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Markets in smaller countries could be under threat: Need to reopen talks on subsidies at WTO

Posted by African Press International on October 24, 2013

Markets in smaller countries could be under threat

JOHANNESBURG,  – The combined effects of the global economic slowdown and increasing climatic shocks are threatening food security in developing countries, prompting many to re-open World Trade Organization (WTO) discussions on limits to support for farmers.

A group of developing countries – known as G33 – is asking to exceed their agreed domestic support limits when they buy, stock and supply cereals and other food to boost food security among the poor; they want these changes to be exempt from any legal challenge.

Essentially, these countries want the freedom to buy grains at set prices from producers and to use that grain to build stockpiles for distribution. The WTO rules do not prescribe limits on the amount of food that can be bought at market prices for food stocks, and it does not limit the amount of food that can be provided as domestic food aid at subsidized prices. The WTO only disciplines buying cereals at administered prices.

The proposal will be discussed at the WTO Ministerial Conference in Bali, Indonesia, in December.

Developed countries and some developing countries are concerned that the G33 proposal – which is backed by India, China and Indonesia – could affect food security in neighbouring countries. They fear these measures could lead to surpluses in stocks, which the G33 members might dump in the global market, disrupting global prices.

Ashok Gulati, chairman of India’s Commission for Agriculture Cost and Prices (CACP), reckons India wants more leeway to provide support for its farmers and consumers because the government is launching a massive subsidized food scheme through a public distribution system that will reach two-thirds of its population – nearly 800 million people. He told IRIN that a situation where India would be in a position to dump excess stocks could arise “once in 10 years.” He added, “the larger distortion will be domestic,” referring to disruptions to local markets.

A representative from one of the G33 countries at the WTO, who did not want to be named, said not all the members of the group were supportive of the proposal. “India is already the largest exporter of rice in the world… Small exporters will lose their competitiveness because of Indian subsidies… Rice prices are already going down, and with further subsidies it can lead to a price crash,” the representative said.

The delegate estimated that support for rice production in India – both in the form of agricultural inputs and procurement – ran into billions of dollars. Even more support could “ruin” agriculture sustainability and “create food insecurity instead of food security” in the region.

“Although agricultural markets have evolved dramatically since 2007, global trade rules have not”

Gulati has publicly come out against the government’s plan to stockpile staple grains because of the effect it would have on prices in the local markets, according to interviews with the Indian daily theEconomic Times and news agency DNA.

He maintains that dispensing subsidized food will not address malnutrition, a significant problem in India, where almost half the population of children are malnourished. Gulati believes this problem can only be addressed by comprehensively tackling the various dimensions of food insecurity, such as by increasing access to clean water and improving the status of women.

But a new paper, produced jointly by the Geneva-based International Centre for Trade and Sustainable Development (ICTSD) and the Food and Agriculture Organization (FAO), takes a sympathetic view of positions on both sides, and uses the proposal to flag the need to reform global agricultural trade rules. The paper contends there has been minimal reform to agricultural trade rules since the Uruguay Round of multilateral negotiations that led to the formation of the WTO two decades ago.

“The G33 proposal can more broadly be seen as symptomatic of the challenges many countries face in designing policies to achieve food security goals in the new price environment,” the paper notes.

“Although agricultural markets have evolved dramatically since 2007, global trade rules have not,” it adds.

To subsidize or not

Agricultural subsidies have been a contentious issue for years. The WTO has placed ceilings on how much the US and the European Union (EU) can spend on agricultural subsidies that distort trade, but these are still rather high, food rights groups say.

A drought in the US in 2012 and fluctuating food prices have led policy-makers there and in the EU to rethink protection and support for their farmers, the International Food Policy Research Institute (IFPRI) pointed out.

The US’s agriculture policy is governed by the Farm Bill, which is updated every four years, but the 2008 legislation was extended to September 2013, when the two parties – the Democrats and the Republicans – were unable to come to an agreement on subsidized food for the country’s poor. The new proposed bill recommends an expanded insurance programme with new crop insurance subsidies, which would see farmers receive money when income from certain crops falls below a targeted level. It also sets higher target prices for crops that trigger payments when revenues fall for several consecutive years. The bill is likely to come up for negotiations in the coming weeks.

The EU has largely done away with export subsidies that support the disposal of surplus production abroad, but the EU Common Agriculture Policy still ensures high levels of direct support to farmers and protects EU markets. The EU has substantially reformed farm support over the years to reduce its impacts on trade and production, but some still question whether the support provided continues to give European producers an advantage over competitors elsewhere.

On the other hand, the economic slowdown and its impact on local currencies have forced developing countries like Zambia to remove subsidiesfor farmers and millers because the expenditure is perceived as draining the country’s limited resources.

More imbalances?

If richer nations are strengthening support to their farmers while the poorer countries cut back, could global imbalances grow?

Jamie Morrison, a senior economist with FAO and a co-author of the ICTSD/FAO paper, says that, generally, when considering support to farmers in times of disasters, countries should take into account the kind of support they have to fall back on. In rich countries, farmers have access to insurance and other safety nets, which might not be the case in developing countries.

He says rich countries use public funding to “underwrite potential losses [for farmers] which private sector insurance institutions may be less willing to cover. This type of support is considered to be less distortive of markets and trade.”

But developing countries tend to intervene directly in the market to stabilize prices for their producers while providing their consumers “with some level of protection against high food prices”, Morrison said. This generally leads to buying grains at prices above the market value and managing cross-border trade. This support not only drains the country’s coffers but “is considered to be distortive of markets and trade.”

Often these subsidies, whether in the form of cheaper agricultural inputs or higher prices for produce, do not get to the intended poorest farmers, and they are often driven by political opportunism – appeasing the majority of the people in developing countries who depend on agriculture for income and food.

“…for many countries, direct support for farmers ‘may be essential in facilitating agricultural transformation’ and the ‘only practical option available given weaknesses’ in other public institutions that could have supported production”

CACP’s Gulati, who formerly headed IFPRI’s Asia office, said, “Subsidies on fertilizer, power and irrigation are not targeted. Subsidies have risen much faster than public investments in agriculture [in India]. The marginal return on subsidies is less than one-fourth of that from investments. Yet subsidies multiply due to higher political returns. So India wants more leverage on subsidies.”

Yet Morrison adds that, for many countries, direct support for farmers “may be essential in facilitating agricultural transformation” and the “only practical option available given weaknesses” in other public institutions that could have supported production. “Greater use of a system more reliant on market-based instruments may make a more efficient use of resources, but may be impractical at the current time”.

Jonathan Hepburn, agriculture programme manager with ICTSD says, “WTO rules need to take into account the reality that countries are in different situations, and that some have fewer resources at their disposal to achieve public policy objectives. “

Negotiating

In the recent past, negotiating groups at the WTO have sought preferential treatment. The least developed countries (LDCs), for instance, are negotiating to enjoy some flexibility in their implementation of import tariffs on agricultural products. However, even the LDCs face limits on the amounts and kinds of subsidies they provide – although many lack the resources to provide the amount of farm support that would be capped by WTO rules, points out ICTSD’s Hepburn.

Part of the problem in creating new rules on trade, Hepburn said, has “been striking a balance between the rights and responsibilities of different groups of countries – especially as the global economic landscape has evolved dramatically over the last decade or so.”

In December, according to the WTO, countries might decide on a “temporary “waiver” (a formal legal exemption allowing some member states to exceed their limits), a non-binding political statement by the conference’s chairperson or some option in between. Flexibility along these lines has sometimes been called a “peace clause” or “due restraint”, because members would avoid bringing legal disputes against developing countries in these circumstances.”

jk/rz

 

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Kenya: AGOA’S unexploited opportunities

Posted by African Press International on May 23, 2013

  • By Maurice Alal, API Kenya

Consumption of Nile Perch fish species was synonymous with residents of Lake Victoria region although it is now eaten nationally. Filleted Nile perch is exported but the skin goes to waste. Consumers of the delicacy don’t know that a shoe made from it fetches up to Kshs.50, 000.

www.africanpress.me/ A facilitator addressing the African Growth & Opportunity Act (AGOA) forum in Kisumu this morning. (photo by Alal)

http://www.africanpress.me/ A facilitator addressing the African Growth & Opportunity Act (AGOA) forum in Kisumu this morning. (photo by Alal)

This is the irony of people laying emphasis on value addition as the sure way to lift the business fraternity in Kenya and African continent out of the poverty cycle, which despite many interventions has eluded many nations.

Kisumu County Director of Trade, Vincent Asikoye said in an interview that the Nile Perch skin can be turned into leather to make shoes that fetch a fortune but most of our people have not understood this concept for which we are committed for economic take-off.

Asikoye further singled out the use of Nile perch and other fish bones to make products like ornaments as a good example of value addition, which if well embraced by Kenya’s business fraternity could transform not only our perception but also scale of business transactions.

“It’s in this light that Kenya Government has taken a bold step to revive collapsed textile mills in Western Kenya region and other parts of the country as a policy aimed at unlocking and fast tracking abundant business potentials existing locally and globally”, he stated.

He said the Ministry of Agriculture has been funded to revive the cotton growing, even though following the collapse of the industry; most of the cotton ginneries were left in the hands of the private sector.

“It was the start of several industries going under; including the sugar sector and the fishing industry. We are now working with the private sector to achieve this common goal of ensuring all the over 6, 400 products on offer get a quality touch”, he said.

www.africanpress.me/ Kisumu County Director of Industrialization, Vincent Asikoye being interviewed in Kisumu this morning, while ACTIF Executive Director, Rajeev Arora looks on. (phto by Alal)

http://www.africanpress.me/ Kisumu County Director of Industrialization, Vincent Asikoye being interviewed in Kisumu this morning, while ACTIF Executive Director, Rajeev Arora looks on. (phto by Alal)

The Director states that Kenya’s indigenous vegetables (Osuga, Saga, Akeyo, Apoth and Dek among the luo), embroidery, jewelry among others could fetch lots of money as they are quite popular across the globe with Tourists as the vegetables have high nutritional value.

He the Government through Industrialization Ministry has already constructed a plant to process Soya Beans as the first step towards building many others where they are needed most in areas where the raw products are grown.

Asikoye commended Kisumu residents for having demonstrated a good image through action in March, 2013 by upholding peace which greatly helped restore investor confidence as a business destination thus warded off the hostility tag associated with it.

“We will tackle issues that don’t enable traders, farmers and investors have a conducive environment by making sure that even as we industrialize, each one of the categories get fairness in terms of pricing alongside cost of inputs for production”, he reiterated.

Quite outstanding was the presentation by the African Cotton & Textile Industries Federation (ACTIF), Executive Director, Rajeev Arora who was explicit that African Growth & Opportunity Act (AGOA) window ends in 2015 but the potential has not been fully exploited.

www.africanpress.me/ ACTIF Executive Director, Rajeev Arora being interviewed in Kisumu.(Photo by Alal)

http://www.africanpress.me/ ACTIF Executive Director, Rajeev Arora being interviewed in Kisumu.(Photo by Alal)

Arora stated that the World Trade Organization (WTO) granted waiver to the United States of America (USA) to have a non-reciprocal preferential trade regime until September 30, 2015. However, stakeholders in the sector expressed optimism that it will be extended further.

AGOA covers 23 counties in Africa and is keen to facilitate the development of cotton value chain for textile and apparels, while at the same time act as the important link to regional and international markets.

“We hope to bring investments in the textile sector similar to the mid 1970s and 1980s when Kenya had excellent cotton market globally”, he explained.

Arora said AGOA started in 2000 introduced duty-free and quota free markets for 6, 400 products with Kenya being the highest exporter from Africa to the USA standing at Kshs.221.9billion (US$250million).

www.africanpress.me/ The African Cotton & Textile Industries Federation (ACTIF), Executive Director, Rajeev Arora sharing a word with Industrialization Ministry, Public Relations Officer (PRO), Richard Abura in Kisumu today while Kisumu County Director of Industrialization, Vincent Asikoye (partly hidden) looks on. (photo by Alal)

http://www.africanpress.me/ The African Cotton & Textile Industries Federation (ACTIF), Executive Director, Rajeev Arora sharing a word with Industrialization Ministry, Public Relations Officer (PRO), Richard Abura in Kisumu today while Kisumu County Director of Industrialization, Vincent Asikoye (partly hidden) looks on. (photo by Alal)

He disclosed that Kenya has developed a strategy to fully exploit AGOA market value through elaborate outreach targeted at the local business fraternity to sensitize the small-scale traders and manufacturers on the high potential market and how best to exploit it fully.

“Kenyan small scale investors have been challenged to focus more on producing for the AGOA market so as to gain more from the AMERICAN open market from African products”, he explained.
Arora said the market has not been fully exploited, since Kenya exports less than 30 products whereas there is an open market for over 6,400 products from Africa.
“As an approach to promote value addition and exportation into the AGOA market, African Cotton & Textile Industries Federation’s (ACTIF) in partnership with the Ministry of Trade has launched a countrywide outreach program to enable Kenyans take full advantage of AGOA before the window of opportunity expire in 2015”, he pointed out.

The Executive Director said high level efforts led by ACTIF and others are underway to persuade the US Administration to extend AGOA or make it a permanent trade arrangement between Africa and the United States.

Arora disclosed challenges facing entrepreneurs who seek to export under AGOA as; high cost of transportation, erratic and costly electricity supply as well as burdensome customs and trade regulations.

However, Kenya is one of the main beneficiaries of AGOA having realised $3.94 billion,$4.67 billion and $5.83 billion worth of exports in 2009, 2010 and 2011 respectively. The key sectors that have benefited include tea (20%), horticulture (16%), textile and apparels (4.35%), coffee (3.8%), tobacco products at 1.6%, among others in 2011.

The top ten exports to the USA in 2011 were tea, horticulture, textile and apparels, coffee, tobacco products, animal and vegetable oils, essential oils, soda ash, articles of plastics and cement in that order.

AGOA is a trade provision by the US Government that offers tangible incentives for African countries to continue their efforts to open their economies and create free markets.

www.africanpress.me/ A section of participants at the AGOA forum in Kisumu today listen as they take notes.(photo by Alal)

http://www.africanpress.me/ A section of participants at the AGOA forum in Kisumu today listen as they take notes.(photo by Alal)

This is a unique market access provision considering that it is a non-reciprocal concession under which developed countries allow duty-free or low-duty entry of imports from selected developing countries up to a certain limit or quota, covering 6,400 products.

Exports from AGOA-eligible countries have grown over 300%, from $21.5 billion in 2000 to $86.1 billion in 2008. It has also created over 300,000 jobs many of which are in the apparel sector which provides employment opportunities for women.

ACTIF, he said, with the support of BAF-DANIDA and Trade Mark East Africa successfully advocated for the extension of 3rd Country fabric provision under AGOA to the expiry of AGOA in 2015.

This enabled thousands of jobs to be salvaged and also protected foreign earnings for AGOA countries including Kenya.

The outreach program, an initiative of ACTIF is designed to engage with the private sector on policy changes and interventions needed to strengthen the capacity of Kenyan entrepreneurs and develop a private sector position ahead of the annual AGOA forum to be held in Ethiopia between June 27 and July 2, 2013.
The AGOA forum brings together key US Government officials, private sector and civil society members, African Ministers of Trade among other industry stakeholders.

 

END

 

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Subsidies and GM crops back

Posted by African Press International on April 10, 2013

More food is available now but it is much more expensive

JOHANNESBURG,  – Food has become expensive and seems set to stay that way, so growing more of it has become both a necessity and an attractive investment. But the trend has also put contentious issues like agricultural subsidies and genetically modified (GM) crops on the menu once again.

IRIN talked to some of the leading food security experts on the emerging issues highlighted in, among other new reports, the 2012 Global Food Policy Report by the International Food Policy Research Institute (IFPRI).

Subsidies are back

Countries like Malawi, caught in a trap of cyclical droughts, have provided subsidized fertilizer to boost food production but have come under attack for promoting unsustainable support to their farmers. “The position of donors on fertilizer subsidies is quite scandalous, given what is happening in their own countries,” says Peter Hazell, a leading agriculture expert who has worked with the World Bank and IFPRI.

A drought in the US and fluctuating food prices have led policy-makers there and in the European Union (EU) to rethink protection and support for their farmers.

The US Farm Bill governs agriculture policy and is updated every four years, but the 2008 legislation was extended to September 2013. The proposed bill recommends an expanded insurances programme with new crop insurance subsidies so farmers receive money when income from certain crops falls below a targeted level, and sets target prices for crops that trigger payments when revenues fall for several consecutive years at much higher levels than before.

“Perhaps the right lesson for Africa is not that subsidies are always bad, but that they need to be designed and implemented in more targeted ways”

The EU has done away with export subsidies that supported the disposal of surplus production abroad, but its EU Common Agriculture Policy ensures high levels of direct support to farmers and protects its own markets.

Jim French, policy advisor to Oxfam America, says the organization “does not object to a nation’s right to invest in and protect its agricultural interests”, but subsidies can “sometimes distort both the market and production in ways that impact global hunger and poverty rates”, and notes that some of the proposals in the new US Farm Bill “included moving back to subsidies“.

Agriculture expert Steve Wiggins, of the Overseas Development Institute (ODI), says if rich countries are providing subsidies, it does not mean poor countries should emulate their bad example.

He argues that subsidies in rich countries “do not prevent any African government from providing decent rural access roads, from funding research and extension, maintaining competitive exchange rates, and so on”. It is export subsidies that affect farmers in Africa, but poor countries can protect themselves from cheap imports by imposing tariffs.

Hazell points out that subsidies have helped countries like Malawi. “Perhaps the right lesson for Africa is not that subsidies are always bad, but that they need to be designed and implemented in more targeted ways that include a built-in exit strategy,” and address financial viability.

These developments have prompted experts and activists to call for reviving the stalled Doha round of talks at the World Trade Organization (WTO), which was to consider subsidies, tariffs and trade distortion in agriculture.

The GM debate

The US Congress adopted a clause in its 2013 agriculture budget bill that effectively bars the department of agriculture from any attempt to halt planting or harvesting a GM crop, even if the call comes from the judiciary, sparking outrage. India imposed a 10-year moratorium on field trials of GM crops in 2012.

My favourite links
FAO Biotechnology Forum
GM Organisms- New Scientist
 WHO | 20 questions on genetically modified foods
 International Assessment of Agricultural Knowledge, Science and Technology for Development
 Towards smart subsidies in Malawi
 Why are Indian farmers committing suicide over their debts?
 Vandana Shiva on BBC’s Hardtalk about the food system

Organizations like Greenpeace and activists worldwide welcomed India’s decision, but the IFPRI report describes it as a significant setback to food policy, and mainstream scientists argue that GM crops offer a way out of deepening food insecurity as growing conditions like the weather and water become compromised by climate change. IFPRI researchers P K Joshi and Devesh Roy note that the moratorium, “not based on scientific logic, will have negative effects on frontier research and demand-driven technology generation”.

The adoption of the US clause, nicknamed the “Monsanto Protection Act”, was described by Greenpeace as a “sad day for democracy and the future of our food”. Mark Bittman, a food writer for the New York Times, cites interviews with the Union of Concerned Scientists stating that GM crops purported to be weed- and insect-resistant are actually failing.

There is no reliable proof that GM crops are harmful to human beings. “That’s not the same thing as saying that the potential isn’t there for novel proteins and other chemicals to generate unexpected problems,” Bittman writes, “which [is] why we need strict, effective testing and regulatory systems.”

The debate on GM crops is polarized between supporters and those who think it will have long-term impacts on biodiversity, possibly health, and lead to a takeover of food production by corporations like Monsanto. This has also been the case in Africa, where some countries have banned GM maize as food aid.

Per Pinstrup-Andersen, 2001 World Food Prize Laureate and the author of a book on the politics of GM food, described India’s moratorium as “nonsensical”, and said it “reduces India’s efforts to assure sustainable food security for its population”. He is among the mainstream scientists who prefer to be open-minded on GM technology and believe that while it might not be the panacea to climate-proof plants, it is a tool with some potential to ensure food security in the coming decades.

“The regulation of the use of improved crop varieties in the United States is best done by the relevant agencies within the federal government, and not by the judiciary,” he told IRIN. “Lack of understanding and insufficient knowledge among some judges are likely to result in erroneous decisions.”

Hazell, who also backs the mainstream view on GM technology, likens the current situation to the state of computer science in the early 1960s. “While the critics were still obsessed with problems of mainframe computers, the industry was busy developing laptop and portable computers that transformed not only the industry, but also the world. Let’s hope that something similar happens with the plant sciences, otherwise we are going to see a lot more famines and deforestation in the years ahead. None of this is to say that we don’t need sound biosafety regulation, but that should be based on science and national priorities, not driven by the misinformed anti-science views of a few international NGOs.”

A new measure of productivity

Historically, farmers and countries alike have relied on yields to measure productivity, but in the past decade – total factor productivity (TFP) – which takes into account fixed factors like land, labour, capital, and the cost of direct inputs like fertilizers, has been gaining ground.

More food but not everyone gets to eat enough: Families in drought-affected Mauritania were pooling their food reserves every day in 2012

Alejandro Nin-Pratt of IFPRI says this method “is straightforward, as is the ratio of total output over total input, in other words, how much output is being produced by unit of total input.”

Hazell agrees that TFP “is a better measure… than yield, which just captures the productivity of land. TFP growth improves with new technologies and investments like irrigation that raise the returns to fixed factors.”

He points out that “one reason why farmers in Africa remain so poor is because agricultural growth there has been driven largely by increases in the cropped area and farm labour, with very little growth in TFP.“

Gender in agriculture

FAO’s 2011 annual report focused on the role of women in agriculture, signalling a new trend. Since then, the US Agency for International Development, IFPRI, and the Oxford Poverty and Human Development Initiative have even developed an index to measure women’s empowerment in agriculture.

“The West makes gender equality an end in itself, and this can be counterproductive in many cultures,” Hazell says. “There is evidence that empowering women farmers, especially in Africa, is important… But this calls for practical and well-focused interventions that take account of local socioeconomic context, not for the construction of national gender empowerment indices that become goals in themselves.”

ODI’s Wiggins insists the goal should be, “All girls in school until they are 16, at least… taking care of children before 36 months, and making sure they are properly nourished.”

Ruth Meinzen-Dick, IFPRI senior research fellow, says there is a lack of rigorous evaluation of approaches that have worked to empower women in agriculture. They have launched a Gender, Agriculture and Assets Project (GAAP) to conduct assessments.

jk/he source http://www.irinnews.org

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