet these objectives. The main deficiency here is that donor countries use it not only as an instrument of development assistance but as instruments of domestic agricultural policy, foreign and trade policies. With few exceptions, to the extent that food aid has been ineffective in increasing producers’ prices and in stimulating
3.
Tariffs of 15% or more.
4.
Tariff rates increase along the food processing chain, resulting in higher tariffs for processed goods than for primary products.
5.
Non-tariff barriers can take on various forms including measures that are directly trade related (import quotas and anti-dumping measures); measures that limit trade through “technical measures” such as labelling, packing and sanitary requirements; and measures that arise from general public policy such as government imposed investment restrictions or the extent of intellectual property rights protection (UNCTAD, 2005b).
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110 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System new export markets (Barrett and Maxwell, 2005), it has not had a significant positive effect on domestic OECD farmers.
PCD issues in developing countries’ domestic policies There is a great deal of diversity in the policies adopted by developing countries. Some countries, mainly in East-Asia and the Pacific and more recently in India and China (as we will see in the next section), have made important progress in providing incentives to their agriculture and export sectors to spur trade and private investment through strategic public investments and appropriate sequencing of policies. Others, mainly SubSaharan African countries, have lagged behind. Nevertheless, since the mid 1980s, developing countries as a whole have undertaken significant reforms in their agricultural and export policies moving from importsubstitution favouring the manufacturing sector, toward export-oriented growth while concentrating on their comparative advantages. Despite these reforms however, some PCD issues still persist in their domestic policies, especially in regard to public investment choices and private investment promotion policies.
Towards major reforms In the past, in pursuing import-substitution ideals, many developing countries taxed their agricultural sector in favour of manufacturing through a wide range of instruments. These included export taxes on agricultural products in order to generate revenues, overvalued exchange rates to get cheaper imported inputs for the manufacturing sector (which penalised agricultural exports), and price controls that artificially kept food prices low for urban consumers (Aksoy, 2005). Since the mid 1980s however, developing countries have made great strides towards reforming their agricultural and export sectors. For the most part, the reforms eliminated the bias against their agricultural and export sectors; export taxes and price controls were removed and exchange rates were devalued (Aksoy 2005). In addition, developing countries as a whole have substantially decreased their average agricultural tariffs from 30% in 1990 to 18% in 2000 (World Bank, 2005). Nonetheless, particularly among middle-income countries, many are moving toward protection, mostly as a reaction to OECD countries protection (Aksoy, 2005). For example, when looking at total Producer Support Estimates (PSE) in India, Indonesia, China and Vietnam, Orden et al. (forthcoming) find that most of these countries have moved toward protection of their agricultural sector. Indeed, while Indonesia has consistently subsidised its agricultural sector (except during the 1998 financial crisis), Vietnam and China are moving towards protection and India’s support was countercyclical, i.e. support increased when world commodity prices were low, and decreased when world prices were high (Figure 1).6 6.
Total PSE = Market Price Support + Budgetary payments (BP). The Market Price Support is commodity specific and the authors may not cover all the commodities (depending on the specific country) so they have two versions of the Market Price Support; the scaled up version (MPSc) and the non-scaled up version (MPS). The MPS assumes that the commodities not covered do not receive any support, while the MPSc assumes that the non-covered commodities receive on average the same type of support as the covered commodities (i.e., the support for non-covered commodities is extrapolated from the average TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Despite this trend, protection of agriculture is much less of a PCD problem for developing countries than it is for industrialised nations. The main PCD issues in developing countries have to do with the inefficiencies of their domestic policies with regards to their investment climates, insufficient public investments in the agricultural and export sectors and under-investment in productivity enhancing science and technology.
support given to the covered commodities). Thus, the PSE = MPS + BP and PSEc = MPSc + BP. The closer the PSE is to the PSEc, the more commodities are covered for the estimates of market price support. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
112 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System Figure 1. Total Producer Support Estimates for India, Indonesia, China and Vietnam (% PSE)
India
Indonesia
30
80
20
60 40 Per cent
Per cent
10 0 -10
20 0 -20
-20
-40
-30
-60 -80
-40 1985
1987
1989
1991
1993
1995
1997
PSEc
1999
1985
2001
1987
1989
1993
1995
1997
1999
%PSEc
PSE
China
2001
2003
%PSE
Vietnam
30
80
20
60 40
10 0
Per cent
Per cent
1991
-10 -20
20 0 -20 -40
-30
-60
-40
-80
1995
1996
1997 PSEc
1998
1999
2000
2001
PSE
1985
1987
1989
1991
%PSEc
1993
1995
1997
1999
2001
%PSE
% PSE gives a measure of support relative to domestic farm revenue. Source: Orden et al. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Domestic investment climates and public investments Developing country governments need to first create the right incentives domestically for people to invest and to engage in international trade. To that effect, they have to reduce the incoherence of some of their domestic policies such as macro-economic, competition, foreign direct investment and regulation policies. Further, when undergoing economic reform, developing country governments need to pay special attention to the sequencing of their policies in order to avoid short-run disruptive economic shocks. Macroeconomic stability is fundamental for the proper functioning of markets and for attracting long-term investments. This entails that policy makers implement sustainable macroeconomic policies including adequate foreign exchange policies that will not penalise the agricultural sector. In addition, in the short-run, governments need to consider price levels in order to avoid excessive price volatility. Next, domestic market institutions need to be reformed in order to foster competition. This entails breaking up monopolies and monopsonies, and also better regulation of barriers to market entry and market exit. It may also entail privatisation of state-owned enterprises and reformulation of foreign direct investment policies in order to attract the desired type of foreign investors. To that effect, governments might want to run targeted investment promotions and/or implement performance requirements (UNCTAD, 2005a). Regulation policy is another area that requires reforms in many developing countries. Regulations can sometimes be excessive and costly, which is an impediment for trade and investment enhancement. For instance, cumbersome customs procedures can be a disincentive for traders to engage in import and export activities. Thus, streamlining procedures in order to remove unnecessary transaction costs should be part of the reform process (World Bank, 2004). Further, in many developing countries, especially in the least-developed ones, public investments to improve the agricultural and export sectors are necessary to spur agricultural trade. Indeed, investments in rural infrastructure and transportation improve market access for agricultural producers and also access to new technologies. They also enable better price transmission to rural areas. In addition, investments in telecommunications technologies can enhance the market integration of rural populations by enabling better access to goods and services as well as information, and also by reducing the cost of communications for producers and small businesses (Torero and von Braun, 2005).
Example of domestic policy incoherence as an obstacle Like many developing countries, several Sub-Saharan African countries undertook market reforms in the 1980s to reduce government intervention in agricultural markets. The main objective of the reforms was to increase producer prices of tradable agricultural commodities. With the reforms, it was expected that a vibrant private sector would intervene to take over the functions previously undertaken by inefficient state-owned enterprises (SOEs) or state marketing boards. However, in many cases, the private sector response failed to materialise because of inadequate implementation of reforms, the persistence of institutional deficiencies and inadequate provision of public services, along with the high susceptibility of Sub-Saharan African countries to risk factors such as droughts and floods, conflicts and diseases (Kherallah et al., 2002).
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114 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System In terms of the inadequate implementation of reforms, the policies of many governments were inconsistent. In some countries, governments liberalised internal trade while still maintaining their monopolies on external trade. For example, in Benin, the government maintained control of cotton exports despite the liberalisation of the internal trade of cotton. In addition, in some countries reforms were not sustained. There were instances of policy reversal due to external shocks or changing political circumstances such as a regime change (Kherallah et al., 2002). In terms of institutional deficiencies, most Sub-Saharan African countries lacked basic property rights protection and proper enforcement of contracts before the market reforms were undertaken. Thus, there was little institutional incentive for private companies to enter agricultural markets (Kherallah et al., 2002). Further, as pointed out by Badiane (2000) and Fafchamps (2005), entry to markets in certain countries, is restricted informally by networks of traders that create barriers to entry. Finally, in terms of inadequate provision of public services, many countries did not invest in structural factors such as roads and communication networks, which seriously hampered market access, the availability of marketing services and the accessibility of new inputs (Kherallah et al., 2002).
Inter-donor coherence and donor-recipient coherence Inter-donor and donor-recipient coherence issues arise in two settings: within the current international trading system, and within the interaction of aid policies and developing countries’ domestic policies. In this sub-section, we address the potential PCD issues within these two contexts.
PCD issues in the current international trading system Several PCD issues arise from global trade trends. First, there is a lack of consistency in the positions of developing countries and donor countries in international agricultural trade negotiations. The World Trade Organization (WTO)’s Doha “Development Round” of negotiations was launched in 2001. The long-term objective of the talks with regards to agriculture are “to establish a fair and market-oriented trading system through a programme of fundamental reform encompassing strengthened rules and specific commitments on support and protection in order to correct and prevent restrictions and distortions in world agricultural markets” (WTO, 2001). However, agriculture has become an impasse to the advancement of multilateral trade talks with the trading blocks refusing to make any substantial concessions. The objective for negotiations on agriculture and non-agriculture market access is “to agree on formulas and other details that will determine the scale of reductions in tariffs on thousands of products and on farm subsidies” (WTO, 2005). However, this agreement is going to be difficult to obtain as the current proposals still vary widely. Second, within the international trade system, there is an increasing volume of regional and bilateral trade agreements.7.Although these agreements provide reduced barriers to trade for partner countries and sometimes create common regulatory frameworks, which can translate in enhanced trade and investments (World Bank, 2004), 7.
As of January 2005, there were 312 RTAs that have been notified to the GATT/ WTO, of which 170 are currently in force. Beyond the RTAs notified to the WTO, there are an estimated 65 that are currently in operation (Crawford and Fiorentino, 2005). TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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they may be undermining multilateral negotiations. Indeed, bilateral and regional trade agreements (RTAs) go beyond the agreed multilateral rules and usually supersede them. Further, agreements often overlap and are increasingly complex. The risks here are as follows: 1. Multilateral negotiations can be undermined because developing country coalitions sign onto different bilateral agreements and RTAs. 2. Traders may experience higher costs in meeting rules for the different bilateral agreements and RTAs. 3. The “spaghetti bowl” problem may arise with multiple tariffs and increased inconsistency in trade rules and regulations between the various bilateral agreements and the RTAs, and between the bilateral agreements/RTAs and multilateral agreements. 4. Regulatory confusions in regional markets may be created and more problems with regard to implementation may be faced (Bhagwati and Panagariya, 2003; WTO, 2005). There is clearly a need for a review of the (in)coherent trade policies resulting from RTAs for global agricultural trade regimes. Third, many developed countries offer low-income countries preferential access to their markets. However, these schemes are also accompanied by several PCD issues. In theory, these schemes can help low-income countries boost their exports to developed countries. However, in reality, preferential schemes have several shortcomings as effective instruments for the promotion of developing country participation in international trade. (1) In their design, the preference schemes offered by OECD countries differ from each other, which means that there is no uniformity in preferential access. Further, many of these schemes exclude or restrict major agricultural products (including processed agricultural products) in which low-income countries have a comparative advantage (Brenton and Ikezuki 2005). (2) From the perspective of a developing country exporter, there is sometimes a high cost associated with preference compliance. For instance, satisfying the rules of origin8 can imply a high cost for the exporter relative to the expected gain from the preference, especially if the exporter deals with processed agricultural goods (Brenton and Ikezuki, 2005). In addition, preference schemes (with the exception of the European Union’s Anything But Arms programme) are uncertain and unpredictable in the long-run in that they are subject to legislative renewal. This creates a disincentive for the developing country exporter to incur long-run investments (Badiane, 2005). (3) For recipient-countries, preference schemes may create a dependence on exports of certain products, which can in turn hamper the diversification of their exports. Also, because of the current WTO negotiations for tariff reductions, the long-term viability of preference schemes is in doubt, and as a result, countries benefiting from preferences face the risk of preference erosion (Brenton and Ikezuki, 2005). Finally, due to the health and environmental concerns of developed country consumers, increasingly strict sanitary and phytosanitary (SPS) measures are being applied in developed countries. Such measures act as barriers to entry for developing country exports. This trend presents a series of PCD problems. First, although protection from food borne and agriculture related diseases is a legitimate goal, there is an 8.
Rules of origin are used to certify that preferences are granted only to exporters from eligible countries. For primary products (products produced in a single stage or wholly obtained in one country), origin is fairly easy to establish. This is not the case for processed products; rules of origin specify “how much or what kind of domestic processing must take place (Brenton and Ikezuki, 2005).
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116 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System underlying risk that some countries may use such measures for protecting their producers. Although international standards9 exist, the WTO’s SPS agreement allows countries to set up their own standards (based on scientific evidence), so that there is no uniformity in standards between countries. Thus, developing country exporters may find complying with different SPS requirements to be very costly. Furthermore, many developing countries do not have the financial resources or the technical expertise to participate in the discussions of international standard setting bodies, so that their needs and concerns are rarely covered by the resulting agreements (Josling, Roberts and Orden, 2004; Matthews, 2005; Jensen, 2002).
PCD issues in the interaction between development co-operation policies and developing countries’ domestic policies Development co-operation policies are supposed to support the domestic policies of developing countries in order to achieve the agreed targets of the MDGs. However, there are often incoherencies between (1) the different donors’ objectives and/or (2) between the objectives of donors and developing country policy makers’ objectives. The risk associated with the first one is that the differing objectives could result in contradictory policies. For example, when Malawi was undergoing agricultural sector reform, one of the obstacles was conflicting donor conditions. While USAID was pushing for the elimination of subsidies for fertilisers to small farmers, the World Bank and the European Union were funding the distribution of free fertilisers and hybrid seeds to poor smallholders (Kherallah et al., 2002). The risk with the second type of coherence issue is that developing country policy makers would not be receptive to the reforms suggested by donors, and would either not implement them or would implement them partially. We illustrate this point with the example of Vietnam, becoming one of the world’s leading rice trading nations. In the late 1980s, the government of Vietnam started implementing market reforms in rice by undergoing macro-economic reforms (establishment of positive real interest rates, devaluation of the exchange rate and liberalisation of trade), eliminating subsidies and price controls, cutting export duties, and strengthening property rights. These initial reforms led to a five percent annual increase of rice production from 1985 to 1995, of which 57% were derived by yield increases, 38% from cropping intensity and 8% from the interaction of the two (Ryan, 1999). By 1995, the government of Vietnam had engaged the country into transition from a planned economy towards a market economy. However, the country had little experience with institutions of market economies. As a result, the government was receptive to research on the appropriate policy environments that would allow the sustained positive impacts of the reforms undertaken in the rice sector. Supported by other multilateral organisations (mainly the World Bank and the Asian Development Bank), the International Food Policy Research Institute (IFPRI) undertook relevant research that helped reduce incoherence in the rice sector by providing new information, as well as by influencing the timing of the rice policies (Ryan, 1999).
9.
The Codex Alimentarius Commission was created in 1963 by FAO and WHO to develop food standards, guidelines and related texts such as codes of practice. The main purposes of this Programme are protecting the health of consumers and ensuring fair trade practices in the food trade, and promoting coordination of all food standards work undertaken by international governmental and non-governmental organizations (FAO/WHO, 2005). TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Linkages between enhanced global agricultural trade and growth and poverty reduction In theory, enhanced agricultural trade offers opportunities for economic growth and poverty reduction for two main reasons. Firstly, trade offers consumers a wider variety of food products at cheaper prices. Since the poor spend a substantial amount of their incomes on food, the availability of better and cheaper foods is reduces poverty. Secondly, since most of the poor live in rural areas and partly depend on the agricultural sector for their livelihoods, trade offers opportunities in terms of market access and therefore enables poor producers to increase their incomes. This can in turn lead to more dynamic effects such as increased opportunities for producers to diversify towards highvalue production, and increased non-farm economic activity in rural communities, offering job opportunities both on-farm and off-farm. Further, the availability of non-farm job opportunities provides rural populations with an incentive to invest in their education and skills to take advantage of the new off-farm job opportunities. However, global agricultural trade and global agricultural growth share a complex, non-linear relationship. There should not be any doubt about the power of trade for enhanced allocative efficiency and economic welfare. The last two decades have seen considerable expansion of agricultural trade with an average growth rate of 4.8% from 1985 to 2003, exceeding those of the value-added of the global agriculture sector (which grew on average by 1.9% during the same period) (World Bank, 2005; FAO, 2005). Thus, the two growth rates show no significant correlation and the linkages between trade and growth may be more indirect through investment linkages, and through political economy linkages for economic reform. Even more complex is the relationship between agricultural trade and poverty reduction at the global scale. Poverty declined only slowly in the past two decades in terms of head count measures. Significant reductions are noted in Asia, in particular in China. Domestic market opening and more international trade have played a role. The stagnation in poverty reduction in Africa is paralleled by slow growth in trade and declining shares in global agricultural trade. PCD and agricultural trade policy must avoid any “black box” approach where strong and direct linkages between trade expansion, growth and poverty reduction are taken for granted. In this section we briefly review the current knowledge on trade reform impacts on the poor before turning our focus to developing countries’ domestic policies. We summarise the main drivers of agricultural trade expansion, and consider the role of the PCD agenda for the expansion of global agricultural trade. In doing this, we highlight the need for a strategic approach in sequencing policies and the central role agriculture in the early stages of development. Looking at the progress in India and China as illustrations of how policy coherence can play a role in promoting trade and lead to increased growth and poverty reduction. Finally, we provide some insights on how to manage the dynamic risks and factors affecting global agricultural trade.
Trade reform impacts on the poor The litmus test for policy coherence in development policy is the short and long term effect for the poor. The impacts of the macro-level changes induced by agriculture trade reform on poor households depend primarily on whether they are net consumers or net producers of food (Orden, Torero and Gulati, 2004). With increased openness, net consumers of agricultural products benefit from a larger variety of products and reduced TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
118 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System prices with cheaper imports entering domestic markets, while net producers face increased competition from imported goods, which may lead to lower prices for their products, depending on their competitiveness. Net producers would also become more susceptible to higher volatility in agricultural prices. In addition, the overall impact of trade policy reform will be determined by households’ abilities to adjust to these changes through shifts in production and consumption patterns, such as switching production toward goods whose prices have risen, switching consumption toward goods whose prices have fallen (McCulloch et al., 2001), or taking advantage of changed opportunities in labour markets. The ability to make such shifts will in turn depend on the household’s access to markets, its physical assets, individuals’ skill sets, and its access to credit and insurance markets. Labour mobility across sectors is an important consideration because labour is the main resource owned by many poor households. Price transmission to rural markets for inputs and outputs are also significant as there are many stages between border prices and prices faced by rural households. Current knowledge on trade reform impacts at the household level is rather limited. Top-down approaches use detailed economy-wide data and build on the microeconomic assumption of a representative agent, while bottom-up approaches use detailed household expenditure data and emphasise heterogeneity of households (Reimer, 2002). In general, very little consensus emerges from this literature. Ivanic (2005) conducts a multi-country analysis of the poverty effects arising from trade reform on different household groups (Table 1). His analysis differentiates households by income sources and regions (urban and rural). He uses the GTAP model along with data from the GTAP database 6 and detailed household surveys from fifteen countries. The author finds that in some of the countries (Chile, Indonesia, Malawi, Mozambique, Peru, the Philippines, Thailand, and Vietnam), the extent of trade reform has a positive impact on poverty levels. However, he finds that this is not always the case in other countries. For instance, in seven of the countries (Bangladesh, Colombia, Mexico, the Philippines, Uganda, Venezuela, and Zambia) full trade liberalisation increases poverty levels in agriculture dependent households. Table 1. Estimates of full trade liberalisation impacts on households in select developing countries Household groups Agriculture Non-agriculture Urban Labour Rural Labour Bangladesh Brazil Chile Columbia Indonesia Malawi Mexico Mozambique Peru Philippines Thailand Uganda Venezuela Vietnam Zambia
37 -94 -16 18 -282 -19 1 -1 -3 46 -7 6 3 -29 0
51 12 0 30 -98 -1 6 -2 -5 -12 0 3 17 -277 3
10 40 1 15 -17 0 12 -2 0 -11 0 0 28 -8 3
65 39 0 16 -80 -4 14 0 -1 -17 -1 5 9 -110 1
Transfer 2 0 1 3 3 -1 11 -2 -1 -4 2 0 1 -8 0
Urban Diverse Rural Diverse 35 -9 -4 8 -49 -3 14 -5 -3 -24 -2 3 15 -227 4
122 -6 -2 8 -219 -18 17 -3 -5 -34 -39 52 5 -1 136 1
Total 323 -17 -20 98 -742 -45 75 -14 -18 -56 -49 69 77 -1 795 10
Source: Ivanic, 2005.
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From the above studies and others on the issue (see for a review von Braun et al., 2005) we can conclude that the majority of poor households will gain from trade reform while some will lose. The results vary across countries, and according to these estimates, the effect of trade openness on poor households’ income is not large. Thus, policy makers in each country need to consider complementary actions targeting vulnerable households in order to avoid potential negative impacts on these populations. The integration of social policies with trade reform policies is a major challenge for the PCD agenda.
Principal driving forces of agricultural trade expansion and the role of policy coherence In order to promote agricultural trade, policies in developing countries have to first ensure that the macro-economic environment is conducive to trade. This involves adequate access to investment capital and exchange-rate policies. Further, institutions that foster economic activity need to be in place. In many countries, this requires significant institutional reforms, for which good governance fostering public order and political stability and security is a necessary pre-condition (Birner and Resnick, 2005). Beyond providing a favourable political environment, policy has to provide the right economic incentives for agricultural producers to invest in improving their lands and also to facilitate their access to formal financial markets, not only through reforms of markets as earlier pointed out, but also through secure property rights and adequate contract enforcement mechanisms (World Bank, 2004). In addition, key public investments in agricultural research and technology, infrastructure and education can enhance agricultural trade and contribute to economic growth and poverty reduction in developing countries. Investments in agricultural research and technology enable productivity growth by providing farmers with more productive seeds and new technologies for more efficient production. Indeed, research has shown that investment in agricultural research has high returns in terms of promoting agricultural growth and poverty reduction. For instance, as shown in tables 2 and 3, investments in agricultural R&D had the second highest and the highest return among public investments in China and India respectively in terms of poverty reduction. Table 2. Returns to poverty reduction from public investments in China Returns to poverty reduction from investments in Education R&D Roads Electricity Telephone Irrigation Poverty loan
Number of poor reduced per 10 000 Yuan expenditure (average from all regions) 8.8 6.79 3.22 2.27 2.21 1.33 1.13
Source: Fan, Zhang and Zhang, 2002.
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Table 3. Returns to poverty reduction from public investments in India Returns to poverty reduction from investment in Ag. R&D Rural roads Rural education Irrigation Rural development Soil and water conservation Rural health Rural electricity
Total poor reduced per million INR 1995 156.61 152.19 48.43 17.01 31.37 27.75 22.35 5.24
Source: Fan, 2002.
Investments in rural infrastructure are also crucial in order to facilitate market access and facilitate price transmission to rural areas. Such investments also enable the reduction of transportation and communications costs. In China, in terms of reducing poverty, investments in roads had the third highest return while in India they had the second highest return. Finally, investment in education can also contribute to enhancing agricultural growth, by improving rural population mobility between on-farm to off-farm sectors. In China, investments in rural education had the highest returns in terms of poverty reduction, while in India they had the third highest return (Tables 2 and 3). Development assistance can play a key role in terms of supporting the above policies through financial and technical assistance. In the context of trade liberalisation, industrialised countries can increase their support to facilitate improvements in the functioning of markets in developing countries (through for e.g. an “aid for trade” programme that would assist countries in making the necessary basic investments in infrastructure and also in modernising their institutions in order to help them take advantage of the new opportunities offered by more liberalised trade). A strategic approach to formulating domestic policies is an integral component of policy coherence for agricultural trade policies in developing countries. This requires that reforms be adequately sequenced and implemented in a gradual manner in order to maximise the benefits of enhanced trade for society as a whole. Indeed, in order to attain the benefits of a more liberalised agricultural trade system, domestic markets and institutions need to be developed to take advantage of new opportunities. As we saw earlier in the example of Sub-Saharan African countries, domestic trade liberalisation efforts were undertaken prematurely in that the required investments and institutional reforms were not carried out before embarking on the reforms. The results were that the reforms did not yield the expected outcomes (Kherallah et al., 2002). Further, agricultural trade reforms need to consider the potential impacts of liberalisation on vulnerable populations, otherwise, reforms might lead to increased poverty. Appropriate risk management strategies that would minimise transitional poverty and enable vulnerable populations to better take advantage of the new trade opportunities need to be put in place before undertaking reform.
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Policy coherence enhanced trade and development: China and India China and India have in recent years made important progress in creating the right incentives in their agricultural and export sectors, albeit through different development strategies. Over the past two and half decades, both countries implemented significant economic reforms that have enabled their increased participation in world agricultural trade. The aggregate effects of these trends have led to high economic growth and spectacular poverty reduction, especially in China (Figure 2). The underlying lesson from the experiences of both countries is that strong national initiatives with a strategic approach are necessary in order to propel a country’s development. Also, trade is part of the story.
5 000 4 000 3 000 2 000 1 000 0
2002
1998
1994
1990
1986
1982
China
1978
1974
1970
1966
1962
1958
1954
1950
2000 PPP International Dollars
Figure 2. GDP per capita in China and India, 1950–2003
India
Source: von Braun, Fan and Gulati, 2005.
Further, in a comparative study of the two countries’ development policies, Gulati et al. (2005) show that the different strategies of development followed by the two countries explain the differences in their achieved growth and poverty reduction rates. While China focused on reforms in the agricultural sector at the beginning of its reforms and then undertook macro-economic and non-agriculture reforms, India followed the reverse path. During the agricultural reforms, China first created strong incentive structures and institutions to enable the increased productivity of agriculture and the proper functioning of agricultural markets. Then, in a second phase, they liberalised and opened up markets. Indian policy makers on the other hand, opened up their agricultural markets before reforming incentives. Nevertheless, reforms were undertaken afterwards which resulted in export-oriented agricultural growth (Gulati et al., 2005). In addition, the two countries’ strategies differed in their pace of reforms. In the Chinese case, although, policy makers made sure that each new measure that they implemented was successful before moving forward with another measure, reforms were implemented relatively faster than in India due to the more pluralistic and bureaucratic nature of political processes in India (Gulati et al., 2005).
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Management of dynamic risks and forces that shape the factors affecting global agricultural trade IFPRI’s IMPACT model10 provides some insight on how policy actions (or inactions) can affect, among other things, commodity prices, demand, cereal yields, production and net trade. A progressive policy scenario outlines several of the most fundamental steps as reviewed above. In this scenario, national governments and the international community focus their policies on agricultural growth and rural development; developing countries increase their expenditure on agriculture and rural development between 2005 and 2015 (including their expenditures on agricultural research and development) and producer support to farmers in developed countries is substantially reduced. Further, developing countries progressively increase their investments in education, social services and health between 2005 and 2020. In the policy failure scenario, the crucial investments in agriculture and rural development are not undertaken and agricultural protectionism increases along with greater political discord. In the technology and resource management failure scenario, agricultural protectionism does not increase but the technology and natural resource failures are severe. The simulations, as shown in figure 3, demonstrate that under the “ideal” conditions of the progressive scenario, because of rising incomes, world demand in cereals and in high-value products such as meat and fruits and vegetables increase. Further, net meat trade increases in developing countries, while net cereal trade decreases (Figure 3; von Braun, Rosegrant et al., 2005).
10.
The International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT) model was developed by Mark Rosegrant at IFPRI to provide insights into the management of the “dynamic risks and forces that shape the factors affecting people’s access to food and the links with malnutrition” through appropriate policy actions. The IMPACT model enables the exploration of the potential impacts of different policy alternatives to manage hunger, malnutrition, commodity prices, demand, cereal yields, production and net trade, by projecting future global food scenarios to 2050 (von Braun, Rosegrant, Pandya-Lorch, Cohen, Cline, Brown & Bos, 2005). TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Figure 3. Some results from the IMPACT model Projected world cereal demand per capita, all scenarios
400
Projected world meat demand per capita, all scenarios
Progressive Policy Actions Scenario Policy Failure Scenario
60
Technology and Resource Management Failure Scenario
55
Progressive Policy Actions Scenario Policy Failure Scenario Technology and Resource Management Failure Scenario
Kilograms per capita
Kilograms per capita
380 360 340 320 300 280 260
50 45 40 35 30 25
240 220
20 1997
2015
2030
2050
1997
Projected net cereal trade in developing countries
2050
Policy Failure 1997
2015
2030
2050
30 000
Thousand of metric tonnes
-50
Million metric tonnes
2030
Projected net meat trade in developing countries
0
-100
-150
-200
-250
2015
Progressive Policy Actions Tech and Resource Failure
20 000 10 000 0 1997
2015
2030
2050
-10 000 -20 000
Progressive Policy Actions Scenario Policy Failure Scenario
-30 000
Technology and Resource Management Failure Scenario
Source: von Braun, Rosegrant et al., 2005.
Concluding remarks New PCD issues have emerged due to changes in the domain of agricultural policy making, new incoherence issues have also arisen. Many developing countries have made significant improvements toward decreasing their protection levels in the agricultural sector. However, in the international arena there have been a number of setbacks in terms of multilateral progress in agricultural trade liberalisation negotiations. The increased focus on bilateral agreements may have undermined progress toward multilateral progress. Also, some old incoherence issues persist. Since political markets are imperfect and incomplete, the risk exists that powerful self-serving interest groups will influence the policy setting and policy implementation in agricultural trade. Fortunately, a large number of developing countries have established parliamentary systems in recent decades, thus opening up political markets. The implication of this for coherence in domestic policies is yet to be seen. Increased transparency, rule of law and dynamic media could also facilitate a reduction in incoherencies.
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124 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System Global welfare, development and poverty alleviation will be well served if rulesbased, multilateral liberalisation of agricultural trade can be achieved. This would bring gains for developing countries not just from new market opportunities created multilaterally, but from trade-based investment and the technological advances these opportunities induce. Public investments are an essential complement to trade policy reforms. To make the Doha Round truly a “Development Round” requires an innovative combination of trade policy reforms with enhanced development finance that facilitates market functioning. This requires closer co-ordination among the WTO and development finance organisations, such as the World Bank and regional development banks. Gains for developing countries from strengthening markets will come from simultaneously enhancing their physical and institutional infrastructures for agriculture, reducing domestic marketing channel inefficiencies, and eliminating internal barriers to private investments. To turn the market opportunities created by either multilateral trade agreements or their own trade policy reforms into concrete gains requires investments which can make markets work and endow the poor with the assets they need to compete. While this responsibility lies primarily within the countries themselves, developed countries and international institutions need to increase their support for these efforts. Trade policy reform and international assistance to agriculture in poor countries are complements, not substitutes in creating benefits for the poor people who are primarily concentrated in the agricultural sector. Progress in reducing agricultural support and protection among the world’s wealthy countries would be important for the development and strengthening of the multilateral trade system. Since they have much to gain, developing countries also need to be actively engaged in the multilateral process of agricultural trade liberalisation. There are substantial grounds for agreement on agriculture between advocates of international development and poverty reduction and those advocating strengthened agricultural trade opportunities.
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126 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System Government of the Netherlands and German Marshall Fund of the United States (2004), Promoting Policy Coherence for Development: Report on the High Level Workshop, October 1. Gueneau, S. (2005), Trade and Sustainable Development: New Policy Coherence Challenges, Paris: Institut du Développement Durable et des Relations Internationales. Gulati, A., S. Fan and S. Dalafi (2005), The Dragon and the Elephant: Agricultural and Rural Reforms in China and India, Markets, Trade and Institutions Division Discussion Paper No. 87 and Development Strategy and Governance Division Discussion Paper No. 22, Washington, DC: The International Food Policy Research Institute. International Monetary Fund (IMF) (2002), Improving Market Access: Toward Greater Coherence Between Aid and Trade, Issue Brief, March, Washington, DC: International Monetary Fund. Ivanic, M. (2005), “The Effects of a Prospective Multilateral Trade Reform on Poverty in Developing Countries”, in Putting Development Back into the Doha Agenda: Poverty Impacts of a WTO Agreement, eds. T.W. Hertel and A.L. Winters (forthcoming). Jensen, M.F. (2002), “Reviewing the SPS Agreement: A Developing Country Perspective”, Working paper part of the research project “WTO Negotiations and Changes in National Agricultural and Trade Policies: Consequences for Developing Countries”. Josling, T., D. Roberts and D. Orden (2004), Food Regulation and Trade: Toward a Safe and Open Global System, Washington, DC: Institute for International Economics. Kapstein, E.B. (2004), “The Politics of Policy Coherence”, Paper presented at the OECD Policy Workshop on “Institutional Approaches to Policy Coherence for Development”, May 18-19. Kherallah, M., C. Delgado, E. Gabre-Madhin, N. Minot and M. Johnson (2002), Reforming Agricultural Markets in Africa, Baltimore, MD: The John Hopkins University Press for the International Food Policy Research Institute. Manning, R. (2003), “Efforts and Policies of the Members of the Development Assistance Committee: Development Co-operation”, Report by the Chair of the Development Assistance Committee (DAC), Paris: Organisation for Economic Co-operation and Development (OECD). Manning, R. (2005), “Beyond 2005: Changes in Donor Roles and Behaviour”, Development Outreach, September. Matthews, A. (2005), “Policy Coherence for Development: Issues in Agriculture - An Overview Paper”, Paper prepared for the OECD Horizontal Project on Policy Coherence, Dublin, Ireland: Institute of International Integration Studies (IIIS). McCulloch, N., A.L. Winters, and X. Cirera (2001), Trade Liberalization and Poverty: A Handbook, London, UK: Center for Economic Policy Research (CEPR). Moore, M. (2001), “Coherence in Global Economic Policy-Making: WTO Cooperation with the IMF and the World Bank”, Speaking note of the Director General at the General Council Informal Meeting, January 18, Geneva: World Trade Organization (WTO). Mullen, K., D. Orden and A. Gulati (2005), Agricultural Policies in India: Producer Support Estimates 1985-2002, Markets, Trade and Institutions Division (MTID), Discussion Paper No. 82. Washington, DC: International Food Policy Research Institute. Orden, D., F. Cheng, H. Nguyen, U. Grote, M. Thomas, K. Mullen and D. Sun (forthcoming), “Agricultural Producer Support Estimates in Developing Countries: Measurement Issues and Evidence from India, Indonesia, China and Vietnam”, IFPRI Research Report, Washington, DC: International Food Policy Research Institute. Orden, D., M. Torero and A. Gulati (2004), “Agricultural Markets and the Poor”, Draft background paper for Workshop of the OECD Poverty Reduction Network (POVNET), March 5. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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OECD (2003), “Policy Coherence: Vital for Global Development”, OECD Observer, July. OECD (2005), The Development Effectiveness of Food Aid: Does Tying Matter?, Paris: OECD. OECD (2005), “Policy Coherence for Development”, Background paper for the Global Forum on Agriculture, 2005. Picciotto, R. (2004), Institutional Approaches to Policy Coherence for Development, OECD Policy Workshop: Policy Coherence and Development Evaluation, Concepts, Issues and Possible Approaches, May 18-19, Paris: OECD. Rausser, G.C. (1982), “Political Economic Markets: PERTs and PESTs in Food and Agriculture”, American Journal of Agricultural Economics, 64(5): 821-832. Rausser, G.C. and D.R. Irwin (1988), “The Political Economy of Agricultural Economic Policy Reform”, European Review of Agricultural Economics, 15(4): 349-366. Reimer, J.J. (2002), Estimating the Poverty Impacts of Trade Liberalization, GTAP Working Paper No. 20, West Lafayette, Indiana: Center for Global Trade Analysis and Department of Agricultural Economics, Purdue University. Ryan, J.G. (1999), Assessing the Impact of Rice Policy Changes in Vietnam and the Contribution of Policy Research, Impact Assessment Discussion Paper No. 8, Washington, DC: International Food Policy Research Institute. Schmieg, E. (1997), “Coherence Between Development Policy and Agricultural Policy”, Intereconomics, January/February. Suwa-Eisenmann, A. and T. Verdier (2005), “Policy Coherence for Development: Background Paper for Trade”, Washington, DC: The German Marshall Fund of the United States (GMF). Tinbergen, J. (1952), On the Theory of Economic Policy, Amsterdam: North-Holland. Torero, M. and J. von Braun (2005), Information and Communication Technologies for Development and Poverty Reduction, Washington, DC: International Food Policy Research Institute. United Nations Conference on Trade and Development (UNCTAD) (2005a), World Investment Report 2005: Transnational Corporations and the Internationalization of R&D, Geneva: UNCTAD. UNCTAD (2005b), “Methodologies, Classification, Quantification and Development Impacts of Non-Tariff Barriers”, Note by the UNCTAD Secretariat, Trade and Development Board, Commission on Trade in Goods and Services, and Commodities, Geneva: UNCTAD. von Braun, J., A. Gulati and S. Fan (2005), “Agricultural and Economic Development Strategies and the Transformation of China and India”, IFPRI Annual Essay 2005, Washington, DC: International Food Policy Research Institute. von Braun, J., A. Bouët, C. Cororaton, T. Mengistu and D. Orden (2005), “Trade Policies to Address the Vulnerability of the Poor in Developing Countries and Opportunities for Complementary Action”, Paper prepared for the 11th Congress of the European Association of Agricultural Economists on “The Future of Rural Europe in the Global Agri-Food System”, Parallel Session 2 on Trade and Vulnerability, Copenhagen, Denmark, August 24, 2005. von Braun, J., M.W. Rosegrant, R. Pandya-Lorch, M.J. Cohen, S.A. Cline, M.A. Brown and M.S. Bos. (2005), New Risks and Opportunities for Food Security: Scenario Analyses for 2015 and 2050, 2020 Discussion Paper No. 39, International Food Policy Research Institute: Washington, DC.
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128 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System von Braun, J. (2005), “Institutions and Technology for Development: On Sources and Policies of Pro-Poor Growth in Agriculture and the Rural Economy”, Keynote paper prepared for the Conference on Rural Development and the Environment in China's Drive for Modernization: An Event in Celebration of the CCAP's Tenth Anniversary, Beijing, September 25. von Braun, J. (2005), “The Millennium Development Goals in Need of Strategy and Instruments Agriculture and Rural Development Matter”, Quarterly Journal of International Agriculture, 44(2): 95-100. von Braun, J., A. Gulati and D. Orden. (2004), Making Agricultural Trade Liberalization Work for the Poor, Presented at the WTO Symposium on “Multilateralism at a Crossroad”, on May 25, Geneva. von Cramon-Taubadel, S., P. Wehrheim, J. von Braun and U. Koester (1996), Assessing Coherence Between the Common Agricultural Policy and the EU's Development Policy: The Case of Cereals in African ACP Countries, Forum reports on current research in agricultural economics and agribusiness management No. 23, Kiel: Institute of Agricultural Economics and Institute for Food Economics and Consumption Studies, University of Kiel. World Bank (2004), World Development Report 2005: A Better Investment Climate for Everyone, New York, NY: World Bank and Oxford University Press. World Bank (2005), World Bank Press Reviews, November 7, US, EU Press Aid Plan to Open Up New Markets; Capital Pool Would Help Developing Countries Revamp their Economies. World Bank (2005), World Bank Press Reviews, World Development Indicators, Washington, DC: World Bank. World Commission on the Social Dimension of Globalization (2004), A Fair Globalization: Creating Opportunities for All, Geneva: International Labor Organization. World Trade Organization (2001), DOHA Ministerial Declaration, Adopted on November 14, 2001, Geneva: World Trade Organization, Accessed online at: www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm (November 17, 2005). World Trade Organization (2005), Sixth WTO Ministerial Conference, Accessed online at: www.wto.org/english/thewto_e/minist_e/min05_e/min05_e.htm (November 17, 2005). World Trade Organization (2005), World Trade Organization's Regional Trade Agreements Getaway, Accessed online at: www.wto.org/english/tratop_e/region_e/region_e.htm (November 11, 2005).
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Chapter 8. POLICY COHERENCE FOR DEVELOPMENT: ISSUES FOR BRAZIL1 Fabio R. Chaddad Ibmec Business School and Marcos S. Jank Institute for International Trade Negotiations Studies (ICONE) Abstract This paper provides a perspective on the issue of policy coherence for development (PCD) as it relates to agriculture in Brazil. While drawing on Brazil’s experience with OECD agricultural-related policies (e.g. tariffs, non-tariff barriers, export subsidies, and payments to domestic producers) and Brazilian agricultural-related policies (e.g. rural development, farm support, and trade), the study examines the policy coherence of these issues, with an emphasis on enhancing global agricultural trade and the development of the Brazilian agri-food economy.
Introduction Beginning in the late 1980s, Brazil started to adopt liberal, market oriented policies, which significantly impacted the performance of its agri-food economy. Brazil’s economic reform programme included controlling inflation, ensuring macroeconomic stability, privatising state-owned companies, deregulating industry, dismantling agricultural credit and price support programmes, and increasing international integration. These changes have significantly impacted the competitiveness of the agri-food sector in Brazil, which has experienced substantial, export-led growth since the mid-1990s. The agri-food sector is now among the most dynamic in the Brazilian economy. According to a recent article in The Economist (2005), “agriculture is the Cinderella of Brazil’s economy.” Between 1990 and 2004, agricultural production doubled from 58 to 120 million metric tonnes (MT), while meat production surged from 7.5 to 18.3 million MT. The agri-food economy generated BRL 534 billion (USD 183 billion) in 2004, which is equivalent to 30% of the country’s GDP. In addition, it accounted for approximately 35% of total employment and 41% of the total exports in 2004. During the 1990-2004, total agricultural exports increased from USD 12.9 to USD 39 billion (Ministry of Industry, Development and Foreign Trade, 2005). Exports accounted for 31% of agricultural production in 2004 compared with shares of 22% in the United States (US), 41% in Canada and 74% in Australia (OECD, 2005). Spurred by an annual growth rate of 6.2% in exports since 1990 (Figure 1), Brazil is now the world’s 1.
The authors are respectively assistant professor at Ibmec Business School and president of the Institute for International Trade Negotiations (ICONE), both in Sao Paulo, Brazil. The authors would like to thank José Garcia Gasques for providing the data regarding the Brazilian government expenditures on farm policy and Sidney Nakahodo and Isabel Oliveira for research support.
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130 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System third largest agri-food exporter – following the European Union (EU) and the US. Brazil is the world’s largest exporter of sugar, ethanol, coffee, beef, poultry, orange juice and tobacco, and is the second largest exporter in the soybean complex. In 2004, Brazil surpassed the US and led the world with an agricultural trade surplus of USD 25 billion. Figure 1. Top fifteen largest world agri-food exporters, 2003
Source: FAO, 2004. Elaboration: ICONE.
The growing competitiveness of the Brazilian agri-food sector is attributed to a number of factors, including investments in agricultural research and availability of agricultural credit, which contributed to significant productivity gains since the 1970s. The average annual growth rate of total factor productivity in Brazilian agriculture was estimated at 3.3% for the period 1975-2002 and at 5.7% for 1998-2002, which are above the growth rate of 1.6% achieved by US agriculture in the 1990s (Gasques et al., 2004). According to the same study, land productivity was the principal component of total factor productivity growth. While agricultural output doubled in the last fifteen years, land used in agricultural production increased 20%, from 38 to 48 million hectares. Other factors, such as the macroeconomic stability introduced with the Real Plan and significant reductions in government intervention and trade barriers, also contributed to the competitiveness and thus to the growth of the agri-food sector in Brazil, (Jank, Nassar and Tachinardi, 2004). Despite these favourable developments and the availability of labour and natural resources such as land and water, the growth of the agri-food sector in Brazil faces significant internal and external constraints. In the domestic arena, agricultural producers in Brazil face uncertainties related to the volatility of macroeconomic policies (high interest rates and over evaluation of the real exchange rate), the lack of clearly defined property rights where land is concerned, the regulatory framework concerning research and marketing of genetically modified organisms (GMOs), poor infrastructure causing TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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logistical bottlenecks, and the decline in government spending in important areas such as sanitary defence, agricultural research and other traditional agricultural policy instruments. The recent re-emergence of foot-and-mouth disease, which forced more than fifty countries (as of 15 November 2005) to close their borders to beef exports from Brazil, will be used as a case study to analyse some of the policy challenges facing the Brazilian agri-food economy. Besides, trade barriers and subsidies to domestic producers and exporters, especially from OECD countries continue to significantly impact Brazilian agri-food products. The benefits from agri-food economy development would be substantially increased for the country if OECD countries reformed their agricultural policies to minimise distortions in agricultural trade. This is why Brazil adopted a more aggressive position in the international trade negotiations at the World Trade Organization (WTO), bringing two high-profile dispute cases against developed countries and taking leadership in the formation of a coalition of twenty-one developing countries known as the G-20. In the next section, we discuss the constraints to agri-food development in Brazil emanating from OECD member countries’ policies.
Brazilian agricultural trade policy and perspectives in international agricultural negotiations According to an OECD report on Key Issues for Policy Coherence for Development in Agriculture (2004), “agriculture is the area on which OECD member countries are creating most trade distortions by subsidising production and exports and by imposing tariffs and non-tariff barriers on trade.” Figures 2 and 3 show the relatively high average agricultural tariffs and domestic subsidies currently prevailing in world trade. In a more recent report which reviews agricultural policies in Brazil, the OECD (2005) observes that “if the US, the EU and other OECD countries were to cut import tariffs and export subsidies on agricultural products, farmers in Brazil would gain from the resulting rise in international prices, with the larger commercial producers benefiting most.”
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132 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System Figure 2. Bound and applied average agricultural tariffs in selected countries1
1. Specific and compound tariffs were converted into Ad Valorem Equivalents (AVE) following the methodology agreed by WTO Members in 2005. Source: WTO (2005). Elaboration: ICONE.
Given that Brazil has already achieved the status of a global agri-food powerhouse, why are international trade negotiations – including the WTO Doha Round, the Free Trade Area of the Americas (FTAA) and the EU-Mercosur regional agreement – still essential to the country’s development? The answer resides in the nature of the products exported: 90% of Brazilian agri-food exports are comprised of agricultural and agroindustrial commodities. International competitiveness and export growth largely depend on the outcome of international trade negotiations.
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Figure 3. Domestic subsidies measured by the OECD producer support estimate (%PSE)1
60%
58%
50% 40% 34% 30%
30% 22% 21% 17%
20%
5%
4%
3%
2%
Russia
Australia
Brazil
N. Zealand
8%
10%
China
USA
Mexico
Canada
OECD
EU
Japan
0%
1. The %PSE expresses the total producer support as a percentage of gross farm receipts measured by the value of total production (at farm gate prices) plus budgetary support. Source: OECD (2005).
Perhaps more importantly, the main agri-food commodities exported by Brazil are treated as sensitive products by importing countries and, therefore, are highly regulated and protected. The great majority of Brazilian agri-food commodities face border restrictions (Table 1). The sugar and ethanol sector is globally protected with tariff peaks, tariff rate quotas, special safeguards and other mechanisms. Other agri-food commodities are subject to more specific protection. A case in point are grains and cotton in the US, which are highly subsidised. The meat sector – including beef, poultry and pork – faces a heterogeneous set of protectionist policies. The EU, Iceland, Norway and Switzerland adopt tariff peaks in all three types of meat, while Japan protects the pork sector, and Canada and Mexico protect the poultry sector. In addition to tariff protection, sanitary barriers exist in the meat sector in countries including those with relatively lower tariffs such as the US (for beef, poultry and pork) and Canada (for beef and pork). As a result of tariff and non-tariff barriers, trade is severely constrained. Tariff rate quotas and special safeguards also restrict market access for most agri-food commodities exported by Brazil. For example, soybeans, tobacco, coffee and cocoa beans are subject to low tariffs, but the processed products – such as soybean oil, roasted and soluble coffee, cigarettes and chocolates – are targets of tariff escalation. We now discuss how Brazil is acting in the international arena to contribute to increasing policy coherence in developed economies.
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134 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System Table 1. Trade barriers to agri-food exports from Brazil Product Raw sugar Ethanol Powder milk Frozen chicken cuts
EU
USA
Japan
161(1,2)
133(1,2)
311(1) 27
(1)
43 64
(1,2) (1)
94
(1)
46
44(1,2) (1,3)
12
155(1,2) 12
Frozen pork
43(1,2,3)
0(3)
136(1,2,3)
Frozen beef
124(1,2)
26(2,3)
50(3)
Corn
73
Tobacco Orange juice
(1,2) (1)
75 15
(1)
1 350
87(1) 0
39(1)
25
1. Specific and compound tariffs. These tariffs were converted into Ad Valorem Equivalents (AVEs) following the methodology agreed by WTO Members in 2005. 2. Existence of Special Safeguard Measures (SSG). 3. Sanitary restrictions that act as a barrier to trade. Sources: Bound rates from WTO, APEC, COMTRADE, USITC, and TARIC12. Elaboration: ICONE.
Brazil and the WTO cotton and sugar cases On 27 September 2002, Brazil filed two dispute cases against US cotton subsidies and EU sugar export subsidies at the Dispute Settlement Body (DSB) of the WTO. Both cases marked the first time that a developing country challenged developed countries’ agricultural domestic and export subsidies. In the sugar panel against the EU, Brazil won alongside Australia and Thailand. The WTO Appellate Body agreed with the argument that the EU provides subsidies above those stipulated in the GATT agreement on agriculture with respect to the exports of 1.6 million MT of white sugar. The WTO Appellate Body also confirmed the market distortions caused by sugar C exports, which refer to sugar production above the domestic market quota (A) and sugar receiving allowed export subsidies (B). As a result of these findings, the EU will have to exit a market of 3.8 million MT of white sugar, which will become available to competitive producers such as Australia, Brazil, South Africa and Thailand. This was an important victory for Brazil because EU sugar subsidies cost annual losses of USD 400 million to Brazilian producers. In the case of sugar, former European colonies in Africa, the Caribbean, and the Pacific (ACP) were against Brazil because they benefit from preferential access to the European market. In the WTO cotton panel, Brazil claimed that the US violated the “peace clause” of the GATT agreement on agriculture as cotton producers received payments during the 1998-2002 marketing years that exceeded the 1992 level of USD 1.9 billion. Brazil’s cotton case argued that US cotton subsidies caused “serious prejudice” to Brazilian cotton producers because they depressed cotton prices, allowing US producers to gain world market share to the disadvantage of Brazilian producers (Chaddad, Aguilar and Jank, 2005; Jank, Araújo and Diaz, 2004). Brazil also won the cotton case, but this time the interests of Brazil converged with those of West African countries (Benin, Burkina Faso, Chad and Mali). Following the establishment of the cotton panel in March 2003, the four African nations presented a proposal to the WTO emphasising that the elimination of cotton subsidies should be TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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considered a priority. Backed by NGOs and other pressure groups, the cotton case won global media coverage. Brazil’s victory in the sugar and cotton panels will have significant impacts in the Doha Round. First, the WTO cotton ruling may have far reaching consequences because the general programmes – including direct payments, countercyclical payments, marketing loans, crop insurance and export credit guarantee programmes – constitute the vast majority of US agricultural support that flow to producers. These programmes are in effect for several crops besides cotton including corn and soybeans. Second, the sugar panel challenges a product that has never been reformed by the EU. Brazil now expects to consolidate these advances in the Doha Round, with a complete elimination of export subsidies and a significant reduction coupled with discipline in the use of distorting domestic subsidies.
A pragmatic role in the WTO Doha Round The WTO Doha Round was launched to reduce the historical imbalance between strong liberalisation in industrial markets since the early stages of the General Agreement on Tariffs and Trade (GATT) in 1947 and persistent protectionism in agriculture, a sector that has been literally left behind in the world trading system. This round is a unique opportunity to improve conditions for international trade in agricultural products. It is at the multilateral level that developing countries can find room to address systemic issues such as domestic support and export competition, which are usually excluded from regional and bilateral trade agreements (IPC, 2005). In 2002 the US doubled its agricultural subsidies by approving the most protectionist Farm Bill in its history. In 2003, the EU eliminated a few subsidies with another reform of its Common Agricultural Policy (CAP). However, Europe’s reform excluded important sectors (i.e. sugar) and did not improve conditions for worldwide access to its large consumer market. On the eve of the 2003 Cancun Ministerial, the US and the EU released a joint proposal outlining their respective defensive positions on subsidies and market access. Together with China, India and eighteen other developing countries, Brazil formed the G-20 in an attempt to revive the Doha spirit on agricultural subsidy reduction and market liberalisation in developed countries2. In the middle of many other coalitions that are formed in the WTO negotiations, the heterogeneous G-20 has been recognised by both developing and developed countries as an important and strategic player in the current multilateral negotiations. Over the past two years the group has changed the variable geometry of the negotiations by acting in a cohesive and pragmatic manner, with strong political representation and good technical work shown in the dozens of proposals presented on each item of the agricultural negotiations agenda. Certainly, the G-20 has been the most significant result of Brazil’s current trade policy.
2.
G-20 member countries generate 12% of the world’s GDP, 21% of the world’s agricultural GDP, 20% of the world’s agricultural exports, 57% of the world’s population, and 70% of the world’s rural population. The group of twenty-one countries has a balanced geographical representation. Five members are in Africa (Egypt, Nigeria, South Africa, Tanzania and Zimbabwe); six countries are in Asia (China, India, Indonesia, Pakistan, The Philippines and Thailand); and ten countries are in Latin America (Argentina, Bolivia, Brazil, Chile, Cuba, Guatemala, Mexico, Paraguay, Uruguay and Venezuela).
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136 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System In the current phase of the Doha Round, the main issues to be resolved include domestic agricultural subsidies and agricultural market access in both developed and developing countries. In particular: •
On domestic agricultural subsidies, it is necessary to force the US to accept deeper cuts and additional disciplines to avoid more escapes and loopholes, as well as demand the immediate implementation of the final decisions of the WTO Appellate Body on cotton subsidies. The Doha Round will fail if the US does not reduce its subsidies, which skyrocketed from USD 7 billion in 1997 to USD 20 billion in 2004. The need to decouple subsidies, given current production and price levels, is also an absolute must. The US has been quite skilful when it comes to “camouflaging” its agricultural subsidies in the WTO, alleging that they are “less trade distorting.” The WTO cotton panel, however, exposed to world public opinion the highly distorting side of US subsidies as they reached excessively high levels. If Washington is unable to come up with groundbreaking proposals to lower subsidies in Geneva, not only is it likely that the Doha Round is doomed to failure but the WTO itself will be forced to deal with an explosion of new disputes (Jales and Nassar, 2005).
•
On agricultural market access, the major effort needs to come from Europe. There is strong resistance, however, to the EU providing greater access to its consumers by means of reduced agricultural tariffs and expanded import quotas. Unlike the US, the EU challenge is not to reduce agricultural subsidies, which was partially achieved in the 2003 Fischler Reform. The greatest challenge facing EU policy-makers and negotiators is to promote openness to agri-food imports from more competitive countries. France continues to put pressure on the European Commission not to give up more, whereas ACP countries do not want to lose preferential access to the European market and tend to fight with the bloc when it comes to the wider opening of trade barriers.
•
The G-20 should also be less defensive when it comes to agricultural market access for developing countries. As these nations account for 70% of the world’s rural population, it is expected that some of them will fear reducing their own tariffs on imports. Within the G20, there are disagreements regarding market access. On one hand, some of its members – including Chile and Mercosur – adopt an offensive position and clearly stand for low agricultural protection. On the other hand, China and India adopt a defensive position as they seek to protect their domestic markets through high tariffs and new protection mechanisms such as the concepts of Special Products and Special Safeguards for developing countries (SSM). An impartial and reasonable reading of the numbers indicates, however, that there is much room for the G-20 to accept more ambitious cuts and simpler, more limited rules for sensitive products. The most important question is whether the Doha Round will affect the current levels of protection, going beyond the trade and agriculture policies currently in place. The challenge ahead is to preserve the high level of ambition of the Doha Mandate.
Deadlocks in regional and bilateral negotiations In addition to multilateral trade negotiations at the WTO, Brazil is also involved in regional and bilateral trade talks. More specifically, Brazil is involved in negotiations between the EU and Mercosur since 1999 and with 34 countries in the Western Hemisphere since 1994.
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Losing ambition in the Free Trade Area of the Americas (FTAA) The Free Trade Area of the Americas (FTAA) initiative was launched in 1994 to promote a gradual hemispheric integration through the substantial and progressive elimination of trade, services, and investment barriers. However, since 2003 FTAA negotiations have become increasingly contentious and moved towards a deadlock between the US and Brazil (Jank and Arashiro, 2004). Faced by US insistence on removing subsidies and trade remedy laws from regional talks, Brazil responded by proposing the transfer of rules in investment, services and intellectual property to the WTO. As a result, the “single undertaking” and the “most-favoured nation” treatments – two core guiding principles of the negotiations – have already been broken. Under the negotiating format set up in the Miami ministerial meeting of November 2003, countries were left free to pursue agreements bilaterally or multilaterally with only a minimum set of rules to be commonly applied. For different reasons, it appears that Brazil and the US, co-chairs of the negotiations, have opted for a more modest approach – the so-called “FTAA a la carte” – considerably less ambitious than what was observed during the early stage of negotiations. The FTAA is currently at a dangerous crossroads as it faces the threat of losing relative importance to other bilateral and sub-regional trade blocs. Such agreements appear to have become the priority for Chile, Mexico and the US. The growth of bilateral agreements in the Western Hemisphere not only undermines the FTAA, but also adds substantial complexity to a future multilateral trade system. In this respect, the FTAA would be the best alternative relative to the proliferation of bilateral agreements in the Hemisphere because it would include uniform trading rules for all countries involved. If the FTAA were negotiated in the original format, a more balanced agreement would have been achieved in order to foster trade in all directions. Additionally, a hemispheric agreement would have avoided the negative effects of trade and investment diversions, and potential conflicts stemming from different rules of origin, technical standards and trade dispute settlement mechanisms.
Sensitivities in the EU-Mercosur bi-regional agreement The EU absorbs 35% of Mercosur’s total agricultural exports or the equivalent to 48% of total bloc exports to the EU. Export products of particular relevance to Mercosur include meats (beef, poultry and pork), sugar, ethanol, tobacco, milk powder, corn, wheat, orange juice and fruits. Although agriculture is central to Mercosur’s interests, the sector continues to suffer from a high protectionist system in the EU based on tariff peaks, tariff rate quotas, minimum entrance prices, special safeguards and sanitary measures, together with domestic support and export subsidies (Jank et. al., 2004). The EU maintains an inflexible position relative to market access for agricultural products and restricts negotiations in this area to a small expansion of tariff rate quotas for selected products. Moreover, the concrete results of the EU-Mercosur negotiations are expected to be influenced by EU enlargements and further CAP reforms for sensitive products, such as sugar. In recent years the EU-Mercosur negotiations failed to achieve any meaningful results. Both sides are to blame. On the one hand, Europe continued to adopt an inflexible position regarding agricultural market access and did not show interest in concluding the agreement due to lack of advances from the FTAA. Additionally, the EU agricultural offer was insufficient and for several products, was lower than what Mercosur already exports. On the other hand, with an excessively timid proposal in industrial goods, TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
138 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System services and government purchases, Mercosur contributed to the stalemate in the negotiation process. From the perspective of the agri-food sector, it would be best that the negotiations resume taking into consideration the informal offers made by both parties in 2004 before the Mercosur proposal. Finally, South-South co-operation has become an increasingly important topic in Brazilian foreign policy, albeit with no concrete results up till now. A trade-strengthening initiative (IBSA initiative) has been launched between India, Brazil and South Africa while a preferential trade agreement between Mercosur and India was signed in January 2004. Besides, a preferential trade agreement between Mercosur and the Southern Africa Customs Union (composed of Botswana, Lesotho, Namibia, South Africa and Swaziland) is under negotiation, and a free trade agreement between Mercosur and the Andean Community was signed in October 2004.
(The lack of) coherence in Brazil’s agricultural policies As mentioned in the introduction, meat production in Brazil more than doubled from 7.5 to 18.3 million metric tonnes (MT) between 1990 and 2004. This growth has been fostered primarily by a surge in exports. Total meat (poultry, pork and beef) exports from Brazil increased from USD 360 million in 1990 to USD 5.2 billion in 2004. In particular, beef exports during this period grew at an annual average rate of 31% reaching USD 2 billion in 2004. This surge in beef exports was made possible by government efforts to eradicate foot-and-mouth disease (FMD) since the 1980s - especially with the 1992 National Programme for the Eradication of FMD and co-ordinated sanitary defence efforts with neighbouring countries (Lima, Miranda and Galli, 2005). As a result of these efforts, there has been a substantial decrease in the number of FMD cases in the country (Figure 4) leading the World Organization for Animal Health (OIE) to recognize several Brazilian states as FMD-free zones. Despite these advances in controlling FMD, Brazilian beef still faces sanitary barriers from major importing countries such as the US, Japan, Mexico South Korea, Canada and China – markets that imported USD 7.5 billion worth of beef products in 2004.
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Figure 4. Number of cases of foot-and-mouth disease in Brazil
12,000 10,000 8,000 6,000 4,000 2,000 47 37 0 0 2 24
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
0
Source: Lima, Miranda and Galli (2005).
On 9 October 2005, a new case of FMD detected in Eldorado, Mato Grosso do Sul – the state with the largest cattle heard in Brazil – sparked a new crisis in the Brazilian beef industry. As more than fifty countries decided to close their borders to Brazilian beef – including the EU, Russia, Egypt and Chile, which are the top four importers from Brazil – fourteen thousand animals were sacrificed, packing houses reduced slaughtering activities, cattle prices fell and jobs were lost. Beef industry participants were quick to blame the government for the crisis, while President Lula, more concerned about avian flu suggested that cattle ranchers were responsible for vaccination. Most experts believe that it was a matter of time for FMD to re-emerge in the country. This recent crisis in the beef industry raises the puzzling question of how the government lost sight of an industry that is so important to the country’s economy. In the analysis that follows we begin to inform this issue.
Brazilian government expenditures on farm programmes Over the last three decades, agricultural policy in Brazil underwent significant changes. The 1970s and early 1980s were characterised by massive government intervention in agricultural commodity markets primarily by means of agricultural credit and price support programmes (Figure 5). At that time, agricultural policy had the objective of promoting food self-sufficiency while compensating the agricultural sector for the anti-export bias of the import substitution model. The debt crisis of the late 1980s forced the Brazilian government to decrease support to farmers and to review agricultural policy goals. Structural reforms introduced in the early 1990s further decreased the strength of agricultural policy in Brazil with the elimination of export taxes and commodity price controls, market deregulation, and the introduction of private instruments for agricultural financing. As a result of these changes, government support currently represents 3% of farm receipts in Brazil, compared with 2% in New Zealand, 4% in Australia, 17% in the US, and 34% in the EU (OECD, 2005).
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
140 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System Figure 5. The evolution of agricultural policy in Brazil1
“Low Inflation” Scenario
“Debt Crisis” and Liberalization Effects
“Massive” Intervention
50%
250
45% 40%
200
35% 30%
150
25% 20%
100
15% 10%
50
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
0%
1966
5% 0
Price Support: % of grain production supported Preferential Credit Support: US$ per ton of grain production 1. Before 1965, there was price support for coffee, sugar cane, milk, and grains. Source: Ministry of Agriculture, Livestock and Food Supply (MAPA), 2005.
Figure 6 shows the decreasing levels of government expenditures on agriculturerelated programmes in Brazil since the mid-1980s. The total amount spent in the 1985-89 period reached BRL 101 billion (USD 34.7 billion), which represented 5.6% of total government expenses. The total amount spent on agricultural programmes decreased to BRL 50 billion (USD 17.1 billion) in the 2000-04 period, representing one per cent of total government expenses (Table 2). Not only have government expenditures on farm programmes decreased by half in real terms, but they were also pulverised in an increased number of programmes. According to Gasques (2004), the number of agriculture-related programmes increased from 30 before the year 2000 to 100 programmes in 2003 (84 under the function Agriculture and 16 programmes under the function Agrarian Organisation3). Many of these programmes are hard to evaluate and, in general, expenses are made in intermittent actions that do not contribute to intended goals. As a result, Gasques (2004) observes that some programmes are stretched out to the limit and cannot survive with decreased budgets. Additionally, he argues that some programmes such as sanitary defence have been neglected despite being essential to agri-food development and export growth.
3.
Brazilian government expenditures are organised in functions and programmes. A function represents the higher level of aggregation of federal government expenses, including health, education, social security and the two agriculture-related functions (Agriculture and Agrarian Organisation). A programme comprises a group of government actions aimed at a specific policy goal. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Figure 6. Brazilian government expenditures in farm programmes1
35
11.9% 8.6%
30 25
1.9%
7.1%
20 1.9%
2.6%
4.4% 2.5%
2.0% 2.2%
2.2% 2.2%
1.3% 2.5%
15 10
1.0% 1.1%
1.0%
0.9%
1.0%
3.5%
5 0 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
1. Expenditures are measured in BRL billions corrected for inflation by IGP-DI (base year is 2004). The percentages on top of the bars represent expenditures in farm programmes relative to total government expenditures. Source: Ministry of Finance (2005). Elaboration: Gasques (2004) and ICONE.
Table 2. Brazilian government expenditures in farm programmes by function1
Years
Expenditures in Agriculture /Total Government Expenditures (%)
Expenditures in Agrarian Organisation /Total Agriculture (%)
6.47
5.55
6.37
Total Expenses in Total Expenses in Agricultural Programs Agrarian Organisation 1 1 (BRL Billion) (BRL Billion)
1985 – 1989
101.52
1990 – 1994
91.11
5.97
2.39
6.56
1995 – 1999
88.15
15.01
2.11
17.03
2000 – 2004 1985 – 2004
50.06 330.85
18.88 46.34
1.02 2.25
37.78 16.91
1. Expenditures are measured in BRL billions corrected for inflation by IGP-DI (base year is 2004). Family Farming (PRONAF) was included in Agrarian Organisation Expenses for the period between 2000 and 2004. Source: Ministry of Finance (2005). Elaboration: Gasques (2004) and ICONE.
Another important trend is the increased emphasis placed on a function known as “agrarian organisation”. This function is largely related to land reform in Brazil, which since 1994 has settled approximately 500 thousand new family farms on expropriated land (Graziano, 2004). In addition to land reform, the government adopted a set of policies targeted toward the rural poor in 1995 – known as PRONAF – including subsidised credit, training and extension. Interestingly enough the Brazilian government created a new ministry in 2000 to run programmes targeted toward family farms and land reform – the Ministry of Agrarian Development (MDA). According to Gasques and Bastos (forthcoming), MDA expenses in personnel and other current expenses cost Brazilian taxpayers BRL 2.2 billion (around USD 1 billion) between 2001 and 2004. Reflecting the dualistic nature of Brazilian farming, Brazil is probably the only country in TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
142 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System the world with two agricultural ministries. Out of a total of five million farms in the country, less than 10% own more than 100 hectares of land (IBGE, 1995). In other words, a small percentage of farms account for a bulk of output and exports, whereas the rest are small-scale, mostly inefficient producers. Table 2 shows that from 1985-89 to 2000-04, federal government expenditures on Agrarian Organisation programmes-as a proportion of total expenditures on farm programmes-increased from 6.4% to 38%. In other words, not only did total government expenditures on agricultural programmes decrease both in relative and absolute terms, but traditional farm programmes – including rural credit, commodity price support, agricultural research, sanitary and phytosanitary defence and extension services – also suffered increased competition from Agrarian Organisation programmes. Figures 7, 8 and 9 illustrate the increased priority given to land reform in Brazil as opposed to traditional farm programmes since the year 2000. Figure 7 shows that government expenditures on land reform and similar programmes increased from BRL 1.84 billion (USD 836 million) in 2000 to BRL 2.4 billion (USD 1.1 billion) in 2004. Expenditures on supporting family farming (PRONAF) also increased from BRL 1.4 billion to BRL 2.8 billion. At the same time expenditures on government purchases and storage of agricultural commodities decreased from BRL 1.32 billion (USD 600 million) to BRL 0.53 billion (USD 241 million). Other traditional agricultural policy programmes such as extension, research and sanitary defence also suffered resource cuts during the last five years.
BRL Billion - Real Values 2004
Figure 7. Brazilian government expenditures in specific farm programmes1
3.0 2.5 2.0 1.5 1.0 0.5 0.0 2000
2001
Research and Development Supply Programmes Land Reform and Other Programmes
2002
2003
2004
Sanitary Surveillance Rural Extension PRONAF (Family Farming)
1. Expenditures are measured in BRL billions corrected for inflation by IGP-DI (base year is 2004). Source: Ministry of Finance (2005). Elaboration: Gasques (2004) and ICONE.
Government expenditures in agricultural research through the Brazilian Agriculture Research Corporation (Embrapa) have substantially increased between 1975 and 1982 (Figure 8). As a result of the 1980s debt crisis, the government has not been able to sustain that growth. Consequently, government expenditures in agricultural research have TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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hovered around the BRL 1 billion (USD 455 million) mark between 1983 and 1995. Since reaching the BRL 1.35 billion (USD 614 million) peak in 1996, Embrapa has received decreasing levels of support from the government. Additionally, over 90% of total Embrapa budget is currently being used for personnel and other current expenses. Given the central role of Embrapa in tropical agriculture research this trend might jeopardise future productivity growth in Brazilian agriculture. Figure 8. Brazilian government expenditures in agricultural research (Embrapa)1
1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 1. Expenditures are measured in BRL billions corrected for inflation by IGP-DI (base year is 2004). Source: Ministry of Finance (2005). Elaboration: Gasques (2004) and ICONE.
Figure 9. Brazilian government supply of agricultural credit1
100 90 80 70 60 50 40 30 20 10 0 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 1. Expenditures are measured in BRL billions corrected for inflation by IGP-DI (base year is 2004). Source: Ministry of Finance (2005). Elaboration: Gasques (2004) and ICONE.
Another important component of agricultural policy in Brazil has been the supply of relatively cheap credit by government sources. Figure 9 shows, however, the reduced level of government intervention in agricultural credit markets since the late 1970s. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
144 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System Government supply of agricultural credit has decrease from BRL 91 billion (USD 41 billion) in 1979 to BRL 13 billion (6 billion) in 1996. During this period, nontraditional sources of credit – including private banks, agribusinesses and international lenders – have substituted for government-supplied credit. Since these non-traditional lenders did not generally reach small family farmers, PRONAF was instituted in 1995. PRONAF provides working capital and investment credit to small farmers, including the beneficiaries of agrarian reform, at below-market interest rates. Since the institution of PRONAF, government supply of agricultural credit rebounded to BRL 38 billion (USD 17.3 billion) in 2003, which is equivalent to approximately 30% of the total agricultural credit market.
Summary and conclusions The agri-food sector in Brazil underwent significant export-led growth in the last decade. This growth in agricultural production and exports has been attributed to a number of factors, including the market oriented policies introduced since the late 1980s and substantial investments in tropical agriculture research and availability of agricultural credit, which significantly impacted the performance and competitiveness of the country’s agri-food economy. Total factor productivity in Brazilian agriculture grew at an average annual rate of 3.3% between 1975 and 2002. In 2004, Brazil surpassed the US as the country with the largest surplus in agricultural trade with USD 25 billion. Despite these favourable developments and the availability of labour and natural resources, the growth of the agri-food sector in Brazil faces significant internal and external constraints. Where external constraints are concerned, Brazilian agri-food exports are significantly impacted by OECD trade barriers and subsidies to domestic producers and exporters. The benefits from agri-food economy development would be substantially increased in Brazil if OECD member countries reformed their agricultural policies to minimise distortions in agricultural trade. That is why Brazil adopted a more aggressive position in international trade negotiations by bringing two high-profile dispute cases against developed countries at the World Trade Organization (WTO) and by taking the lead in the formation of a coalition of developing countries (the G-20). In the domestic arena, agricultural producers in Brazil face uncertainties related to the lack of clearly defined property rights for land, the regulatory framework concerning research and marketing of genetically modified organisms (GMOs), poor infrastructure causing logistical bottlenecks, and the decline in government spending in important areas such as sanitary defence, agricultural research and other traditional agricultural policy instruments. This paper has shown that government spending in farm programmes has significantly decreased in the last couple of decades. Perhaps more importantly, the number of agriculture-related programmes has tripled since the early 2000s, meaning that only a limited supply of resources is available to be spent on an increasing number of programmes. Traditional farm programmes – including commodity purchases and storage, agricultural credit, research and development, and sanitary defence – have suffered from the consequences of significant reductions as the Brazilian government has shifted priorities to land reform and other Agrarian Organisation programmes. One of the structural changes of recent agri-food development in Brazil is the growth of commercial agriculture, including in areas that have traditionally been important to small-scale farmers such as dairy products and corn (OECD, 2005). This creates pressures on less competitive, semi-subsistence farmers, for whom the long-term future TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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mostly lies outside the agricultural sector. As a result of these changes, and significant political pressure from the landless workers movement (MST) and the Catholic Church, the Brazilian government has developed programmes targeted to small-scale farmers, including land reform and PRONAF. Given the role of agriculture in the Brazilian economy, however, it is important that policies aimed at poorer farmers do not hold back further improvements in productivity of more competitive farms. The recent re-emergence of foot-and-mouth disease, which forced more than fifty countries to close their borders to beef exports from Brazil, clearly shows some of the policy challenges to the development of the Brazilian agri-food economy. Brazilian efforts in international trade negotiations will not contribute to agrifood development if the country continues to neglect important domestic issues such as sanitary defence. Growth in perishable commodity exports – including meats and fruits – depend on the country’s success in guaranteeing product safety and quality. It is, therefore, important to enhance the network of laboratories for product testing, develop modern certification and traceability mechanisms, and control FMD and other diseases. If Brazil does not do its homework, it will suffer the consequences of the “visibility curse” as the country increases its market share in global agri-food trade and adopts a pro-active role in international trade negotiations. In retrospect, farm policies in Brazil have evolved in the last three decades from a food security emphasis before 1985, to deregulation and openness to trade between 1985 and 1995 and, since then, to a land reform and family farm focus. Looking ahead, Brazilian policy makers should develop farm policies to balance competitiveness with social and environmental sustainability goals. This policy agenda should include social inclusion goals and programmes targeted toward different types of family farms, but also programmes that are essential to agri-food competitiveness, including agricultural research, sanitary defence, food safety, traceability, clearly defined property rights to land, and infrastructure development.
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REFERENCES Chaddad, F.R., P. Aguilar and M.S. Jank (2005), “Agri-food Market Integration: Perspectives from Developing Countries”, Paper presented at the Second Annual North American Agri-food Market Integration Workshop, San Antonio, TX, May 4-6, 2005, paper available at: http://naamic.tamu.edu. Food and Agricultural Organization (FAO) (2004), FAOSTAT Database, available at: http://faostat.fao.org, April. Gasques, J.G. (2004), Gasto Público para o Desenvolvimento Agrícola e Rural: O Caso do Brasil, Research report prepared for the FAO, Santiago, Chile. Gasques, J.G. and E.T. Bastos, Gastos Públicos na Agricultura: Uma Atualização, forthcoming. Gasques, J.G., E.T. Bastos, M.P.R. Bacchi and J.C.P.R. Conceição (2004), “Condicionantes da Produtividade da Agropecuária Brasileira”, Revista de Política Agrícola 13(3): 73-90, 2004. Graziano, X. (2004), O Carma da Terra no Brasil, A Girafa Editora, São Paulo. IBGE (Instituto Brasileiro de Geografia e Estatística) (1995), Brazilian Census of Agriculture. IPC (International Food & Agricultural Trade Policy Council) (2005), Building on the July Framework Agreement: Options for Agriculture, Washington, DC. Jales, M. and A. Nassar (2005), “How to Read the US and EU Proposals on Domestic Support to Agriculture”, Bridges, International Centre for Trade and Sustainable Development (ICTSD), No. 10, December 2005, p. 5-7, available at: www.ictsd.org. Jank, M.S. and Z. Arashiro (2004), “Free Trade in the Americas, Where Are We? Where Could We Be Headed?”, in Inter-American Dialogue (org), Free Trade in the Americas: Getting There From Here, Washington, DC: Report of the Inter-American Dialogue. Jank, M.S., L. Araújo and J. Diaz (2004), “The WTO Dispute Settlement Mechanism Perspective: Challenging Trade-Distorting Agricultural Subsidies”, in J. Lacarte and J. Granados (eds), Inter-Governmental Trade Dispute Settlement: Multilateral and Regional Approaches, London: Cameron. Jank, M.S., J.Y. Carfantan, G. Kutas, A.J. Meirelles, A. Nassar and J.H. Cunha Filho (2004), “Scenarios for Untying the Agriculture Knot”, in A. Valladao, F. Peña and P. Messerlin (eds.), Concluding the EU-Mercosur Agreement, Paris: Mercosur Chaire of the Institut d’Etudes Politiques de Paris, Presses de Sciences Po. Jank, M.S., A.M. Nassar and M.H. Tachinardi (2004), “Agronegócio e Comércio Exterior Brasileiro”, Revista USP 64 (Dezembro), pp. 14-27. Lima, R.C.A., S.H.G. Miranda and F. Galli (2005), Febre Aftosa: Impacto sobre Exportações Brasileiras de Carne e o Contexto Mundial das Barreiras Sanitárias, São Paulo, ICONE. Ministry of Agriculture, Livestock and Food Supply (MAPA) (2005), Brazilian Agriculture Policy. Presentation, Washington, DC, 16 June 2005. Ministry of Finance (2005), Relatório Resumido de Execução Orçamentária do Governo Federal, data available at: www.fazenda.org.br. Ministry of Industry, Development and Foreign Trade (2005), trade data available at: www.desenvolvimento.gov.br/sitio/secex/negInternacionais/tec/apresentacao.php. OECD, Key Issues for Policy Coherence for Development in Agriculture (2004), report available at: www.oecd.org/dataoecd/22/53/25507214.pdf. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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OECD, OECD Review of Agricultural Policies: Brazil (2005), report available at www.oecd.org/document/62/0,2340,en_2649_201185_35584190_1_1_1_1,00.html. The Economist (2005), The Harnessing of Nature’s Bounty, pp. 73-75, November 5-11. World Trade Organization (2005), data and notifications available at: www.wto.org.
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Chapter 9. POLICY COHERENCE FOR DEVELOPMENT: ISSUES FOR CHINA Xiaoshan Zhang Institute of Rural Development, Chinese Academy of Social Sciences Abstract Chinese rural development policies were secondary to China’s national development paradigm, development framework and development strategies. In the past two decades and a half, China’s rural and agricultural sectors have grown significantly. However, problems persist in the areas of labour, land and capital. Cheap labour, cheap land, domestic and foreign capital, advanced technology, information and management, good infrastructure, effective policies and market access were important to China’s development process. Rural development however suffered. Chinese authorities have tried to tackle problems relating to social justice and also those relating to exclusionary issues, both of which they recognise as being important. However, a comprehensive policy adjustment framework is necessary to approach these matters in an effective manner. China’s agricultural trade policies have been subordinated to the overall trade policy framework which in turn is an indispensable part of the country’s development framework. The central policy of speeding up the industrialisation process through open policies which emphasise attracting FDI enabled China to become a world factory However, in order to ensure the export of industrial products, agricultural trade was neglected. The fact that Chinese agricultural trade policies have stayed open seems to have merely been the inevitable result of the strategies followed by Chinese trade players and their international counterparts. Even if China’s overall development policy is changed, Chinese trade policies will not have to undergo any significant adjustments. The competitiveness of manufactured goods will be raised through the up-grading of the industrial structure and the enhancement of technology and capital. But the policy of adopting an open attitude in terms of agricultural trade to ensure the export of manufactured goods – an approach that resulted in the expansion of China’s agricultural trade products-will remain unchanged. A close relationship existed between the expansion of world grain trade and the expansion of Chinese grain imports. It is possible that China’s overall imports of grain will increase and the import volume of grain (including soybean) will approach 30 million tonnes. Such a situation will inevitably influence China’s effective and sustainable grain security mechanism and the livelihoods and incomes of Chinese grain producers, especially those of soybean producers in the north-eastern areas and of wheat producers in the central areas. In the long run, it is very possible that there will be a deficit between domestic grain supply and demand. It is important to manage such a situation in order to maintain an effective and sustainable grain security mechanism. Other priorities include deepening internal reform and implementing institutional changes to reduce corruption and to protect the rights and interests of excluded and
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150 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System vulnerable social groups. It is also important to implement a top-down organisational approach combined with bottom-up initiatives.
Chinese agricultural-related policies Chinese rural development policies are subordinated to the national development paradigm, development framework and development strategies The national development paradigm China adopted since reforms were implemented was urban-oriented, SOE-oriented, and coastal regions-oriented. The basic ideas driving the paradigm were put forward by Deng Xiaoping who mentioned on several occasions that certain groups of people should be allowed to participate and that some regions must take the lead, in both rural and urban China, where development is concerned. (p. 23, Deng Xiaoping, 1993). In practice, growth spurts were associated with a relatively narrow range of reforms. The Chinese called it a gradual change approach which is unlike shock therapy. It was also thought that such an approach would reduce the resistance from vested interest groups so that the reform process could proceed smoothly. During the transformation from a central-planned economy towards a more outwardoriented, market-oriented economy, assisted by inflows of FDI, new sectors like private sectors, TVEs (township and village enterprises), joint ventures, and multi-national or trans-national corporations, sprang up besides the old sectors which were still controlled by the state. Employment and income sources increased and diversified, the peoples’ dependence on the old system decreased, and the gains from the new sectors covered the costs of the reform (Fan Gang, 1991). However, the development paradigm is not a remedy for all ills and some problems remain to be addressed.
Poverty alleviation issue In the past two decades and a half, significant achievements have been made by the Chinese government in reducing rural poverty (Table 1). However, much remains to be done. In 1993, the central government set up the “eight-seven plan”, with the aim of lifting 80 million of the rural poor out of poverty by the year of 2000. However, at the end of 1997, 50 million of the rural poor still lived below the poverty line while in 2000, this number stood at 30 million (Table 1). As per the poverty line criterion set by the World Bank, a person needs a minimum of one USD per day in terms of purchasing power parity (PPP). In line with this definition, at the end of 1997, the rural poor numbered 124 million and the poverty rate was 13.5% (Wu Guobao, 2000). In 2003 the number of poor increased by 800 thousand as per the Chinese definition of poverty (Table 1). Several Chinese institutions set a minimum requirement of CNY 8821 (2003) for low income rural populations. This was supposed to be close to the World Bank definition. 1.
In this report, China’s currency is called Yuan which is equal to Yuan renminbi. The currency code applied is CNY which is in line with ISO classification. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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According to this revised criterion, in the year 2003, the number of people in rural areas living below the poverty line was 85.17 million, and accounted for 9.1% of total rural population (UNDP; NDRC, PRC; CICETE,PRC; CQOLS, Wuhan University; 2004). Table 1. The number and percentage of rural population under poverty line Year
Rural population (million)
1978 1985 1990 1995 1996 1997 1998 2000 2002 2003
790 808 841 859 851 842 832 808 782
Rural people under poverty line (million) 250 121 85 65 58 50 42 30 28.2 29
Percentage (%) 31.65 14.98 10.10 7.57 6.82 5.94 5.05 3.71 3.61
Rural poverty line: CNY 450 per capita (1994) CNY 530 per capita (1995) CNY 640 per capita (1997) CNY 635 per capita (1998) CNY 630 per capita (2001) CNY 627 per capita (2002) CNY 637 per capita (2003) Sources: China Statistical Yearbook, Analysis and Forecast on China’s Rural Economy (1999-2000); Green Book of China’s Rural Economy, UNDP; NDRC, PRC; CICETE,PRC; CQOLS, Wuhan University; A National Development Framework Converging with the MDGs to Build China’s Overall Xiao-Kang (Well-off) Society, December, 2004.
The widening gap between urban and rural areas in terms of income and social welfare In 2000, the per capita disposable income in urban areas was CNY 6 280 (Table 2). The gap between urban and rural incomes widened from 2.65 in 1999 to 2.8 in 2000, and then to 3.23 in 2003. In 2003, per capita annual net income of rural households was CNY 2 366 (80% in cash and the rest in kind). Factoring in the prevailing urban bias in public expenditures, urban hidden income and the residual urban social welfare from the long-existing dual structure, the gap between urban and rural incomes is even wider.
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152 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System Table 2. The gap between urban and rural annual per capita income Year 1978 1980 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Per capita annual disposable income of urban households (CNY) 343.4 477.6 739.1 1 510.2 1 700.6 2 026.6 2 577.4 3 496.2 4 283 4 838.9 5 160.3 5 425.1 5 854 6 280 6 859.6 7 703
Net income of rural households (CNY) 133.6 191.3 397.6 686.3 708.6 784 921.6 1 221 1 577.7 1 926.1 2 090.1 2 162 2 210.3 2 253.4 2 366.4 2 476
The ratio between urban and rural income 2.57:1 2.50:1 1.86:1 2.20:1 2.40:1 2.58:1 2.80:1 2.86:1 2.72:1 2.51:1 2.47:1 2.51:1 2.65:1 2.79:1 2.90:1 3.11:1
Source: China Statistical Yearbook.
The stagnation of growth rate of Chinese farmers’ net income The per capita growth rate of Chinese farmers’ annual net income decreased for four consecutive years starting the year 1997 (Table 3). There is an urgent need to increase farmers’ income. This can then enhance their purchasing power which in turn will stimulate domestic rural markets. Table 3. The change of farmers’ net income per capita Year 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Nominal income (CNY) 397.60 423.76 462.55 544.94 601.51 686.31 708.55 783.99 921.62 1 221.00 1 578.00 1 926.00 2 090.00 2 162.00 2 210.00 2 253.00 2 366.40 2 476 2 622.00 2 936
Nominal rate of increase (%) 11.90 6.58 9.15 17.81 10.38 14.10 3.24 10.65 17.56 32.50 29.20 22.00 8.50 3.40 2.20 1.90 5.00 4.63 5.90 11.98
Real income (CNY) 383.05 410.32 445.79 491.69 536.22 667.62 700.04 750.35 809.08 967.70 1 282.00 1 720.02 2 014.60 2 179.87 2 244.16 2 256.00 2 347.63 2 480 2 582 2 800
Real increasing rate (%) 7.80 3.20 5.20 6.30 -1.60 11.00 2.00 5.90 3.20 5.00 5.00 9.00 4.60 4.30 3.80 2.10 4.20 4.80 4.30 6.80
Notes: Real income is the net income deflated by the price index. Real increasing rate is calculated as follows: current year’s real income divided by previous year’s nominal income minus 1.00. Source: China Statistical Yearbook, State Statistical Bureau, PRC.
Within the development paradigm China adopted since the reform, policy priorities were not in favour of rural areas. Inland areas, agriculture, rural and small-and-mediumTRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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sized enterprises were especially disadvantaged and were the major reasons for the stagnation of rural and agricultural development.
Discriminating policies for rural workers jeopardised urbanisation process Data shows 130 million rural labourers working in the TVEs and according to the recent survey, about 120 million of the rural labour force worked out of their home counties. These people are considered marginal and belong to the unstable and vulnerable section of the population. For example, the rural workers in TVE and in urban areas do not enjoy social security privileges. Such institutional arrangements result in a stagnation of the urbanisation process. The rural workers shifting to urban areas or working in TVE have been regarded as cheap labour. This means that they don’t enjoy decent salaries, have to tolerate very poor working and living conditions, and have no social security privileges. This labour force was exploited to the utmost, could not afford to put down roots and to settle down in urban areas. However, according to demographic census, many of these people were included in the urban population so that the urbanisation rate was calculated at 40.53% in 2003. Because this phenomenon cannot be considered “real” urbanisation, these numbers are misleading. Why is the rural labour force so “cheap”? The rural labour force brought an abundant supply of cheap, unskilled labour and any calls for an increase in wages, or improvements in working or living conditions will meet resistance from employers, given the increase in costs such changes would entail Moreover, in order to attract FDI, increase fiscal revenue, and to realise personal promotion, local cadres were inclined to form a coalition with entrepreneurs in order to control supplies of cheap labour.
The drawbacks of the land tenure system deprived farmers of their property rights and negatively influenced farmers’ livelihoods The Constitution stipulates collective ownership of rural land. But it is difficult to clarify who could represent the rural collective. Moreover, the ambiguous system of rural land rights also enables local governments, domestic and foreign industrial and commercial capital to obtain, through confiscation and together with community leaders, rural land from rural collectives and then to convert the land -after infrastructural improvements-into construction land. In some cases, farming land is used to construct infrastructure, such as high-ways or oil-pipe-lines, and in other cases, the land is used for the construction of industrial parks or for commercial housing. In this way the local economy could accumulate capital and most of the added value from land use conversions would be shared among the local governments, industrial and commercial capital. Since the reform, reportedly about CNY 2 000 billion from the added value associated with the conversion of rural land have been taken from farmers. It is also reported that according to the programme, from the year of 2000 to 2030, 3.63 million ha of arable land will be expropriated. If the current compensation criteria are still in force, the losses to farmers from the transactions will equal more than CNY 3 000 billion. Besides, the confiscation will also cause about 80 million farmers to be temporarily unemployed (Zhang, 2004).
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154 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System Those farmers who lost their land during the urbanisation process through such land transfers can get only limited compensation, and therefore became both landless and jobless. It was reported that in the year of 2002, 880 000 farmers lost their land in Zhejiang Province and got only a lump-sum compensation (“Peoples’ Daily”, 17 March 2003). Further, because these people were not included in the urban social security network, they also became marginal and vulnerable. It was said that various kinds of development zones expropriated 35 400 square km of arable land, and the landless farmers numbered 35 million. Fifty per cent of them were both landless and jobless (Zhang, 2004). The so called “three Nos farmers” (no farming land, no job and no right to minimum social security) will create serious problems for society. In terms of arable farming land, agribusiness started featuring in o agriculture and signed contracts (leases) with local governments and rural collectives to take land already-contracted land away from farmers. The entrepreneurs then developed large-scale plantations to grow cash crops such as fruits and vegetables, and hired dispossessed farmers as agricultural labourers. Since the small piece of the contracted land is still the basic means of security for a vast number of small-scale farmers, any change in the land tenure system will inevitably impact this population’s security. Also, whether or not the people who lost their rights to land use will be compensated by other stable means of security, like non-farming employment opportunities and social protection is an important issue. The land tenure system should be regarded as an important factor when it comes to influencing the livelihood, income and employment opportunities of rural labourers. According to the recently issued Rural Land Contract Law, the state should maintain the long-term stability of the rural land contract arrangements. During a given contract period, those who issue contracts will not be allowed to renege on the terms of the contract. But the purpose of this law is to regulate the economic relationship, within the rural collective, between those who issue contracts (village cadres) and the contractors (ordinary farmers). This law does not address the key issue of how to protect farmers’ interests and property rights during the land confiscation process. Besides, the implementation of this law will meet resistance from local officials and rural cadres since they will not be able to easily take the contracted land away from the farmers in the name of promoting agricultural integration or for developing agricultural, scientific and technological parks.
Tax-sharing system and fiscal policies were also not in favour of rural development After the tax-sharing fiscal reform in 1994, the fiscal situation at both the central government and provincial government levels has improved to a certain extent. As a result, most of the fiscal sources were concentrated at central, provincial, or even prefectual levels and many of the responsibilities and obligations were allocated down to county and finally to township or town levels. Such an approach caused difficulties for the rural grassroots organisations (township or town, villages) in carrying out their normal functions. The unfunded mandate from above also caused the crises in the provisions of public goods and of basic social welfare amenities at a grassroots level. Local governments, both in poor and even in relatively rich areas, face severe imbalances due to the gaps which exist between required and available budgets. For example, when the cost of a luxury car at the provincial level exceeds the total yearly TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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budget of a township, it is difficult to provide sufficient public service at the grassroot levels. Besides, the debt burden on both townships and villages is high as well. It was reported that the average debt owed per town or township was CNY 4 million and the average debts owed per village was CNY 200 000 (Zhang et al., 2001).
Rural financial policies couldn’t provide farmers with enough capital After the closing-down of the Rural Co-operative Funds (RCF), the Rural Credit Co-operatives (RCC) became the monopolistic financial powers in rural areas. There are problems involved in converting these bodies into real co-operatives. Besides, given the high transaction costs involved in dealing with small farmers and also fearing financial difficulties, commercial banks are withdrawing from the countryside. Therefore, farmers, small rural business men or other working people have fewer chances of getting loans from the formal financial sectors and have to depend on money-lenders. In the past two decades and a half, China witnessed significant increases rural and agricultural growth. But there were problems associated with labour, land and capital. The development process was fuelled by cheap labour, cheap land, domestic and foreign capital, advanced technology, information and management, good infrastructure, effective policies and market access. However, rural development was neglected.
Adjustments of Chinese rural development policies - government priorities for rural development Policy makers could still continue with the old development patterns, which include making GDP growth a priority, concentrating resources on the coastal areas, big cities, SOEs, stimulating the domestic consumption of certain groups (white collar or golden collar people) and developing the automobile industry, tertiary industry and commercial housing. It is thus possible to sustain a 7% per annum growth rate in GDP for at least 10, perhaps even 20 years. An alternative approach is to adjust the distribution structure which is currently distorted and rebuild the national social policy framework so that excluded social groups can get as much of access to basic public services as their more included counterparts. Investing in human capital in this manner will yield huge social benefits. If development is defined as sustainable economic growth based on equitable distribution, then in the past two decades and a half, China has achieved rapid economic growth. However, to a certain extent, the country has not realised real development. Thus, fundamental policy adjustment is not only connected with social justice, but also with development issues. During the 16th Congress of Chinese Communist Party which was held in November 2002, Mr. Jiang Zeming said that China’s goal for the next twenty years is to build a society which will benefit its more than a billion Chinese people. He also mentioned that, so far in China, the urban-rural, dual economic structure has not changed, the trend toward increasing inequities between regions have not been reversed, and a large number of number of people continue to live below the poverty line. Therefore, when it comes to realising China’s potential for industrialisation and modernisation, there still remains a long way to go. In the 3rd plenary session of the 16th Party’s congress in 2003, five harmonised development objectives (regional development – both urban and rural, economic and TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
156 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System social development, human development and environmental preservation, domestic development and openness to the outside world) were put forward. There was also a call to improve the institutional environment so that the rural surplus labour force could find employment opportunities in their home villages. Besides, the need to eliminate restrictive regulations on rural labourers who wanted to pursue urban employment so as to gradually create more flexible labour markets and to unify the urban and rural labour pools, while prioritising the needs of agriculture, rural areas and farmers was also emphasised. In line with these ideas the Chinese Communist Party in 2004 and 2005 said that the scientific development outlook should be adopted in order to encourage human-capitalbased sustainable development. The development goal is to finally build a harmonised society. In the 5th plenary session of the 16th Party’s congress in October 2005, the goal of building new socialist villages was suggested in the context of the “eleventh five year plan”. These perspectives indicate that Chinese authorities have attached great importance to solving social issues including problems relating to the exclusion of social groups. However in order to realise these ideas, a comprehensive policy adjustment framework should be set up. Several policies have now been launched in the area of rural development. These are as follows 1. In 2004, taxation reform was launched in 30 provinces and the central budget transferred CNY 51 billion to governments at rural levels in order to help cover budgetary deficits. 2. Establishing a new rural co-operative medical care system. 3. Promoting rural educational reform: The aim is to increase the percentage of children who can enjoy nine years of compulsory education to above 85% in the western regions of the country. It is also the aim to reduce illiteracy rate among adults to below 5%. A state education report issued recently by the ministry of education promised that by the year 2010, education would be made compulsory and would also be free everywhere in rural China.
Chinese trade policies on agricultural products While Chinese agricultural trade policies are subordinated to trade policies, they are also an indispensable part of China’s development framework. China’s share in global trade increased from 0.9% in 1980 to 6.2% in 2004. The share of agricultural products in China’s trade decreased dramatically from 28.5% in 1980 to 5.8% in 2004 while the share of fuel and mineral turnover decreased from 13% in 1980 to 8.2% in 2004. Meanwhile the share of manufactured products in total trade increased significantly from 55% in 1980 to 85.2% in 2004 (Chen, 2005). The figures indicate that in the past two decades and a half, there have been important changes in China’s overall trade structure. The development strategy of speeding up the industrialisation process using open policies which emphasise attracting FDI has enabled China to become a world factory. Agriculture trade was sacrificed to ensure the export of industrial products. As an inevitable result of China’s own trade strategies and those used internationally, Chinese TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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agricultural trade policies remained open. In 2004, tariffs on agricultural products in China were 15.8%. This was much lower than the world average (46.5%)2. Besides, in general, China’s tariff rate was 15% compared to the world average of 62% (Ke, 2005). As far as imports go, the tariff level of less than 8% was far below the world average of 15.8% (Table 4). Table 4. China’s tariff of agricultural products import, 2004
Grain Oil Cotton Sugar Soybean Vegetables Fruits Animal Husbandary products Others Total/ average
Import value (million USD) 2 210 3 890 3 200 280 6 980 90 590 4 040
The share of total import (%) 7.9 13.9 11.4 1.0 24.9 0.3 2.1 14.4
6 750 28 030
Tariff rate (%) 1 9 1 15 3 13 12 12
24.1 100.0
14 7.7
Tariff amount (million USD) 22.1 350.1 32 .42 209.4 11.7 70.8 484.8 945 2 167.9
Sources: The data of import value were provided by the Information Centre, Ministry of Agriculture, China. The tariff rates were synthesised according to the actual custom tariff quoted from Ke et al., (2005).
An overall adjustment in China’s development policies will not significantly impact China’s trade policies. The manufactured goods sector will remain competitive through the up-grading of the industrial structure, and the enhancement of technology and capital. However, I personally think that the open policy in agricultural trade (to ensure maintaining the exports of manufactured goods) will remain unchanged.
Agricultural policies have been adapted to meet the needs of the new situation The new situation was characterised by: 1. A reduction in grain supply. In 2003, influenced by structural adjustments in the agricultural sector and by natural disasters, the total grain output fell to 430.67 million tonnes – the lowest it had been since the 1990s. Compared to the highest output levels achieved for 1998, this marked a decrease by 15.9% and compared to the year of 2002, a decrease of 5.8%. Such a phenomenon caused an increase in food prices which spilled over to the related sectors and goods. 2. The stagnation of farmers’ income. 3. A depressed domestic market. The Chinese government must target two goals: ensure the security of grain supply and enhance farmers’ incomes. In order to achieve the two goals, government should adopt policies which will give farmers’ more incentives to produce grain and will also improve the competitiveness of agricultural products. 2.
Chen Yongfu’s calculation according to the data from Benjamin Buetre, Roneel Nair, Nhu Che and Troy Podbury (2005).
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158 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System In 2004, in order to promote rural taxation reform, funds to the tune of CNY 51 billion, were transferred from the central government. During the reform, the elimination of agricultural special taxes on all products except tobacco combined with a reduction in agricultural taxes enabled farmers to reduce their debt burdens significantly. Besides, the direct subsidies to grain producers in 2004 reached CNY 11.6 billion, while the subsidies for using good varieties of grain in 13 grain-producing areas totalled CNY 2.8 billion. The subsidies provided for purchasing agricultural machinery reached CNY 0.5 billion. However, the total subsidies accounted only for 0.5% of China’s agricultural output value (Ke, 2005).According to China’s WTO commitments relating to the Amber Box Policies, the percentage of subsidies in the future could reach 8.5%. All policies adopted by the central government produced positive results. In 2004, the area allocated to grain increased by 330 million mu (22 million hectares) as compared to the previous year. Grain output reached 469.47 million tonnes – an increase of 9% or 38.77 million tonnes. Grain output per mu (1/15 of hectare) reached 308 kg, an increase of 6.6% (Table 5). Both the average yield and the absolute yearly increase in grain production were record-breaking. Table 5. Changes in grain output and area Year 1978 1980 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Grain output (million tonnes) 304.77 320.56 379.11 446.24 435.29 442.66 456.49 445.10 466.62 504.54 494.17 512.30 508.39 462.18 452.64 457.06 430.67 469.47
Grain sown areas (million mu) 1 809 1 759 1 633 1 702 1 685 1 658 1 658 1 628 1 651 1 688 1 694 1 707 1 697 1 627 1 591 1 558 1 491 1 524
Grain output per capita (kg/person) 318.7 326.7 360.7 393.1 378.3 380.0 387.4 373.5 378.3 414.4 401.7 412.4 405.5 366.1 355.9 357.0 333.3 361.2
Source: The Main Data of Chinese Rural Economy 1978-2003, Rural Social and Economic Survey Department, National Statistics Bureau.
In 2004, farmers’ net income per capita reached CNY 2 936 - an increase of CNY 314 or 12% from the previous year. The real rate of increase was 6.8%. This was the highest and fastest increase since 1997 (Table 3). It should be pointed out that the increase in grain prices played a key role in increasing farmers’ incomes. In 2004, the price of grain (over a wide range of grains) per kilo rose by 22.2%. Such an increase in prices enabled farmers’ per capita net income to increase by CNY 165 (Zhang, 2005). In 2005, 27 provinces, autonomous regions and municipalities had already eliminated agricultural taxes and it was announced that starting the year 2006, China would eliminate agricultural taxes entirely. Direct subsidies to grain producers in 2005 would be increased by 10% from CNY 11.6 billion in 2004. Meanwhile the State Council decided TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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to transfer CNY 5.5 billion to support education, science and technology, and agriculture in 800 grain-producing counties. Analysing the agricultural situation of 2004, we will notice that almost all the factors which enabled the increase of grain output and farmers’ income had temporary and shortterm features. Factors such as the expansion of acreage under grain, rising grain prices, favourable climate, exemption of agricultural taxes, etc. had no sustainable function. It is crucial but difficult to establish an effective and sustainable mechanism which can ensure grain supplies while increasing farmers’ income in the long run (Zhang, 2005).
China’s experience with OECD agricultural-related policies The expansion of agricultural products trade Chinese agricultural trade was forced to adopt open policies in order to ensure the expansion of manufactured goods’ exports. This also contributed to the expansion of trade in agricultural products. According to statistics on agricultural products from the Ministry of Commerce, from 1995 to 2004, Chinese trade in agricultural products first decreased and then increased. Especially after accession to the WTO, the scale of trade gradually expanded. By the end of 2004, the total trade in agricultural products expanded from USD 26.5 billion in 1995 to USD 51.2 billion in 2004 – an increase of 93% (Table 6). With regard to trade in agricultural products, China has become one of the top players in the world. If EU was considered a single entity, the China ranked 4. On the other hand, if the EU is diasggregated, then China ranked No. 8 (Weng, 2005). Table 6. The trade balance of China's agricultural products Unit: million USD
Agricultural products
Item Total import Total export Trade balance Total amount of trade
1995
1996
1997
1998
m
12 169
10 827
9 924
8 332
x
14 375
14 255
14 928
x-m
2 206
3 428
x+m
26 544
25 082
1999
2000
2001
2002
2003
2004
8 216
11 237
11 813
12 411
18 898
28 126
13 805
13 551
15 617
15 997
18 027
21 251
23 090
5 004
5 473
5 335
4 379
4 184
5 616
2 353
-5 036
24 853
22 137
21 768
26 854
27 810
30 438
40 149
51 215
"+" means favourable balance; "-" means unfavourable balance quoted from Chen (2005). Source: The Ministry of Commerce Statistics.
In terms of trade turnover, the import of agricultural products decreased from USD 12.2 billion in 1995 to USD 8.2 billion in 1999. It increased for each consecutive year afterward and reached USD 28.1 billion - 1.3 times more than it was in 1995. The export of agricultural products was reduced from USD 14.4 billion in 1995 to USD 13.6 billion in 1999. Again, it increased continuously afterward and reached USD 23.1 billion - 0.6 times higher compared to 1995. In terms of the trade balance of agricultural products, from 1995 to 2003, China maintained a favourable trade balance of more than USD 2.2 billion. But in 2004, the trade balance became unfavourable and the deficit reached USD 5.036 billion. It was estimated that in 2005, although the numbers would be reduced, the trade balance for TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
160 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System agricultural products would continue to remain unfavourable. In any case, the scenario of favourable trade balances which lasted for nearly 20 years, seems to have changed.
China’s grain trade structure In 2003, China grain output fell to the lowest it had been since 1990. Simultaneously however, China exported the largest quantities of grain in history. The net exports of grain reached 16.16 million tonnes. Corn exports alone amounted to 16.39 million tonnes - a record-breaking amount (Zhang, 2004). With regard to cereals, China went from being a net exporter in 2003 to a net importer in 2004. Imported wheat counted to 7.23 million tonnes while the import of soybeans amounted to 20.23 million tonnes. In 1996, Chinese State Council issued a white book named “Chinese Grain Issues”. This book suggested that in order to achieve relative self-sufficiency in grain consumption, net imports of grain could not exceed 5% of domestic consumption. Statistics however show that in 2004, net imports accounted for 5.2% of domestic consumption (Zhang, 2005). A close relationship existed between the expansion of world grain trade and the expansion of Chinese grain imports. World grain trade increased from 505 million tonnes in 1990 to 676 million tonnes in 2003. World grain imports increased from 251 million tonnes in 1990 to 337 million tonnes in 2003. In 2003, Chinese grain imports accounted for 9.5% of world grain imports. In 2004, the net imports of grain amounted to USD 8.3 billion while net imports of grain reached 24.84 million tonnes (Table 7). In 2004, soybean accounted for 67% of the total volume of grains imported while wheat accounted for 24% of the total volume of imported grains. In terms of value, soybean accounted for 92% of the total value of imported grains (Chen, 2005). Table 7. The change of grain import and export, China
Export turnover (million USD)
2002
2003
2004
1 846
2 818
1 055
Import turnover (million USD)
3 060
5 998
9 364
Export- import (million USD)
-1 213
-3 179
-8 309
Export volume (million tonnes)
15.14
22.30
5.14
Import volume (million tonnes)
14.17
22.83
29.98
0.98
-0.53
-24.84
Export volume-import volume (million tonnes)
Grain trade turnover indicated the commodities whose tariff codes are HS10, 11, 1201, the figures of grain trade volume are quoted from Chinese Agricultural Development Report, 2005. Source: Chinese Agricultural Development Report, 2005, Statistical Division of Chinese Custom quoted from Chen (2005).
It is possible that the structure of Chinese trade in grains will change as the total import of grain (including soybean) will soon approach 30 million tonnes. While the United States benefited significantly from China’s increasing imports of grain and soybean, it is also one of China’s fastest growing markets. Chinese agricultural exports to the United States increased by 43% between 2002 and 2004 (Fred Gale, 2005). But such a situation will inevitably influence China’s effective and sustainable grain supply structure. The livelihoods and incomes of Chinese grain producers, especially those of
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soybean producers in the north-eastern areas and wheat producers in the central areas will be influenced.
The prospects for China’s agricultural trade Some factors will influence the long-term domestic grain supply. These include the reduction of cultivated land; the prices of grain products which provide the main incentives for farmers’ to produce grain, and the demand for raw materials in industrial sectors. According to a report from the Chinese Vegetable Oil Association, by the end of 2004, the processing capacity of 169 large scale soybean processing enterprises had already reached 70.10 million tonnes while their capacity utilisation rate was only 40%. A similar situation applied to cotton. The processing capacity of cotton is three times greater than market demand (Zhang, 2004). This overheating will cause severe competition among regions for raw materials and will in turn influence the import needs of the country. In the long run, it is very possible that there will be a deficit between domestic grain supply and demand. It is important to manage such a situation while maintaining an effective and sustainable grain supply mechanism. Since arable land and water are scarce resources in China and because there is an abundant surplus of rural labour, it seems intuitive that China should import more land and water intensive products (such as corn and wheat) while simultaneously exporting labour-intensive products (such as horticultural products, fruit, poultry and meat). Such a policy would allow China to capitalise on its comparative advantages (Rural Development Institute, Chinese Academy of Social Sciences and Rural Social and Economic Survey Department, State Statistical Bureau of PRC, 2000, p. 13). The impact on Chinese farmers of Chinese agricultural trade policies in relation with world agricultural trade policies should be analysed according to different regions, different products and different farming groups. While it is not possible to say conclusively as to who the potential winners and losers may be, it can be tentatively suggested that the cash crop producers who are mostly living in the coastal may be the potential beneficiaries and the staple food producers living in the north-eastern regions, and the middle regions of China would be the possible losers in light of China’s membership to the WTO. There are however some concerns. Firstly, recent data on exports and imports show that although those projected to lose have done so in reality, it will be difficult for those projected to gain to do so in reality. Secondly, China mainly exported vegetables, processed foods, fruits and animal husbandry products to offset the deficits. But in terms of sorting, grading, packing, quality control and quarantine, China has a long way to go when it comes to meeting international standards and in overcoming the non-tariff barriers (green barriers). Since China will not be regarded as a market economy country for some 15 more years, the domestic prices of exported products cannot be used as yardsticks in the context of antidumping issues. This will make the situation even more difficult for the exporters of agricultural products.
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162 – Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System
Conclusion In China’s case, policy coherence means policy adjustments and deepening reforms. These are not easy to implement. At the governmental level, the contradiction between various sectors can jeopardise comprehensive social schemes. Each government department has its vested interests and officials are inclined to pursue and maintain their vested interests through rent-setting and rent-seeking activities. As the background paper pointed out, “achieving policy coherence is difficult because of multiple policy objectives and conflicting interests”. In the new version of the World Bank report (Reaching the Rural Poor - Strategy for Rural Development), the writers correctly point out that “the question of how national policies contribute to greater inclusion in or exclusion from the benefits of globalisation is critical” (p. 3, Csaba Csaki, 2003). It should be pointed out that during the past two decades and a half, especially during the globalisation process, there has been a tendency in China toward the capitalisation of power and the empowerment of capital. The most important task for China is therefore, to deepen internal reform and undertake policy adjustments through institutional changes and organisational innovation. This will help the country in meeting the challenge of globalisation and in protecting the rights and interests of excluded or vulnerable groups. In forming the new national policy framework, in order to reduce corruption caused by rent-setting and rent-seeking activities, priority should be given to political and administrative reform. On 28 June 1986, Mr. Deng Xiaopiong said in a speech that “We will not succeed if we only undertake economic reforms without reforming the political system. Such reforms will finally not find the support of the people. Problems have to be solved by the people. What could you do, if you want to decentralise power, but he wants to keep the power in his hands? From this perspective, whether or not reforms are successful will finally depend on reforming the political system.” (p. 164, Deng, 1993). Democratisation could act as a powerful instrument in facilitating inclusion and in enabling local people to express, share, enhance, analyse their knowledge and experiences. This can also help them formulate new policies and to use them to their advantage. Therefore, reforms have to be deepened in order to promote the democratic process and to empower individuals (citizens) and their organisations. Participation will also ensure the involvement of excluded and vulnerable social groups. By combining top-down approaches with bottom-up initiatives, a new and more effective development strategy can be formulated. It is therefore clear that only the empowerment of the masses can balance the empowerment of capital.
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REFERENCES Binsheng, Ke (2005), Agriculture: Facing Challenge, Going Ahead with Burden, Half a Month Forum, No. 3. Binsheng, Ke et al., (2005), China’s Agricultural Development and New Round of Negotiation After China’s Accession to WTO, Chinese Agricultural Press. Csaki, Csaba (2003), Reaching the Rural Poor: A Renewed Strategy for Rural Development, World Bank. Gale, Fred (2005), China’s Agricultural Imports Boomed During 2003-04/WRS-05-04, Economic Research Service/USDA. Gang, Fan (1991), “On Reform Process”, in Reform, Open up and Growth, Shanghai Sanlian Publishing House, Shanghai, China. Guobao, Wu (2000), “The Review and Prospect of China’s Rural Poverty Alleviation”, in Analysis and Forecast on China’s Rural Economy (1999-2000) - Green Book of China’s Rural Economy, Social Sciences Documentation Publishing House, Beijing, China, pp. 122-145. Institute of Rural Development, Chinese Academy of Social Sciences & Rural Social and Economic Survey Department, State Statistical Bureau, PRC, (1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005), Analysis and Forecast on China’s Rural Economy - Green Book of China’s Rural Economy, Social Sciences Documentation Publishing House, Beijing, China. Ming, Weng (2005), “International Trade and Competitiveness of Agricultural Products”, in Analysis and Forecast on China’s Rural Economy (2004-2005) - Green Book of China’s Rural Economy, Social Sciences Documentation Publishing House, Beijing, China, pp. 91-105. MOA (2005), Agricultural Development Report of China, Agriculture Press of China, Beijing, China. Project Group (2001), The Report on the Application of Agricultural Survey in Agricultural Policies and Development Program. UNDP, NDRC, PRC, CICETE, PRC, CQOLS, Wuhan University (2004), A National Development Framework Converging with the MDGs to Build China’s Overall Xiao-Kang (Well-off) Society. Yongfu, Chen (2005), “Analysis on the Impact of Chinese Grain Trade on the Domestic Grain Safety”, unpublished report. Xiaoping, Deng (1993), Deng Xiaoping’s Selection, Peoples’ Publishing House, Beijing, China. Xiaoshan, Zhang and Cui Hongzhi (2001), “The Key Issue - Adjusting the Redistribution System of National Income”, Agricultural Economic Problems, No. 6. Xiaoshan, Zhang (2004), “Increasing Farmers’ Income and Ensuring Grain Safety”, in Analyses on the Perspect of China’s Economy, Spring Report, Social Sciences Documentation Publishing House. Xiaoshan, Zhang (2005), “Maintaining Good Situation and Deepening Rural Reform”, in Analyses on the Perspect of China’s Economy, Spring Report, Social Sciences Documentation Publishing House.
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PART III. CONTRIBUTING TO THE MILLENNIUM DEVELOPMENT GOAL OF ERADICATING EXTREME POVERTY AND HUNGER
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Chapter 10. ERADICATING EXTREME POVERTY AND HUNGER: TOWARDS A COHERENT POLICY AGENDA1 Prabhu Pingali, Kostas Stamoulis and Randy Stringer Agricultural and Development Economics Division United Nations Food and Agriculture Organization Abstract The most recent food security data present a rather bleak picture for a large number of developing countries. The reduction of hunger and the attainment of many other Millennium Development Goals are inter-related. Key policy lessons learned from past successes and failures in hunger and poverty reduction show that the following factors play an important role in enhancing food security and reducing poverty in developing countries: agricultural growth, hunger reduction, appropriate technology, trade, public investment, and development assistance. Policy interventions need to be designed in the context of emerging global, regional and national trends. These are: • • • •
Rapid urbanisation in the developing world and its impact on food markets. Increasing integration of global food markets through trade. Deterioration of the natural resource base and the degradation of global and local commons. Rising transactions costs in the acquisition and use of science and technology for development. While policy agendas are context specific, the essential elements of policy coherence include:
• • • • • • • • •
1.
Focussing on hotspots. Focussing on the long-term while responding to immediate needs. Enhancing productivity of smallholder agriculture. Seek complementarities between trade and domestic policy. Increase effectiveness of Official Development Assistance. Ensure complementarities of public resources and ODA. Create an environment conducive to private investment. Include food security and rural development in PRSPs. Combine poverty reduction programmes with increased provision of global public goods.
This paper is prepared for OECD’s 2005 Global Forum on Agriculture: Policy Coherence for Development. Prabhu Pingali is Director, and Kostas Stamoulis and Randy Stringer are Service Chiefs, Agricultural and Development Economics Division, FAO. This paper draws from the background paper prepared by FAO for the International Dialogue on Agriculture and Rural Development in the 21st Century, held in Beijing China from 9-10 September 2005.
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168 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger
Introduction and overview The most recent food security data present a rather bleak picture for a large number of developing countries. Between 1995-97 and 2000-02, the number of undernourished people in the developing countries increased by 18 million (SOFI, 2005), a disturbing development, given the global community’s commitment to food security concerns, its capacity to produce more than enough food for every human being, and its power to use modern information systems to pinpoint exactly where food is needed and to mobilise rapid transport systems to move food quickly around the globe. The food security problem remains a persistent, formidable and elusive development problem. From a long term perspective, progress in hunger reduction has been nothing short of remarkable. The proportion of people in developing countries living with average daily food intakes of less than 2 200 kcal fell from 57% in the early 1960s to just 10% by the end of the century. In spite of a near doubling of their population during this period, average per capita food consumption in developing countries increased 30%. A large number of countries have shown that success is possible. More than 30 developing countries, with a total population exceeding 2.2 billion people, have reduced the population of their undernourished by 25%. FAO’s most recent estimates indicate that the number of undernourished people in the world in 2000-02 is 852 million, of which 815 million are in the developing countries (Figure 1). Just under two-thirds of the total number of undernourished are found in Asia and the Pacific, followed by sub-Saharan Africa, which accounts for 24% of the total (SOFI, 2005). Undernourishment is defined as food consumption insufficient to meet minimum levels of dietary energy requirements. The proportion of the population which is undernourished varies between the different developing country regions (Figure 2). The highest incidence of undernourishment is found in sub-Saharan Africa, where FAO estimates 33% of the population to be undernourished. This is well above the 16% undernourished estimated for Asia and the Pacific and the 10% estimated for both Latin America and the Caribbean and the Near East and North Africa.
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Figure 1. Undernourished population by region, 2000-02 (millions)
Countries in Transition 28
Developed Market Economies 9
Sub-Saharan Africa 204
Asia and the Pacific 519
Near East and North Africa 39 Latin America and the Caribbean 53
Source: FAO (2005).
Figure 2. Percentage of population undernourished, by region, 2000-02 % 35 30 25 20 15 10 5 0 Developing C ountries
Asia and the Pacific
Latin America and the C aribbean
Near East and North Africa
SubSaharan Africa
C ountries in Transition
Source: FAO (2005).
One of the more conspicuous characteristics gleaned from food security indicators is the difference between progress in availability of food and the lack of progress in access to food. To date, growth of global agricultural production has been more than sufficient to meet the growth of effective demand for food coming from expanding populations and rising incomes. The average global calorie supply per person grew by 19% since the mid-1960s to reach 2 800 kcal/person/day in 2002, with the developing country average expanding by more than 30%. An encouraging feature of this rapid food production growth is that developing countries growth rates are higher than the world average during the last three decades, both in aggregate and in per caput terms (Figure 3). The declining trends in TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
170 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger world commodity prices and rising real incomes in many developing countries mean that consumers today have access to more efficient calories at lower prices than consumers of past generations. Even as developing countries attempt to solve the perennial problems of poverty and food insecurity they face new policy challenges emerging from rapid urbanisation and globalisation and the consequent changes in diets and lifestyles. Evolving food supply systems driven by the rapid rise in demand for food are placing unprecedented pressure on environmental resources at the local and global levels. The policy agenda for hunger and poverty reduction in the 21st century needs to address these emerging challenges even as it pursues the unfinished business of the last century. Figure 3. Long-term trend in per caput food production by developing country region (Index 1999-2001 = 100) Index 120 110 100 90 80 70 60 50 40 70
72
74 World
76
78
80
82
84
86
88
Developing Countries
90
92
94
96
98
00
02
04
Developed Countries
Source: FAO (2005).
Measuring progress: MDG 1 and the World Food Summit goal At FAO’s 1996 World Food Summit (WFS), and again at the 2002 Millennium Summit, the international development community established an ambitious agenda for reducing hunger and poverty. The MDGs and WFS both set targets for 2015, using 1990 as a benchmark. The MDG 1 Goal includes two targets: i) halving the proportion of population which is undernourished and ii) halving the proportion of people living in poverty. The WFS target is to halve the number of undernourished people over this 25 year period. The latter is a more ambitious target given the rising populations in developing countries. At the global level the MDG hunger goal to half the proportion of undernourished does appear to be within reach, presuming high levels of investment and policy commitment to enhancing food security. Table 1 summarises FAO’s most recent data and projections to 2015. In 1990, 20% of developing country population (824 million) was undernourished, while FAO’s most recent estimate of undernourished people in the world (2000/02) is 17% of the population (815 million). The projection for 2015 is 11%. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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The regional data suggest that East Asia, South East Asia, Latin America and the Caribbean can reach their Millennium Development Goal (MDG) target. By the year 2000/02, East Asia had reduced its undernourished population from 16% to 11% with a target of 8% for the year 2015. The corresponding numbers for South Asia are a decrease from 26% in 1990 to 22% in 2000-02, with a target of 12% in 2015. The target for Latin America is a decline from 13% in 1990 to 10% in 2000/02, with a target of 6.5% in 2015. The highest incidence of undernourishment is found in sub-Saharan Africa, where the FAO estimates 33% of the population to be undernourished, and where the target of 18% by 2015 would not be reached for more than 100 years at the current rate of progress. Table 1. Projections of food and hunger indicators by region
Sub-Saharan Africa
Year
Near East and North Africa
South Asia
Per capita food consumption (kcal/person/day) 1964-66 2 058 2 290 2 017 (1)
2000-02 2 195 3 006 2015 2 360 3 090 2030 2 540 3 170 Millions of persons undernourished 1990-92 168 25 2000-02(1) 204 39 2015 205 37 2030 183 34 Percentage of population undernourished 1990-92 35 8 (1)
2000-02 2015 2030
33 23 15
10 7 5
East Asia
Latin Developing America and Countries Caribbean
1 957
2 393
2 054
2 403 2 700 2 900
2 921 3 060 3 190
2 824 2 980 3 140
2 800 2 850 2 980
289
275
59
824
301 195 119
217 135 82
53 40 25
815 610 443
26
16
13
20
22 12 6
11 6 4
10 6 4
17 11 6
1. Projections to 2015 and 2030 have 1997-99 as base period. Source: FAO, World Agriculture Towards 2015/30, Summary Report, Rome 2002.
Because of the successes in much of Asia, including China and Indonesia, the long term incidence of undernourishment in developing countries has declined steadily from 37% of the total population in 1969-71 to 17% in 2000-02. Asia reduced the proportion of it’s undernourished by 25%. Nevertheless, Asia and the Pacific account for more than half of the total number of the undernourished (61%), followed by sub-Saharan Africa, which accounts for 24% of the total. In sub-Saharan Africa, the number of undernourished actually rose from 92 million in 1969-71 to 204 million in 2000-02. Latin America and the Caribbean experienced a significant decrease in both the proportion and absolute numbers of undernourished in the 1970s, but have made little progress since (SOFI, 2005). In contrast to the MDG hunger reduction target, only East Asia and a few countries in Latin America will reach the more ambitious World Food Summit (WFS) goal of halving the number of hungry people, from about 800 million to 400 million. World population is TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
172 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger expected to grow by approximately two billion between the baseline period (1990–92) and 2015. So, even if the proportion of that larger population who are undernourished is reduced by half, nearly 600 million people in the developing world will continue to suffer from chronic hunger. To reach the WFS target of 400 million, the proportion of the population who are undernourished would need to be reduced not by half, but by two thirds.
The poverty target The MDG 1 poverty reduction goal to halve the proportion of poverty between 1990 and 2015 is on track based on the World Bank poverty projections (less than USD 1 per day). At the global level, poverty has declined both in absolute numbers (if only marginally) and in relative terms. The East Asia region met its poverty reduction target by 2001, 14 years ahead of the timetable. In China and East Asia, GDP per capita more than tripled and the proportion of people in extreme poverty fell from 56% to 17% over the past two decades. South Asia, too, made considerable progress in percentage terms during the 1990s, and achieving the goal of halving USD 1/day poverty is feasible. The poverty reduction goals seem much more challenging in the other regions. In sub-Saharan Africa poverty has in fact increased between 1990 and 1999. The available projections suggest that for sub-Saharan Africa the MDG poverty goal may be beyond reach. Very little progress will be made unless performance is significantly enhanced in the near future, and the absolute number of poor may in fact rise considerably. Should this scenario materialise, close to half the world's poor will live in sub-Saharan Africa in 2015. Latin America and the Near East/North Africa have made only marginal progress (in relative terms) during the 1990s. If the forecasts are accurate they should at least come within reach of the poverty reduction target. The transition countries in Eastern Europe and Central Asia present a different picture. A big surge in poverty occurred in the region after 1990 (the base year for the target). Most of these countries were then on the brink of a recession after the collapse of the centrally planned regimes and the beginning of the transition towards market economies. At present, the hunger and poverty projections imply that: •
At a global level, the goal of halving by 2015 the proportion of hungry people from that prevailing in 1990-92 may be achieved provided high levels of investments and policy commitment are targeted toward hunger reduction.
•
Sub-Saharan Africa and South Asia will continue to account for a high proportion of the global population of hungry in 2015.
•
The goal of reducing the actual number of hungry people by half by 2015 is probably not attainable, given current trends in hunger reduction and projected population growth rates.
•
The goal of halving by 2015 the proportion of people living in poverty from that prevailing in 1990 may be achieved – the proportion falls from 29.0% in 1990 to 12.3% in 2015.
•
As they decline from 1.27 billion in 1990 to 0.75 billion in 2015, poverty in absolute numbers may not be halved.
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•
Much of the decline in poverty results from prospective developments in East Asia and South Asia, and
•
In contrast, sub-Saharan Africa’s absolute numbers in poverty kept increasing in the 1990s and are projected to continue to do so until 2015.
Lessons from past performance in poverty and hunger reduction The reduction of hunger and the attainment of many other Millennium Development Goals are inter-related. Levels of child and maternal mortality and low rates of school attendance in developing countries are intimately linked to the prevalence of hunger and undernourishment. The same applies to environmental sustainability. The overexploitation or misuse of natural resources too often compromises people’s food security. To a great extent the achievement of most of the MDGs depends critically on progress in improving nutrition and reducing hunger. The following are some of the key policy lessons learnt from past successes and failures in hunger and poverty reduction.
Agricultural growth plays a critical role in enhancing food security and reducing poverty in developing countries. There is ample evidence that combating hunger and extreme poverty requires a renewed and expanded commitment to agriculture and rural development in developing countries. Overall, some 70% of the poor in developing countries live in rural areas and derive their livelihoods from agriculture directly or indirectly. This dependence on agriculture is greater in those countries where hunger is most prevalent. Figure 4 presents the percentage share of agriculture in GDP in 1998-2002 for developing countries grouped according to the incidence of undernourishment in 2000-02. For countries where more than one third of the population undernourished, the share of agriculture in GDP is almost 25%. The lessons to date suggest that no sustainable reduction in poverty is possible without improving rural livelihoods. Economic growth originating in agriculture can have a particularly strong impact in reducing poverty and hunger. Increasing employment and incomes in agriculture stimulates demand for non-agricultural goods and services, providing a boost to non-farm rural incomes as well. The corollary to this is that additional demand for agricultural products must come from outside of the rural communities and the communities must be able to meet the expectations of these external markets.
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174 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger Figure 4. Agricultural GDP and undernourishment
% Undernourished
Developing >34% 20-34% 5-19% 2.5-4% <2.5% 0
5
10
15
20
25
30
Ag GDP / Total GDP Source: FAO (2004) and World Bank.
Hunger reduction is a prerequisite for fast development and poverty reduction Poverty causes hunger, but it is equally true that hungry people will always be poor. Hungry people cannot take full advantage of a pro-poor development strategy because hunger negatively affects health, labour productivity and investment choices, and thus perpetuates poverty. It has been calculated that for each passing year for which hunger is not reduced, developing countries suffer a total loss of about USD 500 billion in terms of lifetime earnings foregone due to hunger and nutritional deficiencies (SOFI, 2004). Investment in hunger reduction is too often seen as “welfare” whereas, in practice, it is an investment with a potential for generating high economic rates of return. It is obvious that hunger reduction is critical not only for reducing poverty but also for meeting the international goals related to health, child and maternal mortality, education and literacy. Poverty reduction is faster when carefully targeted programmes such as food for work provide immediate hunger relief. As another example, school meal programmes lead to long-term inter-generational gains in poverty reduction.
Technology can make a difference but under the right conditions Improved technology, especially for small-scale farmers, hastens poverty reduction through increased crop yields and higher incomes. The decline in food prices, in real terms, has benefited poor consumers, including the rural poor. However, the access poor farmers have to technology has been hampered by gaps in infrastructure, seed and input markets, extension systems, and very often their inability to afford these inputs. Market, institutional and policy failures have exacerbated the problem. A great deal needs to be done to alleviate the constraints small farmers face when it comes to access to technology. Technologies that build on and complement local knowledge tend to be particularly effective in meeting the needs of poor farmers in marginal environments.
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Trade can lead to substantial reductions in hunger and poverty Trade offers opportunities for the poor and food insecure by acting as a catalyst for change and by promoting conditions in which the food insecure are able to raise their incomes and live longer, healthier and more productive lives. Trade can also have adverse effects, especially in the short run as productive sectors and labour markets adjust. Opening national agricultural markets to international competition – especially from subsidised competitors – before basic market institutions and infrastructure are in place can undermine the agricultural sector with long term negative consequences for poverty and food security. Some households may lose, even in the long run. To minimise the adverse effects and to take better advantage of emerging opportunities, such as those arising from agriculture diversification to bio energy and other non-food products, governments need to understand better how trade policy fits into the national strategy of promoting poverty reduction and food security. Expanding the benefits of trade for the poor requires a range of other facilities including market infrastructure, institutions and domestic policy reforms.
Public investment fails to reflect the importance of agriculture Public investment in infrastructure, agricultural research, education and extension is essential in stimulating private investment, agricultural production and resource conservation. But actual public expenditures for agriculture and rural development in the developing world do not reflect the importance of the sector to their national economies and the livelihood of their populations. In fact, government expenditures on agriculture come closest to matching the economic importance of the sector in those countries where hunger is least prevalent. For the group of countries where undernourishment is most widespread, the share of government spending devoted to agriculture falls far short of matching the sector’s importance in the economy. The trends are discouraging as well. Throughout the 1990s public investments targeted towards agriculture have been declining in countries where the prevalence of undernourishment is highest (Figure 5). Private investment, including farmers’ investments, tend to follow the trends set by the state. Rural communities have typically not benefited from privatisation of infrastructure in the way that urban dwellers have and there is little (if any) evidence of the effective use of public private partnerships to provide new rural infrastructure.
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176 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger Figure 5. Agricultural orientation of public investment % Population undernourished <2.5% 1990-92 average
2.5 - 4% 5 - 19%
1996-98 (or most recent period for w hich data are available)
20 - 34% >= 35% 0.0
0.1
0.2 0.3 0.4 Agricultural orientation index1
0.5
1. Share of agriculture in total public expenditure/share of agriculture in GDP.
Development assistance does not target the neediest countries Development assistance is critical for very poor countries with limited ability to mobilise domestic private and public savings for investment. It is particularly critical for agriculture which is largely bypassed by foreign private investors. And yet official development assistance to agriculture, broadly defined, declined by an alarming 24% between 1990–92 and 1999–2001 in real terms. The countries with the highest prevalence of undernourishment were the hardest hit (Figure 6). In those countries, External Assistance to Agriculture (EAA) declined by 49% in real terms (FAO, 2002). Many of these countries are badly starved of resources that can be invested. For these countries, international assistance, which can be a lasting solution to the debt problem, would be a sure and tangible sign that the commitments to reach the World Food Summit and the Millennium Development goals are being honoured. The recent decisions by major donors to increase ODA and to cancel debts of the poorest nations are very encouraging in this regard. The Council of the European Union has set an ODI/GNI ratio of 0.56% by 2010 rising to 0.70% by 2015. Moreover the recent agreement reached by the G8 cancels all debts owed to them by 18 countries without a reduction in the overall funds available to those or other countries. These are important steps towards implementing the Monterrey consensus which will also require a greater share of funds going to agriculture and rural areas.
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Figure 6. External assistance to agriculture per agricultural worker (1998-2000)
% Undernourished
35% or more
20 to 34%
5 to 19%
less than 5% 0
5
10
15
20
25
USD/worker
Peace and stability are sine quo non conditions for growth and poverty reduction Protracted conflicts and civil crises disrupt food production and undermine food security as they drive people from their homes, strike at the foundations of their livelihoods and erode the social fabric of families, communities and countries. Conversely, food insecurity may lead to or exacerbate conflict, particularly when compounded by other shocks and stresses. The interface between food insecurity and conflict has critical implications for food security and conflict prevention programmes alike. Assessing and addressing the risk factors common to food insecurity and conflict, can serve as a mechanism both for preventing conflict and reducing hunger. A growing body of experience confirms the importance of strengthening the resilience of societies and food systems before crises erupt and of factoring resilience into responses to protracted crises. Relief and rehabilitation efforts are far more effective if they build on the foundation of resilience rather than relying exclusively on injections of external inputs, technology and institutions.
The changing world and persistent policy challenges Alleviating hunger and poverty has been and continues to be the pre-dominant policy challenge facing global and national decision makers. However, policy interventions for addressing this challenge ought to be designed in the context of emerging global, regional and national trends. This section discusses four major trends that are shaping the future food economy and consequently the prospects for meeting hunger and poverty goals. These are: i) rapid urbanisation in the developing world and its impact on food markets; ii) increasing integration of global food markets through trade; iii) deterioration of natural resource bases and the degradation of the global and local commons; and iv) rising transactions costs in the acquisition and use of science and technology for development.
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Urbanisation and the transformation of food markets With urban areas expected to account for virtually all of the world’s population growth between 2000 and 2030, provisioning the expanding urban markets is a major challenge for agriculture and food marketing systems in the years to come. Rapidly rising urban food demand, accompanied by trends towards diet diversification, induces an increasingly commercial orientation of production systems, while inefficiencies in the marketing and transport infrastructure will either provide incentives for the location of production in semi-urban areas or encourage lower cost imports. The determinants and nature of food security are different in an urban as compared to a rural context. Compared to their rural counterparts, the urban poor rely almost exclusively on market purchases of food, and depend on wage income or self-employment in the informal sector. Urbanisation increases the scope for economies of scale in food marketing and distribution, while reductions in transactions costs increase the size of the market for distributors and retailers. The result is not only an impressive increase in the volume of food marketing handled by supermarkets, but also substantial organisational and institutional changes throughout the food marketing chain. Such changes include the setting of private grades and standards for food quality and safety, and the adoption of contracts between buyers and sellers at various points along the food marketing chain. Sub-contracting for products of specified quality and traits is likely to proliferate as a form of interaction between retail food chains, processors and producers. The pressures to meet the requirements of a more exacting food system have brought with it a renewed interest in small farm welfare. For the small farmer there are difficulties in commercialisation that arise from poor public good provision. These hinder market exchange and a new set of transaction costs that emerge from dealing with a food system characterised by different rules, regulations and players.
Changing patterns of trade in food In general, the emergence and strengthening of international trade agreements have resulted in substantial improvements in the three aspects of food security: availability, access and stability. On the other hand, this has also meant that nations have reduced their control over the flows of goods and services between countries. The challenge facing the members of the WTO is to manage and further adjust the new rules-based agricultural trading system in a way which is conducive to achieving greater efficiency, transparency and fairness with equal opportunities for all international agricultural trade. In this regard, the Doha development agenda recognises explicitly the food security and rural development needs of developing countries by granting them special and differential treatment. The practical question is how this recognition can be translated into concrete rules and modalities on which all WTO members can agree. Developing countries are increasingly net importers of food and many have negative net agricultural trade balances due to the fact that their domestic agricultural sectors are not very competitive, a trend that is likely to continue (even if OECD countries eliminate their agricultural protection and support policies). This is often the result of inappropriate policies and of insufficient resource mobilisation which fail to enhance the competitiveness of poor rural communities, the sustainable use of natural resources and adequate investment in market infrastructure and research. Limitations in domestic capacity to meet increasingly strict sanitary and phyto-sanitary standards exacerbate the
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problem of low competitiveness particularly with respect to the growing market for processed products.
Resource use and resource degradation Over the past fifty years, human beings have changed ecosystems more rapidly and extensively than in any comparable period of time in human history, largely to meet rapidly growing demands for food, fresh water, timber, fibre, and fuel.2 As a consequence many ecosystem services are being degraded or used unsustainably, including fresh water, capture fisheries, air and water purification, the regulation of regional and local climate, natural hazards, and pests. The Millennium Ecosystem Assessment concludes that the degradation of ecosystem services could grow significantly worse during the first half of this century and is a barrier to achieving the Millennium Development Goals. For example, observed recent changes in climate, especially warmer regional temperatures, have already had significant impacts on biodiversity and ecosystems, especially in dry land environments such as the African Sahel. Degradation of ecosystem services is exacerbating the problems of poverty and food insecurity in the developing world, particularly in the poorest countries. Because many ecosystem services are not traded in markets, markets fail to provide appropriate signals that might otherwise contribute to the efficient allocation and sustainable use of the services. The Millennium Assessment suggests a wide range of economic and financial instruments for influencing individual behaviour with respect to the use of ecosystem services. These include: the elimination of subsidies that promote excessive use of ecosystem services; and the promotion of market based approaches including user fees and payments for environmental and ecosystem services. In addition to market instruments, strengthening institutional and environmental governance mechanisms, including the empowerment of local communities, is absolutely crucial for the effective management of environmental resources.
Harnessing science and technology for development Harnessing the best of scientific knowledge and technological breakthroughs is crucial as we attempt to “retool” agriculture to face the challenges of an increasingly commercialised and globalised agriculture sector. Modern science and technology can also help provide new impetus for addressing the age-old problems of production variability and food insecurity of rural populations living in marginal production environments. Whilst the real and potential gains from science and technology are apparent, it is also necessary to take into consideration the fact that research and technology development are more and more in the private domain: biotechnology is a prime example. Biotechnology holds great promise, but may involve new risks. In most countries, the scientific, political, economic or institutional basis is not yet in place to provide adequate safeguards for biotechnology development and application, and to reap all the potential benefits. Clearly the question is not what is technically possible, but where and how life sciences and biotechnology can contribute to meeting the challenges of sustainable agriculture and development in the twenty-first century, based on a science-based evaluation system that would objectively determine, case by case, the benefits and risks 2.
This section draws from the Millennium Ecosystem Assessment, Synthesis Report, 2005.
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180 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger of each individual GMO. Similarly, the evolution of food chains has been led by the private sector with obvious benefits in terms of food safety and food price reductions. However, there have been casualties as some farmers and firms have been marginalised. In this case the question becomes one of whether there are technical solutions and business models that can enable engagement of such marginalised groups. Modern science can also provide opportunities for enhancing input efficiencies and for developing more sustainable production systems. The extent to which farmers in developing countries benefit from such technologies, which are often highly knowledge intensive is a matter of debate. Furthermore, it is doubtful if they are compensated for the environmental good that such changes effect.
Designing a coherent policy agenda for hunger and poverty reduction3 Rapid progress in achieving the Millennium Development goal of hunger and poverty reduction would require coherence in international as well as domestic policies and harmonisation between the two. It would require coherence in the setting of priorities and in the financing of agricultural and rural development. It would also require coherence between interventions designed to manage short-term crisis situations and long term development goals. Finally, peace, stability and “good governance” are crucial enabling conditions for improving the lives and livelihoods of the hungry and the poor. While the specific policy agenda is context specific, the following are some of the essential elements that ensure policy coherence. Focus on the hotspots. Programmes and investments must focus on poverty and hunger “hotspots” – those areas around the world and within a country where a significant proportion of people suffer from malnutrition and high incidence of poverty. Implementation of plans of action for country groups or regions (e.g. NEPAD) should be supported in the context of the strategies to achieve the MDGs, tailored to their specific contexts. Focus on the long term while responding to immediate needs. Hunger and poverty reduction requires a twin-track approach which combines, a) direct interventions and social investments to address the immediate needs of the poor and hungry (social safety nets, conditional or unconditional cash transfers, health interventions, food and nutrition programmes), and b) long-term development programmes to enhance the performance of the productive sectors (especially to promote agriculture and rural development), create employment and increase the value of the assets held by the poor (physical, human, financial). Coherence between policies and investments to increase productivity and economic efficiency in the social sectors improves the effectiveness of both. Enhance productivity of smallholder agriculture. Enhancing food security in the rural areas involves scaling-up actions to improve the productivity of smallholder agriculture. In the first instance, this strategy improves nutritional standards and thereby opens opportunities for further performance improvements. In the long term it broadens participation in market-led growth. Promoting sustainable use of natural resources, improving rural infrastructure, research and communications, facilitating the functioning of markets and enhancing rural institutions are integral parts of the strategy. Productivity3.
Based on the Background note for Round Table 1: Eradication of Poverty and Hunger, ECOSOC 2005, High Level Segment, 29 June-1 July 2005, United Nations, New York. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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induced agricultural growth has a wider impact on rural areas through the strengthening of off-farm activities, rural employment and wages. Seek complimentarity between trade and domestic policy. Trade liberalisation can be a powerful tool to promote economic growth. However, low income countries, in order to benefit from trade reform, will need to enhance domestic competitiveness through policy and institutional reform. Furthermore, in view of the continuing distortions on world markets, they must be granted more “policy space” which is necessary to reduce poverty and hunger by developing their rural areas and agricultural sectors. Trade liberalisation should go hand in hand with donor support for improving agriculture productivity. Increase effectiveness of Official Development Assistance. It is widely recognised that there is ample scope for increasing the effectiveness of ODA. The Paris Declaration on Aid Effectiveness, adopted in March 2005, calls for: ownership, i.e. aid should reflect recipient rather than donor priorities; alignment, i.e. aid should be aligned with recipient countries’ budgetary cycles and behind national strategies and programmes; and harmonisation, i.e. there should be more donor co-ordination to exploit complementarities, combined with simplified procedures for disbursement. Ensure complementarities of public resources, domestic and international. Given the common purpose, ODA and public domestic resources for reducing poverty and hunger should be well co-ordinated and targeted. The key notion should be mutual accountability of donor and partner countries for development results. Therefore, recipient countries would strive to involve all stakeholders, including parliaments, in the formulation of national development strategies. Donors should commit to providing timely, transparent and untied aid flows to allow partners to manage these resources more effectively. Create an environment conducive to private investment. Public investments must be accompanied by policies that induce complementary flows of private investment. The quality and transparency of governance and public administration political stability, reliance on market signals and macroeconomic discipline and stability, are essential for stimulating private investment. Make PRSPs more inclusive in addressing food security and rural development. The implementation of the PRSPs in many countries still lacks focus on food insecurity and a clear appreciation of the potential of rural and agricultural development in reducing poverty. The result is insufficient budgetary allocations to these key areas. The dilution of institutional responsibilities for rural development and the inadequate empowerment of rural stakeholders have to be addressed in order to strengthen the political leverage for increased “rural” resources. Furthermore, there is a need for greater integration/co-ordination of PRSPs and existing national food security and rural development policies and strategies. Combine poverty reduction with increased provision of global public goods. Financing of payments to farmers for e.g. maintaining agricultural biological diversity and for following practices which result in reduced carbon emissions in the atmosphere can result in both poverty reduction while promoting environmental and resource sustainability.
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REFERENCES FAO (2002), World Agriculture Towards 2015/30, Summary Report, FAO, Rome. FAO (2002), The State of Food Insecurity, FAO, Rome. FAO (2004), The State of Food Insecurity, FAO, Rome. FAO (2005), The State of Food Insecurity, FAO, Rome. FAO (2005), The State of Food and Agriculture, FAO, Rome. UNDP (2005), Human Development Report, International Cooperation at a Crossroads: Aid, Trade and Security in an Unequal World, UNDP, New York.
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Chapter 11. HOW CAN POLICY COHERENCE IN AGRICULTURE CONTRIBUTE TO THE ERADICATION OF EXTREME POVERTY AND HUNGER? Tom Arnold Concern Worldwide Abstract This paper attempts to offer some insights into how policy coherence can play a significant role in eradicating extreme poverty and hunger in the developing world. It focuses specifically on what policy coherence can contribute to a key target of the first Millennium Development Goal (MDG) – to halve, between 1990 and 2015, the proportion of people in the world who suffer from hunger (hereafter referred to as the Hunger MDG). The paper starts by discussing the location, scale and nature of hunger and its associated costs. It is argued that the concept of policy coherence necessary to achieve the Hunger MDG must be broadly conceived. The discussion of policy coherence thus far has predominantly focused on how OECD agricultural policies and international agricultural trade policy have been incoherent with the development policies of developing countries and with the development co-operation – aid policies of OECD countries. It is asserted that this analytical framework is not broad-based enough. Specifically, the primary importance of the domestic policy framework needs to be recognised while acknowledging the importance of a favourable international environment. The need for policy differentiation to reflect the development needs of different categories of developing countries is stressed. The importance of policy sequencing is emphasised. Three overarching factors – conflict, governance standards and the disease burden, including HIV/AIDS – have a key influence on the development possibilities for developing countries. Progress in each of these areas is necessary if the Hunger MDG is to be achieved. The paper draws on the work of the Millennium Project Hunger Task Force (HTF) and on the experience of Concern Worldwide in fighting famine and hunger over 37 years. It highlights the priority policies which the key stakeholders – governments of developing and developed countries, the UN and the wider international community, the private sector and civil society, in developing countries and international nongovernmental organisations (NGOs) – should adopt in working towards the achievement of the Hunger MDG by 2015. These include increased investment in agricultural and rural development (including rural infrastructure), targeted nutrition interventions to break the cycle of maternal and child malnutrition, investment in institutional capacity building in developing countries and improved donor coherence. Civil society can make a critical contribution to the eradication of extreme poverty and hunger.
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Introduction The first Millennium Development Goal (MDG) is aimed at eliminating poverty and hunger in the world. It has two targets – to halve between 1990 and 2015 (a) the proportion of people whose income is less than USD 1 a day and (b) the proportion of people who suffer from hunger. Achievement of MDG 1 would underpin the achievement of the other MDGs of which there are eight in total. The question I try to answer in this paper is what role policy coherence can play in achieving the halving of hunger by 2015, as set down in MDG 1. I had the honour of serving on the Millennium Project’s Hunger Task Force (HTF), along with two fellow participants in this OECD Global Forum: Joachim von Braun of the International Food Policy Research Institute (IFPRI) and Kevin Cleaver of the World Bank. The Task Force proposed a detailed policy agenda for the achievement of this objective. This paper draws on the work of the Hunger Task Force and on the experience of my own organisation, Concern Worldwide, which has been working to fight famine and hunger and to promote development during the 37 years of its existence.
The paper has four sections: •
Hunger in the world today – its location, scale and nature, and its cost in human, economic and social terms.
•
Aspects of policy coherence which are relevant to an agenda for halving world hunger by 2015.
•
Overarching factors such as conflict, governance and the disease burden, including HIV/AIDS, on which progress must be made if policies aimed at eliminating hunger are to succeed.
•
Key factors in achieving the Hunger MDG and the policies that should be implemented if it is to be achieved. The key actors are the governments of developing and developed countries; the UN and the international community; the private sector; and civil society, both in developing countries and developed countries. The proposed policies are those, which based on available evidence, have worked in a range of different circumstances.
Hunger in today’s world We need to begin from an understanding of the scale and nature of hunger in today’s world. The HTF report noted that, over the past 20 years, the proportion of the world’s population which is hungry declined from one fifth to one sixth. But today, some 852 million people, mainly in the developing world, are acutely or chronically hungry. Most of them are in Asia, particularly India (221 million) and China (142 million). In both these countries and in other countries in Asia, rapid economic growth is contributing to a significant reduction in the number of hungry people. This is not the case in Sub Saharan Africa, which has 204 million hungry people and is the only region in the world where hunger is increasing. If current trends continue, this region will fail to meet the MDG. Because this is the region with the most acute problem, I will mainly focus on the specific policy requirements of Africa in meeting the Hunger MDG.
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Further analysis from the HTF classifies the hungry into four main categories which include farm households (400 million), rural landless households (176 million), urban households (160 million), and herders, fishers and forest dependent households (64 million) (HTF, 2005). There are multiple causes for hunger and include poverty, low production, poor education of mothers, climatic factors and poor water and sanitation. The situation in Africa is aggravated by falling levels of per capita cereal production, which is now 10% less than in 1960, and by rapid population growth. Policy failure, macroeconomic instability, lack of support for agriculture and the collapse of infrastructure have also contributed to the decline in food production. Hunger is generally classified according to three forms: acute, chronic and hidden. Acute hunger involving severe undernourishment over a sustained time-period, is reflected in wasting and starvation, and is caused by emergency situations which require immediate food aid. Acute hunger is what grabs the headlines – this year we remembered the Ethiopian famine of 20 years ago and we had to deal with a severe food crisis in Niger. Unless urgent action is taken, I fear we may see similar scenes in the coming months in Malawi and Zimbabwe. But, terrible as it is, acute hunger represents less than 10% of the hungry. The vast majority of hungry people are chronically undernourished. Chronic hunger resulting in malnutrition is caused by a lack of access to the right quantity and quality of food as well as other health related factors. It causes under-weight and leads to stunting, most notably in children. Stunting, in particular, is an indication of the long term nutritional situation of the population. An increase in child mortality brought on by associated diseases often occurs. In an analysis of the target population Concern has dealt with Eritrea, where over the past four years, 32% of the children were stunted. In Malawi, 49% of children suffer from stunting. Hidden hunger refers to micronutrient and/or vitamin deficiencies found in vast numbers of people who otherwise have access to adequate calories and protein. It affects more than 2 billion people. The costs of hunger manifest themselves in different ways. The human costs are the most significant. Underweight status is the leading cause of human mortality and morbidity. Of the total number of 852 million who are hungry, over 300 million are children. An estimated 60% of deaths of children less than five years of age in the developing world – from all causes, particularly diarrhoea, malaria, measles – are associated with under nutrition. Between 5-6 million children under 5 die each year from these preventable diseases. Undernutrition in childhood leaves a legacy of physical and mental retardation which can last for generations. At an adult level, there is a clear interlinkage between undernutrition, HIV/AIDS and tuberculosis. The economic and social costs of hunger are manifested in diminished labour efficiency, greater susceptibility to illness, intergenerational transmission of poor nutritional status, risk adverse behaviour and a decline in national economic performance. On the latter, it has been estimated that hunger costs developing countries 6–10% of GNP in labour productivity annually (HTF, 2005).
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What role can policy coherence play in achieving MDG 1 Faced with a problem on this scale, what role can policy coherence play in fighting hunger and in achieving the Hunger MDG? What aspects of policy coherence are important in working towards this objective? A recent report by the OECD titled ‘Policy Coherence for Development’ states that “achieving policy coherence is a process through which governments make efforts to design policies that take account of the interests of other policy communities, minimise conflicts, maximise synergies and avoid unintended incoherence” (OECD, 2005). I will offer an interpretation of this in layman’s language. My proposed definition of policy coherence is ‘doing the right thing for the right people in the right sequence’. This definition immediately raises a question as to what a ‘right’ policy means? My answer is based on evidence of how effective policies have been in reducing hunger and in achieving development. This is the purpose of the Global Forum – to discuss experiences and models which can be applied to our own national or local circumstances so that resources can be used more effectively and sustainable development can be achieved more quickly. The discussion on policy coherence for development has predominantly focused on how OECD agricultural policies and international agricultural trade policy have been incoherent with the development policies of developing countries and with the development co-operation–aid policies of OECD countries. I would assert that this focus does not capture key elements of policy necessary to achieve the Hunger MDG. It is significant that the HTF saw trade liberalisation in agriculture as being of second order importance in the hierarchy of policy priorities in order to achieve the Hunger MDG. Louise Fresco of FAO contends that policy coherence is based on three related myths: •
Myth 1. We can actually achieve policy coherence.
•
Myth 2. Once policy coherence is achieved, everything will fall into place.
•
Myth 3. Policy coherence is about trade policies of developed or OECD countries. In my view, the conception of policy coherence necessary to achieve the Hunger MDG needs to be a more complex and multilayered version than the more narrowly trade and development policy focused concept which has dominated the discourse. This broader concept of coherence needs to recognise the relative importance of domestic and international policy, the need for policy differentiation to reflect the differences between developing countries and the importance of policy sequencing and synergies. I will discuss each of these factors in turn.
The importance of national policy The primary importance of having an appropriate domestic policy framework in achieving development needs to be more clearly recognised. Faced with a similar international trade and policy environment, there are considerable differences in economic performance between developing countries. The reasons for this must be better understood and the lessons drawn from it.
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The African Union (AU), through the establishment of the New Economic Partnership for African Development (NEPAD), and the Blair Commission on Africa have emphasised the critical importance of African leadership if development is to be achieved. Only with high governance standards, a commitment to democracy and an emphasis on the rule of law can genuine change take place in Africa. Ultimately, the only people who can achieve real change in Africa are Africans themselves. Leadership for the development of any country be driven by domestic stakeholders and policy makers, and must come from within The failure of many projects and programmes in the past, due to a lack of ownership, has taught us this simple fact. If the MDGs are to be achieved, developing country governments must adopt development strategies bold enough to meet the challenge. But if the primacy of national policy is recognised, the need for external assistance to those leaders and policy makers who are genuinely seeking to achieve development should also be acknowledged. One critical aspect of this assistance relates to human resources for development. The importance of having the capacity to frame and to administer policy needs more explicit recognition. Many of the poorest countries are beset by glaring weaknesses in capacity. The HIV/AIDS pandemic is undermining the human capital base. The available capacity is further strained by the differing administrative and reporting demands of donors. Developing countries, supported by donors, need to have capacity building at the heart of their development strategies.
Policy differentiation It is essential to differentiate between the policy priorities of developing economies which are increasingly integrating into the world economy and those of the least developed countries (LDCs) which remain marginalised from it. This latter group of countries have a minimal share of world trade and a limited capacity, for the foreseeable future, to engage in international trade, even with the most favourable trading arrangements. Many of these countries are in Sub Saharan Africa and are the countries where Concern works. They require a combination of safety nets to deal with food crises or chronic food insecurity. These include long term investment in basic social services such as health and education and measures to boost the productive capacity of their economies. Because of existing structural economic weakness and an inadequate tax base, international development assistance will have to provide additional resources to these countries for the medium term future. As I will discuss later, the WTO recognises the necessity for special and differential treatment for the poorest developing countries. According to the UN classification, 77 countries fall into the category of ‘least developed’ and 32 of these are members of the WTO.
Policy sequencing Frequently, debates on policy coherence do not adequately specify the sequence of policies which will provide the best basis for development. This is an important practical issue as politicians and policy makers face choices with regard to what the kind of balance between short and long term policy measures which can secure development.
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188 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger The HTF recognised the importance of this sequencing issue. It attempted to identify the priority actions which need to be taken immediately and simultaneously if the Hunger MDG is to be achieved. It focused on ‘entry points’, i.e. those first order interventions that are essential to start certain processes of transformation. These should then be followed by second order interventions which can only be addressed after the ‘entry points’ have been successfully addressed (Arnold, 2004). The Task Force also identified a number of synergistic interventions which addressed the hunger problem in more ways than one, or triggered additional innovations which further strengthened anti-hunger efforts and contributed to achieving other MDGs.
The overarching issues The HTF made a series of policy recommendations across three main headings: global, national and community. The rest of this paper will broadly reflect this approach, drawing particular attention to the connections and symmetries between the three areas. But the Task Force clearly recognised that there is a wider political and economic framework within which these recommendations will be implemented. Three elements within that framework are key if the specific recommendations dealing with hunger are to have any chance of being implemented. These elements relate to conflict, governance and the disease burden, including HIV/AIDS. Concern works in many countries either currently experiencing conflict or where there has been conflict in the relatively recent past. Conflict is one of the greatest impediments to development in these countries and conflict resolution is central to the commencement of the development process. Conflict directly impacts on the level of hunger and food insecurity. I could give many examples. Between 1998 and 2005, between 3 to 5 million people are estimated to have died from conflict, disease and hunger in the Democratic Republic of Congo (DRC). This has occurred in a country richly endowed with natural resources. But because of conflict, the infrastructure – roads, schools, hospitals – has been destroyed and, in parts of the country, the economy reduced to subsistence. In Darfur in Sudan, over 2 million people are in camps, driven from their villages by conflict and fear. Camps are sustained by a massive international humanitarian operation, and this is the third year in camps for many of these people. Unless there is a political settlement which improves security and allows people to return to their villages, this operation will stretch into the foreseeable future. Emergency food situations are increasingly being driven by man-made factors. Whereas human induced disasters contributed to only about 10% of total emergencies in 1984, by the end of the century they were a determining factor in more than 50% of the cases. Preventing/minimising conflict and its impact requires new political arrangements at international level (as highlighted by the proposals of UN Secretary General Kofi Annan) for the reform of the UN, including the establishment of a Peacebuilding Commission and more resources for conflict prevention and resolution. Improving governance goes beyond the obvious solution of trying to tackle corruption. It involves positive things like encouraging a spirit of democracy. It means more than elections. It means a political culture in which citizens and minority groups have rights and where civil society organisations have the space to flourish. As Amartya TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Sen highlighted in his seminal analysis, famine in the twentieth century only happened in countries without genuinely accountable administrations. This has implications for aid programmes aimed at achieving the Hunger MDG. Donors must be prepared to make long term investments in supporting accountable governance arrangements and in building governmental and administrative capacity. There is an obvious link between health, poverty and hunger. These conditions represent a vicious cycle from which it is extremely difficult to break. The HIV/AIDS pandemic is a historical event and there needs to be a far greater awareness of the devastating impact it is currently having, particularly - but by no means exclusively - in Sub Saharan Africa. The link between food insecurity and HIV/AIDS is most destructive at community levels. HIV/AIDS affects the most productive working age groups and has major implications for food security in Sub-Saharan Africa where 70-80% of the population depend on small-scale subsistence agriculture. Since 1985 about 7 million African agricultural workers have died from AIDS in the 25 most affected countries and 16 million more deaths are likely in the next two decades. Tackling the HIV/AIDS pandemic is, quite simply, an imperative of global human security (Arnold, 2004). Similarly, increased investments in preventing diseases such as tuberculosis and malaria is necessary. Without significant improvements in each of these areas – conflict, governance and the disease burden – progress in working towards the Hunger MDG will be compromised, even if good policies are followed across a range of other sectors.
The agenda to achieve the Hunger MDG The HTF proposed a broad range of policy measures, at global, national and community levels, which it believed are necessary if the Hunger MDG is to be achieved. The broad policy recommendations fall under the following headings: •
Move from political commitment to action.
•
Reform policies and create an enabling environment.
•
Increase the agricultural productivity of food-insecure farmers.
•
Improve nutrition for the chronically hungry and vulnerable.
•
Reduce vulnerability of the acutely hungry through productive safety nets.
•
Increase incomes and make markets work for the poor.
•
Restore and conserve the natural resources essential for food security. Under each of these headings there are a range of more detailed recommendations. However, rather than repeat the HTF recommendations in this paper, I will instead pinpoint what I believe are the priority policies which each of the key actors – governments of developing and developed countries, donors, the international community, the private sector and civil society – should adopt in order to achieve the Hunger MDG. As stated above, I base these priorities on what I understand is the evidence of what has worked.
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Governments of developing countries The priority policies for developing countries should include: •
Increased investment in agricultural and rural development.
•
Investment in basic infrastructure.
•
Investment in education and health systems relevant to the Hunger MDG.
•
Nutrition interventions.
Investment in agricultural and rural development Three quarters of the world’s poor are estimated to live in rural areas and depend on agriculture, either directly or indirectly, for their incomes and food security. In most African economies, 30-50% of national income and 70-80% of total employment comes from agriculture. Various studies have shown that the industrial sector in Africa has generally underperformed relative to the agricultural sector. Since 1980, growth within the agricultural sector has been, on average, 2.5% per annum, compared to only 1.2% in the industrial sector (Hazell, 2005). A successful agricultural sector can have a huge impact on incomes as a whole – on farms directly, on the local economy through secondary linkages. If rapid agricultural growth leads to reduced prices for food and raw materials, the real incomes of the urban poor are raised (Matthews, 2005). Agricultural development can contribute to the overall growth of an economy by supplying food and inputs to the industrial sector, generating foreign exchange and providing a domestic market for non-agricultural goods and services. However, over the past number of decades growth in agricultural production in many developing countries has been disappointing. The agricultural trade surplus of developing countries has virtually disappeared and the outlook to 2030 suggests that they will, as a group, become net importers of agricultural commodities, especially of temperate-zone commodities. The least developed countries (LDCs) became net importers of agricultural products as early as the mid-1980s, due to the operation of global comparative advantage and poorly-designed policies. Many developing countries effectively taxed their agricultural sectors and it is only recently that this bias against agriculture in development strategies is gradually being overcome (Arnold, 2004). Even now, a surprising number of poor African countries give only limited priority to agricultural and rural development in their Poverty Reduction Strategy Papers (PRSPs). This should be rectified. The HTF made a number of key recommendations for the development of domestic agriculture. It recognises the key role of government in providing macroeconomic stability. Evidence, especially from the 1980s, shows that macroeconomic stability is crucial if agricultural development policies are to succeed. On specific agricultural policy, the HTF recommends that African governments should, at a minimum, meet the NEPAD target of spending 10% of their total budget on agriculture and rural development and that the poor must have more land available to them. It also recommends reduced internal and external barriers to trade, the linking of nutrition and hunger interventions, and the promotion of female empowerment (HTF, 2005). If these recommendations are supported over the long term, the potential for many developing countries could be significant. It is projected that, over the next two decades, TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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the world’s population will increase by 24% to reach 7.5 billion in 2020. Virtually all of this growth will take place in developing countries, with much of it in urban areas. This will have profound effects on food preferences and demands. IFPRI projects that between 1997 and 2020, global demand for cereals will increase by 35%, and for meat by 57%, with almost all of this increase being accounted for by developing countries. However, as stated recently by Hazell (2005), such broad-based outcomes can only be achieved if the whole of the agricultural sector, rather than just small subsections such as high value exports, is developed. In this case as well, there needs to be serious analysis and differentiation between the hugely disparate countries on the African continent. What is true for the resource rich, and infrastructurally well developed (relatively), is not necessarily pertinent for the land locked and resource poor.
Basic infrastructure Many developing countries have major infrastructural deficits which need to be addressed if their productive and export capacity is to be strengthened. This will require major commitments on the part of developing countries, as well as donors. The Africa Commission stated that these investments should be focussed on everything from “rural roads and small-scale irrigation to regional highways, railways, larger power projects and Information & Communications Technology (ICT)”. IFPRI has shown that investment in rural roads is crucial to development. Drawing on evidence from China, they concluded that “in terms of poverty reduction, low-quality roads raise far more rural and urban poor above the poverty line per yuan invested than … high-quality roads” (IFPRI, 2005). However, beyond roads, railways and ports, institutions dedicated to freeing up trade between suppliers and their respective markets should be established at national, regional and local levels. Similarly, trade supporting bodies need to be established at regional levels between trading partners.
Health and education systems Investments are necessary in both the health and education systems of developing countries to guarantee and strengthen the sustainability of investments in the economy as a whole, and in agriculture in particular. As highlighted by the Millennium Project, “practical investments and policies for a functioning health system include training and retaining competent, motivated health workers, strengthening management systems, providing adequate supplies of drugs, and building clinics and laboratory facilities”, (Millennium Project, 2005). IFPRI analysis shows that there are very high returns from investing in girls’ education.
Nutrition interventions If the cycle of disease and poverty is to be broken, malnutrition, particularly in the under five-year olds, has to be tackled. Undernutrition in childhood leaves a legacy of physical and mental retardation which can last for generations. Research shows a clear link between malnutrition, anaemia, cognitive function and school performance. Improving nutrition is therefore key not only to the Hunger MDG, but to six of the eight MDGs. The HTF makes very clear and specific recommendations in this area: promote mother and infant nutrition (as primary carers, women are particularly important for improving nutritional levels); reduce malnutrition among school-age children and
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192 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger adolescents; and reduce the prevalence of infectious diseases that contribute to malnutrition.
Governments of developed countries The priorities for donor governments should be the following: •
Increase the quantity and quality of aid.
•
Increase aid to agricultural and rural development.
•
Invest in long term institutional capacity building in developing countries.
•
Improve donor coherence.
Quantity and quality of aid The donor community made important commitments during 2005, at the G8 Summit in Gleneagles and the UN Summit in New York, to increase aid to developing countries and to reduce the debt burden on a number of heavily indebted countries. The OECD’s Development Assistance Committee (DAC) should monitor how these commitments are being delivered on. The Millennium Project’s report ‘Investing in Development’ estimated the total cost of achieving the MDGs by 2015 and the contribution required of OECD countries through their aid programmes. It estimated that ODA for direct MDG support will need to rise to USD 73 billion in 2006 and USD 135 billion in 2015 if all countries are to meet the MDGs. It recommended that developed countries should meet the UN’s aid target of 0.7% of GNP and that increased aid and debt relief should be targeted specifically at meeting the MDGs. To increase aid alone is insufficient; improvement in the quality and effectiveness of aid is also necessary. Aid needs to be more predictable, targeted at long term needs, untied and donated on the basis of need rather than political orientation. Country-level needs should be approached systematically by donors and fit within the country owned PRSP.
Aid to agriculture As already stated, agricultural and rural development should get higher support in national development strategies of poor countries. This should also be reflected in aid allocations from donors. A brief analysis of aid to agriculture shows that official donations have been steadily falling over the past twenty years. Overall DAC bilateral aid to agriculture has fallen from 12% of total bilateral aid in 1980-81 to 6% of the total in 2000-01. For individual donors, the decline is even more striking. For Canada, the decrease was from 22 to 4%; for New Zealand, from 25 to 3%; for the Netherlands, from 21 to 3% and from 18 to 4% for the United States. The multilateral institutions have also reduced aid flows to agriculture, from 35% of their total flows in 1980-81 to 7% in 2000-01 (Matthews, 2005).
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Table 1. Aid to agriculture by donor and share in total aid; commitments, 1980-2001 1980-81
1985-86
1990-91
1995-96
2000-01
% of donor total
2000-01 USD million
Total DAC
12
12
7
8
6
2 569
Total multilateral
35
30
25
16
10
1 541
Total
16
16
10
10
7
4 110
Source: Matthews (2005); OECD (2004b).
The reasons for the reassignment of aid from agriculture included the high failure rate of agricultural projects, the complexity, risk and high transactions costs (preparation, supervision and monitoring) involved in agricultural and rural development projects, a dearth of suitably qualified staff, unfavourable domestic policies which discriminated against the agricultural sector, and the increased profile of the poverty alleviation objective which led many donors to give priority to social spending in the sectors of health and education (Matthews, 2003). Some of these conditions have now changed and there is a growing recognition among donors that agricultural and rural development should receive a higher priority. The World Bank appears ready to increase its lending portfolio to agricultural and rural development. There are opportunities for additional aid to support agricultural production, rural infrastructure, and the provision of global public goods such as agricultural research, disease control, water, land and forest management that are aimed at the specific crops and challenges of Least Developed Countries. There is also a greater need for aid to increase the capacity of developing countries to engage in trade. The increased monitoring of this jointly by the WTO and OECD will ensure that it receives greater prominence in the future (Matthews, 2005).
Institutional capacity building Institutional capacity building is of crucial importance to developing countries. Long term donor support for the building of national capacity in service-oriented public management is essential. This will require investments in strengthening public sector management through training, information technology, and higher salaries to retain the skill base. It will also require sufficient training and retention of adequate numbers to deliver services on the ground through community health workers and teachers (Millennium Project, 2005).
Donor coherence Beyond the volume and the quality of aid donation, donor coherence needs to be improved. Donor coherence involves the adoption of a co-ordinated approach by donors, in line with agreed host country policies, with simplified procedures and reliable disbursement of funds. Donor coherence includes the co-ordination of policies and programmes across the different branches (trade, international finance, foreign policy etc) of a donor government whose decisions impact on developing countries. Lack of donor coherence is a serious problem for recipient governments. Many developing countries are overstretched by excessive donor planning missions. A few
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194 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger years ago, Tanzania, exhausted by the constant round of visitors, imposed a six-month moratorium on aid visits. To alleviate this problem, in executing aid missions, Ireland now teams up with like-minded donors - the UK, Holland and some of the Scandinavian countries. A good example of best practice taking place in this field is the ‘three ones’ policy promoted by UNAIDS. This includes an agreed HIV/AIDS action framework, a national AIDS co-ordinating authority, and a monitoring and evaluation system. The ‘fourth one’, yet to be adopted, is a donor planning, financing and accounting process. This approach warrants further support from OECD countries specifically with regard to country-owned and agreed Poverty Reduction Strategies in developing countries.
The international community The international community has a key role in working toward achieving the Hunger MDG. The functioning of the UN system and the range of international agreements which shape the international economic and trading environment and the operation of are of particular importance. In this paper, I will focus on priorities in two areas: emergency response capacity and the international trading system, negotiations for which occur under the aegis of the World Trade Organisation (WTO).
Emergency response capacity After the succession of disasters in 2005 – the Asian tsunami, the food crisis in Niger, Hurricane Katrina in the US and the earthquake in Pakistan – it is apparent that the world needs a more effective system of emergency response. The current situation of appealing to donors on an ad-hoc basis for funding regularly fails to meet commitments and is simply not adequate in dealing with the complexity and frequency of disasters today. The UN Emergency Co-ordinator, Jan Egeland recently pointed out: “Imagine if your local fire department had to petition the mayor for money every time it needed water to douse a raging fire. That's the predicament faced by anguished humanitarian aid workers when they seek to save lives but have no funds to pay for the water, medicine, shelter, or food urgently needed to put out a fire”. The UN Secretary General, Kofi Annan, proposed a series of measures to the September UN Summit to meet this need. They included: •
Strengthening the overall humanitarian response capacity.
•
Predictable funding for emergency response through the establishment of a USD 500 million rolling fund.
•
Improved humanitarian co-ordination – through organising UN agencies and NGOs into sectoral clusters – e.g. shelter, nutrition, health - which build the specialised capacity to respond quickly and effectively to disasters. Decisions taken at the UN Summit and subsequently have gone some way to implementing the Secretary General’s proposals but more progress is necessary and more resources need be committed.
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Trade Reform of the international agricultural trading system and of OECD policies on domestic agricultural support are clearly important to developing countries. It is a key demand in the current WTO trade negotiations which will be held in Ministerial session meeting in Hong Kong later this month. Developing countries which export agricultural commodities should unambiguously gain from fairer export competition on world markets and from improved access to the markets of developed countries. For net food importing developing countries and for countries who currently have preferential trading arrangements with a major developed country trading bloc, the situation is more complex. Matthews makes the point that, “There is a growing awareness that some developing countries, and particularly LDCs, could lose out from OECD country reforms in the short run. Thus the design of the liberalisation process, it’s sequencing and the availability of accompanying measures to provide a safety-net or compensation to countries adversely affected are all important issues” (Matthews, 2005) This suggests that policy makers should implement a differentiated approach to distinguishing between the differing needs of developing countries. The Uruguay Round (concluded in 1993) acknowledged the need for such differentiation in accepting (a) the need for Special and Differentiated Treatment (SDT) for certain developing countries in the context of tariff reduction and market access and (b) the Marrakesh Decision which provided for compensatory financing mechanisms for net food-importing countries in the event of higher food prices arising from trade liberalisation. This decision has not been implemented. For the current Doha development round, poorer developing countries need support in two key areas: •
Assistance in developing their trade capacities.
•
The provision of safety nets which will protect them against shocks arising from trade liberalisation or other phenomena. Many of the least developed countries, particularly in Africa, are marginal to the current international trading economy. They will have to first focus on strengthening their domestic economies and improving their trade capacities regionally before turning to expanding their international trading capacity. An ‘Aid for Trade’ initiative aimed at the Least Developed Country group is slated for discussion during the Hong Kong Ministerial meeting. This is a welcome indicator of the fact that WTO members are serious about this round “development” round. Aid for Trade Assistance could involve infrastructure improvements for roads and waterways, schemes to enable traders to meet international trading standards like sanitary and health standards; assistance with WTO negotiations (from funding think tanks to providing IT training for trade analysis), and projects to modernise customs and border procedures. African governments also need to work in conjunction with each other for trade facilitation, through the African Union and NEPAD. Such bodies play a key role in encouraging greater trade between countries at the regional level and in lowering SouthSouth trade barriers. Tariff barriers affecting the poorest countries are imposed not just by
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196 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger OECD countries, but by middle-income developing countries. In addition, tariff barriers between poorer developing countries are frequently high. A trade agenda for development needs to tackle all of these issues. The provision of safety net arrangements for poor countries should be part of any Doha round outcome. Traditionally, food aid has been seen as one such safety net. The Food Aid Convention (FAC) dates back to the 1960s and requires signatories to the Convention to commit quantities of food or money to meet emergency food needs and, through programme food aid, support development programmes. Food aid has become a contentious issue in the current WTO negotiations. In light of evidence that the USA sometimes uses food aid to dump agricultural surpluses and to attempt to create new markets for its exports, and as part of the Doha Round negotiations, many agricultural exporting developing countries and the EU have called for new disciplines on food aid. These practices create substantial adverse side-effects in trade that damage local markets and affect the livelihoods of poor farmers. A recent OECD study has shown that food aid sourced in donor countries costs 50% more than local purchase of food and 33% more than purchase in third countries. Whatever the outcome of the WTO negotiations, it is important that sufficient quantities of food aid are available to meet emergency needs. The re-negotiation of the FAC in 2006 is an opportunity to agree on the modalities and future quantities of food aid so that it can operate as an effective safety net in the future.
Private sector engagement The private sector must play a key role if the MDGs are to be achieved. Many developing countries have a poorly developed private sector. Political and economic instability, poorly developed legal and financial systems and, in certain cases, corruption, explain this situation. Investments are required in many countries to develop the rule of law, to promote anti-corruption measures and to build financial systems. The private sector has also become increasingly involved in recent years in corporate social responsibility. According to the latest research from the World Economic Forum, “the business sector is increasingly coming to the table to actively engage in efforts to achieve the MDGs” (WEF, 2005). This is giving rise to many new models of partnership between the private and public sectors and between the private sector and international NGOs in pursuit of development objectives.
Local Civil Society Organisations (CSOs) Civil society, within developing countries and at the international level has a crucial role to play in achieving the MDGs. Within many developing countries, there has been a notable growth in civil society over the past decade. But the record is mixed. In many African countries, governments have not given civil society political space or freedom of expression and action. In other countries, the capacity of civil society groups is very weak. Part of the international development agenda should involve encouraging and assisting governments to create such a space for their own civil society (Arnold, 2004). Where civil society has the opportunity and capacity to contribute, it can play an important role in working with and helping donors learn about the poorest sections of the TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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population. Civil Society organisations (CSOs) can play a key role in targeting the hungry and destitute. They can also assist in improving understanding of the impact of national and international policies at the household level. There has been inadequate attention to this level of analysis over the years. The role of local CSOs has tended to focus on informing the poor of their rights and articulating their voice at the national level. The participatory approaches used by such organisations should be supported further. Better information about services which the poor are entitled to is an important part of delivering more effective accountability. Furthermore, such organisations have a role to play in the area of agricultural development. Public sector resources should be directed towards farming organisations to help strengthen the local agri-business sectors. Similarly, such support can be used to enable farming organisations to represent their sector, to improve the standards of their marketed output and to access markets (WEF, 2005).
International NGOs The past 10-15 years has seen huge structural changes in international nongovernmental organisations (NGOs). A number of them have become ‘family federations’ with a fundraising base spread across a number of developed countries. As representatives of civil society in developed countries, NGOs have played an important advocacy role in public policy. At a practical level, NGOs are an essential partner with the main UN agencies in responding to humanitarian crises and in promoting long term development. International NGOs can make an important contribution to the achievement of the Hunger MDG in the following ways: •
Advocacy: NGOs have played an increasingly important role in recent years in advocating for changes in economic structure and rules which impact on the poor – for example, this year’s Global Call for Action against Poverty (GCAP), the Make Poverty History (MPH) in the UK and Ireland and the One campaign in the US. Going forward, NGOs will have a crucial role in holding their governments accountable in implementing the commitments made to achieve the MDGs.
•
Building capacity with southern civil society: This is a slow, complex and sensitive task which is of significant long term importance.
•
New models of partnership: I have already referred to new models of partnership emerging between NGOs, governments, the UN agencies and the private sector. These are likely to increase in importance in the future.
•
Innovation: A number of NGOs have now reached a scale and capacity where they can be important agents of innovation in new approaches to meeting humanitarian and development challenges. I would like to provide an example relevant to the Hunger MDG which my organisation, Concern Worldwide, has been involved in. Concern has developed a new approach to tackling malnutrition, Community Therapeutic Care (CTC), in association with a private consultancy firm, Valid International. CTC is based on public health principles and aims to maximise impact and minimise risk by treating the majority of people suffering from malnutrition in their homes. It combines newly designed “ready-to-use therapeutic food” for the outpatient treatment of severe malnutrition with techniques aimed at mobilising populations,
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198 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger combined with information drawn from development thinking. This generates many positive benefits for those involved in the care and treatment of the patient. These include fewer hours away from home, fewer hours spent travelling to treatment centres, ingredients purchased locally where possible, and training firmly rooted within the community. These advantages greatly strengthen the sustainability of the approach. The CTC approach was field tested in a number of countries with the co-operation of the governments. Results have been carefully monitored, reported on to the international nutrition community and subjected to rigorous peer review. As a result, a number of aid agencies have adopted CTC as their programme approach to tackling malnutrition. A number of governments have also built CTC into their public health systems.
Conclusions Policy coherence plays a key role in achieving the Hunger MDG – to halve the proportion of people suffering from hunger by 2015. But it needs to be conceived of in a broad way. Thinking of policy coherence solely in terms of agricultural policy, or of the interaction between OECD agricultural policies, OECD development assistance policies and international agricultural trade policy, is not an adequate analytical framework. Specifically, the primary importance of the domestic policy framework needs to be recognised while acknowledging the importance of a favourable international environment. The need for policy differentiation to reflect the development needs of different categories of developing countries is stressed. The importance of policy sequencing is emphasised. A series of overarching factors, including conflict, governance standards and the disease burden, including the HIV/AIDS pandemic, determine the overall environment within which more specific sectoral policies aimed at achieving the Hunger MDG are framed. Political decisions and actions aimed at improving the situation in each of these areas are essential to creating the enabling environment which will facilitate the halving of hunger over the next decade. This objective can best be achieved within the vision of partnership which underpins the MDGs. Developing countries must take responsibility and own their development strategies, must improve standards of governance, must create an investment climate conducive to investment and must provide political space for civil society to contribute to the achievement of the MDGs. Developed countries must increase their aid to achieve the MDGs, must be prepared to commit to long term support for institutional capacity building in governmental services and must create a fairer international trading system which takes account of the needs of developing countries. The private sector and civil society, both within developing countries and internationally, are also key partners in achieving the MDGs. New and exciting models of partnership between the various actors are increasingly being formed and should contribute to the achievement of the MDGs.
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REFERENCES Arnold, T. (2002), “Perspectives on Agriculture Policy – A Developing Country Perspective”, Speech delivered to the Irish Agricultural Science Association (ASA) Conference, Dublin. Arnold, T. (2004), “Agriculture, Trade and Development: Why Policy Coherence Matters”, Speech delivered to OECD Committee for Agriculture and Secretariat Consultation with Civil Society Organisations, May 2004, Paris. Arnold, T. (2004), “Ethics, Hunger and Agriculture”, Speech delivered to Cornell University Workshop on Hunger, 2004. Collier, P. (2005), “Is Agriculture still relevant to Poverty Reduction in Africa?”, Speech delivered to British Parliamentary Group on Overseas Development, www.odi.org.uk, London. Commission for Africa (2005), Our Common Interest, Commission for Africa, London. Hazell, P. (2005), “Is Agriculture Still Relevant to Poverty Reduction in Africa?”, Speech delivered to British Parliamentary Group on Overseas Development, www.odi.org.uk, London. IFPRI (2005), Road Development, Economic Growth and Poverty Reduction in China, IFPRI, Washington, DC. Matthews, A. (2005), “Policy Coherence for Development: Issues in Agriculture: An Overview Paper”, Trinity College, Dublin. Millennium Project - Hunger Task Force (2005), Halving Hunger: It Can Be Done (Summary version), UN, New York. Millennium Project (2005), Investing in Development: A Practical Plan to Achieve the Millennium Development Goals, UN, New York. OECD (2005), Policy Coherence for Development: Promoting Institutional Good Practice, OECD, Paris. Sen, A. (1999), Development as Freedom, Anchor Books, New York. WEF (2005), Report of Expert Group on Poverty and Hunger, WEF, Geneva.
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Chapter 12. FOOD GRAIN SURPLUSES, YIELDS AND PRICES IN INDIA1 Raghav Gaiha Faculty of Management Studies, University of Delhi and Vani S. Kulkarni Centre for Population and Development, Harvard University Abstract This study analyses some aspects of state intervention in the foodgrain market in India and to assess how these have impacted foodgrain productivity, accumulation of stocks, wholesale and consumer prices, and exports. The main conclusions of the study are as follows: •
• • • •
•
Growing agricultural subsidies - including food subsidies - have slowed down wheat and rice yields by constraining public investment in agriculture. A related concern is that higher private investment-mainly in ground water exploitation - may have resulted in negative externalities for other farmers in the same village by lowering the water table. The Minimum Support Prices (MSPs) have had significant positive effects on wheat and rice procurement but these effects have weakened during the late 1990s, presumably as a result of removal of restrictions on domestic and international trade. Wheat and rice off-takes fall with higher MSPs, as the wedge between market and subsidised prices narrows down. Foodgrain stocks have grown as a consequence of higher MSPs but at a diminishing rate. The inflationary effects of hikes in the MSP are corroborated. The Wholesale Food Price Index (WFPI) is very sensitive to the MSP, and the former in turn raises the Consumer Price Index for Agricultural Labourers (CPIAL). As rural poverty is positively correlated with (unanticipated) increases in the CPIAL, the effects on the poor are larger than those registered by just lower food entitlements. Because international food prices crashed in the 1990s, the MSP - independent of changes in the real effective exchange rate - impacted foodgrain exports unfavourably. Exports were made feasible by subsidies. As a result, a vicious circle of hikes in the MSP, leading to higher food stocks and export subsidies to reduce them was created. Briefly, state intervention in the foodgrain sector has hampered productivity growth, regional shifts in foodgrain production more conducive to sustainable agricultural growth, a more diversified pattern of agricultural growth in major foodgrain producing
1.
We are grateful to Wayne Jones and Michael Ryan for the invitation to present this paper at the Global Forum on Agriculture: Policy Coherence for Development, organized by OECD, Paris, and for helpful suggestions. We are also grateful to Raghbendra Jha, Prabhu Pingali, Ganesh Thapa, Anil Deolalikar, Pasquale Scandizzo, and several participants at the Global Forum for constructive and insightful suggestions. The econometric analysis could not be performed without Raj Bhatia’s computational expertise. The views expressed here are, however, our own and we take full responsibility for any deficiencies.
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202 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger states, and has hurt the poor in different ways (e.g. limited expansion of employment opportunities, lower food and other entitlements). Various options have been proposed to replace the present form of the MSP. These include freezing of the MSP at current levels with the aim of phasing it out, and deploying the resources saved in improving farmer access to technical advice, credit and rural infrastructure in order to facilitate a shift to higher value crops and agribusiness activities. More specific proposals include investment grants to induce a shift from foodgrain production to higher value crops and agribusiness, contract farming and income support measures (e.g. a lump sum annual or seasonal payment to farmers based on crop area cultivated), and strengthening of other safety nets (e.g. national rural employment guarantee scheme). However, little can be said about their workability in the present context except that a package of reforms with a clear and coherent rationale may have greater acceptability across India’s political spectrum.
Introduction In recent years, foodgrain surpluses in India have exceeded the buffer stock norms. In 2002, for example, the Food Corporation of India (FCI) had accumulated over 60 million tonnes of foodgrains - nearly three times the normal requirements for buffer stocks and the Public Distribution System (PDS) (Rao, 2005, World Bank, 2005). The objective of this paper is to analyse this trend. The sharp rise in the quantity of foodgrains procured and in the stocks held by the FCI is a recent phenomenon. The annual procurement for most years during the 1990s was 24 million tonnes until 1998-99, and increased to 31 and 36 million tonnes in the two subsequent years, respectively. This implies an addition of 19 million tonnes to the FCI stocks. Moreover, the off-take declined by 5 million tonnes in 2000-01. Larger procurements together with a decline in off-take accounted for 24 million tonnes of additional stocks. Therefore, while both larger procurements and declining off-take resulted in larger stocks, the former is the more important factor. Foodgrain procurements are influenced by output and procurement prices. Available evidence points to a slowing down of the growth of foodgrain output in recent years. Although there was a decline in foodgrain output of 6% in 2000-01, procurement increased by 5%. The steep rise in procurement is thus not just a result of growth of foodgrain output at the all-India level. But a strong link between the concentration of foodgrain output in Haryana, Punjab and Andhra Pradesh - mainly of rice and wheat - and procurements cannot be ruled out. In Haryana and Punjab for example, states which account for the bulk of wheat procurement, the growth rate of wheat output was nearly double of the all-India growth rate during 1998-2000. Steep hikes in the Minimum Support Prices (MSPs) is yet another significant factor. The MSPs fixed by the government have been higher than those recommended by the Commission on Agricultural Costs and Prices (CACP). There was, for example, a 25% rise in the MSP for wheat in 1997-98 followed by continuous increases in each of the subsequent years. As a result, the MSP rose by 54% over the period 1997-2001. Although the MSPs for rice rose less steeply, they were higher by 34% over the same period. Finally, although net exports of foodgrains have averaged 7 million tonnes during the last seven years, they may have contributed in a small measure to the FCI stocks, as there was a decline in the international prices of food grains. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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While the stocks have accumulated through high MSPs, and foodgrain allocations to the PDS (Public Distribution System) have increased, the subsidies have risen too.2 Food subsidies, for example, rose from INR 19.6 billion in 1981-82 to INR 105 billion in 200102 (at 1993-94 prices). The total sum of agricultural subsidies increased from INR 59.2 billion in 1981-02 to INR 364.2 billion in 1999-2000, and the corresponding shares in GDP increased from 1.2% to 3% during the same time period. The fact that these subsidies were associated with reductions in public investment in agriculture is corroborated by a sharp decline in the latter until 2000-1 (from INR 71.3 billion in 198182 to INR 44.2 billion in 2000-01), followed by a slight increase in 2001-02 (INR 52.6 billion) and a negligible reduction in 2002-03 (INR 51.5 billion) (World Bank, 2005). That this decline in public investment is associated with a slowing down of growth of productivity in foodgrains is indisputable.3 The main concern of the present study is therefore to analyse some aspects of state intervention in the foodgrain market and to assess how it has impacted foodgrain productivity, accumulation of stocks, wholesale and consumer prices, and exports. This is done by econometrically analysing a comprehensive data base, compiled from the Reserve Bank of India, Ministry of Agriculture and Ministry of Consumer Affairs, Food and Public Distribution. Our findings illustrate that the forms of state intervention analysed have hampered agricultural growth, regional and crop diversification, expansion of agricultural exports and hurt the poor in different ways- through, for example, higher food prices. It is necessary therefore to phase out the MSP and transfer the resources saved to build rural infrastructure, extend irrigation and ensure better access of farmers to agricultural support services. But the feasibility of various policy options remains a major concern.
Foodgrain (wheat and rice) policy The Government of India (GOI) foodgrain policy is motivated by two concerns: (i) to protect producers against sharp reductions in prices, through procurement and price support operations; and (ii) to ensure that low income households have access to foodgrains at reasonable prices, through the Public Distribution System (PDS) and buffer stock operations. In pursuing these objectives, the Food Corporation of India (FCI) - a government parastatal - was created. FCI or its designated state government agency procure paddy and wheat at the MSP. In addition, FCI obtains additional rice supplies through a “rice levy” on rice mills. This ranges from 10% to 75% of milled rice output at a government prescribed levy rice. On average levy rice accounts for about 60% of total rice procurement by the FCI. Paddy/rice and wheat stocks are then used for the PDS, buffer stocks and other welfare measures. The GOI (Government of India) sets minimum support prices for 24 major crops, including paddy, wheat, maize, pulses and oilseeds. The Commission of Agricultural 2.
Note that, while foodgrain allocation rose from 21.59 million tonnes in 1993-94 to 30.01 million tonnes in 2001-02, the share of off-take in total foodgrain allocation dropped sharply from 0.67 to 0.45. This resulted in a slight reduction in the amount of off-take over this period (World Bank, 2005).
3.
Public capital formation comprises mainly investments in major and medium irrigation schemes. Gulati and Batla (2002) broaden the coverage to investments in power. In both cases, public capital investments declined. They also show that a 10% increase in public investment (including irrigation and power) results in a 2.4% decline in agricultural GDP growth. Further, there is a strong complementarity between public and private investments in agriculture.
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204 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger Costs and Prices (CACP) recommends MSPs for these crops every year. Farmers can sell their produce in the open market or to the FCI or its designated agency at the MSP. A growing concern is the rapidly rising MSPs for rice and paddy and the fiscal burden these MSPs impose. Further, increasing MSPs have led to a decrease in public investment. Until recently, the GOI generally adhered to the CACP recommendation of MSPs for rice and wheat. The CACP bases its recommendations on the C2 costs of production, including all expenses in cash and in kind, plus rent paid for leased land, imputed value of family labour and interest on owned capital. Since 1997-98, the MSPs have been set at higher than the C2 benchmark. In 2001-02, for example, the weighted average C2 costs of eight wheat producing states was INR 4.83 per kg while the MSP was set at INR 6.20 per kg. In 2002-03 the GOI’s attempts to freeze the MSPs were resisted by the main beneficiary states (Punjab, Haryana and Andhra Pradesh). Although the MSPs were frozen at 2001-02 levels, compensations took the form of a “drought relief bonus” (INR 200 per tonne to the paddy MSP and of INR 100 per tonne to the wheat MSP). The bonuses overlooked the fact that these crops are largely grown in irrigated areas. As a consequence, the FCI was forced to procure more, resulting in increasing foodgrain stocks (World Bank, 2005). The (direct) benefits of MSPs accrued to a few states where procurements were the largest. Wheat procurement is concentrated in three states: Punjab, Haryana and Western Uttar Pradesh (accounting for 95% of total wheat procurement), while rice procurement is concentrated in five states: Punjab, Andhra Pradesh, Haryana, Uttar Pradesh and Tamil Nadu (accounting for 85-90% of total procurement). In 2001-02, the total fiscal transfers to Punjab amounted to INR 19.8 billion, while those to Haryana and Andhra Pradesh amounted to INR 9.4 billion and INR 4.9 billion respectively (World Bank, 2005). What is perhaps an equally serious concern is that the benefits of the MSPs accrue mostly to larger wheat and rice farmers. Combining the 54th round of the NSS with two cost estimates for 1998, it turns out that transfers to a large rice farmer in Punjab were nearly 10 times the amount to a marginal farmer; and, to a large wheat farmer in the same state, nearly 13 times the amount transferred to a marginal farmer (World Bank, 2005).4
Wheat and rice yields There is growing concern that the production of foodgrains has slowed down as a result of slowing down of public investment in agriculture. As pointed out earlier, the latter is largely a consequence of the mounting burden of subsidies.5 Both rice and wheat yields exhibit a positive but diminishing trend. As shown in Figures 1 and 2, 1996 onwards there was a marked reduction in yields per hectareparticularly of wheat.6 4.
The cost estimates are C2 and A2+FL. The latter includes all cash costs and imputed cost of family labour. The transfers per household are twice as high with the A2+FL benchmark. Also, it is higher for wheat than for rice. For details, see World Bank (2005).
5.
For a more detailed exposition with illustrative evidence, see World Bank (2005), Chand (2005), and Chadha and Sharma (2005).
6.
A quadratic time trend was fitted to logs of wheat and rice yields per hectare, with a dummy variable that takes the value 1 from 1996 on and 0 for all the earlier years. In both cases, the dummy variable has a significant negative coefficient. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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In a series of econometric exercises, the following results are corroborated. In the case of wheat, productivity is positively correlated with the use of fertilisers and to public investment in irrigation. However, controlling for these effects and for that of net sown area, increases in capital formation - implying essentially greater private investment in wells, tube wells - are negatively related to yields.7 This may seem somewhat contradictory but if there are negative externalities associated with groundwater exploitation by individual farmers in Haryana, (for example, the average water table depth falls annually by 1-33 cm), higher productivity on individual farms would be associated with lower productivity on other farms.8 The negative relationship between wheat yields and gross capital formation is, however, robust to different specifications. Figure 1. Wheat yields 3500
3000
Yield (Kg/Hectare)
2500
2000 Actual Predicted 1500
1000
500
19 50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02
0
Year
Source: Various sources as listed in the text.
Similar results are obtained for rice yields. Both fertiliser and net sown area have positive effects on yields. The effect of public investment is positive as well, while that of overall capital formation in agriculture is negative. The negative effect of overall capital formation persists even after a dummy variable is inserted. This variable takes the value 1 for the years starting 1996 and is set at 0 for the preceding years.9 As may be noted from Figures 1 and 2, in both cases, estimated yields track actual yields closely. An important conclusion that can be drawn is that the rapid decline in public investment in agriculture during the 1990s had a major role in explaining the fall in rice and wheat productivities not just directly but also indirectly through private investment in 7.
For details, see Table A.1.
8.
In a recent paper based on household data collected by the National Council of Applied Economic Research, Foster and Rosenzweig (2005) show that a farmer’s tubewell depth when he digs a new tubewell is deeper by 2.9% if the number of wells in the village is higher by 10%.
9.
For details, see Table A.2.
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206 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger ground water utilisation resulting in negative externalities for other farmers in the same village.10
Foodgrain procurement, off-take and stocks The increasing divergence between the MSPs for wheat and rice and their costs of production (attributable mainly to the political clout of farmers in these states), larger procurements, declining off-takes and failure to export larger values of foodgrains contributed to the accumulation of foodgrain stocks, considerably in excess of buffer stock norms. Some important results of econometric exercises - focusing mainly on the key role of the MSP in the accumulation of foodgrain stocks and higher foodgrain prices are shown. Figure 2. Rice yields 2500
Yield (Kg/Hectare)
2000
1500 Actual Predicted 1000
500
19 50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02
0
Year
Source: Various sources as listed in the text.
Procurements of wheat and rice increase at a diminishing rate. The same is true for the off-take of rice. There is, however, a sharp reduction from 1996 onwards, which is captured by a significant negative coefficient of the dummy variable. Wheat off-take shows a positive trend except that the dummy variable has a negative but weakly significant coefficient. Not surprisingly, stocks of wheat and rice also increase at a diminishing rate. In order to examine the effect of the MSP on the accumulation of stocks, some additional exercises were carried out. Wheat procurement exhibits a strong positive relationship with the MSP. So the higher the MSP, the greater is the wheat procurement. Controlling for this effect, the dummy variable that takes the value 1 for 1996 and the subsequent years, and 0 for the years before 1996 has a significant negative coefficient, implying a weakening of the positive effect of the MSP in more recent years.11 Off-take of wheat is negatively related 10.
For illustrative evidence on deceleration of total factor productivity associated with declining public investment in agriculture, see Chadha and Sharma (2005).
11.
For details, see Table A.3 in the annex. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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to the MSP (as the issue price rises), as also to (predicted) wheat yields. Controlling for these effects, there is a positive time trend.12 Stocks of wheat are positively related to production of wheat. Controlling for this effect, the share of wheat production in Haryana, Punjab and Andhra Pradesh has a negative effect. The overall effect of the MSP-including that of the interaction with wheat production - is positive, given the larger absolute value of wheat production. This result implies that higher production in combination with higher wheat MSP would contribute substantially to the building of wheat stocks. However, the negative coefficient of the dummy implies a weakening of these effects since 1996.13 Rice procurement is positively related to the MSP. This effect weakens slightly starting 1996. It is also positively linked to the rice output in Haryana, Punjab and Andhra Pradesh.14 Rice off-take is negatively related to both rice output (at a national level) and to the share of these three states in national rice output. Controlling for these effects, there MSP has a negative effect, and exhibits a residual positive time trend.15 Rice stocks vary with the MSP, but less so starting 1996. Controlling for the effect of the MSP, rice output of the three largest rice producing states does not have a significant effect on rice stocks.16 How closely our specifications approximate actual rice and wheat stocks are illustrated in Figures 3 and 4. Figure 3. Actual and estimated rice stocks 30
25
20
Actual Predicted
15
10
5
20 01
20 02
20 00
19 98
19 99
19 97
19 95
19 96
19 94
19 93
19 91
19 92
19 90
19 89
19 88
19 87
19 85
19 86
19 84
19 83
19 82
19 81
19 80
0
Year
Source: Various sources as listed in the text.
12.
13. 14.
15. 16.
In an alternative specification, off-take of wheat is negatively related to all-India production of wheat, and negatively to the MSP. Controlling for these effects, there is a positive time trend. Details will be furnished on request. For details, see Table A.5. In an alternative specification, rice procurement is positively related to all-India rice output as well as to the share of Haryana, Punjab and Andhra Pradesh in all-India rice output. Controlling for these two effects, there is a positive effect of the MSP. For details of the results reported in the main text, see Table A.6. For details, see Table A.7. For details, see Table A.8.
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208 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger Figure 4. Actual and estimated wheat stocks 30
25
20
Actual Predicted
15
10
5
02
01 20
20
00
99 19
20
98
97 19
19
95
94
93
96 19
19
19
92 19
19
90
91 19
19
88
87
86
85
84
89 19
19
19
19
19
19
82
81
83 19
19
19
19
80
0
Year
Source: Various sources as listed in the text.
Inflationary effects of MSP MSP hikes have also contributed to higher wholesale and consumer prices. Unanticipated increases in the latter tend to aggravate rural poverty independently of the level of agricultural production and land inequality (Bliss, 1985; Gaiha, 1989, 1995). Figure 5. Wholesale food price indices 600
500
400
Actual Predicted
300
200
100
0 81 982 983 984 985 986 987 988 989 990 991 992 993 994 995 996 997 998 999 000 001 002 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 19 1 Year
Source: Various sources as listed in the text.
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An econometric analysis confirms the positive effect of the (combined rice and wheat) MSP on the wholesale food price index (WFPI). Controlling for this effect, neither the gross fiscal deficit nor the money supply (M3) has a significant effect on the WFPI. There is a residual positive time trend which weakens over time.17 That this specification tracks the actual WFPI well is illustrated in Figure 5. The Consumer Price Index for Agricultural Labourers (CPIAL) in turn varies with the (predicted) WFPI. The former is not affected by (predicted) wheat and rice off-takes. Nor is it affected by a measure of money supply.18 There is, however, a declining residual time trend. This specification also tracks the actual CPIAL closely, as shown below in Figure 6.19 Figure 6. Consumer Price Index for agricultural labourers 2000
1800
1600
1400
1200 Actual Predicted
1000
800
600
400
200
20 02
20 01
19 99 20 00
19 97 19 98
19 96
19 95
19 94
19 93
19 91 19 92
19 90
19 89
19 88
19 87
19 86
19 85
19 83 19 84
19 81 19 82
0
Year
Source: Various sources as listed in the text.
Prices, exchange rates and foodgrain exports Not only has the state intervention in the foodgrain marketing through the MSP hampered greater public investment in agriculture and hurt the poor through higher prices, but it has also dampened expansion of foodgrain exports. Even though the share of rice and wheat exports grew from about 14.5% in 1993-94 to about 19% in 2003-04, with 17.
In alternative specifications, larger (predicted) stocks of wheat and rice replacing the MSP have a positive effect on WFPI but not money supply (M3). Details will be furnished on request.
18.
Here money supply (M3) is multiplied by its velocity.
19.
For details, see Table A.10.
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210 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger sharp fluctuations in the dollar value of wheat exports, it is arguable that a more rapid expansion was hampered by the sharp increases in WFPI, stemming from hikes in the MSP.20, 21 An econometric analysis corroborates this link.22 The MSP has a negative effect on foodgrain exports while the real effective exchange rate does not have a significant effect. There is a positive residual time trend which has weakened over time.23 That this specification yields estimates which closely track the actual value of rice and wheat exports is illustrated below. Figure 7. Value of foodgrain exports 250
200
150 Actual Predicted 100
50
20 02
20 01
20 00
19 99
19 98
19 97
19 96
19 95
19 94
19 93
19 92
19 91
19 90
0
Year
Source: Various sources as listed in the text.
20.
Export subsidies for cereals were introduced in early 2000. The GOI resorted to subsidies as world cereal prices crashed in the late 1990s, coinciding with sharp hikes in the MSPs. As a result, government foodstocks rose to 60 million tones. In November 2000, the GOI decided to offer private traders wheat for export at a price equal to the Food Corporation of India’s economic cost minus two years carrying cost, but not lower than the central issue price for below the poverty line households (World Bank, 2005). In 2003, the scheme was expanded to cover rice. The GOI justified its export support policy under the exemption for developing countries contained in Article 9.4 of the Agreement on Agriculture. The exports rose but so did the subsidies.
21.
Chadha and Sharma (2005) point out that agricultural sub-sectors with lower levels of government intervention such as fruits and vegetables, and dairy and poultry products recorded higher rates of growth than foodgrains.
22.
Export values are expressed in terms of a nominal (effective) exchange rate.
23.
For details, see Table A.11. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger – 211
Concluding observations Some observations on the preceding analysis are made below from a broad policy perspective. State intervention in foodgrain marketing in India - especially in rice and wheat aims at protecting producers against sharp reductions in prices, and ensuring adequate availability and access of low income households to foodgrains. The subsidies involved have, however, grown rapidly and contributed in large measure to fiscal stress in recent years. Moreover, the (direct) benefits of the subsidies have accrued mostly to large farmers in a few of the major wheat and rice producing states. Not only is the targeting of subsidised food through the Public Distribution System (PDS) a continuing concern, it is also far from a cost-effective way of transferring food/real income to the poor.24 In fact, there has been a sharp decline in the foodgrain off-take over the period 1993/04 - 2001/02 (the ratio of off-take to allocation plummeted from 0.67 to 0.45) due to a narrowing of the wedge between subsidised prices and market prices. Although targeting has improved with the switch to the Targeted Public Distribution System (TPDS), a large proportion of the poorest remains excluded for various reasons (e.g. unavailability of the item in ration shops, unsatisfactory quality).25 A major concern is the role of the MSP as a deterrent to the shifting of wheat and rice production to northern and eastern states, which possess highly favourable agroecological conditions. Existing major producers such as Haryana, Punjab and Tamil Nadu are constrained by increasing water scarcity.26 For a regionally more differentiated agricultural strategy that would be sustainable over the long-term, it is vital that these states shift to a more diversified agricultural patterns, growing less water-intensive and higher value crops (World Bank, 2005). Simultaneously, larger investments in rural infrastructure (e.g. roads, better maintenance of surface irrigation) and agricultural support services (e.g. research and extension) are a major priority. The specific concerns raised by our analysis are: •
Growing agricultural subsidies have slowed down yields of wheat and rice by constraining public investment in agriculture. A related concern is that higher private investment - mainly in ground water exploitation - has resulted in negative externalities for other farmers in the same village by lowering the water table.
•
The MSPs have had significant positive effects on wheat and rice procurement but these effects have weakened during the late 1990s, presumably as a result of removal of restrictions on domestic and international trade.
24.
A not-so-recent but detailed analysis of the PDS in Andhra Pradesh, for example, shows that when both central and state expenses are accounted for, a rupee of income transferred to the poor cost INR 6.35. If it was as dismal as this in Andhra Pradesh with a relatively efficient administration, it is likely to be much worse in other states such as Uttar Pradesh and Bihar. For details, see Radhakrishna et al. (1997), and for a review of this and other estimates, see Gaiha (1999, 2002, 2003).
25.
A recent review of the TPDS points to low targeting accuracy (i.e. barely 25% of the poor households bought foodgrains), and a low caloric elasticity with respect to food subsidies (0.08). For details, see Kochar (2005).
26.
The fact that foodgrain production has remained concentrated in a few states, such as Haryana, Punjab, and Tamil Nadu, is attributable to a perverse incentive structure embodied in the MSP, and water and power subsidies. For illustrative evidence, see World Bank (2005), and Chadha and Sharma (2005).
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212 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger •
Wheat and rice off-takes fall with higher MSPs, as the wedge between market and subsidised prices narrows down.
•
Foodgrain stocks have grown as a consequence of higher MSPs but at a diminishing rate.
•
The inflationary effects of hikes in the MSP are corroborated. The Wholesale Food Price Index (WFPI) is very sensitive to the MSP, and the former in turn raises the Consumer Price Index for Agricultural Labourers (CPIAL). As rural poverty varies positively with (unanticipated) increases in the CPIAL, the effects on the poor are larger than just lower food entitlements.
•
The MSP - independent of changes in the real effective exchange rate - impacted unfavourably on foodgrain exports- especially because international food prices crashed in the 1990s. Exports were feasible only with subsidies. So a vicious circle of hikes in the MSP, leading to higher food stocks, and export subsidies to reduce them was created. Briefly, state intervention in the foodgrain sector has hampered productivity growth, regional shifts in foodgrain production more conducive to sustainable agricultural growth, and a more diversified pattern of agricultural growth in major foodgrain producing states. It has also hurt the poor in different ways (e.g. limited expansion of employment opportunities, lower food and other entitlements). Various options have been proposed to replace the present form of the MSP. These include freezing of the MSP at current levels with a view to phasing it out, and deploying the resources saved in improving farmer access to technical advice, credit and rural infrastructure, in order to facilitate a shift to higher value crops and agribusiness activities. More specific proposals include investment grants to induce a shift from foodgrain production to higher value crops and agribusiness; contract farming; and income support measures (e.g. a lump sum annual or seasonal payment to farmers based on crop area cultivated); and strengthening of other safety nets (e.g. national rural employment guarantee scheme). Little, however, can be said about their workability in the present context except that a package of reforms with a clear and coherent rationale may have greater acceptability across India’s political spectrum.
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Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger – 213
Appendix
List of variables The variables used in the regressions are listed first, followed by the results. Note that l denotes logarithmic transformation of a variable. y_w- wheat yield (Kg/per hectare) y_r-rice yield (Kg/per hectare) hyv-area under fertiliser (million hectares) fert-fertiliser consumed in lakh tonnes nsa-net sown area (million hectares) public-fixed public investment in agriculture gfc-gross fixed capital formation in agriculture proc_w- procurement of wheat off_w-off-take of wheat p_o-predicted off take of rice and wheat proc_r- procurement of rice off_r-off-take of rice prod 3_w- production of wheat in Haryana, Punjab and Andhra Pradesh prod 3_r- production of rice in Haryana, Punjab and Andhra Pradesh msp_w- minimum support price of wheat prod 3r_r- production of rice in Haryana, Punjab and Andhra Pradesh productiona_r- production of rice at all-India level wfpi-wholesale food price index p_wfpi-predicted wholesale food price index cpil-consumer price index for agricultural labourers msp_r- minimum support price of rice stock_w-stock of wheat stock_r-stock of rice p_s-predicted foodgrain stock m3-measure of broad money m3v-broad money multiplied by velocity t- year d4-a dummy variable that takes the value 1 for 1996 and subsequent years, and 0 for all other years gdp-fiscal deficit as a proportion of GDP export-exports of rice and wheat reer-real effective exchange rate
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214 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger
Regression results
A selection of regression results is given below. Table A.1. Determinants of wheat yields per hectare . reg ly_w
l_fert l_hyv
l_nsa l_public l_gfc
Source | SS df MS -------------+-----------------------------Model | 1.74638616 5 .349277232 Residual | .065902365 23 .00286532 -------------+-----------------------------Total | 1.81228853 28 .06472459
Number of obs F( 5, 23) Prob > F R-squared Adj R-squared Root MSE
= = = = = =
29 121.90 0.0000 0.9636 0.9557 .05353
-----------------------------------------------------------------------------ly_w | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------l_fert | .3970201 .0701265 5.66 0.000 .2519524 .5420878 l_hyv | .0318791 .1094206 0.29 0.773 -.1944746 .2582328 l_nsa | .0842052 .7619551 0.11 0.913 -1.492019 1.660429 l_public | .1867698 .1030926 1.81 0.083 -.0264934 .400033 l_gfc | -.3725182 .1442052 -2.58 0.017 -.6708293 -.0742071 _cons | 7.161421 3.737476 1.92 0.068 -.5701372 14.89298 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
6,
29) =
1.848832
Table A.2. Determinants of rice yields per hectare . reg ly_r
l_fert l_hyv
l_nsa l_public l_gfc
Source | SS df MS -------------+-----------------------------Model | 1.1654518 5 .233090359 Residual | .048232205 23 .002097052 -------------+-----------------------------Total | 1.213684 28 .043345857
Number of obs F( 5, 23) Prob > F R-squared Adj R-squared Root MSE
= = = = = =
29 111.15 0.0000 0.9603 0.9516 .04579
-----------------------------------------------------------------------------ly_r | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------l_fert | .2930058 .0599929 4.88 0.000 .1689009 .4171106 l_hyv | .079827 .0936089 0.85 0.403 -.1138177 .2734717 l_nsa | 2.38765 .6518497 3.66 0.001 1.039196 3.736104 l_public | .2283495 .0881953 2.59 0.016 .0459037 .4107953 l_gfc | -.5400347 .123367 -4.38 0.000 -.7952387 -.2848307 _cons | -3.0007 3.197396 -0.94 0.358 -9.615018 3.613618 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
6,
29) =
2.325756
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Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger – 215
Table A.3. Determinants of wheat procurement reg lproc_w lmsp_w
d4
Source | SS df MS -------------+-----------------------------Model | 2.786745 2 1.3933725 Residual | 1.41798287 25 .056719315 -------------+-----------------------------Total | 4.20472787 27 .155730662
Number of obs F( 2, 25) Prob > F R-squared Adj R-squared Root MSE
= = = = = =
28 24.57 0.0000 0.6628 0.6358 .23816
-----------------------------------------------------------------------------lproc_w | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------lmsp_w | .7009209 .1428624 4.91 0.000 .4066902 .9951516 d4 | -.2856172 .1753093 -1.63 0.116 -.6466735 .0754391 _cons | -1.481225 .7048169 -2.10 0.046 -2.932823 -.0296279 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
3,
28) =
1.437986
Table A.4. Determinants of wheat off-take . reg loff_w P2y_w lmsp_w lprod3r_w
t
Source | SS df MS -------------+-----------------------------Model | .486438766 4 .121609691 Residual | .376605238 14 .026900374 -------------+-----------------------------Total | .863044004 18 .047946889
Number of obs F( 4, 14) Prob > F R-squared Adj R-squared Root MSE
= = = = = =
19 4.52 0.0149 0.5636 0.4390 .16401
-----------------------------------------------------------------------------loff_w | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------P2y_w | -4.04519 1.406203 -2.88 0.012 -7.061196 -1.029183 lmsp_w | -1.588698 .5230233 -3.04 0.009 -2.710471 -.4669246 lprod3r_w | .6718056 1.103084 0.61 0.552 -1.694073 3.037685 t | .2543796 .0704038 3.61 0.003 .1033786 .4053807 _cons | 34.51119 10.85437 3.18 0.007 11.23087 57.7915 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
5,
19) =
2.388369
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216 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger
Table A.5. Determinants of wheat stocks . reg stock_w lproda_w lmsp_w lprod3r_w lmsp_lprod3r_w d4 Source | SS df MS -------------+-----------------------------Model | 629.077326 5 125.815465 Residual | 209.442194 17 12.3201291 -------------+-----------------------------Total | 838.519521 22 38.1145237
Number of obs F( 5, 17) Prob > F R-squared Adj R-squared Root MSE
= = = = = =
23 10.21 0.0001 0.7502 0.6768 3.51
-----------------------------------------------------------------------------stock_w | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------lproda_w | 30.22979 13.97772 2.16 0.045 .7393812 59.72021 lmsp_w | -303.5929 101.6075 -2.99 0.008 -517.9661 -89.21974 lprod3r_w | -457.2067 164.6097 -2.78 0.013 -804.5028 -109.9106 lmsp_lprod~w | 87.28221 28.45391 3.07 0.007 27.24972 147.3147 d4 | -11.71217 3.023529 -3.87 0.001 -18.09126 -5.333076 _cons | 1275.065 548.4879 2.32 0.033 117.8565 2432.273 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
6,
23) =
2.164253
Table A.6. Determinants of rice procurement . reg lproc_r
lprod3_r lmsp_r
d4lmsp_r
Source | SS df MS -------------+-----------------------------Model | 2.38132124 3 .793773747 Residual | .51399224 19 .027052223 -------------+-----------------------------Total | 2.89531348 22 .131605158
Number of obs F( 3, 19) Prob > F R-squared Adj R-squared Root MSE
= = = = = =
23 29.34 0.0000 0.8225 0.7944 .16448
-----------------------------------------------------------------------------lproc_r | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------lprod3_r | 1.119585 .5027261 2.23 0.038 .067367 2.171803 lmsp_r | .3777641 .1597507 2.36 0.029 .043402 .7121261 d4lmsp_r | -.0418761 .03027 -1.38 0.183 -.105232 .0214798 _cons | -10.43792 4.359485 -2.39 0.027 -19.56243 -1.313413 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
4,
23) =
1.869441
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Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger – 217
Table A.7. Determinants of rice off-take . reg loff_r lproda_r lmsp_r lprod3r_r
t
Source | SS df MS -------------+-----------------------------Model | 1.95096133 4 .487740332 Residual | .203844268 18 .011324682 -------------+-----------------------------Total | 2.1548056 22 .097945709
Number of obs F( 4, 18) Prob > F R-squared Adj R-squared Root MSE
= = = = = =
23 43.07 0.0000 0.9054 0.8844 .10642
-----------------------------------------------------------------------------loff_r | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------lproda_r | -1.476232 .2943581 -5.02 0.000 -2.094656 -.8578089 lmsp_r | -.6052373 .2874419 -2.11 0.050 -1.20913 -.0013443 lprod3r_r | -.7297286 .4206878 -1.73 0.100 -1.613561 .1541036 t | .1278471 .0241974 5.28 0.000 .0770102 .178684 _cons | 21.5815 3.87392 5.57 0.000 13.44269 29.7203 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
5,
23) =
2.637188
Table A.8. Determinants of rice stocks . reg lstock_r
lprod3_r lmsp_r
d4lmsp_r
Source | SS df MS -------------+-----------------------------Model | 4.14854474 3 1.38284825 Residual | 1.12396884 19 .059156255 -------------+-----------------------------Total | 5.27251357 22 .239659708
Number of obs F( 3, 19) Prob > F R-squared Adj R-squared Root MSE
= = = = = =
23 23.38 0.0000 0.7868 0.7532 .24322
-----------------------------------------------------------------------------lstock_r | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------lprod3_r | .2648605 .7434133 0.36 0.726 -1.291121 1.820842 lmsp_r | 1.058798 .2362336 4.48 0.000 .5643558 1.553241 d4lmsp_r | -.0908384 .0447622 -2.03 0.057 -.1845268 .00285 _cons | -5.720489 6.44665 -0.89 0.386 -19.21348 7.772504 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
4,
23) =
1.305523
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218 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger
Table A.9. Determinants of wholesale food price index reg
lwfpi lmsp
t t_sq lgdp
Source | SS df MS -------------+-----------------------------Model | 6.2775142 4 1.56937855 Residual | .018488713 17 .001087571 -------------+-----------------------------Total | 6.29600291 21 .299809662
Number of obs F( 4, 17) Prob > F R-squared Adj R-squared Root MSE
= 22 = 1443.01 = 0.0000 = 0.9971 = 0.9964 = .03298
-----------------------------------------------------------------------------lwfpi | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------lmsp | .4897218 .1202888 4.07 0.001 .2359346 .743509 t | .0823942 .0130857 6.30 0.000 .0547858 .1100025 t_sq | -.0008895 .0002037 -4.37 0.000 -.0013193 -.0004598 lgdp | -.0840261 .0690123 -1.22 0.240 -.2296292 .0615771 _cons | 1.199785 .6444351 1.86 0.080 -.1598544 2.559424 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
5,
22) =
1.681609
Table A.10. Determinants of Consumer Price Index for Agricultural Labourers (CPIAL) reg lcpil p_lwfpi t t_sq lp_o lm3v Source | SS df MS -------------+-----------------------------Model | 5.23677061 5 1.04735412 Residual | .010809061 16 .000675566 -------------+-----------------------------Total | 5.24757967 21 .249884746
Number of obs F( 5, 16) Prob > F R-squared Adj R-squared Root MSE
= 22 = 1550.34 = 0.0000 = 0.9979 = 0.9973 = .02599
-----------------------------------------------------------------------------lcpil | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------p_lwfpi | 1.183712 .1300023 9.11 0.000 .9081196 1.459305 t | -.0990314 .0721378 -1.37 0.189 -.2519568 .0538939 t_sq | .0001382 .0002324 0.59 0.560 -.0003545 .000631 lp_o | -.0460181 .1001097 -0.46 0.652 -.2582411 .1662049 lm3v | .4468396 .4400847 1.02 0.325 -.4860982 1.379777 _cons | -3.046769 3.796471 -0.80 0.434 -11.09493 5.00139 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
6,
22) =
2.245881
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Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger – 219
Table A.11. Determinants of foodgrain exports reg lexport
lmsp lreer t t_sq
Source | SS df MS -------------+-----------------------------Model | 12.8545073 4 3.21362683 Residual | .774379858 8 .096797482 -------------+-----------------------------Total | 13.6288872 12 1.1357406
Number of obs F( 4, 8) Prob > F R-squared Adj R-squared Root MSE
= = = = = =
13 33.20 0.0000 0.9432 0.9148 .31112
-----------------------------------------------------------------------------lexport | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------lmsp | -9.365794 4.624371 -2.03 0.077 -20.02961 1.298025 lreer | -4.03542 3.278745 -1.23 0.253 -11.59622 3.525379 t | 4.039484 1.262311 3.20 0.013 1.128591 6.950378 t_sq | -.0561465 .0175522 -3.20 0.013 -.0966221 -.015671 _cons | 16.29379 26.63452 0.61 0.558 -45.12551 77.71309 -----------------------------------------------------------------------------Durbin-Watson d-statistic(
5,
13) =
1.979735
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220 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger
REFERENCES Bliss, C.J. (1985), “A Note on the Price Variable”, in J.W. Mellor and G.M. Desai (eds.), Agricultural Change and Rural Poverty: Variations on a Theme, by Dharm Narain, Baltimore: Johns Hopkins University Press. Chadha, R. and P. Sharma (2005), “Liberalising Indian Agriculture”, Margin, Vol. 37, No. 3. Chand, R. (2005), “Whither India’s Food Policy? From Food Security to Food Deprivation”, Economic and Political Weekly, Vol. XI, No. 11. Foster, A. and M. Rosenzweig (2005), “Inequality and the Sustainability of Agricultural Productivity Growth: Groundwater and the Green Revolution in India”, A paper presented at the Indian Policy Conference at Stanford University, June 2005, mimeo. Gaiha, R. (1989), “Poverty, Agricultural Production and Prices in India - A Reformulation”, Cambridge Journal of Economics, Vol. 13. Gaiha, R. (1995), “Does Agricultural Growth Matter in Poverty Alleviation?”, Development and Change, Vol. 26. Gaiha, R. (1999), “Food, Prices and Income”, Canadian Journal of Development Studies, Vol. XX. Gaiha, R. (2002), “Income and Expenditure Switching Among the Impoverished During Structural Adjustment in India”, Economics of Planning, Vol. 35. Gaiha, R. (2003), “Does the Right to Food Matter?”, Economic and Political Weekly, 4 October. Gulati, A. and S. Batla (2002), “Capital Formation in Indian Agriculture: Trends, Composition and Implications for Growth”, Mumbai: Occasional Paper 24, National Bank for Agriculture and Rural Development. Kochar, A. (2005), “Can Targeted Food Programmes Improve Nutrition? An Empirical Analysis of India’s Public Distribution System”, Economic Development and Cultural Change, Vol. 54, No. 1. Radhakrishna, R., K. Subbarao, S. Indrakant and C. Ravi (1997), “India’s Public Distribution System: A National and International Perspective”, Washington, DC: World Bank, mimeo. Rao, C.H.H. (2005), Agriculture, Food Security, Poverty and Environment, Essays on Post-Reform India, New Delhi: Oxford University Press. World Bank (2005), India: Re-energising the Agricultural Sector to Sustain Growth and Reduce Poverty, New Delhi: Oxford University Press.
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Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger – 221
Chapter 13. COHERENCE OF INTERNATIONAL TRADE LIBERALISATION POLICY WITH THE OBJECTIVES OF RURAL POVERTY REDUCTION: LISTENING TO THE VIEWS OF THE RURAL PEOPLE IN SUB-SAHARAN AFRICA Mohamed Beavogui Western and Central Africa Division, IFAD Abstract The gap between the Millennium Development Goals (MDGs) set for 2015 and the present situation in Sub-Saharan Africa (SSA) is not closing fast enough, despite the positive aggregate economic performance of the last six to seven years. Favourable aggregate results tend to mask important inter-country differences and also important inter-sectoral differences within countries. Agriculture in SSA has been hit by the serious international market crises that befell the major export crops of the sub-continent namely coffee, tea, cocoa and cotton. Setbacks in the agricultural sector have a severe impact on poverty in SSA, since 70% of the sub-continent’s poor people depend on agriculture for their livelihoods. The disappointing performance of agricultural production is attributed to a complex set of state and market failures that constrain the potential for development in rural areas and, subsequently, the prospects for poor rural people to lift themselves out of poverty. Lack of coherence between different policy objectives, and between policy objectives and policy implementation practices, increases the incidence of state and markets failures in SSA. Eight issues in policy coherence are discussed in this paper. Four issues concern the governments of industrialised countries while the other four concern the governments of SSA countries. The issues regarding the governments of industrialised countries include: (i) the total amount of Official Development Assistance (ODA) disbursed to SSA, (ii) the distribution of ODA expenditure by sector, (iii) the expected impact of trade liberalisation in light of the SSA experience and (iv) the impact of the domestic protection of domestic agriculture in industrialised countries. The issues regarding the governments of SSA countries include: (i) the coherence of the system of incentives available to agricultural producers, (ii) the coherence of the international trade policy of SSA governments, with the objective of promoting an expanding the market for African farmers, (iii) the coherence between the pace at which SSA governments pursue regional economic integration objectives and the formulation of common regional agricultural development policies with the need to develop capacity for fast reactions to the challenges of globalisation of international markets, and (iv) the coherence of the policies for institutional development currently promoted in SSA with the establishment of an environment which encourages the development of grass-root institutions which promote the emergence of new leaderships and strong producers’ and community organisations. The ODA received by SSA in 2003 was about the same as in 1993 in nominal terms, with the agricultural sector receiving a much smaller share than ten years before. The
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222 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger Doha development programme of 2001 emphasises the importance of agriculture for poverty reduction in Africa, but progress in negotiating implementation has been very slow. Little agreement has actually been reached on concrete measures to disentangle critical international trade policy issues influencing African agricultural development. Reaching the MDGs by 2015 in SSA requires urgent and major corrections to policy incoherence. Agricultural development also requires expanding markets, remunerative prices for agricultural producers and competition among equal trading partners. Faster integration of the African regional economies, common regional agricultural development policies focused on rural poverty reduction, and appropriate protection against unfair competition from outside the common markets would strengthen the technical and financial basis of SSA agriculture. The establishment of enabling institutions at grassroots levels would encourage the emergence of strong producers’ and community-based organisations, improve local governance and mobilise the energies and consensus required to react positively to the incentives provided for improving agricultural production and productivity. The paper ends with five considerations related to the political dimension of the agricultural and rural poverty reduction challenges in SSA.
The Millennium Development Goals and Sub-Saharan Africa: the gaps are not closing fast enough Three Millennium Development Goals (MDGs) directly involve the linkages between agricultural development policy and international trade policy: (i) halving the number of rural people living in extreme poverty, (ii) halving malnutrition, and (iii) improved governance in rural areas. There has been wide agreement in the international community on the need for these objectives to be achieved by 2015. What progress is being made in SSA? And what are the perceptions of the rural poor about the coherence of the declared policy intentions of their governments and the available system of incentives which will enable the rural poor to lift themselves out of poverty? The average rate of growth of Gross Domestic Product in SSA from 1996 to 2002 was 3.8%. Growth accelerated during 2003 and 2004, with some countries in West Africa growing at more than 5% per annum.1 This was the result of a number of factors including the economic policy reforms carried out during the 1990s, the abatement of a number of serious civil disturbances and the impact of high international market prices of some key SSA exports (e.g. oil and metals), which offset the serious drop in the international market price of agricultural primary commodities (coffee and tea in the late 90s, followed by cotton and cocoa in the early 2000s). However, the strong aggregate economic performance of SSA should not detract from the fact that there are considerable variations between countries2 and, within countries, from one sector to another. Such variations are highly relevant with respect to achieving the MDGs in a timely manner. In fact, the Organisation for Economic Co-operation and Development (OECD) estimates3 that only several countries in SSA are likely to achieve the MDGs by 2015. 1.
OECD, Perspectives Economiques en Afrique, 2004/2005.
2.
Half of SSA countries recorded near-zero growth rate between 1990 and 2002: FAO The State of Food Insecurity in the World 2003-2004.
3.
OECD, Perspectives Economiques en Afrique, 2004/2005.
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Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger – 223
Only 10 out of 47 countries (21%) are performing satisfactorily towards the objective of halving extreme monetary poverty and hunger. For the remaining 79%, the level of economic growth that would be required to halve the number of people living on less than USD 1 per day is far beyond what can be reasonably projected. In addition, the development policies in those countries do not seem adequately geared to addressing the problems of the agricultural sector, from which the largest share of poor African people struggle to earn their livelihood. The number of people who live on USD 1 per day in SSA are estimated to number 230 million. More than 70% of this population lives in rural areas and draws it’s livelihood from agriculture. These numbers show few signs of decreasing, what with agricultural gross national product (GNP) not growing fast enough in most countries, and actually declining in some cases due to the impact of falling international market prices of primary agricultural commodities. From 1995/97 to 2000/02, the incidence of undernourishment increased by 3% in Central Africa, but decreased 1% in West Africa and 5% in Southern Africa. Overall in SSA, one third of the population is still undernourished, and 27% of the children are underweight. Vulnerability to food insecurity increased, signalled by the large increase in the importation of cereals (up 60 during the same period) compared to that of the rest of the world (up only 18%). With respect to the issue of governance in SSA, progress has been made in the overall development of democratic institutions at national and provincial/district levels. Reform of public administration carried out in many countries has strengthened local governments to a considerable extent, although generating additional burdens on overstretched public finances. Nevertheless, there is considerable additional ground to be covered in order to develop an effective linkage between “government” and the rural people, and to create a path towards truly pluralistic governance in rural areas. Rural populations point out that the emphasis at the district/municipality level on public administration reform has not yet developed adequate instruments for the “voice of the village” to be heard. This is particularly true when it comes to decisions about the use of public funds in matters that directly concern livelihoods of rural communities. Farmers’ organisations are emerging and growing stronger, but much remains to be done to establish genuine enabling institutions at that level.
OECD countries’ contribution to reaching the Millennium Development Goals in Sub-Saharan Africa In 2003, the total net Official Development Assistance (ODA) of the OECD countries to SSA was USD 21 billion, about the same level in current prices as it was in 1993. From 1995 to 2000, there was a significant reduction in aid flow, with the lowest ODA in 1999 of less than USD 16 billion. The reduction was combined with a gradually growing share of debt relief and of emergency aid towards the end of the period. The share of SSA in the total ODA (USD 69 billion) stood at a little over 30% in 2003, of which almost one third was emergency assistance and debt relief combined (approximately in the ratio of one to two thirds, respectively). If emergency aid is excluded, the ODA disbursed in 2003 to SSA was equivalent to less than USD 90 per person living in conditions of extreme poverty. The following graph, taken from the OECD/African Development Bank (AfDB) 2005 report “Economic Perspective in Africa”, includes the ODA disbursed to all African countries, the great majority of which was to SSA.
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224 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger
Between 1993 and 2003, debt relief resulted in a change in the structure of ODA, but not in an increased flow of resources to SSA. This presumably increased the degree of freedom SSA governments had in using those resources no longer directly allocated to specific development programmes. It may or may not result in more investment for agriculture and rural poverty reduction, depending on the pressure of recurrent expenditure on the total resources available to finance government budgets. The ODA disbursed by the OECD countries in SSA was clearly insufficient to help generate the kind of economic growth required for reaching the MDGs by 2015.4 Following the Monterrey and Kananaskis meetings of the G8, OECD countries committed themselves to increasing their total annual ODA, including debt service, from USD 69 billion to USD 88 billion in 2006, and to USD 100 billion in 2010, and to allocate half of the larger flow to SSA. The commitment for the future looks somewhat brighter, although even a flow of USD 50 billion per year to SSA would represent only a marginal increase in real terms with respect to the inflow of aid in the very early 1990s. Among the representatives of the rural people of SSA, there is a certain amount of scepticism as to whether the promises made at Monterrey, Kananaskis, Doha, Cancun and after will actually be kept – and when. The situation should become clearer at the Hong Kong meetings scheduled for December 2005. Even if promises on the total aid disbursement and on the share for Africa were actually fulfilled in the time proposed, there is recognition that it is not enough to reach the MDGs by 2015. There is a growing feeling that African people must increasingly find a solution to their poverty-reduction problems by relying more on themselves than on external assistance. At the same time, there is awareness that ODA from the OECD countries will remain a key engine of development in SSA for quite some time. 4.
The “Zerillo Report”, UN, 2001 estimates total ODA requirements to reach the MDGs by 2015 at about USD 120 billion annually in 2006. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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At the root of slow progress: state and market failures, incoherent policies The reasons for the slow progress towards the MDGs in SSA are obviously complex and vary from country to country. The African perception, however, goes beyond inadequate external investment resources. Of paramount importance is a combination of two conditions: the failure of the states to set in motion a sustainable process of agricultural development; and the failure of the market to efficiently allocate resources with equal opportunities and benefits for all trading partners. State failures have impacted both the governments of the OECD countries in addressing the agricultural development process in SSA, and the governments of SSA countries themselves. It is the latter who are ultimately responsible for developing the economic sector where the largest impact on poverty reduction can be achieved. Government failures are to a large extent the result of incoherence in the policies in different areas of public spending. This incoherence produces contradictory rather than consistent results. Market failures are the result of the asymmetric distribution of opportunities, including access to information, assets and external economies. This asymmetric distribution is often enhanced by incoherence among desired policy objectives and the policies actually pursued.
Eight issues of policy coherence In SSA, rural people perceive a number of important areas where lack of policy coherence directly impacts their livelihoods and diminishes opportunities available to the poorer segments of the population for lifting themselves out of poverty. This paper addresses eight issues that were highlighted on several occasions. Of these, four policy coherence issues concern the governments of the OECD countries, and while the other four concern the governments of the SSA countries. Since most of the rural poor in SSA depend on agriculture, the four issues that concern the policies of governments of OECD countries are best presented in the form of the following questions: •
Is the country allocation of the ODA funded by OECD countries coherent with the objective of reaching the MDGs in SSA?
•
Is the structure- by sector- of expenditure of ODA in SSA coherent with the objective of developing agriculture?
•
Is the liberalisation of international markets advocated by OECD countries for SSA coherent with the objective of activating fast agricultural development in SSA?
•
Is the protection of domestic agriculture in developed countries coherent with the poverty-reduction objectives of their own ODA? The questions related to the four issues concerning the policies of governments of SSA countries are:
•
Is the system of incentives that confronts agricultural producers in SSA coherent with the objective of fast growth and equity in the agricultural sector?
•
Are the international trade policies of SSA governments coherent with their objectives of agricultural development and rural poverty reduction?
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226 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger •
Is the pace at which SSA governments pursue regional economic integration and their approach towards a common regional agricultural development policy coherent with the objective of accelerating the growth of agriculture?
•
Are the institutional transformations currently pursued in SSA coherent with the need to develop strong grassroots institutions?
Policy coherence issue no. 1: geographical distribution of ODA A guiding principle of ODA allocation by country is that priority should be given to countries that have large number of poor people and are also capable of effectively using external resources. This approach generates a bias in favour of large developing countries such as India and China that combine a great number of people who live below the poverty line with proven capacity to use resources quite effectively. For industrialised countries, a concentration of ODA in middle-income countries has the added advantage of stimulating the growth of economies that represent attractive and rapidly expanding markets for their own products. This guiding principle has not been strictly followed by all donor governments. Equity demands that the poorest countries, which are often also the weakest states, be supported to an even larger extent than middle-income countries precisely because of their poor capacity to mobilise domestic resources and to use technical and financial assistance as effectively as the middle-income countries. To what extent is the current actual allocation by country coherent with the objective or reaching the MDGs in SSA? Recent research by the Institute of Development Studies of the University of Sussex5 analysed the distribution of ODA with respect to four MDG indicators: extreme poverty, child malnutrition, children not enrolled in school, and mortality rates among children under-five years of age. Aid concentration curves were constructed for the total ODA disbursed in 2003 by all OECD countries, and by the major donors individually. The research shows that all major donors distribute their ODA by giving higher priority to reducing extreme poverty and lowest priority to reducing under-five mortality. It also shows that, while the World Bank, the UN and the UK concentrate their concessionary assistance in the poorest countries (negative Suits indices, see Table 1), the US and the EU “spend the majority of their aid budgets in middle-income countries, which have already met, or are “on track” to meet, the MDGs.” France, Germany and Japan spend less than half of their ODA in the poorest countries, “with large poor countries (such as India and Nigeria) receiving much less aid than some former colonies.”
5.
Bob Baulch, “Aid Distribution and the MDGs”, CPRC Working Paper, November 2004.
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Table 1. Suits indices for major bilateral and multilateral donors MDGs
Donor (in descending order of ODA disbursed)
Extreme poverty
Child malnutrition
Children not in school
Under-five mortality
USA
0.364
0.416
0.414
0.457
Japan
0.217
0.298
0.319
0.370
EU
0.303
0.346
0.359
0.370
World Bank
-0.371
-0.308
-0.210
-0.176
France
0.180
0.254
0.237
0.290
Germany
0.152
0.212
0.233
0.275
UN
-0.314
-0.257
-0.172
-0.138
UK Total DAC
-0.314 0.123
-0.257 0.187
-0.172 0.210
-0.138 0.254
Negative value indicates progressivity, i.e. aid concentration towards the poorest countries. Source: B. Baulch, 2004.
The Baulch study is based on data from 73 developing countries and does not specifically construct aid concentration curves for SSA. However, since most of the poorest countries in the series are in SSA, the conclusions of the study mostly concern the sub-continent. The study draws attention to the fact that some important donors are not distributing their ODA in a way that is coherent with the MDGs they are committed to help reaching by 2015. If the inconsistencies are not addressed, the paper concludes, it is likely that even the promised big push in the level of ODA disbursement will fall short of reaching the target. After Monterrey and Kananaskis, more ODA to SSA is now an official policy of the OECD countries. This shift may correct the inconsistencies in the major donors’ country allocation of aid to development. Encouraging commitments have already been made by some industrialised countries towards the interim target of USD 88 billion by 2006, including significant debt relief. Whether the increase and the adjustment in the share of SSA will actually take place in full and in the time scheduled, and whether the larger share of aid pledged to Africa will be disbursed in time to have an impact, remains to be seen.
Policy coherence issue no. 2: sector-wide distribution of ODA expenditure The structure of ODA expenditure by sector is an issue that directly affects the interests of rural people in Africa. Research undertaken by African farmers’ organisations shows that the ODA allocated to agriculture in SSA fell from 14 to 16% of the total flow in 1990 to about 4% in 2000.6 In absolute terms, the decline was more severe due to the reduction of ODA to SSA during the 1990s. Given the share of poor people that draw their livelihood from agriculture, the question is legitimately raised as to whether the 6.
Mamadou Cissokho et Jacques Berthelet, « Cohérence des Politiques de Développement, Questions pour l’Agriculture Africaine », draft paper, 2005.
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228 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger decline of ODA expenditure in agriculture is coherent with the declared policy objective of reaching the MDGs in SSA. Furthermore, whereas the erosion of the real value of the ODA due to inflation was probably offset by the appreciation of the USD in the 1990s, the opposite occurred after the USD started to depreciate in 2002. Countries in SSA with their currency linked to the Euro have been seriously affected. It is important to highlight that the drastic reduction of ODA expenditure in agriculture followed large structural adjustments already undertaken in developing countries during the 1980s. Since ODA determines to a very large extent all African governments’ development expenditure, the entire public expenditure in agriculture was affected. The evolution was the result of a deliberate policy, shared by donors and receiving governments alike, to scale down the agricultural development service delivery system built after independence, largely with the help of the international community. In the process, many government organisations that provided African farmers with key services such as extension, research, credit, input distribution and marketing support were liquidated or significantly reduced in size and resources. The drastic scaling down of the public sector was justified on grounds of efficiency, effectiveness and sustainability of the public expenditure incurred, considerations that were, and still are, widely accepted. However, the policy for reconstruction based on a different service delivery and infrastructure system in agriculture, formulated in the early and middle 1990s, has not been implemented forcefully enough. These factors, combined with unfavourable events in the international market of primary agricultural commodities, have seriously handicapped the chances of sustained agricultural development in most of SSA, and with it the scope for rural poverty reduction.
Policy coherence issue no. 3: trade liberalisation and agricultural development in SSA The Doha Development Programme (DDP), launched at the closing of 2001, aimed to promote accelerated economic growth in developing countries through increased opportunities resulting from trade liberalisation. Negotiations on the DDP dragged on for about three years, going through a setback at Cancun until some agreement was reached in mid-2004 - a major stumbling block concerned Africa and SSA agriculture. A key policy coherence issue is to what extent and under what conditions trade liberalisation policies would really contribute, in the short and long term, to the growth of African agriculture. A quick look at some basic facts and at the recent experience of agricultural producers in SSA casts some light on this matter.
Key facts Three key factual considerations are in order. The first consideration is that SSA countries are indeed very open economies, as indicated in the following summary table. This suggests that African governments can do little to further increase the share of international trade on the national economies.
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Table 2. Share of international trade on GNP Average of SSA countries
53%
World average
42%
Average in the Middle East and North Africa
50%
USA and Japan France
20% 44%
Source: Documents presented to the 2005 Forum organised in Ouagadougou by Réunion des organisations Paysannes des Pays de l’Afrique de l’Ouest (ROPPA).
The second consideration is that a major share of the trade of SSA is with countries of the EU. Most countries of SSA have had free access to these countries since the mid1990s, on a non-reciprocal basis, by virtue of unilateral concessions made by the EU within the framework of the Lomé Agreement. Under the circumstances, the expected beneficial effects of trade liberalisation should have already begun to emerge. The third consideration is that, despite liberalisation, the share of SSA in the world market declined from 2% in 1990 to 1.6% in 2000, and there was no appreciable growth of export earnings from 1998 to 2002, except in countries which export oil and metal.7 On the other side of the trade balance, significant increases of food imports have been recorded, with import of cereals, for example, growing at a rate three times higher than in the rest of the world.
Recent experiences of agricultural producers Trade liberalisation is historically associated with falling prices of agricultural primary commodities. In SSA the most affected commodities are coffee, tea, cocoa, sugar and cotton - commodities that make up the bulk of the export earning potential of many countries that are among the poorest in the world. Since the mid-1990s, a series of international market crises have affected those commodities: coffee and tea markets plunged during the last years of the 90s, cotton and cocoa in the first years of the new century. After the collapse of the International Coffee Agreement (ICA), the world market price of coffee declined sharply. From a range of 110 to 160 USD cents per pound during the 1980s, prices fell to between 50 and 85 USD cents per pound during 1990-94. Thereafter, a series of sharp fluctuations around a steep downward trend began, which brought the price in the early 2000s at the lowest level ever recorded, and the current inter-annual price volatility rate at 50%, compared to 10 or 15% during the time of ICA regulatory clauses. What was the impact on industrialised countries? The margins between the price paid to exporters in developing countries and the price paid by consumers in the importing countries increased very significantly, with consumers in industrialised countries enjoying no benefit of the drastic reduction of the remuneration of producers in developing countries. Trading companies and roasters accumulated large profits, despite the significant increase in the cost of retail marketing. The facts are summarised in 7.
OECD, 2005, shows that about half of the countries in SSA actually recorded negative growth of export earnings during that period.
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230 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger Table 3 below. Low-income countries-including a number of SSA least-developed countries (LDCS with little diversification of export earnings) were hit particularly hard. Smallholder coffee farmers lost a significant share of their cash earnings, having no flexibility to grow other crops, and losing forever their investment in coffee trees. It is only now that the coffee situation in rural Africa is being viewed as an example of the negative impact of liberalisation and globalisation on the economies of poor countries. Table 3. Coffee export earnings as per cent of the retail value of coffee sold in developed countries: early 1980s and early 2000
Retail value of coffee sales in developed countries, USD billion Coffee export earnings Share of exporting countries, %
Early 1980
Early 2000
(ICA enforced)
(unregulated market)
30 10 33
55 8 14.5
Source: IFAD. Rwanda. Appraisal of cash crop development project, 2003. Elaboration of ICO data.
Whereas the impact of falling international market prices of agricultural commodities on the balance of payments of the exporting countries is well appreciated and well researched, the impact on poverty in the exporting countries is much less known, although recently it has been the subject of some interesting case studies. One such study concerns the cotton sector. Between January and May 2002 the international market price fell by 40%, reaching a level that was half the nominal price prevailing during the mid1990s. The subsequent impact on poverty is well represented by the case of cotton growers in Benin. In Benin, as in other African countries, cotton is a smallholder crop that is grown more by the less wealthy segments of the rural population. Before the recent price fall, the income of 37% of the cotton growers in Benin was below the poverty line. For these households, cotton is the major, if not the only, source of cash income. A recent World Bank study8 shows that the 40% fall in the international market price of cotton lint was associated with a 20% reduction of growers’ seed cotton prices, which in the short term raised the incidence of poverty among cotton growers from 37 to 59%. Taking indirect effects into account, the incidence of poverty among all Benin farmers – cotton growers and non-cotton growers – increased from 40 to 48%. The long-term impact, taking into account the adjustments of the farming practices that are likely to intervene, is only marginally different. The data are summarised in Table 4 below.
8.
N. Minot and L. Daniels, “Impact of Global Cotton Markets on Rural Poverty in Benin”, Washington, DC, 2002.
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Table 4. Impact of the fall of the international market price of cotton on rural poverty in Benin -40% -20%
Change in the international market price of cotton lint Impact on the domestic price of seed cotton in Benin Short-term impact in Benin: Percent of cotton growers below the poverty line:
37%
* before the price change
59%
* after the price change Increase in the number of farmers (cotton growers and non-cotton growers) below the poverty line
From 40% to 48%
Long term impact (after expected adjustments in the cropping patterns of cotton growers) * percent of poor among cotton growers
47%
* percent of poor among all farmers
46%
Similar conclusions were reached by investigations in other cotton-producing countries of SSA.
Scope for diversification of agricultural exports from SSA The potential offered by the EU preferential treatment of SSA for developing exports of non-conventional agricultural products is often mentioned as a benefit of free trade that may be underestimated. For many years, considerable attention has been paid to such opportunities by international financial institutions, bilateral co-operation agencies, and by a number of NGOs and private entrepreneurs from the developed world. Two strategic policies have been implemented. One supports the production and export of products that are either new to European markets (e.g. tropical fruit) or are supplied in competition with European producers, filling seasonal gaps in European supplies (e.g. finger beans). The other consists of the exploitation of market niches such as those of very high quality specialty products by the Fair Trade Network. The certification of the organic origin of agricultural products must also be mentioned, although this has been applied much more by large-scale producers (e.g. banana plantations) than on smallholders’ crops because of the current high cost of market-accepted certification. A number of successful export diversification projects have indeed been implemented in Africa over the years. They cover a wide variety of products, ranging from cut flowers to cassava chips, and from finger beans to gooseberry. The emerging opportunities are of considerable interest in themselves and deserve to be strongly supported, but the size of the operations, and their future prospects, are still marginal compared to the gap in resources generated by worsening terms of trade for the traditional exports. Furthermore, the “success stories” have proven difficult to replicate. For example, the Kenya finger beans story, surely the most successful example of African export diversification in recent times, is proving hard to replicate in areas that are less well served by the rural infrastructure and international air transport network. This has been demonstrated by the difficulties that similar programmes in Ethiopia and in the countries of the Sahel are still facing after years of external support, and despite the high level of entrepreneurship and horticultural skill that the local farmers possess. Fair Trade organisations, on the other hand, deal with traditional export crops such as coffee, tea, bananas, sugar, etc. They tap the opportunities emerging through diversification of consumer demand for high-quality products in affluent communities. They also help assure that the corresponding extra trading margins are paid to producers and are used for development purposes by producers. In the case of coffee, for example, TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
232 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger the Fair Trade Network manages to pay prices twice as high as those offered by other traders for the share of high-quality products of the smallholder co-operatives it sponsors in Latin America, Asia and Africa. It also helps the co-operatives to sell their lowerquality output better by providing market information, quality certification and negotiation assistance. The impact of these initiatives at the village levels is very encouraging, but the size of the high-quality retail market controlled by the Fair Trade Network is a tiny fraction of the total world coffee market, and this is not likely to significantly change for a long time.
Policy coherence issue no. 4: protection of domestic agriculture in the industrialised countries It is estimated that the protection of agriculture by the OECD countries costs the developing world between USD 5 billion and 10 billion per annum.9 Analysts suggest10 that even if OECD protection were significantly reduced, in a scenario of full-trade liberalisation the benefits for the LDCs would be marginal. Moreover, LDCs would actually lose out in the short and medium term due to supply inelasticity in their own production systems, and from the application of reciprocity in preferential market access. In SSA the medium-term supply inelasticity argument is contradicted by a fair amount of experience accumulated over the years, which provides evidence of the quick reaction of African farmers to remunerative prices. However, farm-gate prices in Africa are closely influenced by the “protection” of domestic agriculture in most OECD countries, the US, the EU and Japan. The perception of the rural people in SSA is that the complete removal of this protection is unlikely, since industrialised countries will always want to maintain a minimum of strategic production in agriculture in order to secure their “food sovereignty”, so to speak. Nevertheless, African farmers do urge their political leaders to fight on their behalf for the elimination of at least the worst effects of that protectionist policy, which would significantly benefit African farmers and the OECD taxpayer countries as well. The worst effects of the protection policies concern the impact that subsidised exports from industrialised countries have on the level of international market prices of commodities exported by SSA, and on the unfair competition of subsidised exporters in the domestic markets of SSA. The extent of the potential gain that SSA may expect from a significant reduction in the subsidisation of some of the least efficient cropping activities in the OECD countries is also well illustrated in the case of cotton. In 2002, the World Bank estimated11 that the abolition of the US subsidy to cotton growers would increase the international market price of cotton lint by USD 12 per pound. For the West African cotton-exporting countries alone, this would generate increased net trading resources to the extent of USD 250 million per annum. The World Bank paper estimates that this amount would be equivalent to 14% of the current flow of ODA from all sources to West African countries.
9.
A. Matthews, “Policy Coherence for Development: Issues in Agriculture: An Overview”, 2005.
10.
Matthews, 2005.
11.
“Cotton Sector Strategy in West Central Africa”, World Bank Policy Research Paper 2957, Washington, DC, July 2002. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Similarly, in the EU the abolition of support to cotton growers would open to international suppliers a market equivalent to the current level of the combined cotton lint exported by all the SSA countries that now enjoy preferential treatment on the EU market. In the short run, such a measure would generate a further significant price increase, perhaps of the same magnitude of that expected from the abolition of the US subsidy. For West African countries alone, the two measures combined might well represent annual trading benefits equivalent to some 30% of the resource transfer now channelled to them through ODA. In addition, a strong incentive to real growth in the African economies would result. African farmers and ginneries have proven their capacity to increase production in response to market demand in a competitive environment. In the CFA zone of West Africa alone, production doubled from 1990 to 2000, keeping consistently good-quality cotton lint standards, high crop yields (over 1 tonne/ha) and ginning ratios higher (about 43%) than in other areas of the developing world. A further doubling can certainly be achieved in a shorter time if price prospects were favourable. One need only consider experience to date, the under-utilisation of the natural potential for growing the crop successfully, and the human and physical capital that has accumulated in the sector since the early 1980s. The cotton case may be emblematic, but it is does not tell the entire story. Country and case studies reveal a disturbing scenario for the economic development prospects of agriculture and of the agro-industries in SSA. A recent review of the situation in Ghana provides insight into this situation with respect to poultry rice, and tomato processing.12 West Africa imports 8% of the total exports of chicken meat from the EU, which is directly and indirectly heavily subsidised. One third of the EU exports to SSA enter the Ghana market. By the end of the 1990s, Ghana had abolished all import quotas and reduced the tariffs on agricultural and agro-industrial products to a fraction of what the country is allowed under World Trade Organization (WTO) rules. This resulted in a very large increase in the import of frozen chicken meat from the EU in particular. About half of the imports consist of “backs and necks” that would otherwise have been sold to the pet food industry in Europe. The Ghanaian poultry industry, previously thriving under solid tariff protection, was severely hit. The share of the market supplied by domestic producers fell from 50% in the mid-90s to 11% in 2002. Approximately 400 000 chicken farmers in Ghana were involved, with a large number of them being forced out of business, hatcheries closing down, slaughterhouse facilities being utilised at a fraction of capacity, and employees being laid off. Given the number of people involved (estimated at 1.5 million), Ghanaian farmers believe that import liberalisation and tariff reduction is somewhat of a national disaster. A similar scenario describes the disruption of the tomato-growing and processing industry and of rice production as well. Ghanaian producers suffered considerable losses; to what extent did Ghanaian consumers benefit? Low-quality imported poultry products are indeed available in the urban markets for a significantly lower price than domestic products, which are admittedly of significantly higher quality. Some poor people now can afford the backs and necks of broilers, which add taste, some fat and a little protein to their soup. However, these advantages, which benefit mostly urban consumers in the largest cities, are not obtained without risk. Although a reliable measure of the sanitary risks is hard to 12.
M. Khor and Tetteh Hormeku, The Impact of Globalisation and Liberalisation on Agriculture and Small Farmers: the Experience of Ghana, 2005.
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234 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger obtain, controls on the imported frozen meat are not very effective in African countries. Some of the samples checked in Ghana and Cameroon reported 15% salmonella infections at the point of entry. There is also the very real risk of thaw caused by freezing several times in transit from Europe to retailing in Africa. The incoherence of EU protection of agriculture is even greater with respect to highly labour-intensive production that has little to do with “food sovereignty”, such as horticultural products. The EU has invested heavily in developing hothouse production of crops that can be grown much more cheaply in Africa’s open fields. Because of labour scarcity in Europe, horticulturalists utilise immigrant labour to a very large extent. A fair percentage of this labour is illegal. Illegal immigration is associated with an increase in criminality, and with rising costs of policy enforcement of immigration rules. To these conditions must be added the subsidies paid to high-cost producers of the same products that the illegal immigrants could legally produce in their own countries if they were allowed to sell them to the EU, with beneficial effects for European consumers, European taxpayers and African farmers alike.
The July Agreement The African perception is that the negotiations of the first half of 2004 that led to the “July Agreement” have succeeded at long last to initiate a serious debate on the need for industrialised countries to make a real effort to support agricultural development in SSA. In this connection there are signals that the World Bank as well may begin to look at the African agricultural development issue with a new frame of mind. The stumbling block at Cancun was influenced by the very marginal progress made in the US Farm Bill of 2002 on the subsidy issue, and to the EU Common Agricultural Policy (CAP) approved in 2003, which modified nothing in the level of public support to domestic agriculture, including the subsidies to exporters of agricultural and agroindustrial products. The July Agreement concerns only the “modalities” for the continuation of negotiations. In that framework, developing countries have accepted the principle that OECD countries have the right to maintain a high level on tariff protection for “critical products”, on the condition that this be compensated by a larger liberalisation of imports of “other products”. The interpretation of this clause in African farmers’ circles is that it meets the interests of the emerging middle-income countries much more than their own. The language of the protocol shifts the solution of issues of tariffs and subsidies to a future, but not specified, time. There is, however, room for negotiating some reduction in the protection of domestic producers, when it results in “trade distortion”. The level proposed for the initial year of implementation (a reduction by 20%) is a fraction of the domestic “protection” that enables US and EU producers to either seriously disturb international market prices or to compete in the domestic markets of developing countries. Furthermore, the very definition of the factors of trade distortion is challenged by the organisations of African farmers on solid technical grounds. The July Agreement on agriculture includes measures concerned with the case of cotton. But what was envisaged is only the establishment of an ad hoc Investigating Committee, actually nominated in November 2004. One year later, a report is being hastily put together for the December 2005 Hong Kong meeting. Twelve million people in SSA alone await the concrete outcome of the results of yet another round of discussions. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Policy coherence issue no. 5: system of incentives confronting agricultural producers in SSA Most governments in SSA have produced Poverty Reduction Strategy Papers (PRSP) that emphasise the importance of faster growth of agriculture for achieving significant reductions in rural poverty. How consistent is the system of incentives provided by the current agricultural policies with the strategies recommended by the PRSPs? The relevant system of incentives includes the entire framework of factors that can facilitate “growth with equity” in the agricultural sector. Policy coherence would require enhanced efforts to rebuild, on new bases, the network of service delivery to agricultural producers that was drastically scaled down by the structural adjustments of the 1980s. Rural people in SSA believe that their governments, and their financiers and advisors, are not doing enough to establish an enabling environment for the emergence of efficient and effective providers of services to agricultural producers in critical fields (e.g. research and technology transfer, rural financial services, agro-industrial credit, crop and product marketing). Competition among service providers for public funds and full accountability for performance to their farming clients are pre-conditions of efficiency and effectiveness. Competition between private and public service providers for public funds, combined with instruments that ensure that providers are accountable to the users of services, has been successfully introduced in other parts of the developing world. It is lagging in SSA. SSA governments need to ask themselves in what way they are responsible for the slow progress. They will uncover many reasons, including the reluctance of their own administrations to respond to the challenge of competition, and their incapacity to develop their roles from that of performing pre-determined field tasks to that of governing development processes. The amount of public financial resources made available to the agricultural sector is only part of the package of measures that may result in rural poverty reduction. Nevertheless, it is one of the necessary conditions. A key aspect where the coherence of SSA governments’ policies for rural development will be tested is with respect to the share of budget expenditure allocated to agricultural development, the quality of that expenditure, and the ratio of total public expenditure in the rural vs. urban areas. In this connection, it is important to recall the decision taken at the Maputo meeting of Heads of State in 2003 that the budget allocation to agriculture in all countries of SSA should be no less than 10%. It is also important to entrust the monitoring of implementation of this decision to the New Partnership for Africa’s Development (NEPAD). The elimination of policy incoherence is very important indeed. However, the view in rural Africa is that the key factor of an effective system of incentives is an expanding market at remunerative prices for African producers. This introduces the second issue of coherence raised by representatives of African farmers with respect to their own governments’ policies.
Policy coherence issue no. 6: international trade policies of SSA governments Organisations of African farmers emphasise the lack of coherence between the international trade polices pursued by many governments in SSA and the objective of providing an expanding market at remunerative prices for African agricultural producers, which is a critical condition for a sizeable and sustainable impact on rural poverty.
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236 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger In July 2005, the Réunion des Organisations Paysannes et des Producteurs des Pays de l’Afrique de l’Ouest (ROPPA) organised a Forum at Ouagadougou to discuss the implications for African agriculture of the Cotonu Agreement, and of the Economic Partnership Agreements (EPA) proposed by the EU as the main instrument of the implementation of the Cotonu Agreement. The Forum highlighted the lack of coherence between two main factors: the objectives of the Cotonu Agreement (poverty reduction, food security, enhancing development opportunities) and the recognition of the need for flexibility in addressing the situation of the weaker trading partners, and the acceleration of market liberalisation and the abolition of preferential treatment for African products under the time phasing suggested in the EPA road map.13 Participants pointed out “the manipulation” by OECD countries of definitions and rules of the WTO on “dumping” and “subsidisation”, which allows the continuation of protection of their high-cost producers and exporters and causes considerable damage to the emerging economies in SSA. Four key considerations are at the basis of the views held by most participants: •
International market prices determine the level of farm-gate prices in SSA.
•
African producers are ready and willing to operate in a competitive market, provided competition is among equal partners.
•
Competition among African producers is among equal partners. However, African producers are not equal partners with those non-African producers who have much better access to information, credit, technology and external economies as well as special protection of their governments.
•
SSA governments are not doing enough to redress the situation – for example, by keeping the tariff protection of domestic agriculture at 20%, well below the level admitted by WTO regulation (which allows up to 100%). At Ouagadougou, there was consensus that the EU-proposed EPA represents a setback from the conditions enjoyed under the Lomé Agreement and the subsequent concessions unilaterally granted by the EU within that framework. Basically, Cotonu adds reciprocity to the free entry of the products of most SSA countries, a change that benefits only EU producers, with no additional benefit for SSA. Giving up the privileged positions of African producers will unquestionably result in less production and income. How can SSA governments reconcile the acceptance of such losses with their poverty reduction objectives? Would African consumers benefit from the EPA? At Ouagadougou it was pointed out that the EPA proposal has a very regressive pro-urban bias. Consumers in African villages would hardly notice the free entry of EU goods (consumer goods of European origin are not in great demand among African village dwellers). On the other hand, the investment goods they demand (e.g. fertiliser) already enter duty-free. In short, farmers would not be affected by the change. With the larger benefits accruing to the wealthier people who can afford to buy expensive goods imported from Europe, such changes would make a difference to city dwellers.
13.
Réflexions sur la mise en oeuvre de ECOWAP dans le cadre des accords commerciaux internationaux de l’APE e de l’OMC, Ouagadougou 2005 ; Termes de Référence du Forum Regional sur la Souveraineté Alimentaire ; Où se battre pour que les pauvres puissent profiter des marchés ? TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Concerns were also expressed with respect to the implications of drastic reductions in the tariffs currently placed on goods imported from the EU on the SSA governments’ fiscal base. SSA governments would be forced to replace the lost revenue (some estimates were as high as 80% of current total receipts from import duties) with other forms of taxation that may be considerably more difficult to enforce, particularly by administrations with poor human physical and financial resources. This would have a negative impact on the financial position of governments that already experience serious budgetary difficulties, and would further curtail the chances that public expenditure on agriculture and rural development could increase as required to achieve rural poverty reduction objectives. The possible recovery of lost revenue from an increasing tax base due to economic growth resulting from liberalised markets is a potential that nobody doubts will take a long time to materialise. Participants in the ROPPA Forum pointed out that African agriculture and agroindustries will never be able to compete with subsidised competitors unless they themselves are supported with public subsidies (which is an unsustainable option in Africa). They also pointed out that they need time to expand their technical and financial bases to be able to compete effectively in the international arenas. Historically, areas of free exchange were established by the developed nations among clusters of countries in which industrial and human development and basic infrastructure were reasonably balanced so that competition was encouraged among equal partners. It is this process that African governments should encourage more forcefully. The conclusion is a double request for a coherent rural poverty reduction policy: (i) phasing the EPA over a long period of time (at least 20 years) and in step with the reduction of EU subsidies to their own domestic agricultural producers and exporters of agricultural and agro-industrial products and (ii) strengthening the African regional common markets to expand the opportunities of African producers, working towards a solid common protection, and a much stronger integration of the regional economies than has been achieved so far.
Policy coherence issue no. 7: pace of regional economic integration and toward common regional agricultural development policies in SSA There seems to be consensus in SSA on the need to co-ordinate regional economic integration policies with the formulation and implementation of coherent regional agricultural development policies. A positive feature of the Cotonu Agreement is that the EPAs will not be negotiated between the EU and the SSA countries individually, but between the EU and the different common market organisations established in SSA: Economic Community of West African States (ECOWAS) in West Africa, Communauté Economique et Monétaire de L’Afrique Centrale (CEMAC) in Central Africa, East African Community (EAC) in Eastern Africa, and Southern Africa Development Community (SADC) in Southern Africa. If closely adhered to, this approach will encourage an acceleration of the process of regional economic integration. In order to bring about significant progress in rural poverty reduction though, this process and the related international trade policies, must be made coherent with a common regional agriculture development policy. At the moment, common regional agricultural development policies are not yet in sight. Organisations of African producers are strongly advocating functioning common African markets. They see a coherent African strategy geared towards establishing an TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
238 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger appropriately protected, internally competitive environment in the regional common markets. Within those markets, there should be active competition among private, public and co-operative economic organisations, with no special privileges granted to specific markets or organisations. Was this not the way the European common market was first established and nursed since the time of the Treaty of Rome almost fifty years ago? Was the European common market not conceived as a protected market? Why should African countries that are less developed than the European countries of the 1950s expose themselves to situations in which unequal partners would be allowed to play a dominant role (not too differently than in colonial days)? The other clear message points to the incoherence between the need for accelerating the integration of the regional economies to build a strong basis for African production, and the lack of a common agricultural development policy shared by all the concerned countries. Regional organisations exist that can provide venues, mechanisms and institutions to facilitate the elaboration of such common policy and eventually the monitoring and evaluation of its implementation.
Policy coherence issue no. 8: how enabling is the environment for developing strong institutions at grassroots level? The reform of the public administration has gone a long way in changing the political environment in several countries of SSA. In these countries, democratically elected local governments are established in districts and provinces, bringing “government nearer to the people”. The international community supported this process with large contributions of public finance, training and advice, concentrating on the decentralisation of the public administration to the district level. Critical responsibilities have been devolved in matters of key local interest, such as basic social services and agriculture. The cost of decentralisation often turns out to be, in practice, much higher than that forecast by the advocates of the reform. Nevertheless, it has also proven to be politically achievable, and made to work. To what extent are rural people in SSA satisfied with the institutional evolution that is taking place? The question raises issues that are not directly related to the relationship between agricultural development and trading policies, yet they must be briefly mentioned because local governance is one of the key MDGs of particular importance in SSA. Moreover, the quality of the process aimed at improving governance has a bearing on the response of people in rural areas. Some observers are of the opinion that the district level is still far too distant from the rural communities for people to have an influence in matters that affect their livelihoods. District administrations are dominated by professional political intermediaries who have a double allegiance – to their constituency and to the party that engineers and finances their election. The latter predominates in the long run, because it is in the party organisation that a local politician has a career prospect. Other observers maintain that, even if dominated by professional politicians and controlled by the apparatus of centralised political parties, district governments are a great step forward in the right direction. They also maintain that, in a number of countries where the process has advanced, improvements in local governance are noticeable. What is relevant for the rural people in SSA is the scope left by the evolving decentralised administrations for grassroots-level institutions to develop, in particular with respect to: the emergence of new local leaders, the formation of a strong and TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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autonomous community and professional organisations with bargaining power vis-à-vis district administrators and with the capacity to establish new linkages with the market and with a variety of potential sources of partnership in development. People’s empowerment is critical for generating and mobilising consensus for poverty reduction. It is more than a key contribution to the mechanisms that improve livelihoods and increase production. It is part and parcel of poverty reduction. A coherent institutional development policy would work in that direction. This coherence is not emerging clearly enough and bringing it about requires more imagination, understanding, good will and political determination than has been mobilised so far.
A final word: the political dimension Coherent poverty reduction policies in SSA cannot be formulated without due reference to the political framework as it affects both donors and receiving countries. What really counts in history is the political interest behind the determination to address problems, and the balance of power that determines whether sets of decisions coherent with policy objectives can really be carried out. A realistic assessment of the political premises and implications of policy coherence is thus required. Five main considerations are offered in this respect. Critical mass. The first consideration concerns the critical political mass of most countries in SSA: they are too small and politically lack the influence to negotiate successfully with large traditional counterparts such as the US, the EU, the World Bank and the International Monetary Fund IMF. As a result of the emergence of large and fastdeveloping middle-income countries, which combined, account for half of the world’s population (China, India, Brazil), in addition to a number of smaller but very dynamic economies, mostly in Asia, the world is no longer divided between “North and South”. The African regional common market organisations could become politically significant entities. However, this would depend on the extent to which they consolidate the level of integration of the economies of member countries, develop large regional markets and corresponding economies of scale, and present a united front vis-à-vis their external partners in development and trade. Food sovereignty. The second consideration is that the political setting in industrialised countries only allows their governments to reason in terms of “food sovereignty”. The list of “critical products” that make up an acceptable level of “sovereignty” is a matter of tough internal and external negotiations. This situation is made more critical by a growing threat to the still fragile African economies posed by new competitors entering the international market arena. These are facts of life which Africans begin to feel they are in no position to modify or influence. Accordingly, the African response cannot be but to develop its own policy on the same grounds. Good political and economic reasons suggest that African countries must accelerate their economic integration on a regional basis, and that the integration must include appropriate protection against unfair competition from outside the regional common markets. Political drive. The third consideration is that African governments must show much stronger determination in removing obstacles to agricultural development. This requires the political courage and the capacity to introduce and manage a different relationship between the urban and rural worlds in their own countries. A significant acceleration of agricultural development and rural poverty reduction requires political drive, which is TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
240 – Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger about mobilising energies and maintaining momentum. It requires the mobilisation of larger domestic resources, i.e. a change in the urban-rural bias in public expenditure – to match a much larger inflow of external resources – i.e. a change in the share of agriculture in the ODA disbursed in SSA. It also requires a new balance in the roles of “state and market” to bring about more rural infrastructure, more technological change and more financial services – in a nutshell, an enabling environment for a faster and more effective delivery system that responds to the demands of agricultural producers in SSA. Decision-making capacity. The fourth consideration concerns the capacity of decision makers to analyse and assess situations and to effectively manage polices that are coherent with set objectives. With regard to central governments, this is all the more urgent and relevant if the structure of ODA will include an even larger proportion of debt relief and thus provide more freedom in the use of public resources by governments and political intermediaries. Consensus. The fifth consideration concerns the consensus, and the political process that brings about consensus. This is a key issue of governance in rural areas, and is not simply a question of providing more services to people. It is about the development of enabling grassroots institutions and the emergence of new leaders at community level, strong farmers’ associations, sustainable co-operative micro-finance associations, etc. – in short, creating a network that empowers people to drive their own socio-economic and human development.
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ANNEX. AGENDA AND LIST OF PARTICIPANTS
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AGENDA GLOBAL FORUM ON AGRICULTURE POLICY COHERENCE FOR DEVELOPMENT 30 November – 1 December 2005, OECD, Paris, France
Background While the phrase policy coherence for development (PCD) is hard to define it recognises a very important concept – that the achievement of international development and poverty reduction targets depend not only on aid but on the policy decisions taken across a wide range of sectoral and macroeconomic policies in both developed and developing countries. It is a process whereby a government makes an effort to design policies that take account of other policy communities, minimise conflicts and maximise synergies. Achieving policy coherence is difficult because of multiple policy objectives and conflicting interests. Consequently, a degree of incoherence may be inevitable but the trade-offs should be made transparent and action taken to minimise the negative impacts on development. At the OECD, the initial focus was on improving internal policy coherence of development policies, i.e. improving the targeting, management and evaluation of aid agency programmes and projects. In recent years, increased attention has been given to integrating the development dimension across the work of other policy areas, i.e. understanding how policies for migration, agricultural, investment etc. affect developing countries.
Objectives The purpose of the Forum is to bring together developed and developing country representatives from both the agriculture and development communities to discuss issues relating to the inter-linkages between agricultural-related policies and development objectives. To this end, the key objectives of the Forum are the following. a) Identify the impacts of OECD agricultural policies on developing countries and consider their relative importance and the implications for coherence with development objectives. b) Illuminate positive examples of coherency between agricultural policies and development objectives, and discuss how these could be applied elsewhere. c) Examine the role of various stakeholders in improving policy coherence. d) Investigate how policy coherence for development can be better integrated into OECD government policy making with specific reference to agricultural policies. An annotated agenda for the Forum has been developed to meet the four key objectives and to focus on the coherence of agricultural-related policies in meeting development priorities. The first session will set the scene be introducing the concept of agricultural PCD from the perspective and practice of policy makers, producers, and the poor. The second and third sessions examine the coherency of various agricultural-related policy measures (such as export subsidies, tariffs, payments, import regulations, aid assistance etc.) in addressing two of the crucial development objectives relevant to agriculture (expanding trade, and alleviating hunger and poverty). The fourth session will bring together the lessons learnt through a high-level round table discussion between invited experts from the field of agriculture and development, and the private and public sectors. TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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Wednesday, 30 November 2005 Chair: Neil FRASER (New Zealand) SESSION 1. SETTING THE SCENE The session will provide the context for the Forum by defining the meeting objectives, the key issues that need to be considered in terms of agricultural policy coherence for development (PCD), and introductory thoughts on the concept and practice of PCD from country, producer and poor perspectives. Forum Introduction – Herwig SCHLÖGL, Deputy Secretary-General, OECD “Policy Coherence for Development: Distilling Lessons from OECD Work” – Kiyo AKASAKA, Deputy Secretary-General, OECD “Policy Coherence for Development: Issues in Agriculture” – Alan MATTHEWS, Trinity College Dublin This will outline the main PCD issues for agriculture, drawing on the original paper and work done by Ireland to put the framework into practice in developing countries, e.g. in Tanzania and Uganda. “Policy Coherence for Development: Making it Work” – Pertti MAJANEN, Finnish Ambassador to the OECD This will discuss how PCD has been achieved in Finland, the issues, the obstacles, and how they have been overcome, with particular reference to agriculture. “Policy Coherence for Development: What it Means for Farmers” – Raul MONTEMAYOR, Chair, IFAP’s Asian Farmers Committee This will discuss the issue from the farmer’s perspective (e.g. what needs to be done, what the biggest issues are, etc.) including the role of producer organisation in achieving PCD. “Policy Coherence for Development: What it Means to the Poor” – Ibrahim Assane MAYAKI, Executive Director, The Hub for Supporting Rural Development in Western and Central Africa This will provide, from the perspective of the poor, an understanding of what aspects of agricultural-related PCD are important and why, some examples of where PCD has been achieved, and comment on the role of non-government organisations/civil society in achieving PCD.
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Wednesday, 30 November 2005 SESSION 2. ENHANCING GLOBAL AGRICULTURAL TRADE THROUGH A FAIR AND MARKET ORIENTATED TRADING SYSTEM WTO members have committed themselves to achieving a fair and market orientated trading system for agriculture. This session will consider the issue of PCD in terms of enhancing global agricultural trade, examining both the extent to which policy (in)coherence is impacting on trade, and the relationship between trade and development. “Enhancing Global Agricultural Trade: A Status Report” – Carmel CAHILL, Head of Policies, Trade and Adjustment Division, Directorate for Food, Agriculture and Fisheries, OECD Drawing on recent OECD work, this will provide an overview of developments in agricultural-related trade policies (export subsidies, tariffs, payments, SPS and other NTB) and trade flows since the mid-1990s, and the work done in linking trade liberalisation and household income. “How Can Policy Coherence Enhance Global Agricultural Trade?” – Joachim von BRAUN, Director General, IFPRI This will discuss the role of policy coherence in enhancing trade and the link to development, providing examples of where policy coherence has enhanced trade and subsequently led to development, and where it has not, emphasising priority areas for action, and how PCD can be better integrated into the policy making process. “Policy Coherence for Development: Issues for Brazil” – Fabio CHADDAD, Professor, Ibmec Business School and Marcos JANK, President, Institute for International Trade Negotiations Studies (ICONE) This will provide a Brazilian perspective on the issue of PCD as it relates to agriculture, drawing on Brazil’s experience with OECD agricultural-related policies (e.g. tariffs, NTBs, export subsidies, payments) and Brazilian agricultural-related policies (e.g. rural development, farm support, trade), examining the extent to which these are acting in a coherent manner, with emphasis on enhancing global agricultural trade, commenting where possible on the relevance for other Latin American countries. “Policy Coherence for Development: Issues for China” – Xiaoshan ZHANG, Director, Institute of Rural Development, Chinese Academy of Social Sciences This will provide a Chinese perspective on the issue of PCD as it relates to agriculture, drawing on China’s experience with aid policies (bilateral, multilateral and NGO), OECD agricultural-related policies (e.g. tariffs, NTBs, export subsidies, payments), and Chinese agricultural-related policies (e.g. rural development, farm support, trade), examining the extent to which these are acting in a coherent manner, with emphasis on enhancing global agricultural trade, commenting where possible on the relevance for other Asian countries.
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Thursday, 1 December 2005 SESSION 3. CONTRIBUTING TO THE MILLENNIUM DEVELOPMENT GOAL OF ERADICATING EXTREME POVERTY AND HUNGER Of the eight millennium development goals, the first goal, to eradicate extreme poverty and hunger, is most directly relevant for agriculture. This goal has two targets: to halve, between 1990 and 2015, (1) the proportion of people whose income is less than one dollar a day; and (2) the proportion of people who suffer from hunger. This session will discuss the issues that are raised when considering this goal and targets through the lens of policy coherence. “Eradicating Extreme Poverty and Hunger: Towards a Coherent Policy Agenda” – Prabhu PINGALI, Director, Agriculture and Development Economics Division, FAO This will provide an up-to-date account of progress towards the goal of eradicating poverty and hunger, including the main obstacles encountered and the success stories that have occurred, emphasising the extent to which these have been the result of policy (in)coherence. “How Can Policy Coherence in Agriculture Contribute to the Eradication of Extreme Poverty and Hunger?” – Tom ARNOLD, Chief Executive, Concern Worldwide This will examine the role PCD in agriculture can take in achieving the millennium development goals by 2015, including priorities for action and the role of various stakeholders in the process. “Food Grain Surpluses, Yields and Prices in India” – Raghav GAIHA, University of Dehli This will provide an Indian perspective on the issue of PCD as it relates to agriculture, drawing on India’s experience with aid policies (bilateral, multilateral and NGO), OECD agricultural-related policies (e.g. tariffs, NTBs, export subsidies, payments), and Indian agricultural-related policies (e.g. rural development, farm support, trade) examining the extent to which these are acting in a coherent manner, with emphasis on the goals of eradicating hunger and poverty, commenting where possible on the relevance for other Asian countries. “Coherence of International Trade Liberalisation Policy with the Objectives of Rural Poverty Reduction: Listening to the Views of the Rural People in Sub-Saharan Africa” – Mohamed BEAVOGUI, Director, Western and Central Africa Division, IFAD This will provide an African perspective on the issue of PCD as it relates to agriculture, drawing on Africa’s experience with aid policy (bilateral, multilateral and NGO), OECD agricultural policies (e.g. tariffs, NTBs, export subsidies, payments), and African agricultural policy (e.g. rural development, farm support, trade), examining the extent to which these are acting in a coherent manner, with emphasis on the goals of eradicating hunger and poverty.
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Thursday, 1 December 2005 SESSION 4. WHAT HAVE WE LEARNT? The aim of Session 4 is to review what has been learnt in relation to the four Forum objectives. The session will be organised around a high-level roundtable discussion between invited experts from the field of agriculture and development, and the private and public sectors. The roundtable participants will have an opportunity to exchange their views and assessments of the issues raised in the previous sessions, including the identification of common points and areas of divergence, areas of coherency and incoherency, and their prioritisation of the actions that need to be taken. High-Level Roundtable Discussion Moderator: Alexandra Trzeciak-Duval, Head of the Policy Co-ordination Division, Development Co-operation Directorate, OECD Willem-Jan LAAN, Unilever and Vice-Chair, BIAC Food and Agriculture Committee Kevin CLEAVER, Director, Agriculture and Rural Development, World Bank Jeremy HOBBS, Executive Director, OXFAM International Richard MANNING, Chair of the OECD Development Assistance Committee Abdus Salam Mohammad KARAAN, Chairperson, National Agricultural Marketing Council, South Africa Pinit KORSIEPORN, Deputy Secretary-General, Office of Agricultural Economics, Ministry of Agriculture and Cooperatives, Thailand Stefan TANGERMANN, Director, Directorate for Food, Agriculture and Fisheries, OECD Jack WILKINSON, President, International Federation of Agricultural Producers (IFAP) Concluding Remarks – Neil FRASER, Chair
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Liste des Participants / List of Participants Président / Chairman: Mr. Neil Fraser, New Zealand
Afrique du Sud / South Africa Mr. Abdus Salam Mohammad KARAAN Chairperson National Agricultural Marketing Council P.O. Box X1 7602 Matieland, South Africa
Mr. I. Winston MAKABANYANE Counsellor (Agriculture) South African Mission to the EU 26 Rue de la Loi 26, Btes 7-8 B-1040 Brussels, Belgium
Email :
[email protected]
Email :
[email protected]
Dr. Shadrack MOEPHULI Assistant Director General South African National Department of Agriculture Private Bag X973 0001 Pretoria, South Africa
Mr. Gunter MULLER Deputy Director: International Trade South African National Department of Agriculture Private Bag X250 0001 Pretoria, South Africa
Email :
[email protected]
Email :
[email protected]
Mr. Attie SWART Deputy Director-General: Agricultural and Business Development South African National Department of Agriculture Private Bag X250 0001 Pretoria, South Africa
Mr. Ben VAN WYK Senior Manager: Production and Resource Economics South African National Department of Agriculture Private Bag X416 0001 Pretoria, South Africa Email :
[email protected]
Email :
[email protected]
Allemagne / Germany Mr. Achim BURKART Counsellor Permanent Delegation of Germany to the OECD 9, rue Maspéro 75116 Paris, France
Mr. Sebastian GRAF VON KEYSERLINGK Bundesministerium für Verbraucherschutz, Ernährung und Landwirtschaft Wilhelmstr. 54 10117 Berlin, Germany
Email :
[email protected]
Email :
[email protected]
Dr. Christoph KOHLMEYER Head, Div 314: Rural Development; Global Food Security German Federal Ministry for Economic Cooperation and Development Friedrich-Ebert-Allee 50 53113 Bonn, Germany Email :
[email protected]
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Argentine / Argentina Mr. César Alberto FAES Secretary Embassy of Argentina in France 6, rue Cimarosa 75116 Paris, France
Mr. Gustavo IDIGORAS Agricultural Counsellor Argentina Embassy to the EC Secretary of Agriculture, Livestock, Fisheries and Food of Argentina 225 Avenue Louise, 4th Floor B-1050 Brussels, Belgium
Email :
[email protected]
Email :
[email protected]
Australie / Australia Mr. Brendan BERNE Deputy Permanent Representative Permanent Delegation of Australia to the OECD 4, rue Jean Rey Paris 75724 Cedex 15, France
Ms. Joanne FREDERIKSEN Permanent Delegation of Australia to the OECD 4, rue Jean Rey 75015 Paris, France
Email :
[email protected]
Autriche / Austria Ms. Christa BAUER Counsellor for Agriculture Permanent Delegation of Austria to the OECD 3, rue Albéric Magnard F-75116 Paris, France Email :
[email protected]
Belgique / Belgium M. Paul DEPAUW Conseiller Agricole M.R.W. Ambassade de Belgique Via dei Monti Parioli 49 I 00197 Roma, Italy
M. Frank DUHAMEL Secrétaire d'Ambassade Délégation Permanente de la Belgique auprès de l’OCDE 14, rue Octave Feuillet F-75116 Paris, France
Email :
[email protected]
Email :
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M. Gabriel YSEBAERT Ministère de la Communauté Flamande Division de la Politique Agricole et de la Pêche WTC Tour III, 4ème étage, 30 boulevard Simon Bolivar B-1000 Brussels, Belgium Email :
[email protected]
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Brésil / Brazil Professor Fabio CHADDAD Professor Ibmec Business School Economics and Business Rua Maestro Cardim 1170 01323-001 Sao Paulo, Brazil
Mr. José Gerardo FONTELLES Special Assessor of the Minister of Finance Ministry of Finance Esplanada dos Ministérios Bloco "P" 2 andar 70048-900 Brasilia DF, Brazil
Email :
[email protected]
Email :
[email protected]
Mr. Edilson GUIMARAES Director of the Department of Agricultural Economy Ministry of Agriculture, Livestock and Food Supply Esplanada dos Ministérios, Bloco "D", Sala 538 70043-900 Brasilia DF, Brazil
Mr. Marcos JANK President Institute for International Trade Negotiations Av. General Furtado Nascimento, 740, conj. 81 Alto de Pinheiros 05465-070 Sao Paulo SP, Brazil
Email :
[email protected] Email :
[email protected] Mr. Ivan WEDEKIN Secretary of Secretariat of Agricultural Policy Ministry of Agriculture, Livestock and Food Supply Esplanada dos Ministérios Bloco "D", Sala 502 70043-900 Brasilia DF, Brazil Email :
[email protected]
Bulgarie / Bulgaria Mrs. Rositsa GEORGOVA Head of Department Ministry of Agriculture and Forestry bul. "Christo Botev", 55 1040 Sofia, Bulgaria Email :
[email protected]
Cameroun / Cameroon Mme Elisabeth BALEPA Secrétaire Général Ministère de l'Agriculture, du Développement Rural Yaounde, Cameroun
M. Roger MBASSA NDINÉ Secrétaire Général Ministère de la Planification, de la Programmation du Développement et de l'Aménagement du Territoire BP 1452 Yaounde, Cameroun
Email :
[email protected] Email :
[email protected]
Canada Mr. Stuart CARRE Counsellor Permanent Delegation of Canada to the OECD 15 bis, rue de Franqueville 75116 Paris, France
Ms. Wendy CYMBAL Agriculture and Agri-Food Canada AAFC, Policy Analysis Division Sir John Carling Building, Room 6109 930 Carling Ave Ottawa, Ontario K1A 0C5, Canada
Email :
[email protected] Email :
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Annex – 251
Ms. Jan DYER A/Director General Research and Analysis Directorate Agriculture and Agri-Food Canada 930 Carling Avenue Ottawa, Ontario K1A 0C5, Canada Email :
[email protected]
Chili / Chile Mr. Marcelo GARCIA Permanent Representative from Chile to the OECD Embassy of Chile in France 2, avenue de la Motte Picquet 75007 Paris, France
Mr. Hugo MARTINEZ Deputy Director ODEPA - Oficina de Estudios y Politicas Agrarias Teatinos 40, Piso 8 Santiago, Chile
Email :
[email protected]
Email :
[email protected]
Mr. Ramiro PIZARRO Economic Counsellor Permanent Delegation to the OECD Embassy of Chile 2, avenue de la Motte Picquet 75007 Paris, France Email :
[email protected]
Chine / China Mr. Xiaoshan ZHANG Professor, Director Chinese Academy of Social Sciences Institute of Rural Development 5 Jianneidajie 100732 Beijing, China Email :
[email protected]
Corée / Korea Mr. Dae Geun KIM First Secretary Permanent Delegation of Korea to the OECD 2-4, rue Louis David 75016 Paris, France Email :
[email protected]
Danemark / Denmark Mr. Mads Ranbøll WOLFF Attaché Permanent Delegation of Denmark to the OECD 77, avenue Marceau 75116 Paris, France Email :
[email protected]
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252 – Annex
Espagne / Spain Ms. María Teresa AMBRÓS Attaché au Bureau de l'Agriculture, de la Pêche et de l'Alimentation Délégation Permanente de l’Espagne auprès de l’OCDE 22, avenue Marceau 75008 Paris, France
M. Enrique CASTAÑÉ FERNÁNDEZ Conseiller pour l'Agriculture, la Pêche et l'Alimentation Ambassade d'Espagne 22, avenue Marceau 75008 Paris, France Email :
[email protected]
Email :
[email protected] M. Vicente FLORES REDONDO Conseiller pour l'Agriculture, la Pêche et l'Alimentation Délégation Permanente de l’Espagne auprès de l’OCDE 22, avenue Marceau 75008 Paris, France Email :
[email protected]
Estonie / Estonia Mr. Olavi PETRON Head of the European Union and Foreign Affairs Department Ministry of Agriculture Lai str 39/41 15056 Tallinn, Estonia Email :
[email protected]
Etats-Unis / United States Mr. George CARNER US Representative to the DAC Minister Counselor Permanent Delegation of the United States to the OECD 19, rue de Franqueville 75116 Paris, France
Mr. Arthur COFFING Agricultural Economist USDA/FAS Rm 5540 S. Bldg 14th & Independent Washington, DC 20250, United States
Email :
[email protected]
Email :
[email protected]
Mrs. Helen RECINOS Advisor for Trade Policy and Agriculture Permanent Delegation of the United States to the OECD 12, avenue Raphaël 75016 CEDEX 16 Paris, France
Ms. Susan THOMPSON Senior Policy Advisor / Co-chair, DAC PovNet Agriculture Task Team U.S. Agency for International Development (USAID EGAT/AG) Bureau for Economic Growth, Agriculture and Trade 2.11-094 RRB 1300 Pennsylvania Avenue, NW Washington, DC 20523-2110, United States
Email :
[email protected]
Email :
[email protected]
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Annex – 253
Finlande / Finland Ms. Tiina INGMAN Senior Officer Ministry of Agriculture and Forestry P.O. Box 30 00023 Government FI, Finland
Ms. Pirkko-Liisa KYÖSTILÄ Counsellor Permanent Delegation of Finland to the OECD 6, rue de Franqueville 75116 PARIS F, France
Email :
[email protected]
Email :
[email protected]
Mr. Pertti MAJANEN Ambassador, Permanent Representative Permanent Delegation of Finland to the OECD 6, rue de Franqueville 75116 PARIS F, France
Mr. Kimmo NÄRHINEN Counsellor Permanent Delegation of Finland to the OECD 6, rue de Franqueville 75116 PARIS F, France
Email :
[email protected]
Email :
[email protected]
Mr. Antero TUOMINEN Director Ministry of Agriculture and Forestry P.O. Box 30 00023 GOVERNMENT FIN, Finland Email :
[email protected]
France M. Jean-Guillaume BRETENOUX Chargé de Mission Ministère de l'Agriculture, de la Pêche et de l'Alimentation SRI/DPEI 3, rue Barbet de Jouy 75349 Paris SP, France
M. Jo CADILHON Chargé de Mission Ministère de l'Agriculture, de la Pêche et de l'Alimentation DPEI 3, rue Barbet de Jouy 75349 Paris SP, France
Email :
[email protected]
Email :
[email protected]
Mme Anne-Sophie CERISOLA Task Manager Ministère de l'Agriculture et de la Pêche 3, rue Barbet Jouy 75349 Paris Cedex 07, France
Mr. Philippe CHEDANNE Agence Française de Développement 5, rue Roland Barthes 75012 Paris, France Email :
[email protected]
Email :
[email protected] Ms. Marjolaine COUR Agence Française de Développement 5, rue Roland Barthes 75598 Paris Cedex 12, France Email :
[email protected]
Miss Philippa DRUCE Stagiarie Délégation Permanente de la France auprès de l’OCDE Service Economique 5, rue Oswaldo Cruz 75016 Paris, France Email :
[email protected]
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Mr. Damien LAGANDRE Stagiaire Agence Française de Développement 5, rue Roland Barthes 75598 Paris Cedex 12, France
Mme Elisabeth LANGELLA Adjointe au Chef de Secteur OCDE Secrétariat Général des Affaires Européennes (SGAE) 2, Bd Diderot 75572 Paris Cedex 12, France
Email :
[email protected]
Email :
[email protected]
Mme Florence LASBENNES Chef de Bureau Ministère des Affaires Etrangères 20, rue Monsieur 75700 Paris 07 SP, France
Mme Anna LIPCHITZ Chargée de Mission Ministère de l'Economie et des Finances DGTPE 139, rue de Bercy Paris, France
Email :
[email protected] Email :
[email protected] Mme Marie-Alix MONTFORT Ministère de l'Economie, des Finances et de l'Industrie DGTPE Service des Politiques Publiques / Bureau Environnement Agriculture 139, rue de Bercy 75572 Paris Cedex 12, France
Mlle. Katharina PESCHEN Stagiaire (Chargée du CAD) SGCI 2, Bd Diderot 75012 Paris, France Email :
[email protected]
Email :
[email protected] M. Michel PRE Ministère des Affaires Etrangères DGCID-DCT/EPS 20, rue Monsieur 75007 Paris, France
Mme Elise REGNIER Chargée de Mission MAPA - Ministère de l'Agriculture, de la Pêche et de l'Alimentation SRI/DPEI - MAP 3, rue Barbet de Jouy 75349 Paris SP, France
Email :
[email protected]
Email :
[email protected] Mme Françoise SIMON Chargée de Mission au Bureau des Relations Extérieures à l'UE Ministère de l'Agriculture et de la Pêche DPEI/SRI, BREUE 3, rue Barbet de Jouy 75349 Paris 7, France
M. Jacques TEYSSIER D'ORFEUIL Conseiller Economique et Commercial Délégation Permanente de la France auprès de l’OCDE 5, rue Oswaldo Cruz 75116 Paris, France Email :
[email protected]
Email :
[email protected] Mme Marie-Cécile THIRION Chargée de Mission Sécurité Alimentaire Ministère des Affaires Etrangères DGCID/DCT 20, rue Monsieur 75007 Paris, France Email :
[email protected]
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Grèce / Greece Dr. Vassiliki KARATHANASSI Agroeconomist, Directorate for Agricultural Policy and International Affairs Division of EU, Int. Relations and Trade Ministry of Rural Development and Food Acharnon 5 Athens, Greece
Mr. Andreas VAROTSOS First Secretary Permanent Delegation of Greece to the OECD 15, Villa Said 75116 Paris, France Email :
[email protected]
Email :
[email protected]
Hongrie / Hungary Mr. Tamás VÁRNAI Third Secretary Permanent Delegation of Hungary to the OECD 140, avenue Victor-Hugo 75116 Paris, France Email :
[email protected]
Inde / India Mr. Raghav Das GAIHA Professor of Public Policy University of Delhi Faculty of Management Studies 122 Malcha Marg. Chanakyapuri 110021 New Delhi, India Email :
[email protected]
Irlande / Ireland Mr. John HOLLAND Department of Agriculture & Food Economics & Planning Kildare Street Dublin 2, Ireland
Mr. Alan MATTHEWS Head of Department Trinity College Dublin Department of Economics Dublin 2, Ireland
Email :
[email protected]
Email :
[email protected]
Italie / Italy Mme Paola COLITTI Commercial Attaché Délégation Permanente de l’Italie auprès de l’OCDE 50, rue de Varenne 75007 Paris, France
M. Claudio PADUA Attaché for Commercial Affairs Délégation Permanente de l’Italie auprès de l’OCDE 50, rue de Varenne F-75007 Paris, France
Email :
[email protected]
Email :
[email protected]
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256 – Annex
Japon / Japan M. Jiro HASHIMOTO Counsellor Permanent Delegation of Japan to the OECD 11, avenue Hoche 75008 Paris, France
Ms. Reiko KAWAMURA Advisor for Development Permanent Delegation of Japan to the OECD 11, avenue Hoche 75008 Paris, France
Email :
[email protected]
Email :
[email protected]
Mr. Kaname MOTOKI Assistant Director Ministry of Agriculture, Forestry and Fisheries International Economic Affairs Division 1-2-1, Kasumigaseki, Chiyoda-ku 100 8950 Tokyo, Japan
Mr. Mitsuaki SHINDO Second Secretary Permanent Delegation of Japan to the OECD Agriculture, Forestry and Fisheries 11, avenue Hoche 75008 Paris, France
Email :
[email protected]
Email :
[email protected]
Mr. Yasunari UEDA Deputy Director Ministry of Agriculture, Forestry and Fisheries International Economic Affairs Division 1-2-1 Kasumigaseki, Chiyoda-ku 100-8950 Tokyo, Japan Email :
[email protected]
Kazakhstan Mrs. Anara JUMABAYEVA Economist Investment Centre, FAO Viale delle Terme di Caracalla Room D-615 Rome, Italy
Mrs. Liliya MUSINA Vice-Minister of Agriculture Ministry of Agriculture of the Republic of Kazakhstan 25, Prospect Abaya 473000 Astana, Kazakhstan Email :
[email protected]
Email :
[email protected] M. Zhambyl SEIITKUL Third Secretary Embassy of Kazakhstan 59, rue Pierre Charron 75008 Paris, France Email :
[email protected]
Lettonie / Latvia Ms. Ginta JAKOBSONE Deputy Director of Department of Common Agricultural Policy Ministry of Agriculture Republikas laukums 2 LV-1981 Riga, Latvia Email :
[email protected]
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Lituanie / Lithuania Mr. Vygantas KATKEVICIUS Director Ministry of Agriculture of the Republic of Lithuania Economics and Finance Department Gedimino av. 19 (Levelio 6) LT-01103 Vilnius, Lithuania
Mr. Gediminas RADZEVICIUS Under-Secretary of the Ministry Ministry of Agriculture of the Republic of Lithuania Gedimino av. 19 (Levelio 6) LT-01103 Vilnius, Lithuania Email :
[email protected]
Email :
[email protected] Ms. Egle STONKUTE Head of Agricultural Policy Division Lithuanian Institute of Agrarian Economics V. Kudirkos Str. 18 LT-03105 Vilnius, Lithuania Email :
[email protected]
Mali Dr. Hamadoun SOW Directeur Général Cellule de Planification et de Statistiques Ministère de l'Agriculture du Mali BP 2357 Bamako, Mali Email :
[email protected]
Mexique / Mexico Mr. Gerardo BRACHO Y CARPIZO First Secretary Permanent Delegation of Mexico to the OECD 8, rue de Berri Paris, France Email :
[email protected]
Mrs. Adriana RODRÍGUEZ Vice-Director of the General Unit of International Trade Negociations and Economic Studies ASERCA SAGARPA Municipio Libre 377 Piso 6, Ala B Col. Santa Cruz Atoyac 03310 Mexico-City, Mexico Email :
[email protected]
Nouvelle-Zélande / New Zealand Ms. Caroline BERESFORD Second Secretary Permanent Delegation of New Zealand to the OECD 7 ter, rue Léonard de Vinci 75116 Paris, France Email :
[email protected]
Mr. Neil FRASER (Président / Chairman) Manager, International Liaison International Policy Ministry of Agriculture and Forestry Pastoral House, 25 The Terrace PO Box 2526 Wellington, New Zealand Email :
[email protected]
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258 – Annex
Pays-Bas / Netherlands Mr. Gerrit MEESTER Agricultural Policy Adviser Ministry of Agriculture, Nature and Food Quality Department of International Affairs P.O. Box 20401 The Hague, Netherlands
Mr. Co NEETESON Senior Policy Officer Ministry of Agriculture, Nature and Food Quality Department for International Affairs P.O. Box 20401 The Hague, Netherlands
Email :
[email protected]
Email :
[email protected]
M. Ancel VAN ROYEN Counsellor Permanent Delegation of the Netherlands to the OECD Agriculture 12-14, rue Octave-Feuillet Paris, France Email :
[email protected]
Pologne / Poland Mr. Cezary BANKA First Secretary Permanent Delegation of Poland to the OECD 136, rue de Longchamp F-75116 Paris, France Email :
[email protected]
Portugal M. Pedro LIBERATO Conseiller Délégation Permanente du Portugal auprès de l’OCDE 10 bis, rue Edouard Fournier 75116 Paris, France Email :
[email protected]
République Slovaque / Slovak Republic Mrs. Eva KOLESAROVA Director Ministry of Agriculture of the Slovak Republic Dept. of International Relations Dobrovicova 12 812 66 Bratislava, Slovak Republic
Mr. Martin SZENTIVÁNY Second Secretary Permanent Delegation of the Slovak Republic to the OECD 28, avenue d'Eylau 75016 Paris, France Email :
[email protected]
Email :
[email protected]
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Roumanie / Romania Mlle Roxana GHERGHE Conseiller auprès du Secrétaire d’Etat Ministère de l’Agriculture, des Forêts et du Développement Rural
Mme Mirela ORZAN Directeur de la Direction de Monitoring des Processus d’Adhésion Ministère de l’Agriculture, des Forêts et du Développement Rural
Email :
[email protected] Email :
[email protected] Mlle Mihaela POPESCU Troisième Secrétaire Ambassade de Roumanie 5, rue de l’Exposition 75343 Paris Cedex 07, France
M. Viorel TOMESCU Ministre Conseiller Affaires Européenes Ambassade de Roumanie 5, rue de l’Exposition 75007 Paris, France Email :
[email protected]
Royaume-Uni / United Kingdom Ms. Laura KELLY Senior Trade Advisor Department for International Development (DFID) International Trade Department 1 Palace Street London SW1E 5HE, United Kingdom
Mr. Jack McIVER First Secretary Trade, Finance & Agriculture UK Delegation to the OECD 140, avenue Victor Hugo 75116 Paris, France Email :
[email protected]
Email :
[email protected] Mr. Richard MOBERLY Head Renewable Natural Resources and Agricultural Team Department for International Development 1 Palace Street SW1E 5HE London, United Kingdom Email :
[email protected]
Fédération de Russie / Russian Federation Mr. Igor NOSKOV Counsellor Embassy of the Russian Federation in France 40-50, boulevard Lannes 75116 Paris, France
Mrs. Eugenia SEROVA President Analytical Centre on Agri-Food Economics 5, Gazetny per. 125993 Moscow, Russian Federation
Email :
[email protected]
Email :
[email protected]
Suède / Sweden Mr. Daniel BLOCKERT Deputy Director Ministry for Foreign Affairs Division for International Trade Affairs
Ms. Ingrid JEGOU Analyst Swedish National Board of Trade Box 6803 S-113 86 Stockholm, Sweden
Email :
[email protected] Email :
[email protected]
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260 – Annex
Mr. Anders KLUM Director Ministry of Agriculture, Food and Fisheries Drottninggatan 21 10333 Stockholm, Sweden
Ms. Kristin PÅLSSON Deputy Director Ministry for Foreign Affairs S-103 39 Stockholm, Sweden Email :
[email protected]
Email :
[email protected] Mrs. Marie SUNDBERG Minister, Deputy Permanent Representative Permanent Delegation IPC Bruxelles 1040, Belgium
Mr. Christer WRETBORN Ambassador Swedish Embassy Rome Piazza Rio de Janeiro 3 00161 Rome, Italy
Email :
[email protected]
Email :
[email protected]
Suisse / Switzerland Mme Dominique JORDAN Conseillère économique Délégation Permanente de la Suisse auprès de l’OCDE 28, rue de Martignac 75007 Paris, France
Mr. Anton STADLER Conseiller Délégation Permanente de la Suisse auprès de l’OCDE 28, rue de Martignac 75007 Paris, France
Email :
[email protected]
Email :
[email protected]
Taipei chinois / Chinese Taipei Mr. Shin-Fa CHEN Commercial Secretary Délégation Economique du Taipei chinois 75 bis, avenue Marceau 75116 Paris, France
Ms. Anne CHOW Director Délégation Economique du Taipei chinois 75 bis, avenue Marceau 75116 Paris, France
Email :
[email protected]
Email :
[email protected]
Mr. Ching-Yung HUANG Commercial Secretary Délégation Economique du Taipei chinois 75 bis, avenue Marceau 75116 Paris, France
Dr. Pai-Po LEE Assistant Secretary General International Cooperation and Development Fund (ICDF) 14F, No. 9, Lane 62, Tien-Mou West Road 11157 Taipei, Chinese Taipei
Email :
[email protected] Email :
[email protected] Mr. Ain-Ding LIAW Director-General of Planning Department Council of Agriculture, Executive Yuan 37, Nan-hai Road Taipei, Chinese Taipei
Mr. Hsiao-Yin WU Commercial Secretary Délégation Economique du Taipei chinois 75 bis, avenue Marceau 75116 Paris, France
Email :
[email protected]
Email :
[email protected]
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Thaïlande / Thailand Mr. Pinit KORSIEPORN Deputy Secretary-General Ministry of Agriculture and Cooperatives Office of Agricultural Economics Phaholyothin Road, Chatuchak 10900 Bangkok, Thailand
Ms. Sawitree SANGJANSOMPORN First Secretary Ambassade Royale de Thailande 8, rue Greuze 75116 Paris, France Email :
[email protected]
Email :
[email protected]
Turquie / Turkey Mr. Ahmet COSKUN Under Secretary of Treasury General Directorate of State Enterprises Department of Agriculture Hazine Müstesarligi Inönü Bulvari No. 36 06510 Emek/ Ankara, Turkey
Mr. Sevki EMINKAHYAGIL Deputy Permanent Representative Permanent Delegation 9, rue Alfred Dehodencq 75116 Paris, France Email :
[email protected]
Email :
[email protected]
Ukraine Ms. Irina KOBUTA Strategic Area Manager UNDP project 4th Floor 1/14 Sadova St. 01008 Kiev, Ukraine Email :
[email protected]
CE / EC Mr. Rüdiger ALTPETER Principal Administrator European Commission 200 rue de la Loi 1049 Brussels, Belgium
Mr. Michael GRAMS European Commission DG Economics and Financial Affairs Belgium Email :
[email protected]
Email :
[email protected] Ms. Florence VAN HOUTTE Agronomist - Civil Servant European Commission - DG Development DG Development - Rue de Genève 12 Office 5/54 Evere, Belgium
Mr. Rainer WICHERN Economist European Commission DG Economics and Financial Affairs BU-1, 0/91, Belgium
Email :
[email protected]
Email :
[email protected]
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262 – Annex
Comité consultatif économique et industriel (BIAC) / Business and Industry Advisory Committee (BIAC) Mr. Willem-Jan LAAN Vice-Chair of BIAC Food and Agriculture Committee Unilever Netherlands Weena 455 3013 AL Rotterdam, Netherlands
Mr. Malcolm BAILEY Bailey Agriculture Limited R.D.7 5600 Feilding, New Zealand Email :
[email protected]
Email :
[email protected] Ms. Carolin LOEHR Business and Industry Advisory Committee to the OECD (BIAC) 13-15, Chaussée de la Muette 75016 Paris, France
Ms. Hanni ROSENBAUM Senior Policy Manager Business and Industry Advisory Committee to the OECD (BIAC) 13-15, Chaussée de la Muette 75016 Paris, France Email :
[email protected]
Mr. Nikolaus SCHULTZE Head of Strategy Syngenta Foundation for Sustainable Agriculture WRO-1002.11.66 CH-4002 Basel, Switzerland
Mr. Alper UCOK Chief of Industry, Services and Agriculture Department TUSIAD- Turkish Industrialists' and Businessmen's Association Mesrutiyet Cad. 74 80050 Tepebasi, Istanbul, Turkey
Email :
[email protected] Email :
[email protected]
Food and Agricultural Organization (FAO) Mr. Prabhu PINGALI Director Food and Agriculture Organization (FAO) ESA Via delle Terme di Caracalla Rome, Italy Email :
[email protected]
The Hub for Supporting Rural Development in Western and Central Africa M. Ibrahim Assane MAYAKI Executive Director / Directeur exécutif The Hub for Supporting Rural Development in Western and Central Africa / La Plateforme pour le Développement rural en Afrique de l'Ouest et du Centre Immeuble Ousseynou Thiam Gueye Point E Rue G x 4, BP. 15702 CP 12524 Dakar – Fann, Senegal Email :
[email protected]
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Inter-American Development Bank (IADB) Mrs. Carolyn ROBERT Trade Specialist Inter-American Development Bank Office in Europe 66, avenue d'Iena 75116 Paris, France Email :
[email protected]
International Federation of Agricultural Producers (IFAP) Mrs. Mercy KARANJA Development Policy Co-ordinator International Federation of Agricultural Producers (IFAP) 60, rue Saint Lazare 75009 Paris, France
Mr. David KING Secretary General International Federation of Agricultural Producers (IFAP) 60, rue St. Lazare 75009 Paris, France
Email :
[email protected]
Email :
[email protected]
Mr. Raul MONTEMAYOR National Business Manager / Chair IFAP's Asian Farmers Committee Federation of Free Farmers 41 Highland Drive, Blue Ridge Quezon City, Philippines
Mr. Jack WILKINSON President International Federation of Agricultural Producers (IFAP) 60, rue Saint-Lazare 75009 Paris, France Email :
[email protected]
Email :
[email protected]
International Food Policy Research Institute (IFPRI) Mr. Joachim VON BRAUN Director General International Food Policy Research Institute (IFPRI) 2033 K Street, NW Washington, DC 20006-1002, United States Email :
[email protected]
International Fund for Agricultural Development (IFAD) M. Mohamed BEAVOGUI Directeur Division Afrique de l'Ouest et Centrale Fonds International de Développement Agricole (FIDA) Via del Serafico, 107 00142 Rome, Italy
Mr. Mohamed MANSSOURI Country Programme Manager International Fund for Agricultural Development (IFAD) Western and Central Africa Division Via Del Serafico, 107 00142 Rome, Italy
Email :
[email protected] Email :
[email protected]
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264 – Annex
Oxfam International Mr. Jeremy HOBBS Executive Director Oxfam International 266 Banbury Road Oxford OX2 7DL, United Kingdom Email :
[email protected]
United Nations Foundation Ms. Janet HALL Senior Policy Advisor United Nations Foundation 1225 Connecticut Avenue, NW Suite 400 Washington, DC 20036, United States Email :
[email protected]
World Bank Mr. Kevin CLEAVER Sector Director, Agriculture and Rural Development World Bank 1818 H Street NW Washington D.C. DC 20433, United States
Mrs. Barbara GENEVAZ Senior Counsellor for the UK and Ireland World Bank Office Paris 66, avenue d'Iena 75116 Paris, France
Email :
[email protected]
Email :
[email protected]
Mr. William MARTIN Lead Economist World Bank 8619 Coral Gables Lane Vienna, VA 22182, United States
Mr. Brian NGO Lead Economist World Bank Office Paris 66, avenue d'Iena 75116 Paris, France
Email :
[email protected]
Email :
[email protected]
World Trade Organization (WTO) Ms. Alicja WIELGUS Economic Affairs Officer World Trade Organization (WTO) Agriculture and Commodities Division Rue de Lausanne 154 1211 Geneva 21, Switzerland Email :
[email protected]
Concern Worldwide Tom ARNOLD Chief Executive Concern Worldwide 52-55 Lower Camden Street 2 Dublin, Ireland Email :
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Annex – 265
Other Participants Mme Thérèse PUJOLLE President Sahel and West Africa Club Centre d'Analyse Prévisionnelle 37, Quai d'Orsay 75007 Paris, France Email :
[email protected]
OCDE / OECD 2, rue André-Pascal 75016 Paris France Mr. Kiyotaka AKASAKA Deputy Secretary-General Email :
[email protected]
Mr. Herwig SCHLÖGL Deputy Secretary-General Email :
[email protected]
Mr. Richard MANNING DAC Chairman DEVELOPMENT CO-OPERATION DIRECTORATE Email :
[email protected]
M. Normand LAUZON Director SAHEL AND WEST AFRICA CLUB Email :
[email protected]
Mr. Michael ROESKAU Director DEVELOPMENT CO-OPERATION DIRECTORATE Email :
[email protected]
Mr. Stefan TANGERMANN Director DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Mr. Ken ASH Deputy Director DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Mrs. Carmel CAHILL Head, Policies, Trade and Adjustment Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Mr. Wayne JONES Head, Non-Member Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Ms. Alexandra TRZECIAK-DUVAL Head, Policy Co-ordination Division DEVELOPMENT CO-OPERATION DIRECTORATE Email :
[email protected]
Mrs. Sunhilt SCHUMACHER Advisor SAHEL AND WEST AFRICA CLUB Email :
[email protected]
Ms. Ebba DOHLMAN Principal Administrator DCD/PRG DEVELOPMENT CO-OPERATION DIRECTORATE Email :
[email protected]
Mr. Joe DEWBRE Senior Analyst, Non-Member Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Mr. Andrzej KWIECINSKI Senior Analyst, Non-Member Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
266 – Annex
M. Jean-Paul PRADERE Consultant (West and Central Africa), Non-Member Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Mr. Michael RYAN Analyst, Non-Member Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Ms. Olga MELYUKHINA Consultant, Non-Member Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Ms. Uma DIXIT Consultant, Non-Member Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Mlle. Florence MAUCLERT Statistical Assistant, Non-Member Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Ms. Anita LARI Assistant, Non-Member Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
Ms. Stefanie MILOWSKI Assistant, Non-Member Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES Email :
[email protected]
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER – ISBN-92-64-02200-7 © OECD 2006
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