Morocco, EU trade deal will reduce tariffs on agricultural products

A new deal between Morocco and the European Union will make trade in a variety of agricultural and food products between the two duty-free.

In the next ten years, 70 percent of EU agricultural exports will be allowed duty-free entry into Morocco. Wheat is one of the commodities named in Press reports as an exception to which Morocco will be allowed to impose approved import duties.

The agreement also involves the immediate lifting of present EU duties on 55% of goods imported from Morocco.

Some ‘sensitive products’ will still have limits on their amounts that can enter the EU market, to protect European producers and prevent flooding the market. Among them are cucumbers, garlic, tomatoes and strawberries. Unprocessed fruits and vegetables make up 80% of Moroccan exports into the EU.

The deal has its critics. Western Sahara, a province of Morocco, seeking to break away, is included in the deal, which some say will make find a solution to the long-running, sometimes violent conflict more difficult. Some large scale local and foreign agribusiness concerns operate there despite the objections of some of the region’s residents. Other fears are the potentially harmful effects of the partial free trade deal on small scale farmers in both the EU and in Morocco.

African Agriculture

EU subsidy policy and disastrous effects on Ghana poultry sector

by Mehdi Shafaeddin

In a recent speech to CUTS in Geneva Mr. Pascal Lamy, the Director-General of WTO, argued, inter alia, that in order to reduce its food deficits, “African Agriculture needs to become more efficient, and…to discover ‘specialization’…”, rather than opting for self-sufficiency. He implicitly drew an analogy between the division of labour between Einstein and his Assistant and Ricardo’s theory of comparative cost advantage (CA). Hence, “… it would make no sense for Africa to produce everything for itself [become self-sufficient], just as it makes no sense for Einstein to process documents too” in addition to his scientific work.

I try to remain within the framework and logic of Mr. Lamy-let alone the fact that the theory of CA of Ricardo is static, suffers from unrealistic assumptions and is inappropriate to development issues.

For the OECD countries, not only the concepts of division of labour, CA, efficiency and market forces do not apply, and import substitution is justified; but also dumping “inefficiently produced” food and other agricultural products to Africa is acceptable. According to Mr. Lamy, African agriculture has suffered because it was shielded from international competition. Although in passing he refers to CAP and agricultural policies of other OECD countries, he does not talk about their impacts on Africa.

Earlier on in an article (jointly written with F. Fischer of EU), on 8 September 2003 he clearly declared that: “Us [sic] Europeans, we refuse to submit fully agriculture to the law of comparative advantage…” In another speech on 20 January 2000 on the future of CAP, he mentioned that agriculture cannot be left “unregulated and solely based on competition”, and spelt out the need for such measure as: external protection, price support and supply control. He added: it [price support] helped Europe become self-sufficient.

On 3 October 2002 in a conference in France he said. “…if agriculture were submitted to the international division of labour [our italics], there is[sic] if we left the consumers to choose, on a global market, the good produced by the most efficient producers [my italics], the 6 million farms in Europe would be cut down to one million….”.

By contrast, according to Mr. Lamy, the agricultural sector of Africa should be subject to liberalization and domestic producers need to compete with the imported foods at “dumping prices”, as OECD countries are not subject to the operation of market forces and efficient production.

The amount of agricultural support received by farmers in OECD countries in 2009 (direct and indirect subsidies, etc. and price supports) amounted to about $348 billion. In terms of per capita of rural population of OECD countries it is about $1421; nearly 2.39 times greater than per capita income of the total population of African least developed countries and Haiti. In the same year, the corresponding support received by EU farmers was $92.954 billion, and the direct support alone constituted 24 per cent of their gross receipts as compared with 22% in 2007.

Consider, as an example, the case of Ghana, and its imports, inter alia, of chicken from EU. Under the pressure from the World Bank and IMF, Ghana reduced its tariffs on agricultural goods and liberalized its agricultural sector fully in the 1980s. Although the bound tariff rate for chicken is higher than the applied tariff, the IMF did not allow the Government to increase it despite the decision of Ghana’s Parliament. The country does not have any legislation to take anti-dumping, countervailing or safeguard measures on imports.

During the last couple of decades Ghana has been dumped on by imported EU chicken. For example, in 2002, total subsidies paid to the EU poultry industry constituted over 27 % of unit value of production out of which 9.7% was in the form of export refund; 8% of the EU’s exports were directed to West Africa (out of which 2.4%-or 27.5 million tonnes) was exported to Ghana- eight times higher than in 1996. The imported chicken was supplied at a price which was sold at 57% of the price of domestically produced chicken.

As a result of dumped imports, in 2001 domestic chicken production in Ghana accounted for only 11% of domestic consumption as against 95% in 1992. Thus, domestic producers developed excess production capacity.

Chicken is not the only agricultural product, and Ghana is not the only African country, suffering from dumping prices: cereal, soya, milk, meat and other animal products, sugar, even tomato and cotton etc. have had more or less the same fate. Hence, I wish, Mr. Lamy would have indicated in which agricultural products Africa should specialize. How about EU and other OECD countries?

Triple Crisis

EU lawmakers OK banana duty cuts for Latin America

by Juliane von Reppert-Bismarck and Charlie Dunmore

European Union lawmakers have approved a deal to cut EU import tariffs on bananas from Latin America, ending the world's longest-running trade row, a European Parliament official said.

A majority in the European Parliament voted to cut duties on Latin American bananas by 35 percent over six years, potentially improving the competitive edge of producers such as Chiquita and Dole over smaller growers in Africa, the Caribbean, Pacific and the European Union.

"This agreement is already being implemented provisionally and now needs final approval from the members of the World Trade Organization," the parliamentary spokeswoman said.

Once rubber-stamped by the WTO later this year, the deal will mark a victory by the world's largest banana producers in a near 20-year battle for cheap access to the EU, the world's largest consumer of the fruit.

It is expected to persuade the United States and 11 Latin American countries, led by Ecuador, to drop a legal challenge accusing Europe of imposing illegally high tariffs to protect banana producers in its Caribbean territories and the Canary Islands, as well as in former colonies of member states.

The deal will cut duties on imports from Latin America to 114 euros ($158) per tonne in 2017, from 176 euros at present.

The EU banana import regime, dating from 1993, had given duty-free access to mostly small producers in former colonies and imposed tariffs on Latin American bananas, most of which are produced by the large U.S. multinationals.

Latin American countries planning free trade agreements with the EU -- such as Peru and Colombia -- have already secured duty cuts to about 75 euros, so Thursday's deal will largely benefit Ecuador, which in 2009 refused a trade pact with Europe.

African, Caribbean and Pacific producers, who oppose the cuts, will retain their duty-free access to EU markets.

Separately, the EU will now decide on an aid package worth up to 200 million euros to support fledgling banana production in Ivory Coast, Cameroon, the Dominican Republic and Suriname. Lawmakers will also debate aid for European producers.

"The future for small banana producers and sustainable production is now even more uncertain," said Catherine Greze, a Green Party EU lawmaker who voted against the motion. She said funds for encouraging banana production could reduce the EU's available budget for other development projects.

The EU imported about 4.8 million tonnes of bananas in 2008 worth a total of some 2.9 billion euros, according to European Commission data.

.Reuters

ACP banana producers feel “betrayed” by EU

Representatives of the African, Caribbean and Pacific (ACP) countries were lobbying for greater assistance for their banana exports to Europe to compensate for the EU’s improving trade relations with Latin America at the European Parliament and Commission in Brussels, on 29 April.

Cameroon’s Trade Minister Luc Magloire Mbarga Atangana, representing the ACP, said he would challenge MEPs and the Commission to go further than the €190 million package proposed by the European Commission, on 17 March, to help banana producing ACP countries adapt to the new trade regime since it resolved its trade dispute with Latin America and the United States, resulting in cuts to import tariffs on Latin American bananas. The minister argued that even with the ‘banana accompanying measures,’ ACP countries had been “betrayed” by the EU.

“We don’t want indefinite support,” he said. “We are asking for accompanying measures to be able to participate in a globalised world, we are asking to be partners,” he added. “Isn’t Europe actually turning its back on our countries?” he challenged. “Isn’t there a kind of falling out of love – I don’t want to talk about divorce – but a kind of falling out of love with Africa?” he asked.

The minister said he felt that globalisation had been vaunted as a great hope for small or developing nations, but had only benefitted the major new players. He said the attitude of large trading powers, such as the EU or the US, was tokenistic. “They say we are going to accept several at the table, the emerging ones, China, India, Brazil, and then consider everyone is represented,” he said.

The Cameroonian minister called for development considerations to be taken into account more. He called the banana industry the “social cement” of ACP countries, many of which are struggling to emerge from economic and political turmoil, providing sources of employment, which feed into social stability.

The Commissioner for Development, Andris Piebalgs, recently said the EU was indeed determined to support these countries’ development through trade. “The Commission has committed itself to fully stand by ACP countries to foster their efficient integration into the world economy while respecting international trade rules,” Piebalgs said.

At the 19th Joint ACP-EU Parliamentary Assembly, held in Tenerife (Spain), parliamentarians asked the European Commission to increase aid to ACP and EU banana producers in order to help them adapt to the new regime and receive compensation for financial losses they might face because of new tariff rules laid down by the EU-Latin America ‘banana agreement’. The one-off programme will apply to the ten main ACP banana exporting countries and aims to help make each nation’s banana market more competitive, diversify its economy outside of bananas or assist with the potential social or environmental impact of the new trade environment.

Freshplaza

EU close to cutting tariffs on non-ACP bananas in WTO deal

European trade leaders are on the verge of agreeing to significant cuts in tariffs on bananas imported from outside the African and Caribbean region, according to a source with direct knowledge of the matter.

"We are hopeful we can initial an agreement this week," the source said, commenting on a deal which would end a long-running dispute with exporters in Latin America, who do not benefit from the preferential tariffs granted to African competitors.

"We have to agree what will happen with regard to the Doha round on tropical fruits," said the source, confirming a Reuters report about an imminent deal on the world's longest-running trade dispute earlier this month.

"We are hopeful that an agreement on bananas will give a momentum for a positive result for world trade," he added.

Reuters

WTO banana deal emerging

An end is in sight to the world's longest-running trade dispute, involving bananas, and a deal could be in place by the end of the year, senior European and Latin American trade negotiators said. Settling the banana dispute would be a fillip for the World Trade Organisation, whose long-running Doha round to free up global commerce, like other trade negotiations, has at times been held hostage by the decades-old row.

Cesar Montano Huerta, the top diplomat at the WTO mission of Ecuador, the world's biggest banana exporter, said officials were negotiating intensively and even hoped to clinch a deal in the next couple of weeks. The deal, which could be reached before the WTO's ministerial conference starting November 30, would see the European Union cutting tariffs on bananas for suppliers in Latin America and elsewhere. In return the Latin Americans would drop outstanding challenges to the EU at the WTO, and Brussels would provide compensation to African, Caribbean and Pacific (ACP) countries, mainly former British, French and Portuguese colonies, who would lose their preferential access to the European market. The detailed terms are likely to resemble an agreement almost reached in July last year on the fringes of a meeting of trade ministers seeking a breakthrough on the Doha talks.

Reuters

ACP countries slam proposed changes to EU banana tariffs

African, Caribbean and Pacific (ACP) countries have spoken out against proposed changes to the EU's banana tariff regime, which they say would harm their exporters.

" We are very disappointed by our partner the European Commission because they are sacrificing development to trade liberalisation," said Gerhard Siwat, the Surinamese ambassador. "We quite often have the feeling that the European Commission does not understand what partnership means," he told a press conference in Brussels on 6 April.

EU banana import policies have been the subject of a decade-long row at the WTO, pitting Brussels against several Latin American banana producers and the US. At issue is the EU's current import regime: a 176 euros/tonne tariff on bananas from most-favoured nation (MFN) suppliers, alongside a 775,000 tonne duty-free import quota reserved for ACP states, many of which are former European colonies. Latin American countries have long insisted that this import regime illegally discriminates in favour of bananas from ACP countries and violates WTO rules on quantitative restrictions. The WTO's Dispute Settlement Body has supported such claims, and Brussels is now under pressure to revise its policies.

Fresh Plaza

EU offers cuts to import duties on Latin American bananas

by Darren Ennis

The European Union has offered Latin America's top banana suppliers to initially cut duties on bananas to 148 euros per tonne from 176 euros now to try and end the world's longest-running trade dispute, a draft showed.

Under a draft proposal, the European Commission -- which oversees trade policy for the 27-nation bloc -- has proposed gradually lowering taxes on banana imports from Latin American countries to 114 euros per tonne by 2016.

The Commission's offer outlines possible arrangements if the stalled World Trade Organisation (WTO) Doha is not completed.

Ecuador, the world's largest exporter of bananas, has led pressure from Latin America for the EU to stick to the tariff deal negotiated in July 2008 on the sidelines of a Geneva meeting of ministers seeking a breakthrough in the WTO talks aimed at liberalising global trade.

When the WTO talks collapsed, the EU walked away, saying the banana deal had to be part of a wider Doha agreement. In the meantime Brussels has been pressing forward with talks aimed at securing free trade agreements (FTAs) with several Latin American countries. But the Latin Americans insist that bananas should be included in a separate pact.

"The initial reaction has been relatively positive from the Latin Americans. But the main stumbling block is the Doha caviat and the condition that any deal would have to be approved by the whole WTO which would give ACP (African, Caribbean and Pacific) countries a veto," a source familiar with the talks said.

The EU offers preferential access to its markets for the African, Caribbean and Pacific (ACP) countries, who are mainly former European colonies. African producers, like Cameroon, are particularly annoyed by the EU proposal. But Brussels is trying to find a package of financial aid for ACP banana producing countries to compensate them for any losses to their industry and unlock one of the barriers to a Doha deal.

Failure to resolve the banana row could block an overall Doha deal because the Doha proposals offer both slower tariff cuts on produce from poor developing countries, like the ACP states, and steeper cuts on tropical produce from countries like the Latin Americans.

The WTO has ruled that charging a tariff on Latin American bananas while letting in ACP fruit duty-free is discriminatory. It said the EU's previous regime, which admitted a quota of 2.2 million tonnes of Latin American bananas with a tariff of 75 euros a tonnes, was still in force.

In November, the WTO's top court ruled again against the EU in what has turned into the world's longest-running trade dispute. The following month, Ecuador said it could exercise its right to slap sanctions on the EU if the row was not settled.

Besides imposing trade sanctions, Ecuador could also challenge the controversial economic partnership agreements (EPAs) that Brussels is forging with developing countries to replace earlier illegal arrangements.

It could also challenge EU domestic subsidies at the WTO.

The EU's own producers in the French Caribbean and Spanish Canary Islands also objected to the July deal, but the source said Paris and Madrid "can be persuaded to get on board in return for some form of financial compensation for their producers".

Reuters

Zambia removes tax on agricultural equipment

by Jerry Munthali and Kasuba Mulenga

The Zambian government has zero-rated Value Added Tax for agricultural equipment and removed the windfall tax on copper. Presenting the 2009 national budget in Parliament yesterday, Minister of Finance and National Planning, Situmbeko Musokotwane also proposed to reduce customs duty on heavy fuel oil from 30 to 15 per cent.

The equipment covered under the zero-rating includes two wheel tractors and accessories, tractors up to 60 horse power, ploughs, harrows, disc harrows, planters, seeders, rippers, sub-soilers, cultivators and pump sets. These measures are meant to accelerate diversification and counter the global financial crisis. Musokotwane said Government had zero-rated value added tax (VAT) on windmills and maize dehullers to promote local capacity to manufacture the equipment. He said Government had observed the growing local capacity of manufacturers to produce windmills and maize dehullers. This measure would have minimal revenue impact.

Musokotwane proposed a 37 per cent increase in the allocation to the agricultural sector, providing K1.096 trillion from K800.5 trillion last year to boost development of the sector. He said Government considered the Fertiliser Support Programme (FSP) as an important tool in empowering small-scale farmers and ensuring national food security. Government has allocated K435 billion to the FSP this year with the hope that should prices of fertiliser remain low, many small-scale farmers would benefit.

The minister said Government was, however, concerned that the programme had a limited impact on increasing agricultural productivity. Considering that increasing productivity went beyond fertiliser provision but required enhanced extension services, Government has this year allocated K25.4 billion for procurement of motorbikes and bicycles.

A total of K12.3 billion will go towards construction and rehabilitation of camp houses for extension officers to improve their mobility and serve a larger part of the rural community.

Zambia would also like to develop a vibrant livestock industry.“To this end, an allocation of K70.7 billion has been allocated for livestock development this year, including the creation of at least one disease-free livestock zone,” Musokotwane said.

Zambia Daily Mail

South African government scraps wheat tariff,

By Paul Richardson


South Africa's International Trade Administration Commission abolished a 2 percent import duty on wheat, Business Report said. The commission found no justification for higher tariffs on wheat and wheat flour because of high international prices for the grain, the Johannesburg-based newspaeper said. A variable tariff has been introduced that will take effect if the wheat price falls below $157 a metric ton, the newspaper said.

Bloomberg

EU trade agreement with Central America may force ACP countries out of banana business

The banana companies in African, Caribbean and Pacific (ACP) States maybe forced out of business following the European Union’s decision to negotiate a Free Trade agreement (FTA) with Central American countries in what the ACP Group describes as on “too generous” terms.

The ACP Group expressed shock that only a week after the EU signed the first Economic Partnership Agreement with an ACP region (CARIFORUM), which supposes to secure, and expand preferential access for ACP bananas into the EU market, the EU has gone ahead to negotiate an FTA with the Central Americans in terms which pose serious threat to ACP preferences.

The EU’s market access offer for bananas in the Framework of the FTA under negotiation might include an initial reference import tariff for bananas, which will be lower than the current applied tariff. Also, there will be a rapid decrease over a relatively short period to a final import tariff landing zone, which is lower than the figure that was indicated by ACP countries as the minimum tariff for the necessary preference that would enable them to continue their export of bananas to the EU. The ACP understands that the EU plans to lower the current levy on competing bananas from certain Central America States of 176 euros per tonne to 95 euros over ten years.

ACP Secretariat

South African dairy exporters protest EU sanitary import standards are protectionist

by Craig McKune

South African dairy farmers say they're sitting on 8 000 tons of cheese ready for export to the European Union, but are blocked by protectionist measures dressed up as sanitary standards.

This is according to a recently released report that consolidates the responses from Western Cape dairy farmers and other industry players at a dairy "crisis" summit last month.

The meeting was called by MEC for Agriculture Cobus Dowry in response to the dwindling profits for dairy farmers that have driven many off the land.

South Africa could export up to 8 000 tons of duty-free cheese to the EU under a reciprocal trade agreement, Dirk Troskie, an agricultural economist with the provincial Department of Agriculture, said. He said South African dairy products were safe for consumption and accepted throughout the rest of the world.

While the country also placed standards on EU dairy imports, specifically relating to mad cow disease, Troskie said those put in place by the EU were often "used as a mechanism to keep certain products out of the market." The department was to investigate the possibility of taking up the dispute with the World Trade Organisation's committee on sanitary and phytosanitary measures, he said.

Another possible response to the export problem, Dowry said, was to target untapped markets, particularly those in the Southern African Development Community, more aggressively.

Dairy farmers said the low tariff on dairy imports was contributing to the industry's problems.

South African farmers are unable to compete with those in the EU, Canada and the United States as these competitors receive hefty government subsidies. For example, in Canada, subsidised milk produced at R4 a litre remains more profitable than milk produced in South Africa at R1 a litre.

The summit called for more support from the government on this issue.

According to Troskie, solutions to international subsidies are complex and a multipronged approach was necessary. He said the industry needed to improve its efficiency, investigate international mechanisms to prevent dumping and explore the sensitive question of raising import tariffs.

Dowry said "crisis" was a strong word for the industry's situation, but Troskie said this was how some in the industry were experiencing it.

Dairy farmers said at the summit that the price paid to them for raw milk had decreased, whereas their costs were soaring.

The department said that, on average, one farmer a day left the land. This translated into a projected loss of 15 percent of producers in the next few months.

Mistrust among players, arising in part from the Competition Commission case against price-fixing by several Western Cape dairy processors, was also cited at the summit as a problem.

IOL

Botswana agriculture anxious about effect of SADC Free Trade Area

A few days after the Southern African Development Community (SADC) became a free trade area, fears are mounting that the move may spell doom for Botswana's agricultural industry.

A study is now being commissioned by the Botswana Agricultural Union (BAU) to find ways government can help sustain rural livelihoods in the face of external competition.

BAU chairman, Phillip Fischer, said the elimination of import duties would seriously threaten the beef, dairy, small stock, piggery, poultry, ostrich, grains, and horticulture industries. He said under the SADC Free Trade Area, agricultural products are not eligible for preferential treatment.

Following the announcement at the recent SADC heads of state summit held in Johannesburg, South Africa, the BAU is commissioning a sector-wide study to assess the nature and extent of adverse effects on Botswana's eight commodity value chains (CVCs) that will be caused by the elimination of tariffs. Upon completion, the document will be presented to government, outlining the adverse effects of elimination of the tariffs, as well as how government can assist the local industry to survive the challenges.

"As no adjustment strategies have been developed or implemented in anticipation of the inevitable elimination of tariffs under the SADC Protocol on Trade, it is anticipated that the elimination of tariffs, and in particular, the elimination of Botswana's import permit system under the Control of Goods Act, will adversely of effect all eight of our agricultural commodity value chains," the BAU chief says.

Fischer is sceptical about remedial measures on local industry as proposed in Article 20 of the SADC Free Trade Act. It does not only override the existing SACU infant industry protection law, but the article in question says governments can only safeguard their industries if there is evidence that the affected industry is adjusting to competition.

The proposed study will, among others, assess the immediate adverse economic and social effects of eliminating tariffs on each agricultural sector, as well as the potential commercial viability of each sector without tariffs. For those sectors that have the potential to be competitive without tariffs, the BAU is seeking adjustment strategies to enhance and sustain their competitiveness.

The BAU study will also look at how to assist producers in those inherently uncompetitive sectors so they can dump their businesses and migrate to competitive sectors. For those producers who cannot migrate to competitive sectors, the BAU is seeking social strategies to prop up rural livelihoods.

Mmegi

ACP countries under pressure to reach banana deal at WTO talks

African and Caribbean countries came under pressure on July 27 to reach a deal on bananas and remove a major obstacle to efforts to rescue global trade talks.

The chances of a deal on the core areas of farm and industrial goods in make-or-break talks at the World Trade Organisation (WTO) were delicately poised as rich and poor nations examined proposals for real new export opportunities.

The European Union and Latin American banana producers agreed early on July 27 to cut the EU's import duty to 114 euros ($179) a tonne by 2016 after an initial cut to 148 euros in 2009 from 176 euros now, people familiar with the fruit talks said.

But it must still be approved by former European colonies in Africa, the Caribbean and Pacific (ACP) as well as EU member states such as France and Spain, whose farmers in the Caribbean territories and the Canary Islands also grow bananas.

A banana deal would settle one of the world's oldest trade disputes and is key to any breakthrough in the WTO's Doha round of talks on a new agreement to open up world trade, potentially giving a boost to the global economy.

The WTO talks began on July 22 and are likely to run into the middle of the coming week.

Under Doha's agriculture proposals, tropical produce from Latin America would have faster, steeper tariff cuts than usual.

But ACP exports would see duties come down more slowly so they can retain some preferential access to rich markets.

The two sides have been working to tidy up overlaps of products on the tropical and preferential access lists but agreement would be impossible without a deal on bananas.

The fruit is a key export for many Latin American and ACP countries. Cameroon's banana industry is the biggest employer in the country after the public sector, and government officials say the industry helps prevent unrest in West Africa, which has been wracked by civil conflict in recent years.

Lowering the EU's import tariff further for their competitive Latin American rivals could devastate ACP banana output, they warn. ACP banana exports pay no EU duty.

"Bananas for us are a factor for political stability," said Luc Magloire Atangana Mbarga, trade minister of Cameroon.

Delegates were hoping to reach final agreement on bananas and other tropical products issues before ministers from 35 key WTO players resumed talks on the Doha deal.

The Doha negotiations were launched in November 2001 to boost the world economy and help developing countries grow out of poverty. They were almost written off last week as rich and poor countries remained deadlocked.

But a controversial move by WTO Director-General Pascal Lamy to shut out most of the ministers and get seven key members to tackle the nine most sensitive issues was vindicated on Friday when they produced a grudgingly accepted compromise.

Talks on July 26 on opening up services sectors were hailed by ministers and businessmen as also offering positive signals. The compromise included a proposed new cut in the ceiling for disputed U.S. farm subsidies and revised proposals allowing developing countries to protect their farmers, seeking to balance the needs of poor country importers and exporters. It also sketched out limits on the ability of developing countries to shield entire industrial sectors from opening up.

A trade source said developing countries were growing alarmed at signs that China would seek to protect markets for rice, cotton and sugar and other industrial sectors, shutting off new export opportunities for them.

Reuters

WTO deal being mooted could ruin small scale farmers, groups charge

Farmers from Europe, Africa, Asia and Canada warned the World Trade Organisation (WTO) on July 22 that a trade deal being negotiated this week could ruin small farmers, harm the environment and increase hunger.

On the second day of a week of crunch talks seeking a breakthrough to rescue the 'Doha' trade liberalisation round, groups representing small-scale farmers told WTO chief Pascal Lamy the proposals were dangerous and unacceptable.

"Further trade liberalisation will benefit large-scale corporate farming and multinational traders at the expense of small-scale, vulnerable farmers, hindering agricultural and rural development in countries which need it most," the farm groups said in a joint declaration handed to Lamy.

The Doha round aims, among other things, to open markets for farm exports from developing countries and limit the huge subsidies paid to farmers in Europe and North America which skew the market against agriculture in the developing world.

The coalition of farmers from the wealthy and highly subsidised European Union and producers from some of the world's poorest countries, in east Africa, showed battle lines at the Geneva talks were not based on purely 'north' versus 'south'.

Pekka Pesonen, head of EU farm lobby COPA-COGECA, said the big winners of the proposed liberalisation would be large-scale farm exporters, some of which are in the EU, but mostly in Brazil, Argentina, the United States and Australia.

While not against liberalisation per se, he said the rules had to allow for subsidies and tariffs to be used to protect livelihoods, the environment and local food production.

European farmers have long been protected by high import tariffs and subsidies totalling more than 40 billion euros a year.

But they are concerned the EU could bargain away too much in reducing import tariffs in the WTO talks while the Africans fear their domestic producers will be squeezed out of their home market by powerful foreign exporters if their tariffs come down.

"We fear that the proposals currently on the table in the WTO will undermine the ability of many countries throughout the world to provide their citizens with urgently needed food security and stability," said the statement, which was also signed by farm groups from India, South Korea and Sri Lanka.

John Mutunga, head of a Kenyan farmers federation, said reforms to global trade that would cut high tariffs on value-added goods would greatly help Kenya, which exports crops like tea and coffee in a less profitable, unprocessed state. But he said developing countries, which have suffered greatly from global food price spikes over the last two years, had much to fear from the Doha round.

"We support the WTO ... but developments are likely to take away livelihoods, especially in developing countries," Mutunga said. "Food security cannot be solved through the free market."

Under the WTO proposals, countries will be able to shield some of their agriculture from the impact of tariff cuts with developing economies and especially the very poorest nations being offered more protection.

But producers in some developing countries are concerned that such measures could fence off markets for them.

Paraguayan Foreign Minister Ruben Ramirez said 70 percent of his country exports, led by beef, soy and maize, went to other developing countries, and he was concerned about possible abuse of so-called safeguard measures.

"This round cannot be allowed to generate new forms of protectionism," Ramirez said.

Reuters

Food exporters at WTO talks decry US, EU farm subsidies

Developing countries and food exporters from rich and poor nations on July 20 demanded that the United States and European Union open their farm markets and eliminate trade-distorting subsidies.

Trade in farm products was at the center of discussions as ministers from three dozen trading powers met in negotiating alliances to prepare for next week's make-or-break talks on a new world trade pact.

Pascal Lamy, the World Trade Organization director-general, called the ministers to Geneva to seek a breakthrough in the seven-year-old Doha round to free up world trade. The various alliances among the WTO's 152 members, from the Cairns group of food exporters to the African, Caribbean and Pacific countries met Sunday to plot strategy.

"Those members responsible for the most significant distortions in global agricultural trade - the EU, U.S. and Japan - bear a heavy responsibility," the Cairns Group of agricultural exporters, which includes Canada, New Zealand, Argentina, South Africa and Thailand, said in a statement. "We can and must now seize this opportunity to secure the main parameters of the Doha round. The costs of failure are too high."

Australia, which is serving as leader of the group, said the prospects of a Doha deal were better than ever.

"This in our judgment is the best opportunity ever, in the whole seven years of this round, to conclude the deal," Trade Minister Simon Crean said.

The World Bank president, Robert Zoellick, said progress on farm issues would bolster confidence in the world economy amid strains from soaring food and energy prices and a financial crisis. "It has never been more important for WTO members to move forward on the Doha Development Agenda," he said in a statement before the talks. "It is now or never." Zoellick, as former U.S. trade representative, helped to inaugurate the Doha round in 2001.

He said an open and fair trading system would give farmers in developing countries a reason to expand production. Consumers would benefit from lower prices and governments could save on the costs of subsidies and improve their budgets.

But ministers will face tough negotiations next week as they seek a deal on tariff and subsidy cuts in the most sensitive areas of agriculture and industrial goods, and the main exceptions to them.

Developing countries want rich nations to open up their markets for farm goods like beef and cotton, in exchange for liberalizing their own markets in industrial goods like cars and textiles, as well as services like banking and telecommunications.

A major sticking point is the level of U.S. farm support. The U.S. trade representative, Susan Schwab, has said the United States is ready to make "enormous" cuts in agricultural subsidies. The latest WTO proposals call for a cut of about 70 percent in trade-distorting U.S. subsidies, to $13 billion to $16.4 billion.

But those figures refer to the ceiling negotiated at the WTO, and the actual, or "applied," figure is already about half that at $7 billion thanks to soaring food prices.

So big developing countries like India and Brazil want either cuts in actual support, or at least a narrowing of the gap between the actual level and the ceiling - known in trade jargon as "water."

"Reducing the amount of water is the objective," the Indonesian trade minister, Mari Pangestu, told reporters after a meeting of the G-33 group of developing countries.

Switzerland, which has one of the world's most protected farm sectors, said any special treatment in industrial goods for poor countries would have to be matched with higher average cuts. "This will be a huge discussion this week with developing countries," the Swiss Economic Affairs minister, Doris Leuthard, said. "I will fight for each percentage point in this negotiation."

Rich countries are concerned that proposals to allow developing countries to protect their fledgling industries from the full impact of tariff cuts could allow them to shield entire sectors from market opening.

That would not fly with powerful business lobbies in the United States and Europe.

"We want a fair balanced deal," the EU trade chief, Peter Mandelson, told reporters after a meeting with Lamy. "It's doable this week, but it has to be sellable to all our constituencies and not just some of them."

IHT

Latin American vs. ACP differences over EU banana tariffs threaten WTO talks

Latin America was on a collision course with rival exporters on July 17 over the European Union's banana import tariffs, a long-standing dispute that threatens to spill into world trade talks this week.

The EU has been at loggerheads with Latin American exporters for more than a decade because it offers preferential terms to former European colonies in Africa, the Caribbean and the Pacific, putting no tariffs on their bananas.

World Trade Organisation Director-General Pascal Lamy tried last week to settle the banana dispute and prevent the issue from further complicating attempts at a breakthrough in Doha Round negotiations over a global trade deal. Lamy said the EU should make annual cuts to its tariff of 176 euros ($280) per tonne of bananas, to reach 116 euros by 2015. In return, Latin American governments would sign a "peace clause" and drop lawsuits against the European Union.

The African, Caribbean and Pacific (ACP) countries are angry at not being consulted over Lamy's proposal and said that such a tariff cut would devastate their production.

Latin American banana exporters, which over the years have filed a string of WTO cases against the EU's banana policy, say they will push hard for better terms.

The world's top banana exporter, Ecuador, said Lamy's offer fell short and asked for deeper and more immediate duty cuts but hoped to reach an agreement before next week's trade talks in Switzerland.

"Latin American countries should not be blamed for hurting trade rounds, but instead the European Union for not being willing to give us a proper duty 12 to 15 years ago," said Mentor Villagomez, Ecuador's head trade negotiator. "We think there is still time ... if both parties are willing, I think we could reach an agreement in time."

In a joint statement, Panama's WTO ambassador and the country's chief trade negotiator said Latin American banana exporters were entitled to a substantial cut applied to the existing EU tariff "plus proper Doha cuts on top of that."

"They are willing to be reasonable in the interest of settling this long dispute but will need to see a better starting reduction, phase-in period and final rate than the one the EC (European Commission) is willing to accept," it said.

Costa Rica seemed more positive on Lamy's proposal. "We hope we can secure an agreement. We are seeing very positive signs so far," said Costa Rica's trade minister Marco Vinicio Ruiz.

Industry sources said Colombia is also willing to accept the offer to quickly lock a separate trade deal with the EU over a wider range of products.But experts said Latin American exporters were unlikely to agree as heavyweights Ecuador, Colombia and Costa Rica have different interests.

Ecuador said it held talks with ACP members over the possible impact on their exports to Europe but was not willing to jeopardize its "legitimate rights" to demand a tariff cut.

ACP banana exporters include Cameroon and Ivory Coast, Africa's leading producers of the fruit.

The group issued a veiled threat, hinting it might not sign up to either a Doha deal or long-awaited preferential trade deals with Brussels, known as Economic Partnership Agreements.

If bananas get dragged into the wider WTO negotiations on farm tariffs, then the Lamy proposal could face a veto from ACP countries which do not want rival Latin American exporters to grab a larger share of the lucrative EU market.

"There is no way they can reach an agreement before trade talks. This banana problem goes all the way back to when the European Union was being formed," said Thomas Spreen, a food economics professor at the University of Florida."There are too many interests involved."

Earlier on July 17, EU Trade Commissioner Peter Mandelson warned banana exporters that they risked derailing the trade talks if they refused to be flexible on EU import duties.

U.S. Trade Representative Susan Schwab, speaking on a conference call, said she had pledged to work with European, Latin American and ACP countries to resolve the banana issue before next week's talks, and if not, in Geneva itself.

"I think it would be a very sad commentary if we had all the makings of a breakthrough on the Doha Round and then it fell apart on this issue," Schwab said.

The Guardian

Sustainable development advocates enslaving African farmers in grinding poverty

by Dominic Lawson

Sometimes an entire philosophy can be glimpsed in a single remark. So I am grateful to Andrew Dorward of London's School of Oriental and African Studies for his explanation of why it would not be in the interests of Africans to adopt genetically modified herbicide-resistant crops. Dr Dorward told the Financial Times that this would be "disastrous for many poor households" because such crops would "allow the replacement of hand-weeding, which is a big source of income for many."

This is the sort of argument which would have dismissed the invention of the printing press as endangering the livelihood of monks and quill manufacturers. The monks, at least, were not engaged in back-breaking labour-- unlike the sub-Saharan subsistence farmer, who under the blazing sun might spend up to 120 days weeding a single field, instead of utilising the time saved in cultivating new crops or tilling new fields. Yet this is the sort of grinding, life-shortening labour in which the advocates of so-called "sustainable development" wish to keep Africans enslaved – the sort of life which no Westerner would tolerate for himself or his family.

It is characteristic of the double standards which the international aid establishment has been promulgating for years – and which has been evident during the Rome food summit over the past few days. Thus John Hilary, of War on Want, claimed both that it was the "liberalisation" of agricultural markets which lay behind the international food crisis, and also that the Western world should end its protectionist farming policies.

He's right that we should do so – yet for some reason he will not utter a word of criticism against the much-higher agricultural tariffs that exist between the countries of sub-Saharan Africa, and which have an obvious and immediate role in making food more expensive for some of the poorest people on earth. Import controls in the developing world are a dramatic contributor to "food poverty" – so why is "market liberalisation" such a terrible idea?

Such impoverishing policies are defended by the likes of War on Want on the grounds that such actions by governments in the developing world are a proper exercise of "food sovereignty." In practice this actually means nothing more than the right of landowners – who tend to be government ministers – to extort monopoly rents at the expense of those less fortunate.

If I were a cynical man, I would wonder whether the international aid agencies had a vested interest in maintaining such a failed political and economic system, since it keeps entire populations in the state of dependence which justifies their own existence, and their regular appeals to our charitable conscience.

The Common Agricultural Policy remains the most organised conspiracy to maintain global food prices at an artificially high level.

Douglas Alexander, the British Government's Secretary for International Development, was quite right to tell the Rome food summit: "It is unacceptable that the rich countries still subsidise farming by $1bn a day, costing poor farmers in developing countries an estimated $100bn a year in lost income."

It would have been even better if he had mentioned the Common Agricultural Policy, specifically, in that statement. More to the point, I wonder why Gordon Brown – who recently sought to blame the Organisation of Petroleum Exporting Countries (Opec) for the high cost of petrol and diesel in our filling stations – has not attacked the much more single-minded cartel known as the Common Agricultural Policy for its contribution to the cost of food in Britain's high streets. Oh, I remember why, now: our country is a member of that infamous cartel.

This is in part why I query the remarks by the Foreign Office minister, Lord Malloch-Brown, after Robert Mugabe had dropped in to make a speech to the gathering. Malloch-Brown declared that "Zimbabwe is one of the few countries whose food crisis is not due to climate change or global prices, but due to disastrous policies."

It's true that Zimbabwe is an extreme case, in which corrupt government policies of land requisition have turned the former African "bread-basket" into a basket-case. Yet across the world, almost every distortion of food production, every misallocation of resources, can be attributed to the interventions of governments, whether as extorters of tax on food, or as lackeys of landowners – or a bizarre combination of both.

In other words, it's not the unfettered free market and globalisation which has caused the world food crisis, but governments who insist that markets can not be trusted – unlike them, of course. What is truly terrifying is that they continue, decade after decade, to get away with it.

The Independent

Wheat production declines in South Africa

South Africa faces a growing food crisis with declining domestic wheat production threatening to escalate food prices.

Critics say the drop is because of a combination of factors, primary among them is government's decision to open up the domestic market to global forces. But transport and infrastructure problems also make it costly for farmers to use the railways to export their product.

Wheat production fell from 2,5-million tons in 1997 to 1,8-million tons last year, according to statistics from the South African Grain Information Service.

In the early 1990s the government moved away from a policy of self-sufficiency in food production, says Nico Hawkins manager of industry services at Grain South Africa (GSA). The new policy of food security means that "as long as we are able to buy food on international markets at prices cheaper than we can produce it ourselves, we would rather import those food items," Hawkins says.

GSA now calls for increased import tariffs. Hawkins says the free trade policy allows for tariffs to be used to protect farmers in times of low profitability.

"We [GSA] asked government to increase import tariffs in 2006, but they refused. Our local market was not protected and commercial farmers were discouraged from farming."

AgriSA executive director Hans van der Merwe says the question of a return to subsidies is not so simple. Developing countries simply can't afford to compete by matching the immense subsidies paid to farmers in the developed world. Such action would also keep food prices high.

"For many decades this approach by governments of industrialised nations resulted in surpluses being produced, which were exported, in many cases below production cost, to other countries. This depressed global prices for agricultural produce, making it unprofitable and unviable, especially for developing countries to invest in the growth potential of their agricultural sectors. South Africa, with many poor African and other developing nations, does not have the fiscal means to equal the subsidy expenditure of industrialised nations."

"By taxing imports heavily food for the poor may become unaffordable. Most importantly: although subsidies are still applied by richer nations to support their agricultural sectors, it is fundamentally against the spirit and rules of the World Trade Organisation."

According to Van der Merwe, AgriSA argues that it is economically and socially defensible to pitch import tariffs on agricultural products at a level that will neutralise the effect on local prices of distortive global subsidies.

"It is true that government failed to adequately protect the wheat industry for a number of years. Low prices led to underinvestment and structural adjustments away from wheat production and, subsequently, a higher dependency on imports. It also holds true that the global boom in agriculture commodity prices will provide an incentive for increased production," he says.

According to Jannie de Villiers, executive director of the National Chamber of Milling, the decay in South Africa's infrastructure also contributes to rising food prices. "In 1985 85% of grain produced in South Africa was transported via railway. Today only 50% of grain is transported by trains. This is despite the fact that road transport is 30% more expensive."

De Villiers says the country is losing out on major export opportunities because of poor infrastructure. "We have an approximate two-million ton surplus in the maize harvest this year, but due to Transnet Freight Rail's low capacity to transport surplus maize to the port the country is losing a lot of money.

Transnet Freight Rail is able to transport only 30 000 tons a week, which means it would take two weeks to fill up a normal size freighter."

Another factor influencing decreased production is in the area of research. Ferdi Meyer, senior lecturer in the department of agricultural economics at the University of Pretoria, says: "Research and development in agriculture has basically collapsed under a restricted budget and poor management in the past few years and only very little research is still conducted without significant support from private institutions."

Mail and Guardian

Asian competitiveness is engendering a Western anti-free trade backlash

By Chan Akya

No good deed ever goes unpunished. Asians are quickly discovering the wisdom of this idiom, as they suddenly confront staggering shortages in basic food items. The price of rice has gone up exponentially in the past few weeks, crossing US$1,000 a tonne, despite the absence of any discernible decrease in global production nor a concurrent increase in consumption.

The upshot for Asian governments is increased social tensions in many countries where food shortages were unheard of until very recently, as well as a number of others where economic fragility has increased on the back of rising food prices. People have to eat, and if it costs them too much to eat, they will in turn demand to be paid more. This creates a vicious cycle of inflation that will eventually reduce the living standards of pretty much every second person in the region.

The source of this sudden spike in food prices, led by rice, has been the weakening purchasing power of the world's favorite currency. The second reason is what military strategists would euphemistically term 'collateral damage' from the ongoing reshaping of the world economic order, namely increased difficulties being faced in international trade.

Tackling the second problem first, the world appears inexorably headed for a period of increased trade confrontations that would make trade terms much more onerous for most countries. The primary target is Asian exports, which are much more competitive now than say 10 or 20 years ago.

Grumbling about the losses of jobs in America and Europe, and using the environment as an excuse, the West is already imposing substantial penalties on the natural advantages of Asian manufacturing. This will lead to higher tariffs on most products, as well as the tying of investments with trade, a key demand from Western countries seeking to overturn the savings advantage of Asians by erecting monopolistic structures around their entrepreneurs.

Agricultural produce has been the source of much abuse by the Europeans, whose Common Agricultural Policy (CAP - surely an acronym that deserves an "R" as its second letter) is uniquely responsible for keeping a billion people in dire poverty. The American response has been both through their own subsidies, and by increasing the alternative uses of agricultural crops such as ethanol for corn that is heavily subsidized in the name of energy self sufficiency.

CAP ensures that vast farms producing overly expensive produce in Europe are sustained at taxpayer expense, leaving fallow the fertile lands of Africa and many parts of Asia as excess production is dumped on global markets. These countries cannot export to Europe or the United States due to the tying of agricultural trade with unrelated items, creating astounding tariff and non-tariff barriers to trade.

A simple example is sugar. Over a fifth of the world's sugar is derived from beet, even though it is more than five times inefficient compared with sugarcane product due to its higher consumption of energy and other factor inputs. The reason that beet sugar is produced at all is the CAP subsidies in Europe, which in turn make it uneconomical for many farming countries in central Africa to grow sugarcane. The result is a constant search for employment, income in turn creating a mess of tribal conflicts across the region.

Any European who talks about how much more civilized the continent has been relative to America's war-mongering clearly doesn't understand the horrific costs on poor farmers elsewhere in the world. Put simply, while it's easy to count America's war dead perhaps in the hundreds of thousands, victims of European farm subsidies number in the hundreds of millions.

The eagerness of unctuous European politicians to protect schemes like CAP has proved to be the biggest stumbling block in talks in free up global trade and has led to a complex web of tariffs on agricultural produce. Each layer of tariffs imposed by a country creates an additional issue for every bilateral agreement. If you wanted to picture this, the best would be a large spider's web, but with every node hosting a separate web connecting with a specific group of countries.

The upshot of all this is that trading in agricultural products is by far the most complex issue in international trade with lack of uniform standards, multiple layers of bureaucracy, zero price transparency and most importantly, a complete absence of free markets.

All too often, these arrangements fail - imagine the spider's web above and think that a ball bearing were to fall through multiple layers - and you get the idea that what starts as a minor problem, such as a weather disturbance, in one country can quickly degenerate into global panic on the price of the produce affected.

This is what has happened to rice of late. The largest consumers of rice being in Asia, a few minor weather disturbances caused exports to decline and as prices rose as a consequence, quickly caused a domino effect of trade bans and other barriers, accentuating the problem. The Philippines is the worst affected by the mess, but others like Indonesia are also suffering.

Rice may be an Asian problem, but the unnecessarily complex system of trade agreements in place is clearly a legacy of corrupt European governments, who bear all the moral shame in this matter.

There is however another culprit here, one that gets away scot-free usually. As most regular readers of this column know, I am referring to the root cause of the current mess of inflation amid excessively depressed interest rates, the US dollar. More simply, the idiot central bankers of Asia who squander their responsibility at the altar of conformity by purchasing billions of dollars worth of useless financial assets have done their region a great disservice.
This is really simple to understand for even a child of five, but since central bankers often forget basic things like tying their shoelaces, lets remind them.

Purchasing too much of anything increases its price, not its value if the latter is defined purely as the marginal utility of consumption. The US dollar is too strong relative to inherent industrial and service sector advantages of the US economy today. Put differently, America's economy if far bigger than it deserves to be, thanks mainly to the unregulated appetite of Asian central bankers in accumulating US dollars and its overvalued counterparts such as the euro.

This is why Americans continue to drive gas-guzzling SUVs to collect their unemployment benefits from an increasingly indebted US government that in turn borrows the money from Asian governments by giving them IOUs that return less than the domestic inflation rates of all these countries. (Note: if you are a central banker, you are encouraged to read that sentence a few times. Anyone else will have understood it in the first read and can proceed).

The other side of this wealth transfer is that Asian currencies are stupidly cheap compared with the competitive advantages that have been heaped on the region for the past few decades. That in turn attunes an excessive number of factor inputs to the production of goods for the US consumer rather than serving domestic consumption. Looking through the economic make-up of most of the region, only Australia and India stand out as countries with a defensible mix of domestic consumption against goods produced for exports.

Locking up savings in a currency that has terminally declining purchasing power means that Asian authorities have less fiscal and monetary policy leeway to regulate the dynamics of their own economies. This is what causes structural inflation, that is, the achievement of a new level in prices, as different from a cyclical increase in prices, which has in turn manifested in food prices.

As governments in countries like the Philippines scurry for cover, very little is being said about the main culprits, namely European farm subsidies and the overvalued US dollar.

Asia Times