This report forms part of an FAO study programme which aims at assessing the experience of developing countries with trade preferences in agricultural products. The main objectives of the study programme are to evaluate trading opportunities and benefits of agricultural trade preferences for developing countries and to assess how gains are or could be affected by main actors in the supply and trading chain by existing government policies and by the market constellation.
More particularly, the main issues of interest include: (i) effective commercial opportunities created by trade preferences; (ii) how exporters and producers exploit these opportunities and the constraints to which they are subject; (iii) the ways and means of enhancing the utilization of preferential opportunities in agricultural products in order to accelerate agricultural development, improve food security and promote economic growth of the recipient countries; and (iv) what could be done to improve preference schemes.
This report provides a framework for analysing the factors that generally account for the success or failure of agricultural trade in developing countries. A deeper analysis of the specific impact of preferences on production, investment and incomes requires country case studies covering specific products. Such studies should confirm whether and if so to what extent the trade preferences have actually had an impact on production, incomes and stimulated investment. They should analyse the entire chain of decisions and actions involved in investment, production and exports, and potential links with importers/processors/retail traders in importing countries. The analysis would thus seek to identify the incidence of supply factors, examine the organization of production and exports, the role of government policies (or absence thereof), market entry barriers and possible improvements of preference schemes.
A parallel survey will be conducted in preference-giving countries, where major importers and processors of the selected products will be asked to what extent preferences influence their decisions to import from and invest in preference-receiving countries, rather than from or in alternative supply countries. Their views on ways and means of extending the benefits of preferences to more countries and products will be collected. The case studies will examine the market structure and main trading channels and the value added chain, as well as private or public market entry barriers and efficient incentives.
These components of the study programme taken together provide an overview of the whole chain of policies and actors that determine the success or failure in using available trading opportunities and preferences. The country surveys for exporting and importing countries should follow the individual segments of the entire value chain, from the production to retail marketing of a specific product, to ascertain the most dynamic and profitable stages in each chain. They should evaluate the importance of the relationship between various actors, the decision-making, and the influence of the market behaviour of the various actors.
The results of the country studies will be discussed at regional meetings of experts and government officials from least developed countries (LDCs), African, Caribbean and Pacific (ACP) and other preference-receiving countries, with participation from preference-giving countries and the business community.
This FAO study programme should result in (i) proposals for improving government policies to strengthen supply; (ii) proposals for action by producers and traders for improving the organization of production and the trading chain; and (iii) proposals for improving the operation of preference schemes.
This report begins with a review of the literature on the effects of preferences, in particular under the Generalized System of Preferences (GSP) and the ACP-EU Convention of Lomé. It then analyses EU trade since the conclusion of the Uruguay Round in agricultural and processed food products to which preferences had been extended. Products for which growing markets and preferential or duty-free access provided substantial trading opportunities in major preference-giving countries since the mid-1990s will be analysed. This report also evaluates the uses made, in particular by ACP countries, of existing preferential opportunities in the EU market. Furthermore, it identifies specific country-product combinations, where GSP recipients and ACP countries achieved export success in the period after the conclusion of the Uruguay Round and the subsequent changes of the preference schemes. The results of the statistical analysis conducted for that purpose are summarized in the tables annexed. They provide data on Most-Favoured Nation (MFN) treatment and preferential trade at the most detailed tariff-line level, growth rates of related trade and the evolution of market shares in EU. The subsequent section provides a more general review on factors relevant to the role of preferences in enhancing production, investment and incomes in the food and agricultural sector, improving food security and alleviating poverty. It also examines factors that may restrict making full use of trade preferences.
The case studies will test the relevance of these factors for specific exports of specific preference-receiving countries to enable the formulation of policy proposals to economic agents and governments in exporting and importing countries. In particular, they are designed to establish:
i. Whether there is indeed a causal link between trade preferences for a specific product and its export success;
ii. whether and how export expansion has been linked with decisions on production and investments for expanding acreage or for modernizing equipment; and
iii. whether export expansion has had beneficial effects on production, employment and incomes in agriculture, for both producers and the labour they employ, or otherwise improved living conditions in the exporting country.
