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Developing countries are especially vulnerable to food import surges
and volatility in global commodities markets for a number of structural
reasons. Farmers have few sources of credit to buy tools and seeds.
Levels of government support are low. Infrastructure for irrigating,
processing harvests or getting food to market is inadequate or financially
out of reach.
Reliance on the production of single crops enhances vulnerability
to price drops, disease or bad weather. War and social strife can
handicap or halt production -- in Africa, AIDS is having a similar
impact. When subsidies to agriculture in the developed world are
factored in alongside these challenges, it is not surprising that
the developing world struggles to compete globally.
Poor countries have long insisted that they need policy mechanisms
that would let them protect themselves from distortions in the world
marketplace. At issue, they say, is not simply protecting a vulnerable
agriculture sector from competition; protection is necessary to
overcome traditional structural challenges affecting the developing
world, as well as to protect large rural populations that depend
on agriculture for survival.
There are defence measures in the current WTO framework designed
to address price fluctuations, problems faced when opening markets,
and unfair trade practices. Special agricultural safeguard provisions
allow an importer to increase tariffs above agreed-upon levels in
the face of sudden import surges or drops in import prices. However,
these are available only to countries converting non-tariff barriers
to imports (such as quotas) over to tariffs and don't apply to most
developing countries. Others involve complicated appeals processes
that surpass the institutional, legal and financial capacity of
smaller governments, effectively removing them as an option.
"Developing countries need access to simpler-to-use safeguards,"
says Harmon Thomas, chief of FAO's Commodity Policy and Projections
Service. "These could be enhanced further through some measures
for technical, financial and legal assistance to strengthen the
institutional capability of developing countries to use the more
general safeguards."
Strengthening agriculture in the developing world
One way to strengthen agriculture in the developing world is for
farmers there to add value to primary commodities by processing
them prior to export -- for example, a cooperative in Guatemala
could earn more selling roasted coffee instead of raw beans. However,
the practice by some countries of tariff escalation -- establishing
duties that get steeper the more an import is processed -- continues
to handicap the ability of developing countries to export high-value
processed products.
FAO estimates that trade in processed agricultural products totals
some US$235 billion annually -- accounting for more than 60 percent
of total world agriculture trade. Developing countries, however,
remain largely dependent on unprocessed agricultural exports. According
to Thomas, while exports of processed agricultural production grew
at 6 percent annually between 1981 and 2000, the share of developing
countries in this trade decreased during that same period. Coffee
provides an example: the trade share of the top ten coffee-exporting
developing countries in global roasted coffee fell from 7 to 2 percent
over the course of the 1990s, FAO studies show.
"The existence of tariff escalation is one of the major factors
that hinder export growth and diversification into the market for
processed agriculture products," Thomas observes. "Another
factor is the lacking market infrastructure in poor countries."
According to recent FAO analysis, he adds, significant tariff escalation
exists in 12 out of 17 major commodity chains, mostly at the first
stage of processing.
Another hurdle to diversification of agriculture in the developing
world is declining rates of investment in the sector. According
to FAO figures, annual agriculture investment needs in the developing
world run around US$180 billion. Yet actual investments are significantly
lower. Moreover, since the 1980s development assistance to agriculture
has shrunk by 50 percent in real terms.
September 2003
Contact:
FAO Media Office
media-office@fao.org
(+39) 06 570 53625
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