×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Import surges: courting disaster the WTO way

Import surges: courting disaster the WTO way
Comment E-mail Print Share
First Published: Wed, Aug 13 2008. 12 54 AM IST

Updated: Wed, Aug 13 2008. 12 54 AM IST
As expected, the World Trade Organization (WTO) ministerial meeting held in the last week of July failed to achieve anything. What followed was an only to be expect ed blame game: the US and European Union (EU) blamed India and China, representatives of developing countries, for the failure even as millions of farmers in India, China and Africa rejoiced at the failure of the negotiations.
Talks broke down on the issue of triggers for the special safeguards mechanisms (SSMs). These mechanisms allow countries to raise tariffs if the import of certain products rises by more than a certain percentage over the quantity imported in the previous three years. This proportion is termed the trigger that invokes SSM. Developed countries wanted the trigger to be invoked at 40%, while developing countries wanted to do this when imports rose 10%.
Why did developing countries adopt such a rigid posture? This question is relevant because it is being asked at a time when food prices are at an all-time high and the threat of a food crisis is very real in many developing countries, especially in Africa. The immediate impact of an import surge is a decline in domestic prices. Higher imports also fulfil the essential role of supplementing a shortfall in domestic supply. So, why should a developing country raise tariffs when prices come down because of cheaper imports? Aren’t cheaper products better for everybody, especially in countries facing a food deficit? Not necessarily.
The overwhelming evidence so far is that import surges of agricultural products have had disastrous consequences on the livelihood of small and marginal farmers in developing countries. The question is, how real are these threats of import surges and what is their exact impact on farmers in such countries.
Food and Agricultural Organization (FAO) has undertaken a series of studies to understand this. Analysis was carried out on data for 1980 and 2003 for 102 countries included in the groups of Low-Income Food-Deficit Countries (LIFDCs), Least Developed Countries (LDCs) and Net Food Importing Developing Countries (NFIDCs).
A total of 12,167 cases of import surges were reported during this period in these countries. The analysis found evidence to suggest there has been an increase in the frequency of import surges after 1995 (when WTO was born). Among the agricultural commodities analysed, the most affected food groups were vegetable oils (India is the third largest importer of vegetable oils in the world), meats and coarse grains. In the case of vegetable oils, import surges occurred once every five years compared with cereals where the frequency was once every 10 years. Vegetable oils, cereals and meats were also the food groups that experienced the highest increase in frequency of import surges after 1995.
All countries have experienced import surges but some have experienced them more often than others. Among those that have are India and Bangladesh in Asia, Zimbabwe, Kenya, Nigeria, Ghana and Malawi in Africa and Ecuador and Honduras in Latin America. In fact, these countries are the ones that suffered the maximum instances of import surges (between 100 and 130) during the 22-year period.
What has been the impact on agriculture?
In Senegal, local production of tomato declined by 50% as a result of a 15-fold increase in imports from EU. In Burkina Faso, local production fell by half because of a fourfold increase in import of tomato paste. In Jamaica, local production of vegetable oils fell by two-thirds due to doubling of imports. In Ghana, rice imports increased from 250,000 tonnes in 1998 to 415,150 tonnes in 2003. The share of “domestic rice” fell dramatically in the country from 43% in 200 to 29% in 2003, resulting in negative returns for two-thirds of rice farmers. In Cameroon, 92% of poultry farmers abandoned poultry farming because of a sudden import surge of 300% between 1999 and 2004 and almost a million jobs were lost between 1994 and 2003. In Cote d’Ivoire, poultry imports increased 650% between 2001 and 2003, causing domestic production to fall by 23%. In Mozambique, domestic production of edible oil fell from 21,000 tonnes in 1981 to 3,500 tonnes in 2002 because of vegetable oil imports, which increased fivefold between 2000 and 2004. Between 1990 and 1997, cotton production in Brazil fell 50% because of increase in imports of cotton lint from 86,000 tonnes to 438,000 tonnes. As a result, 1,289 cotton plants shut down and around 569,000 workers lost jobs.
The list is endless. In most developing countries, import surges have led to loss of livelihood for millions of farmers (many of whom are subsistence farmers).
In India too, allowing unfettered imports in agricultural commodities will spell doom for the economy yet to recover from the worst agrarian crisis of the millennium manifested in farmer suicides. If the Doha Round has to have any meaning, protecting the livelihoods of millions of farmers in developing countries should have greater priority than the commercial interests of farmers in developed countries.
To read all of Himanshu’s earlier columns, go to www.livemint.com/farmtruths
Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi. Farm Truths will look at issues in agriculture and run on alternate Wednesdays. Respond to this column at farmtruths@livemint.com
To read all of Himanshu’s earlier columns, go to www.livemint.com/farmtruths
Comment E-mail Print Share
First Published: Wed, Aug 13 2008. 12 54 AM IST
More Topics: Import | WTO | SSM | agriculture | farm truths |