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Zimbabwe[114]


1 Introduction

1.1 Importance and structure of the agricultural sector

Agriculture is the backbone of Zimbabwe’s economy inasmuch as Zimbabweans remain largely a rural people who derive their livelihood from agriculture and other related rural economic activities. It provides employment and income for 60-70 percent of the population, supplies 60 percent of the raw materials required by the industrial sector and contributes 40 percent of total export earnings. Despite the high level of employment in the sector, it directly contributes only 15-19 percent to annual GDP, depending on the rainfall pattern (Government of Zimbabwe, 1995), and this is a statistic that understates the true importance and dominance of the agricultural industry. It is generally accepted that when agriculture performs poorly, the rest of the economy suffers.

Zimbabwe has a total land area of over 39 million hectares, of which 33.3 million hectares are used for agricultural purposes. The remaining 6 million hectares have been reserved for national parks and wildlife, and for urban settlements. The distinguishing characteristic of Zimbabwe agriculture is its dualism, i.e. the existence of two major subgroups based on the size of landholdings. The larger group is unsophisticated and comprises about 7.1 million smallholder and communal farmers occupying a total of 21 million hectares. In general, communal and smallholder farmers occupy areas of lower natural potential for agriculture in terms of rainfall, soils and water for irrigation. In addition, these areas are of lower economic potential because of the distances from markets and poor communication and social infrastructure. Until recently, the other group comprised about 4 000 large-scale farmers with very sophisticated production systems and occupies about 11 million hectares of land, primarily located in the areas of high agricultural and economic potential.

Communal and commercial farmers are also distinguished by the fact that the former produce mainly for own consumption, and the latter produce mainly for commerce. The main agricultural products produced by communal farmers are maize (the staple food), groundnuts, other grains, beans, vegetables, meat, milk and fuelwood. Commercial farmers concentrate on cash crops such as tobacco, horticultural products, particularly cut flowers, coffee, maize, groundnuts, sorghum, soya beans, sunflowers, cattle for slaughter, pigs, goats and sheep. Zimbabwe’s principal agricultural exports in descending order include tobacco (60 percent of total agricultural production), cotton lint (about 10 percent), raw sugar (9 percent), tea and coffee, horticultural products and maize (in nondrought years). Imports of agricultural products are limited mainly to wheat and maize in drought years.

1.2 Major policy changes and programmes in the last two decades

Three main policy frameworks have affected the performance of agriculture in Zimbabwe in the past two decades. First, there was the “growth with equity programme” pursued by the government between 1980 and 1990. It sought to redress the colonial legacy in favour of communal farmers. Second, there was the “structural adjustment market-oriented reforms”, the Economic Structural Adjustment Program (ESAP), adopted in 1991. Finally, with more profound implications for the sector, there was the programme of “fast-track land resettlement and redistribution” started in 2000 and currently in progress.

The two main features of agriculture at independence in 1980 were the duality of agriculture and the high degree of government intervention in the sector intended to stimulate production. After independence in 1980, agricultural policy was directed to reducing inequality and to supporting smallholders. The supply response by smallholders was dramatic, and they became the largest suppliers of maize and cotton to formal markets within the first five years (1980-1985) of independence. The focus on stimulating and supporting smallholder agriculture was also seen as a means towards achieving food self-sufficiency and food security among communal farmers. At the same time, government instituted a land resettlement programme and charged all key public sector institutions to give a high priority to smallholder agriculture.

In 1986, government took measures to stimulate production through export incentives, introducing the Export Retention Scheme and the Export Revolving Fund and foreign exchange allocations in favour of exporters. Air transport was improved, the Horticultural Promotion Council was formed, and the communal areas management programme for indigenous resources (Operation Campfire) was established towards the end of the 1980s. In addition, government policy indirectly stimulated export production through the relatively low government-set producer price for maize, which made many commercial farmers diversify into cash crops destined for the more lucrative export markets.

By the early 1990s, the interventionist policies had reached their limit and could not be sustained any further, forcing government to embark on market-oriented reforms including in agriculture. The market reforms adopted in 1991 were aimed at market deregulation, liberalization and export promotion (Government of Zimbabwe, 1991). Agricultural marketing was deregulated, and controls on domestic prices were removed except for a few commodities. The main thrust was export-oriented agricultural production, but the problem remained that of generating substantially greater farm output from smallholder farming (communal, resettlement and small-scale farming) to meet direct household consumption needs and to generate greater net farm cash incomes. To consolidate these reforms, in 1995, government adopted a comprehensive agricultural policy for the period 1995-2020.

Although export incentives were phased out, the devaluation of the Zimbabwean dollar throughout the 1990s continued to stimulate exports. Because of this, agricultural producers suddenly received much higher prices in Zimbabwean dollars for their exports. While trade was liberalized, importation and exportation of some goods required a licence. For example, importation of fertilizers is regulated as well as exportation of maize and other foodstuffs.

Market liberalization reforms led to a tremendous increase in agricultural production costs particularly for stock feeds, fertilizer, transport costs and agricultural equipment compared with prices of agricultural produce. Interest rates swelled and now constitute one of the largest components of production costs for commercial farmers. The hoped-for diversification resulting from market reforms has not happened because of limited appropriate technology options in the various farming regions, lack of access to capital, lack of markets, absence of any farmer advisory services and the disruptive nature of land invasions. Some diversification was noted, including ostrich production and specialized horticulture, which are capital-intensive and beyond the means of many communal farmers.

In view of the negative outcome of the economic reforms on prices and consumer welfare as well as the strategic role of agriculture and the struggle around the land reforms (land invasions), government has since reversed some agricultural policies. In 2000, it introduced price controls over a number of agricultural and food products. The marketing of grain is now controlled by the Grain Marketing Board (GMB), and private operators are required to declare their holding of grain, or it is confiscated by government. The GMB is tasked with maintaining strategic grain reserves and has the sole right to import and export maize.

1.3 Land reform

The land issue lies at the heart of economic performance of Zimbabwe both in the past and in the future. For centuries, landownership has been at the centre of all struggles, revolutions, power and control of the country in both political and economic terms. At independence, there was an uneven distribution of land and water, to the detriment of smallholders. Policy measures were required in order to correct this anomaly. However, there was a stumbling block in the form of the Lancaster House Agreement of 1979, which required that all land be acquired on a “willing buyer willing seller” basis and that compensation for any land seized was to be denominated in foreign currency. Donor support for this programme was poor, and disbursements were relatively small. As a result, land was costly, and since it was purchased under the “willing-seller willing-buyer” rule, it was available mainly in marginal production areas and on an ad hoc basis. Despite the passing in 1985 of the Land Acquisition Act, which gave the government the first option to purchase land that was put on the market, it did not redress the problem of the lack of large blocks of land where planned resettlement would be more feasible.

Since 1998, the land issue has become the most important factor in the agricultural performance of Zimbabwe. This was triggered by a number of both subjective and objective factors. The objective factors include the needs to redress the unequal distribution of land resulting from colonialism and to enhance production potential of communal farmers. The immediate objective of the current land reform is not increased productivity but transfer of landownership. As such, success of land reform is, according to its proponents, measured in terms of transfer of ownership in the short term, while increased production is a longterm objective. In August 2002, the government declared the fast-track land reform complete, after implementing its transfer of landownership policy.

1.4 Trade policy

Zimbabwe is a member of the WTO, the ACP-EU Cotonou Agreement, regional trade arrangements (SADC, COMESA and CBI) as well as bilateral trade agreements with neighbouring countries, i.e. the Trade Agreement Group, which includes Botswana, Namibia, Malawi, Zambia and South Africa. All the arrangements provide frameworks for further liberalization of trade, and Zimbabwe has made commitments within each of these arrangements towards that objective.

Prior to the 1991 reforms, Zimbabwe imposed stringent controls on trade, foreign currency flows and the exchange rate. The main objective of economic reforms in the area of trade was the abolition of quantitative controls, reduction and harmonization of tariffs and duties, removal of export incentives, phasing out of the import licensing regime, elimination of foreign currency controls, reduction of tariffs and removal of surtax.

The trade policy component of the programme was carried out in full. All imports were placed on the Open General Import Licence except those that are regarded as strategic such as fuels. An Export Processing Zone programme that included several export incentives was introduced to promote export-oriented production and development. The policy also focused on regional integration and liberalization of trade within WTO with a view to implementing a uniform tariff structure. In an effort to restore stability in the foreign exchange market and to curtail import pressure on the exchange rate, as well as to generate revenue, protect local manufacturing and improve income distribution, government reversed policy and increased tariffs in October 1998 on finished goods with local substitutes or those considered as luxuries.

WTO commitments

The birth of WTO in 1995 coincided with the end of Zimbabwe’s economic reform period, during which it carried out autonomous and unilateral trade liberalization policies. By the time commitments made under WTO came into effect, Zimbabwe already had a much more liberal trade policy. Controls on imports and foreign exchange had been removed, tariffs reduced, the domestic market de-controlled and the environment for foreign direct investment improved. Given this background, Zimbabwe viewed trade liberalization within WTO as a complementary and supportive international instrument to buttress national efforts. It was expected that Zimbabwe’s trade and investment liberalization would not only succeed but also, more importantly, result in economic growth, employment creation, increased exports and integration of the country into the world economy. Thus, the approach taken by Zimbabwe in the WTO was to “lock in” trade liberalization measures initiated within ESAP through the WTO agreements.

Zimbabwe is classified as a net food-importing developing country within the WTO. As a developing country, Zimbabwe enjoyed some concessions regarding compliance, longer implementation periods, and exemption from some commitments, grace periods and technical support towards meeting its obligations. Five years after the WTO came into being, however, there is no clear understanding of the implications of its disciplines on the Zimbabwean economy. What is more disturbing is that, before Zimbabwe has been able to come to terms with the commitments undertaken under UR, it is now faced with the challenges of negotiating new commitments in the WTO Doha Round.

ACP-EU Cotonou Agreement

After independence, Zimbabwe became a signatory of the Lomé Convention that, since 1975, has provided the basic framework for economic cooperation between the EU and 71 ACP countries. Trade cooperation, which is based on nonreciprocal tariff preferences given to ACP by the EU, is a very valuable component of EU-ACP cooperation inasmuch as preferences guarantee better market access and market prices to goods originating from ACP countries. The impact of preferential market access has generally been positive for Zimbabwe.

In the four consecutive years from 1994, Zimbabwe enjoyed a balance of trade surplus in its trade with the EU. Exports to the EU currently account for about 36 percent of the country’s total exports and cover both traditional and nontraditional product lines. Major agricultural export products to the EU are tobacco, cotton, meat products, tree plants, and cut flowers. Under the Convention’s Beef and Veal Protocol, Zimbabwe has a preferential tariff quota that allows it to export 9 100 tonnes of beef into the EU annually. Under the Sugar Protocol, Zimbabwe’s preferential tariff quota stands at 30 225 tonnes annually supplemented by a variable Special Preferential Sugar quota. Zimbabwe has also benefited from the STABEX fund for supporting export earnings owing to a decline in prices of commodity exports.

The current diplomatic row between Harare and the EU has culminated in the imposition of “smart sanctions”. The imposition of the sanctions has been based on the ACP-EU Cotonou Agreement, and the argument has been that Zimbabwe has violated article 9 of the Agreement, which deals with maintenance of the rule of law, human rights, democracy and good governance. It remains to be seen whether the sanctions will also translate into preference erosion for Zimbabwe’s goods in the EU market. Since the EU is Zimbabwe’s main market especially for agricultural products, sanctions (smart or otherwise) will alter the preference schedule and lead to a serious deterioration in export market access for the country.

Regional trade integration

Regional integration within SADC and COMESA is another important platform through which Zimbabwe is undertaking further trade liberalization measures. Since the 1990s, all COMESA and SADC countries have been liberalizing their trade and foreign exchange regimes unilaterally under market economic reforms supported by the IMF and the World Bank.

To stimulate trade integration, SADC members in 2000 started to implement a Trade Protocol aimed at establishing a free trade area within eight years from its ratification. In recent years, there has been a marked shift from EU towards SADC, and exports to the region now account for about a 30 percent of Zimbabwe’s total exports, while imports from SADC are over 40 percent of the total import bill. Zimbabwe supplies a variety of products to SADC, chief among them tobacco, cotton, oil cake and soya beans, maize, live bovine animals, coniferous wood, cotton seeds, light manufactures and imports in exchange fuels, vehicles, explosives, chemicals machinery, plastics, paper and steel.

In November 2000, COMESA launched its free trade area with duties on a wide range of goods reduced to zero. Contrary to Zimbabwe’s situation in SADC, trade with COMESA countries is characterized by a huge surplus trade balance that has existed since COMESA was founded. Zimbabwe’s major imports from COMESA include food and live animals, crude materials, manufactures, beverages and tobacco, while its exports are dominated by food products, manufactures, chemicals, transport equipment and machinery.

Bilateral trade agreements

South Africa is a major trading partner for Zimbabwe, and trade between them grew at a much faster rate in the 1990s following removal of international sanctions imposed on apartheid South Africa. The Trade Agreement between South Africa and Zimbabwe that entered into force on 30 November 1964 accords preferential treatment to goods and services in the form of rebates on duty and duty-free market entry. Some products including textile and clothing are subject to quotas and rules of origin when entering the two markets. Agreements with Botswana and Namibia are based on the same framework. Goods and services are allowed tariff- and surcharge-free between Zimbabwe and Botswana and between Zimbabwe and Namibia. In each of the two agreements, access of goods and services is subject to a 25 percent minimum local content. Under the Botswana-Zimbabwe agreement, certain classes of textile and clothing products from Botswana are not allowed into Zimbabwe, to reduce competition.

2 Experience with implementing the WTO agreements

2.1 Market access

Bound and applied tariffs

In agriculture, Zimbabwe bound most of its tariffs at 150 percent (except a few items whose bindings were set at 25 percent and bananas at 40 percent) to give scope for trade-offs in future negotiations on agricultural tariffs and to counter the impact of subsidized imports on domestic agricultural production. The high level of bindings was also arrived at after considering the need to gain more understanding on the implications of the reduction commitments. Like other developing countries, Zimbabwe committed itself to reducing its bound tariffs by a simple average of 24 percent between 1995 and 2000.

Applied rates in Zimbabwe are much lower than bound rates. The current structure of applied tariffs is characterized by a three-tier structure with tariffs escalating according to level of processing. Lower tariff rates are applied to raw materials, higher rates for semi-processed products and very high rates for finished industrial products. Given that Zimbabwe is mostly an exporter rather than an importer of agricultural products, the level of tariffs affects relatively few imported products. Table 1 below shows Zimbabwe’s bound and current applied tariffs on agricultural imports. For example, nine tariff headings covering spices, cocoa butter and powder and essential oils were bound at 25 percent with effect from 2004. The majority of the products whose tariff rates are bound are not produced in Zimbabwe and are not essential raw materials. This leads to the conclusion that protection objectives were not a factor during the negotiation of the bindings. The potential of producing some of the items bound is limited.

Table 1. Zimbabwe’s bound and applied tariff schedule on selected agricultural products

HS code

Description

Base rate (%)

Bound rate (%)

Applied rate (%)

0904
1200

Pepper, crushed or ground

50 (U)

25

15

0905
0000

Vanilla

30 (U)

25

15

0906
2000

Cinnamon and cinnamon tree flower, crushed or ground

50 (U)

25

15

0907
0020

Cloves, crushed or ground

50 (U)

25

15

0908
1020

Nutmeg, crushed or ground

50 (U)

25

15

1006
3000

Rice: semi-milled/wholly milled

30 (U)

25

15

1804
0000

Cocoa butter (fat or oil)

30 (U)

25

15

1805
0000

Cocoa powder, unsweetened

50 (U)

25

15

3301 Ex

Essential oils (terpeneless or not), excluding oils of bergamot, lavender or lavendin, anise, bitter almond and camphor, caraway, cinnamon, cumin, mustard, nutmeg, rosemary, valerian and vanilla in immediate packings of a content minimum 5 litres/5 kg or other packings

30 (U)

25

5

Source: Ndoro and Tekere (1999).

Trade with neighbouring countries is becoming increasingly important for Zimbabwe because of regional trade arrangements (SADC and COMESA), and there is a marked difference between applied tariffs on agricultural imports from the region and those from outside the region. For example, Zimbabwe’s applied tariffs for imports from the COMESA region are either zero-rated or zero, and this applies to agricultural products. However, with the implementation of the SADC trade protocol, applied tariffs on imports from the region will also be much lower than the applied MFN rates. Table 2 gives a comparison of applied MFN rates on agricultural products (HS chapters 01-24) with those that will apply to imports from SADC countries at the end of the first stage (in 2004) of the tariff phase according to the SADC Trade Protocol. It is noted that where rates applied to imports from non-SADC countries are low, these will tend to be much lower or zero-rated for imports from SADC and vice versa.

Table 2. Comparison of post-2004 SADC and MFN tariffs

HS chapter

MFN tariffs

SADC tariff ratesa

1

17

5

2

7

3

3

26

20

4

26

20

5

19

0

6

7

0

7

30

25

8

25

10

9

17

15

10

12

0

11

15

10

12

6

0

13

21

0

14

4

0

15

23

5

16

17

15

17

31

5

18

18

10

19

36

20

20

34

20

21

36

25

22

46

30

23

9

0

24

75

75

a Operational as from 2004, being the first of the three-stage tariff phase down according to the current implementation schedule of the SADC trade protocol.

Non-tariff measures

Zimbabwe does not maintain any quotas and does not have the right to invoke special safeguards. Import restrictions have been minimized, and most imports now enter Zimbabwe without any licensing restrictions. While domestic controls an maize are being decreased in Zimbabwe, the GMB still exercises some monopolistic controls over maize imports. This is being done mainly to ensure the avoidance of importation of GMOs and to ensure that the imported commodities conform to the country’s biosafety regulations and standards.

2.2 Domestic support

Zimbabwe did not make any major commitments under domestic support except notification obligations. Prior to ESAP, the Zimbabwe government manipulated production through pre-planting and/or pre-harvesting policy statements and price guarantees. With the coming of ESAP and trade liberalization, such distortions were removed, even though the government retained the right to announce a benchmark price to influence the market. Zimbabwe in future must therefore limit its use of trade-distorting support disciplined by the Amber Box to de minimis levels. However, it is unlikely that this constraint will prove limiting in the near future.

Currently, the support given to the agriculture sector by the Zimbabwean government includes research, extension, training, purchase of land for resettlement and veterinary services. Expenditure on general support measures provided by the Zimbabwean Government under the Green Box has been very low and falling during the period 1995-1999 (Table 3). There was an 81 percent increase in government spending on the Department of Lands and Technical Services from 1998 to 1999. This was due to the increased demand for technical services on newly acquired farms. The decline in total support is due to a significant reduction in farms acquired over that period (3 456 ha compared with 42 721 ha in 1995 and 34 782 ha in 1998).

Table 3. Green Box expenditure 1995-1999 (US$ thousand)


1995

1996

1997

1998

1999

Department of Research and Specialist Services

5 069

5 607

5 058

5 192

3 577

Department of Lands & Technical Services

2 902

971

1 393

2 488

4 492

Department of Agricultural, Technical & Extension Services

131

99

109

191

163

Department of Veterinary Services

5 368

5 714

3 536

2 447

2 377

Total

13 471

12 393

10 097

10 319

10 610

Source: Ministry of Lands Agriculture and Rural Resettlement, Harare.

2.3 Export subsidies

The adoption of ESAP in 1991 led to the banishing of inward-looking growth strategies and the removal of export incentives. By 1994, export incentive measures such as the Export Revolving Fund, the Export Support Facility, Export Retention Scheme and the Inward Processing Rebate Scheme had been phased out. The government, in its notifications to the WTO, has stated that:

In accordance with Article 25.2 of the Agreement on Subsidies and Countervailing Measures and Article XVI: 1 of the GATT 1994, the Government of Zimbabwe wishes to inform that it does not grant or maintain within its territory any subsidy within the meaning of Article 1.1 of the SCM Agreement which is specific within the meaning of Article 2 of the Agreement, or which operates directly or indirectly to increase exports or reduce imports into its territory within the meaning of Article XVI:1 of the GATT 1994 (Zimbabwe Permanent Mission, 1998).

Thus, in Zimbabwe, export incentives were removed long before the country made commitments within the UR. In effect, Zimbabwe had no export subsidies, and thus it has nothing to implement on this commitment. Nevertheless, there is a threat from subsidized products from overseas finding their way into regional markets where Zimbabwe has a competitive advantage.

2.4 SPS/food safety and quality issues

SPS measures are regulations and standards applied to both imported and domestic goods that aim to protect human, animal or plant life or health from pests or diseases. While SPS regulations and standards aim to satisfy the above objectives, in the wrong hands they become powerful tools to impede international trade and protect domestic producers through unjustified different requirements in different markets and unnecessary costly and time-consuming testing. In addition, SPS standards are always changing, and are becoming increasingly stringent with the blessing of the international standard-setting bodies. These changes have increased production and marketing costs for developing countries, which is a major concern to Zimbabwe.

With the exception of beef (during the foot and mouth outbreaks), the SPS requirements and environmental awareness and concern have generally remained high in Zimbabwe. Various legislative, regulatory and monitoring instruments are in place on SPS, affecting both imports and exports. For example, arising from the implementation of the National Environmental Protection Act, producers and exporters have realized the importance of good agricultural practice to encourage top yields and quality produce free from pathogens and pests. Zimbabwe has one of the most stringent pesticide legislations in Africa. Over the years, reducing pesticide has ensured a safe and acceptable product. As one of the leaders in the development and use of Integrated Cropping Management Systems, the Zimbabwean horticultural industry is able to reduce agrochemical usage. Producers have always been aware of the need to utilize recyclable materials for all their packaging requirements. Growers have always been encouraged to undertake HACCP reviews of their entire product from seed to dispatch of the final product.

Under the Lomé Convention between the ACP and the EU, Zimbabwe received technical assistance from the EU to deal with foot and month disease, which has enabled it to export beef to the EU under the protocol arrangement. However, since the freezing of relations between the EU and Zimbabwe, provision of technical assistance on SPS has ceased.

2.5 TRIPS

Under TRIPS, Zimbabwe is concerned with issues related to health, particularly access to medicine, food security, biodiversity conservation, sustainable use, patenting of life forms, market access and rural development. Since independence, Zimbabwe has applied international patent and trademark conventions. It is a member of the World Intellectual Property Organization. Generally, the Government of Zimbabwe seeks to honour intellectual property ownership and rights, although there are serious doubts about its ability to enforce these obligations. New legislation on protection of biodiversity, patents, copyrights and traditional knowledge is in place. Remittances for royalties, technical services and management fees must be approved by the Reserve Bank. Such remittances have been suspended by many companies with overseas ties, owing to the severe hard currency shortage experienced in Zimbabwe since year end 1999.

To protect traditional knowledge and farmers’ rights, Zimbabwe is pursuing possible sui generis policy options under TRIPS. The strict restrictions imposed by pharmaceutical companies through the TRIPS agreement on the right of countries to provide health care to their peoples and to acquire drugs at affordable prices is of major concern. In this regard, Zimbabwe advocates the right of developing countries to provide health care, develop pharmaceutical industries and secure drugs at affordable prices for the majority of people.

3 Review of food and agricultural trade

3.1 Macroeconomic trends

For the past 3-4 years, Zimbabwe has experienced its worst economic crisis ever, with all macroeconomic fundamentals indicating a continued collapse of the economy. Output growth has decelerated since 1997, with real GDP falling by 5.5 percent in 2000 and 7.5 percent in 2001, mainly because of the poor performance of the agricultural sector. The economy confronts a dangerous mix of ballooning domestic and external debt, crippling foreign exchange shortage, poor weather conditions, negative real interest rates and three-digit inflation (currently 120 percent; UNECA Economic Report for Africa, 2000).

The main cause for this collapse lies in the shocks (land invasions, bad rainfall pattern, poor economic management) to agriculture, which is the mainstay of the Zimbabwean economy. Further, lack of policy credibility, and particularly macroeconomic policy inconsistency and reversals, has undermined efforts at turning round the economy. For example, over the past ten years, government has consistently fuelled the budget deficit by overspending and borrowing from the local market to cover the deficit, which is the main cause of inflation since 1998.

The external sector was also hit by a series of policy reversals. Tariff increases were effected on selected industrial imports considered as luxuries while importation and exportation of food crops are monopolized by the state trading companies. However, Zimbabwe’s exchange rate policy is characterized by inconsistency between policy and practice. Official policy documents support a flexible exchange rate policy, yet for the past two years, the exchange rate has been fixed, leading to a severe shortage of foreign exchange. Figure 1 shows the trend in the quarterly real exchange rate for the major currencies from 1990. Figure 2 and Table 4 show quarterly and annual trends in nominal exchange rate movements between the Zimbabwean dollar and the currencies of some of the major trading partners from 1985 to 2000. From the period 1985 to 1991, the exchange rate in nominal terms compared quite favourably to the major currencies. Since 1991, the Zimbabwe dollar was devalued on seven occasions by more than 400 percent and currently stands at $Z55 against the US dollar. The devaluation failed to close the gap between the official rate and the parallel market rate (which started in 1999), which was trading in mid-2002 at Z$650 to the US$ and Z$1 000 to the pound. This has led to speculative pressures in the economy, with most exporters holding on to their foreign currency earnings in anticipation of increased devaluation.

Table 4. Nominal exchange rate 1985-1999 ($Z per US$)

1985

1.59

1993

6.61

1986

1.67

1994

8.23

1987

1.67

1995

8.78

1988

1.84

1996

10.18

1989

2.13

1997

13.49

1990

2.49

1998

26.23

1991

4.05

1999

38.09

1992

5.14



Source: Reserve Bank of Zimbabwe Quarterly Economic and Statistical Digests and IFS.

Figure 1. Trends in nominal exchange rate (1985-2000)

Source: Reserve Bank of Zimbabwe Quarterly Economic and Statistical Digests and IFS.

Figure 2. Trade weighted real exchange rate (1990:1-2000:4)

Source: Reserve Bank of Zimbabwe Quarterly Economic and Statistical Digests and IFS.

3.2 Agricultural trade developments

A number of salient features characterize Zimbabwe’s agricultural trade. First, there is a marked shift from cereal production and exports to cash crops. Second, export performance is directly a function of rainfall pattern, as is the case with import performance. Third, agricultural exports are relatively diversified by African standards. Fourth, agricultural imports are concentrated in cereals.

The agricultural sector is the largest single source of export earnings, contributing about 40-45 percent of total exports in most years. The single largest foreign currency earner is tobacco; even in years of very serious drought such as 1992, the production of tobacco was maintained. Until the land invasions, other rising stars in terms of exports were horticulture and beef. Without disturbances on farms and depending on the rainfall pattern, Zimbabwe is generally a net food exporter rather than an importer. Recently, imports have tended to increase more rapidly than exports, in both value and volume terms, especially in drought years, reaching a peak of US$2 437 million ($Z11 232 million) in 1992 (Ministry of Agriculture Statistical Bulletin, 2001). However, the decline in the food import bill after 1992 led to a marked improvement, with the balance of agricultural trade in surplus in six of the eight years from 1992 to 2000. The year 2002 has already been declared a disaster year in terms of agriculture, and government is seeking donor support to source food from outside.

One of the main features of Zimbabwe’s agriculture in recent years is the marked shift from production and exports of cereals to cash crops. There has been a general decline in cereal production in the country ever since 1985. Commercial farmers realized that they could reap higher profits by producing more of other cash crops like tobacco and the highly demanded horticultural products in the international market. This scenario has brought about a change in the export composition of the county, i.e. from the domination of cereals to the domination of tobacco and horticultural commodities. However, it resulted in increased importation of cereal commodities, an unhealthy situation from the viewpoint of the country’s food security. It is also interesting to note that there has been a steady increase in citrus fruit production from the 1980s through to the year 2001. This increased production has been brought about because of the increased demand for citrus fruits in the international market, which has seen exports of citrus fruits becoming one of the dominant exports in the country’s export basket.

Zimbabwe has experienced a continuous deterioration in its terms of trade for agricultural commodities over a long period, which has adversely affected its agricultural trade performance. Table 5 illustrates that world prices of Zimbabwe’s agricultural exports have been on a downward trend. With the exception of sugar, prices of all major agricultural exports are below their 1990 levels.

Table 5. World commodity prices for Zimbabwe’s major agricultural exports (US$)

Commodity

1980

1985

1990

1991

1992

1993

1994

1995

1996

1997

Cotton
(US$/tonne)

2 843

1 921

1 819

1 641

1 999

1 204

1 600

1 785

1 553

1 622

Tobacco
(US$/tonne)

3 161

3 807

3 392

3 425

3 227

2 536

2 39

2 214

2 671

3 277

Coffee (mild)
(US$/tonne)

4 814

4 710

1 972

1 833

1 324

1 468

3 002

2 796

2 359

3 869

Tea
(US$/tonne)

2 503

2 636

2 051

1 679

1 598

1 578

1 431

1 281

1 479

1 950

Maize
(US$/tonne)

174

164

109

105

98

96

98

104

145

109

Beef
(US$/tonne)

3 833

3 140


2 606

2 303

2 463


1 597



Sugar (EU)
(US$/tonne)

676

511

583

599

589

583

564

577

599

582

Sugar (United States)
(US$/tonne)

920

654

513

465

441

448

441

426

432

449

Sugar (world)
(US$/tonne)

877

131

277

193

187

207

242

246

231

233

Source: UNCTAD Trade and Development Statistics (2000).

The Zimbabwean economy has continued to rely on markets and conditions that existed before the UR AoA, with most of its exports still flowing to the EU mainly through preferential treatment under the Lomé Convention. The second largest destination is the regional market within SADC, with South Africa alone accounting for over 40 percent of regional trade. Table 6 shows the percentage breakdown of the value of Zimbabwe’s agricultural exports to different countries, regions and organizations. Increased access to developed countries remains Zimbabwe’s principal goal. There are still significant barriers in agricultural goods, e.g. tariff peaks and subsidies in developed countries (CAP in the European Community), and the country is yet to benefit from the AoA.

Table 6. Zimbabwe’s export destinations (%)

Year

COMESA

EU

Other

RSA

UNDEF

SADCa

Total

1993

15.9

39.6

30.2

8.2

6.1

20.0

100

1994

15.2

43.1

25.0

9.7

7.1

24.4

100

1995

15.8

47.2

24.3

7.5

5.2

22.0

100

1996

12.7

38.4

37.4

5.8

5.7

17.9

100

1997

15.9

42.8

29.5

8.4

3.4

22.2

100

1998

18.2

41.0

29.0

9.0

2.8

26.0

100

a The SADC figure incorporates several countries that are also part of the COMESA. The total is the sum of all the figures except SADC, as this involves some countries already accounted for in the COMESA figure.

Source: Ndoro and Tekere (1999).

3.3 Agricultural exports

Figure 3 shows the trend in total agricultural exports since 1985. Total agriculture exports grew by an average of 6 percent between 1985 and 1988. The 1992 drought led to a 20 percent fall in exports, but these quickly recovered owing to a favourable rainfall pattern and increased productivity. From 1996, however, the trend in export growth has been declining, although a recovery has taken place in

Figure 3. Agricultural products total export (with linear trend line).

Zimbabwe exports a wide variety of agricultural products, ranging from cash crops and cereals. The major agricultural exports include tobacco, cotton, tea, coffee, beef sugar, horticultural products and maize, depending on the rainfall pattern. The share of major agricultural commodities in total exports is shown in Figure 4 for the period 1985-2000. After 1995, there was considerable diversification away from tobacco to horticultural products. The industry experienced increased exports in four main categories; fresh produce (mostly vegetables), citrus and subtropical fruits, deciduous fruits and flowers. For example, a total of 54 000 tonnes (US$103 million) of horticultural produce was exported in the 1996/1997 season, compared with 6 000 tonnes (US$6 million) ten years previously in the 1986/1987 season (Horticultural Promotion Council of Zimbabwe). This was mainly because the tariff harmonization brought about by trade liberalization under the UR and foreign exchange liberalization under ESAP offered new options and enabled growers to penetrate previously impenetrable markets.

Figure 4. Share of agricultural exports.

Source: Agricultural Sector of Zimbabwe, Statistical Bulletin (2001).

Table 7 shows trends of quantities, exports and unit value for individual commodities over the past 15 years. The main observation is that between 1985 and 1994, the quantity of major exports (tobacco, cotton lint, dairy products, cereals including maize) by 24-105 percent, whereas for the period 1990-2000, all products except tobacco and dairy products recorded negative growth. However, the value of exports did increase for all products in the first period as well as in the second period bar cotton lint and cereals. Mean unit prices between the periods 1990-2000 have declined for most of the products, except for tobacco and cotton lint.

Various factors have affected the performance of agricultural exports. First, there was an outbreak of foot-and-mouth disease during 2001. Second, the volatile political environment and the current diplomatic row between Harare and the EU significantly undermined exports, especially to the EU market. Subsequently, horticulture has suffered, as major airlines that normally transported these products to the European markets pulled out of Zimbabwe. Third, the “fast-track” land redistribution exercise impacted on the ability of Zimbabwe to take advantage of the UR provisions. For instance, land most suitable for horticulture production (close to towns) has been turned over to wholesale cotton and maize production. The move has led to the replacement of cash crop production with subsistence production. Nevertheless, land redistribution in the long term could lead to increased productivity.

Table 7. Exports and unit values for major agriculture exports (annual average, US$)

Commodity




Percentage change

1985-89

1990-94

1995-2000

(A) to (B)

(B) to (C)

(A)

(B)

(C)

Tobacco






Value (US$ thousand)

266 181

363 771

555 502

36.67

52.71

Quantity (thousand tonnes)

101 419

139 283

183 864

37.33

32

Unit value (US$/tonne)

2 624.6

2 611.7

3 021.3

-0.49

15.68

Cereals






Value (US$ thousand)

45 325

59 909

51 491

32.18

-14.05

Quantity (thousand tonnes)

333 121

447 794

363 192

34.42

-18.89

Unit value (US$/tonne)

136.1

133.8

141.8

-1.672

-99.94

Maize






Value (US$ thousand)

43 532

56 688

33 595

30.22

40.74

Quantity (thousand tonnes)

323 637

436 854

270 842

34.98

-38.0

Unit value (US$/tonne)

134.5

129.8

124.0

-3.53

-4.41

Cotton lint






Value (US$ thousand)

85 526

68 739

11 604

19.63

-83.12

Quantity (thousand tonnes)

67 352

50 529

76 548

24.98

51.49

Unit value (US$/tonne)

1 269.8

1 360.4

1 458.0

7.13

7.17

Dairy products and eggs






Value (US$ thousand)

2 758

5 194

12 208

88.32

135.04

Quantity (thousand tonnes)

2 375

4 872

14 995

105.14

207.78

Unit value (US$/tonne)

1 161.3

1 066.1

814.1

-8.20

-23.63

Beef and veal






Value (US$ thousand)

539

0

423

100


Quantity (thousand tonnes)

546

0

135

100


Unit value (US$/tonne)

987.2

0

3 133.3

100


Beverages






Value (US$ thousand)

950

1 433

3 338

50.84

132.94

Quantity (thousand tonnes)

46 691

38 339

7 333

-17.89

-80.87

Unit value (US$/tonne)

20.3

37.4

455.2

83.7

1 117

Source: FAOSTAT.

3.4 Analysis of major agricultural export commodities

Tobacco

Zimbabwe is the world’s third largest tobacco producer after the United States and Brazil. Tobacco has always dominated the agricultural export composition, with the largest shares of 78 percent and 67 percent in 1992 and 1993, respectively. Low labour costs and high yields make Zimbabwe a more competitive producer of quality tobacco than its Brazilian and American rivals.

Tobacco production is mainly for export, with the domestic market consuming around 2-3 percent of the total. Half of Zimbabwe’s tobacco crop is exported to the EU. Tobacco exports have been growing since the 1980s. The favourable tobacco prices in the international market between 1994 and 1997 resulted in a boost in production of the crop. Flue-cured tobacco dominates tobacco exports, and its price started to rise in 1994 and peaked in 1996 at US$2.94 in response to a world shortage (Tekere and Ndoro, 1999). Since then, there has been a fall in the value of tobacco exports between 1997 and 2000, as shown in Figure 5.

Three key issues face the Zimbabwe tobacco industry. The first is the recently imposed five percent turnover tax on tobacco sold at auctions and the legislation tabled to impose a six percent levy on buyers and growers. The (white-controlled) Zimbabwe Tobacco Association has warned that these moves would result in a loss of confidence from multinational tobacco buyers. There is growing pressure for increased black involvement in the industry and plans by the (blackcontrolled) Zimbabwe Association of Tobacco Merchants to set up a third tobacco auction floor and block the award of buying licences to the white-owned merchant company, Tribac. Second is the tariff rate quotas applied on Zimbabwe’s tobacco exports in developed markets such as the United States. The third issue is the mounting anti-tobacco campaign in the north, which is a major market for Zimbabwe’s tobacco.

Figure 5. Tobacco total export value.

Source: FAOSTAT database.

Cotton

Cotton contributes 10-22 percent of agricultural exports. Recently, the introduction of an input credit scheme and deregulation of cotton marketing have resulted in a massive surge in production. Zimbabwe produces high-quality cotton because it is hand-picked, thus helping it secure and establish a niche market. Exports of cotton increased from 18 797 tonnes in 1993, peaked at 92 769 tonnes in 1997 and declined to 79 671 tonnes in 1998 because of low yields. Depressed world prices since the beginning of 1999 have depressed production further, although there is hope that economic recovery in the Asian economies may reverse the trend.

Sugar

Sugar, much of which is exported in raw form, is one of Zimbabwe’s major exports. Zimbabwe is a beneficiary of the sugar protocol under the ACP-EU Cotonou Agreement. Exports of sugar to the EU are within two arrangements: the normal ACP-EU duty-free annual quota and the special preferred sugar arrangement. The problem with sugar in Zimbabwe is that it is reliant on irrigation, which also depends on the rainfall pattern. As such, there have been fluctuations in the contribution of sugar to exports, with a significant drop experienced during the drought years of 1992-1993. The industry recovered in the ensuing years, and this enabled the country to negotiate an above-quota allocation under the special preferred sugar arrangement, which came into effect in 1995 and provided enhanced market access for Zimbabwe’s sugar exports.

Figure 6. Exports of sugar 1985-1999.

Source: The Agricultural Sector of Zimbabwe, Statistical Bulletin (2001).

Figure 6 shows the trends in exports of raw and refined sugar between 1985 and 2000. After 1985, there was a gradual decline in the exports of sugar, with the lowest levels being reached between the drought years 1992 and 1993. There was a rapid increase in sugar exports in 1994 caused by an improved market access condition following autonomous liberalization of trade in 1992 and enlargement of the EU market in 1995. The peak was reached in 1997, and since then, there has been a gradual decline in exports of sugar mainly as a result of the decline in world commodity prices and the current land redistribution programme in the country.

Horticultural exports

The horticulture industry is the fastest growing export sector in Zimbabwe. It ranks number six in the agricultural sector in terms of its contribution to foreign currency earnings after tobacco, cotton, cereal and grain, sugar, tea and coffee. The main export market is the EU, accounting for about 95 percent of cut flower exports, 90 percent of vegetables, herbs and spices, and 75 percent of citrus fruit exports. Total exports ballooned from 14 474 tonnes between 1989 and 1990 to 64 650 tonnes between 1999 and 2000 (Figure 7). Zimbabwe’s horticultural products enjoy a competitive cost advantage in the international market, deriving from low costs, good climate, vast availability of land suitable for horticulture, export processing zone status and (previously) the number of airlines servicing the industry. Opening up new markets in the Near East and East Asia is likely to perpetuate the growth of horticultural exports. There was a drastic fall in the export value of horticultural commodities in the 1998/1999 season of about 57 percent, despite the continuous increase in quantity produced resulting from depressed flower markets and prices and withdrawal of several airlines from Zimbabwe as well as the introduction of exchange rate controls. However, exports recovered again in 1999/2000 (Agricultural Statistical Bulletin, 2001).

Figure 7. Horticultural exports: 1989-2000.

Source: The Agricultural Sector of Zimbabwe, Statistical Bulletin (2001).

Floriculture, a subsector of horticulture, is expanding rapidly, with flowers for export to Europe, the United States, South Africa, Austria and the Far East being grown throughout the country. Floriculture is the least affected by the current turbulent environment, primarily because it is capital-intensive, and growers are less able to switch to alternative production. The success of the floriculture sector has been based on a free market situation requiring considerable entrepreneurial flair from producers.

3.5 Agricultural imports

Until recently, Zimbabwe has been largely self-sufficient in the provision of agricultural goods. From 1985, imports have been growing because of the increased shortages of cereals caused by drought, population growth, increased urbanization and the shift of production from cereals to cash crops. Before the reform programme, emphasis was on food security through self-reliance in cereal production rather than through trade. As such, food imports were minimal. The implementation of the structural adjustment programme in 1990 saw a shift from self-reliance towards trade. This caused a steady increase in import value, and the peak in terms food imports was in 1992 because of the drought. Figure 8 shows the trends in agricultural imports between 1985 and 2000.

Figure 9 shows the composition of agriculture imports from 1990 to 2000. Table 8 shows that wheat dominated total imports with rice, vegetables and fruits contributing significantly. This clearly shows that Zimbabwe is a net importer of wheat (grain).

Figure 8. Agricultural product imports 1985-2000, with a linear trend line.

Source: FAOSTAT.

Figure 9. Contributions of some agricultural commodities to total imports.

Source: CSO, National Accounts and Agricultural Statistical Bulletin (2001).

Table 8. Food import and export value indexes for Zimbabwe

Year

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Food import value index

129

55

52

77

57

163

801 578


815

252

393

812

541

570

461

Food import unit value index

58

63

71

66

79

101

120

70

88

132

162

106

133

106

105

Food import quantity index

222

87

74

116

72

161

672 265


928

191

243

762

407

534

439

Food export value index

66

86

106

113

76

138

86

37

77

223

151

158

178

163

119

Source: FAOSTAT database.

The implementation of the UR coincided with the autonomous dismantling of some of the trade barriers on imports under the structural adjustment programme. Zimbabwe’s current tariff levels are well below their bound levels for all agricultural commodities. The poor agricultural seasons that prevailed between 1995 and 1997, coupled with the “fast-track” land reform, led to a sharp decline in agricultural production and hence an increase in import quantity and value. In light of this and the UR, it is noteworthy that Zimbabwe has not abandoned quantitative restrictions on either maize imports or exports. However, the applied duty for this commodity has been maintained at a low level to ensure that imports are not too expensive in times of need, like the 2002 drought.

3.6 Inward investment flows in agriculture

Investment in agriculture has been shrinking, especially since the mid-1990s, at a time when the current fast-track land reform needed resource backstopping to succeed. Table 9 shows that, from 1988, the percentage of total investment going towards agriculture and forestry declined steadily in US$ terms. However, foreign investment (Table 10) showed a marked increase from 1993 to 1996, before dramatically shrinking from 1997. This is attributed to the economic and political shocks that started with the pension packages for war veterans and, thereafter, the ambiguities in land reform, farm invasions and general macroeconomic instability. Therefore, it is very difficult to disentangle investment effects of the UR and from liberalization under IMF.

Table 9. Fixed capital formation at constant 1990 prices (US$ million)

Year

1988

1989

1990

1991

1992

Agriculture and forestry sector

226.14

169.11

189.16

164.32

109.90

Total fixed capital formation

2 086.17

1 346.47

1 571.99

1 190.29

857.42

Agriculture and forestry (percentage of total)

7.63

5.84

4.82

3.41

2.5


1993

1994

1995

1996


Agriculture and forestry sector

60.51

58.35

55.04

33.80


Total fixed capital formation

713.86

593.52

566.6

344.44


Agriculture and forestry (percentage of total)

1.27

1.19

1.11

0.96


Table 10. Annual foreign investment in agriculture (US$ million)

Year

1993

1994

1995

1996

1997

1998

1999

Value (US$)

3.30

15.11

25.59

62.44

5.73

3.11

1.97

Source: Ministry of Lands, Agriculture and Rural Resettlement.

4 Food security impacts

4.1 Food security dimensions

In Zimbabwe, food security, defined in terms of availability of maize as the staple food product, has remained an issue of great concern in view of the increased incidence of drought-related hunger. For a number of years, agricultural food imports have constituted a large proportion of food trade. Further, the food security situation has been seriously threatened by the increased production of cash crops by commercial farmers in the country, which have higher returns taking advantage of developments under the AoA. The fall in returns from food crops has led farmers to increase their production of non-food cash crops, which are usually grown on large farms in the country. However, small-scale farmers have moved in to grow food crops for subsistence, with surpluses being sold. As such, the area under food crops has been increasing, although at a lower rate than for cash crops (Mangoyana and Meda, 2001).

Cereals supply in Zimbabwe is largely dependent on domestic production, especially when the rainfall pattern is not erratic. Figure 10 shows that significant import surges in cereals occurred during the year 1992-1993 because of the drought. In the Zimbabwean case, import surges during the UR period can be attributed to government policy (in responding to food shortages) and not to any WTO commitment as such.

Figure 10. Zimbabwe’s share of production and imports in cereal supply.

Source: FAO.

4.2 Trends in poverty and undernutrition

In Zimbabwe, post-independence (1980) agricultural policies focused on developing a high degree of food security through production while improving the welfare of the long-marginalized rural population. Government directly stimulated agricultural production by way of policies and measures on land, water, infrastructure, credit and technology. These measures include irrigation development, input support, provision of tillage services, provision of credit and strengthening of research. It also established depots and collection points, and ensured guaranteed prices and markets. Indirect stimulants in the form of subsidies and income policies were employed to stimulate production and demand. During the same period, food insecurity at both household and national levels fell.

With the advent of ESAP and the implementation of the UR Agreements, there was a shift in food security policies. Downsizing of operations by the GMB and the closure of several collection points became the order of the day. It should also be noted that liberalization brought with it unsustainable chronic increases in food prices throughout the ESAP period (1991-1996). In 1995, the Strategic Grain Reserve, with a ceiling of physical stocks of 936 000 tonnes of maize and a floor of 500 000 tonnes, was established.

Studies have shown that household food insecurity worsened during liberalization. Although Zimbabwe can be generally considered food secure in terms of national requirements, household hunger, evidenced by the fact that 30 percent of children under the age of five suffer from chronic malnutrition, is still prevalent (SAPRI, 2001). The average daily energy consumption declined from 2 233 kcal per capita in 1980 to 2 000 kcal per capita in 1993, and the situation is expected to deteriorate through to 2010 (FAO, 1997 in Meda and Mangoyana). The period 1970-1997 saw the daily per capita supply of energy falling from 2 225 kcal (which was above the SADC average of 2 173 kcal in 1970) to 2 145 kcal in 1997 (below the SADC average of 2 224 kcal), i.e. a 14 percent fall in per capita supply. In addition, the daily per capita supply of fats changed only by 6.8 percent for Zimbabwe, compared with the regional average of 16.9 percent showing increased food insecurity for the country over the years (SADC Human Development Report, 2000). Currently, food insecurity in the country is immense among the urban poor and many households in the food-deficit southern and eastern areas of the country. Bilateral food aid to meet part of the import requirement may be considered as an option according to the FAO Global Watch Report (FAO, 2001), but more worrying is the current strained relationships between the Zimbabwean government and the likely donors.

As a result, government has reverted to interventionist policies in an attempt to achieve food security. For example, Statutory Instrument 350, 1993 under the Control of Goods Act requires a permit for the importation and exportation of cereals. These import and export controls have been imposed and relaxed time and again. Import controls on wheat were relaxed in 1996, while export controls for wheat were relaxed in 1997. The current grain shortage has forced the government to abandon grain exports, and it is now importing more of the product.

In an effort to enhance food security, the Ministry of Agriculture has put in place incentives in the form of an input credit scheme to assist the smallholder farmers starting in the year 2000 and has undertaken to review producer prices. Through these measures, production is expected to increase to about 2.5 million tonnes in the forthcoming season and rise thereafter to 3.1 million tonnes annually. This will be adequate to fully meet domestic maize needs, maintain a strategic reserve, and expand exports. However, at the moment, the country is facing a widespread grain shortage. The reason for the food shortages is poor grain management by the authorities.

5 Interests and concerns in the current negotiations round

Nearly eight years after the implementation of the WTO AoA, trade barriers in agricultural goods still exist. For developing countries, including Zimbabwe, increased access to developed countries’ markets remains unfulfilled. There are many key issues that Zimbabwe, together with other developing countries, considers to be important in negotiating for future effective AoA in the wake of commitments undertaken at the 4th WTO ministerial meeting held in Doha in 2001.

5.1 Market access

Tariff reduction has not necessarily made developed markets accessible (see Table 11). Average agricultural tariffs remain higher than industrial tariffs because tariffication resulted in higher tariff protection. Tariff reductions have also led to increased tariff dispersion. The structure of agricultural tariffs has become complex with the frequent use of specific and other non-ad valorem rates. Tariff structures in developed countries should be made more unified, simplified, transparent and less complex, and all tariffs should be converted to ad valorem tariffs.

Table 11. Tariff peaks by agricultural product groups facing Zimbabwe’s exports to the EU

Product group

Number of tariff lines within a tariff range

Number of peaks

Share in total percent

Total

20-29 %

30-99 %

>100 %

Meat, live animal (1-2)

351

68

79

14

161

46

Dairy products (4)

197

21

77

9

107

54

Fruit and vegetables (7-8)

407

10

5

1

16

4

Cereals, flours, etc. (10-11)

174

29

75

0

104

60

Prepared fruit, vegetables (20)

310

70

39

1

110

35

Other food industry products (19, 21)

90

27

8

0

35

39

Beverages and tobacco (22, 24)

202

9

15

2

26

13

Other agricultural products (5-6, 13-14, 23)

231

4

14

4

22

10

Notes: Tariff peaks are defined as tariff rates that are 20 percent or more. All are MFN tariffs. The numbers in parentheses in the product are Standard International Trade Classification numbers.

Source: UNCTAD, 1997, tables 1-3.

The levels of TRQs for some of Zimbabwe’s exports are restrictive. For example, the TRQ of 12 million kilograms of tobacco which the United States has granted to Zimbabwe goes against the spirit of GATT/WTO in that it protects the United States tobacco market, is conditional and is non-transparent. In the next round of negotiations, a concerted effort should be made to phase out TRQs and incorporate all market access opportunities on an MFN basis. TRQs should not act as quantitative restrictions. To this end, Zimbabwe proposed that there should be:

Tariff peaks in agriculture are most common in three product groups: major food staples; fruit and vegetables; and the food industry (processed food products; FAO, 1999). Products with the highest frequencies of tariff peaks and escalation are in the major agricultural staple foods - cereals, meat, sugar, milk, butter and cheese - as well as those of export interest to developing countries, such as sugar, tobacco, cotton and fruits and vegetables (UNCTAD, 1997). Indeed, it is not uncommon for these high OECD tariff peaks to exceed 100 percent. In contrast, an UNCTAD/WTO study found that agricultural tariffs above 100 percent were rare in developing countries (UNCTAD, 1997). An appropriate formula should be used to reduce these extremely high tariffs by larger amounts to more reasonable levels. Tariff reductions should be weighted to ensure that sensitive products in developed countries are not given further protection.

Any agricultural tariff negotiations would need to provide SDT to developing countries, as is the WTO practice. Developing countries should be allowed meaningful flexibility, i.e. phasing in of tariff reductions according to achievement of some concrete measurable development thresholds instead of using mere time frames.

High levels of protection in developed countries are grossly unfair as they defeat the whole purpose of the AoA. When compared with the non-tariff barriers of the 1990s, an ESCAP study reveals that the EU’s final bindings for the year 2000 are almost two-thirds above the actual tariff equivalent for 1989-1993. For the United States, they are more than three-quarters as high. Furthermore, for major agricultural products, developed countries’ tariffs are about twice as high as those of developing countries. For two major cereals, wheat and maize, the bound tariff rates for developing countries are 94 percent for wheat and 90 percent for maize. In contrast, the OECD average in the first year of implementation (1995) was calculated at 214 percent for wheat, 197 percent for barley and 154 percent for maize (FAO, 1996). In the next round of negotiations, Zimbabwe should press for a revision of tariff reduction targets that have to be met within certain periods. The aim should be for tariffs of all developed countries initially and developing countries later to converge at specific points within a certain period to ensure the achievement of a level playing field for all farmers of member countries.

Provision of special safeguards presents a number of problems for developing countries. The duration of SSG, criteria for invocation of SSG and trigger mechanism are invoked unfairly. These need to be modified to make it more responsive to the needs and conditions of the developing countries. In view of the need to enable farmers to adjust to increased competition and also to diversify their production in the face of a surge in imports or a decline in prices, developing countries should be allowed to levy SSG duties for a longer duration. They should also press for a revision of the trigger mechanisms that unfairly constrain their exports. The right to use the safeguards should be extended to developing countries, including Zimbabwe, that did not “tariffy” or previously reserve the right.

5.2 Domestic support

The treatment of domestic support has remained a contentious area, especially between the Cairns Group, EU/Japan and developing countries. For the developing countries group, there are a number of contentious issues. They contend that the ongoing AoA process needs to be reoriented to address issues of food security and rural livelihoods in their countries.

Before the AoA, developing countries were generally not applying domestic support measures and did not record them in their schedules, and they have been barred from applying these measures in the future beyond the de minimis levels. Countries that had a high AMS (generally the developed countries) have been allowed to maintain them with a gradual reduction. After applying the 20 percent reduction schedule as required by the AoA, some developed countries still have comparatively high levels of support. Further, the delinking of the AMS from fluctuations in international prices and exchange rates means that a country can meet its AMS reduction commitments and at the same time experience an increasing real level of protection (i.e. the level of protection measured by the difference between current domestic producer prices and current world prices). In addition, developing countries face problems in calculating the AMS owing to excessive changes in macroeconomic factors such as excessive inflation. A country experiencing substantial rates of inflation since the base period may actually have a negative AMS. On exemptions from AMS reduction commitments, problems have emerged regarding criteria for exempt measures in Green Box measures and the de minimis limit. The de minimis limit of 10 percent does not provide developing countries with flexibility in the provision of domestic support, and several of them are close to the ceiling. The criteria for exempt measures in the green box are not clearly defined, allowing countries to disguise support measures that should not meet the criteria for inclusion in Green Box exemptions.

In view of these, Zimbabwe will press to:

5.3 Export subsidies

High subsidies in OECD apart from being trade-distorting destroy local producers and destabilise and depress agricultural prices. Subsidized EU and US grain has undermined food security in developing countries. For example, US sales of PL 480 wheat to Zimbabwe in 1998 kept local wheat prices low and greatly affected the viability of local wheat production. In addition, the importation of cheap EU subsidized grain by grain-deficit countries in SADC undermines Zimbabwe’s competitive advantage in maize and wheat production in the region. In 1997, in the 24 OECD countries, producer support to rice and meat was, respectively, 4.11 and 6.18 times the value of world exports of these products (UNCTAD, 1999).

The incessant use of export subsidies under the AoA by developed countries is a clear violation of WTO regulations that prohibit dumping. Dumping disrupts local production and the most vulnerable producers in developing countries are small-scale farmers. These high subsidies are a major obstacle for developing countries in several ways. They result in high OECD food surpluses, which are often exported to developing countries, hence taking away third country markets from exporting developing countries.

Zimbabwe’s attempts to expand its regional and international market opportunities have been greatly undermined by these export subsidies. Removal of domestic support and export subsidies by developed countries will benefit Zimbabwe’s cotton, horticulture, tobacco, sugar, beef and maize industries. Prohibitive transportation costs limit Zimbabwe’s ability to enter the world market competitively. However, because of her location in the region, she is able to exploit regional markets competitively. This is only possible when the dumping of food from developed nations is checked within the region. Reduction in export subsidies and domestic support will help to boost the growth of the horticulture industry.

5.4 Food security-related concerns and proposals

Food security is one of the contentious issues in the negotiations in agriculture. For developing countries, food security is inextricably connected to national security and political sovereignty as most of the population is engaged in subsistence agriculture. In Zimbabwe, agriculture is not just another sector of the economy, but it has far reaching implications on political influence, support, economic performance specifically employment, food availability, balance of payments position as well as people’s livelihoods. The current policy is that it is dangerous to depend on imported food, as the foreign exchange reserve position is often feeble.

In view of these concerns, Zimbabwe has made a number of proposals that revolve around the so-called “Development Box’. Developing countries in general and Zimbabwe in particular feel the instruments in the Food Security/Development Box should include the following:

A Development Box should be created with policy instruments that have the following aims:

1. Protect and enhance developing countries’ domestic food production capacity particularly in key staples. Exclusion of major food products in developing countries from disciplines of import control and domestic support.

2. Placing all domestic support by governments in developing countries for food production for local consumption, as well as support for all agricultural production by small-scale farmers under SDT.

3. Increase food security and food accessibility, especially for the poorest.

4. Provide, or at least sustain existing, employment for the rural poor.

5. Protect farmers, who are already producing an adequate supply of key agricultural products from the onslaught of cheap imports.

6. Flexibility to provide the necessary supports to small farmers especially in terms of increasing their production capacity and competitiveness.

7. Stop the dumping of cheap, subsidized imports on developing countries.

8. All developing countries should be able to use a positive list approach to declare which agricultural products or sectors they would like disciplined under AoA provisions. That is, only the products which are declared by a country are subject to AoA commitments.

9. Allow developing countries to re-evaluate and adjust their tariff levels. Where it has been established that cheap imports are destroying or threatening domestic producers, developing countries should be allowed to raise their tariff bindings on key products to protect food security.

10. Prohibit developed countries from the use of the SSG Clause. This Clause instead should be opened up to all developing countries. Developing countries should be allowed to invoke this, based on low prices or excess volume.

The need to support domestic food production directly and indirectly is important, particularly among the more vulnerable small-scale farmers. However, the current disciplines of the AoA on import controls and domestic support hamper this effort.

References

FAO. 1999. Agriculture, trade and food security: Issues and options in the WTO negotiations from the perspective of developing countries - Report on papers of a FAO symposium held in Geneva. Geneva.

FAO. 2001. Global watch report. Rome.

Government of Zimbabwe. 1991. Economic structural adjustment program (ESAP). Harare, Government Printers.

Government of Zimbabwe. 1995. Zimbabwe’s agricultural policy framework 1995-2020. Harare.

Government of Zimbabwe. 2000. The agricultural sector of Zimbabwe, statistical bulletin. Harare.

Government of Zimbabwe. 2001. The agricultural sector of Zimbabwe, statistical bulletin. Harare.

Mangoyana & Meda. 2001. Food security and sustainability in Zimbabwe. Harare.

Tekere, M. & Kuda N. 1999. Study on the impact of the WTO and other international trade agreements on Zimbabwe’s agricultural sector: Key issues for WTO 2000, conference proceedings paper. Harare (mimeo).

UNCTAD/WTO. 1997. Document TD/B/COM.1/14. Geneva.

UNCTAD. 1999. Examining trade in the agricultural sector, with a view to expanding the agricultural exports of the developing countries, and to assisting them in better understanding the issues at stake in the upcoming agricultural negotiations, TD/B/COM.1/EM.8/2. 23 February.

UNECA. 2000. Economic report for Africa. Addis Ababa.


[114] Study prepared for FAO by Dr. Moses Tekere (with the assistance of James Hurungo and Masiiwa Rusare), Trade and Development Studies Centre, Harare.

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