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2. Adjusting to changes in the global trading environment

2.1. Facts and figures

SIDS are very different in their economic profile and in their level of development, ranging from the most vulnerable to the most developed islands. An analysis of the different level of development3 of SIDS shows that the majority of SIDS are located in the extreme groups - either the poorer group with significant agriculture sector, or the richer group with limited agriculture sector. In particular, 59 percent of SIDS are below US$ 4 000 of GDP/cap PPP, representing 67 percent of the total population4. The most explicit indicators are the percentage of active population in agriculture - ranging from 6.6 percent to 57.6 percent - and the contribution of agriculture to GDP, from 4 to 27 percent.

The exports of SIDS tend to be concentrated in a small number of commodities such as sugar cane, banana, tuna fish, tropical beverages and forest products, many of which have suffered from a long-run decline in real world market prices and slow growth in demand.

SIDS face a number of challenges, many of which are shared by other developing countries, in achieving and retaining competitiveness in international markets for agricultural products. The small size and geographic isolation of many SIDS present particular challenges in terms of achieving sufficient economies of scale to enable producers to compete in international markets or, in many cases, to compete with imported commodities in the domestic market. Many SIDS depend on a single export commodity and/or preferential access to a single market for a high proportion of their export earnings, making them particularly vulnerable to changes affecting that market. Inadequate transportation and communications infrastructure and weak institutional capacity pose additional challenges for many SIDS in responding to the changing international trade environment.

Most SIDS receive preferential access to the major developed country markets through special arrangements such as the EU's Lomé Convention for the African, Caribbean, and Pacific (ACP) and the USA's Caribbean Basin Initiative (CBI) and/or through the World Trade Organization's (WTO) Generalised System of Preferences (GSP) for developing countries. Benefits accruing from the various preferential trading schemes are concentrated among a few countries and a few commodities, and in many cases the beneficiaries, including SIDS, have not been able to fully exploit the opportunities available to them.

Twenty-four SIDS are members of the WTO. Tonga, Samoa and Cape Verde applied for WTO membership in 1995, 1998 and 1999 respectively and are in the process of accession. Vanuatu has experienced a long tedious accession process to become a member of the WTO which has ended by putting the accession on hold by the Vanuatu Government. SIDS which are members of WTO have a representation in Geneva looking after their concerns in WTO. The Committee on Trade and Development which has been mandated to look after the needs of "small economies", including SIDS, is the forum for discussion of all cross-cutting matters of special interest to SIDS. The Committee on Trade and Development serves as a focal point for consideration and coordination of technical assistance in the WTO and its relationship to development-related activities in other multilateral agencies.

2.2. FAO action in SIDS

Having to rapidly adapt to this evolving international context with sometimes dramatic repercussions at country level, SIDS have strengthened their collaboration and requested assistance for capacity building in order to be better prepared for the trade negotiations and to be better represented at the WTO.

The objectives and proposed actions of the FAO Plan of Action on Agriculture in SIDS in this field are the following:

In accordance with the above objectives, and in order to assist SIDS meet their capacity-building needs to mitigate the implication of globalization, FAO has undertaken training activities in relevant Agreements and their implications for agriculture and trade (e.g. agriculture, sanitary and phytosanitary measures, technical barriers to trade, trade related aspects of intellectual property rights), as well as in emerging issues and topics relevant to future negotiations and in special issues of regional and sub-regional concern.

Besides training, projects to assist SIDS in the areas of global trading environment have mainly focused on strengthening national capacity in trade negotiation, phytosanitary capabilities, food security and early warning, market information and institutional development, support in food insecurity and vulnerability information and mapping system, food control system and safety, capacity building in Codex Alimentarius food standards and agricultural census and statistics.

Under the Umbrella Training Programme on the "Uruguay Round Follow-Up and Multilateral Trade Negotiations on Agriculture" which was launched in 1999, FAO conducted a series of 15 one-week workshops on a regional basis. Thirty-four SIDS5 attended at least one workshop. Scores assigned to the achievement of the objectives of the Programme and to the coverage and quality of the presentations, background material and discussions of the various topics were consistently high. FAO, in partnership with the Government of New Zealand and the Commonwealth Secretariat, has also convened an annual Round Table for the Pacific Islands Countries on WTO for six years in a row; the sixth being held in Wellington, New Zealand in August 2003. The primary focus of the series is to assess the implications of WTO Multilateral Trading System on Agriculture Sector in the Pacific countries. In addition, during the period since 1994, FAO has assisted 19 SIDS6 through regular funds, in agricultural census and agricultural statistics.

Examples of recent projects in this field include:

2.3. Issues and challenges

The challenge faced by SIDS has several facets including adapting to the potential erosion of tariff preferences currently available under preferential trade arrangements - and responding to the new challenges and opportunities as world trade in agricultural products becomes increasingly free and competitive.

While some of the problems behind the under-utilization of trade preferences are of a more structural nature related to supply constraints, they are in part also due to problems in implementing the various provisions of the preferential arrangements. Many of them can be solved through better understanding of the rules and through consultations with the preference granting countries.

In-depth review of the implications of the WTO negotiations for agriculture and food security at the individual country level can help SIDS formulate more adapted policy responses to the emerging challenges.

In the area of agriculture and food policy, FAO is being asked for assistance in capacity building for agricultural policy analysis concerning trade issues. More detailed advice is being sought about specific policies, analytical methodologies and ways in which policies might be implemented so that countries can take advantage of trade opportunities and make necessary adjustments to domestic food and agricultural policies. Some FAO members that are not members of WTO have been assisted in policy preparation before formal entry negotiations have taken place. The obligations of WTO members associated with the SPS and TBT Agreements have resulted in a significant increase in requests for FAO technical assistance, including legal assistance for the drafting/revision of the legislative instruments necessary to comply with the Uruguay Round Agreements.

Given the position of many SIDS as net food importers, the importance of creating an environment in which domestic producers can increase food production where economically justified could be emphasized.

Over and beyond immediate adjustments, the discontent of SIDS which consider that trade rules are being forced upon them should not be underestimated. Following the outcome of the WTO meeting in Cancun in September 2003, demands are being put forward for new trade scenarios. Ideas are being developed7 for a trade organization based on new principles and practices; an international World Cooperation Organization (WCO) putting trade at the service of societies with the objective of reducing poverty. In this scenario, the WCO preserves institutional plurality and supports equal rights between North and South. It subordinates trade rights to social and environmental rights. It is based on the following reforms:

SIDS ability to adapt to the new context and to propose new routes which suits their needs will reinforce their group representation. The need for SIDS to be organised as a strong negotiating entity, specially in relation to commodities of high relevance (such as sugar, banana and fish) and well represented in a Trade Institution is being strongly emphasised.

3 Considering: GDP per capita, purchase power parity, percentage of rural population, percentage of active population in agriculture and the agriculture value added expressed as percentage of GDP.

4 Data based on the on-going FAO analysis of Country Policy Papers (December 2003).

5 Including: Guinea Bissau, Sao Tome and Principe, Comoros, Seychelles, Mauritius, Maldives, Cook Island, Fiji, Kiribati, Marshall Islands, Niue, Palau, Papua New Guinea, Samoa, Solomon Island, Tonga, Vanuatu, Cuba, Antigua and Barbuda, Bahamas, Barbados, British Virgin Islands, Cayman Islands, Dominica, Grenada, Guyana, Haiti, Jamaica, St Kitts and Nevis, St  Lucia, St Vincent and the Grenadines, Suriname, Trinidad and Tobago and Bahrain.

6 Including: Bahamas, Belize, Cape Verde, Comoros, Cook Island, Dominica, Fiji, Grenada, Maldives, Mauritius, Samoa, Sao Tome, Seychelles, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Tonga, Trinidad and Vanuatu.

7 Alain Lecourieux, member of the Scientific Council of ATTAC, France, 2003. Alternative proposals for a World Cooperation Organization.

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