25. Memorandum submitted by Tom Arnold,[68]
Chief Executive, Concern Worldwide
The broad based terms of reference for this
inquiry and the focus on agriculture are appropriate. The terms
of reference facilitate consideration of agricultural policy reform
in developed countries and the trading arrangements for agricultural
products, which will result from the Doha Development Round. They
also focus on developing countries, on their capacity to negotiate
an outcome of the Round which will suit their long-term development
needs and on the productive capacity of their economies to avail
of the opportunities arising from the Round.
This dual focus is important. Any realistic
longer term vision of development has to deal with the capacity
of a developing country to integrate with the international economy.
Given that the agricultural sector remains the largest economic
sector in most developing countries, it is of vital importance
that its productive capacity is enhanced and can contribute to
broad based economic growth. The relevant policy question is what
needs to be done to enhance that productive capacity and what
role do improved and fairer trading arrangements, to be negotiated
under the Doha Round, have in this regard.
The answer will vary depending on the level
and stage of development of the developing country.
Many of the poorest countries, particularly
in Africa, are increasingly marginalised from the world economy.
They are becoming more dependent on food imports, whether commercial
imports or food aid. Enhanced food security, through a combination
of increased domestic food production and, where necessary, assured
levels of food aid, will be a development priority. For countries
such as these agricultural trade liberalisation will be of marginal
relevance in the forseeable future.
On the other hand, middle income developing
countries, and developing countries with agricultural export potential,
clearly have a keen interest in an outcome to the Doha Round which
provides greater market access to the markets of developed countries
and fairer trading arrangements on world markets. These countries
require a move towards the elimination of trade distorting agricultural
subsidies and a reduction in the overall level of subsidies paid
by rich countries to their farmers. But if fairer trading arrangements
are put in place, many of these countries will need to enhance
their own productive and trading capacity if they are to capitalise
on the new arrangements. And their primary opportunities may be
in developing regional trade arrangements rather than accessing
the EU markets.
The issue of trade and development therefore
fits into a much wider development agenda. Within this wider agenda,
consideration has to be given to the decisions which fall within
the competence of developing country governments and the decisions
taken by the international community (eg. the Doha Round) which
define the economic environment within which developing countries
have to work. Concern believes that a connection needs to be made
between both sets of decisions in any coherent discussion of the
Doha Round.
NATIONAL
The most basic issue at national level which
will determine development possibilities is the quality of governance.
If any proof were needed, the current condition of Zimbabwe serves
as a prime example.
The longer term macroeconomic policies pursued
by governments are also crucial. Over the past three decades many
developing country governments have made the mistake of not giving
sufficient priority to their agricultural and rural sectors. From
about the mid 1980s onwards, there was a decline in investment
levels in these sectors in a number of developing countries. This
was also mirrored in the policies of many of the main donor agencies.
The justification given for these policy choices was the poor
results which many agricultural projects had given and the depressed
state of world agricultural markets.
Over the next two decades there are a number
of reasons why governments and donors need to give agricultural
development a higher priority. With agriculture still accounting
for 30-40% of GDP in the poorest developing countries, the sector
has to be a key component in any development strategy. Currently,
800 million people do not have enough food. The annual increase
in world population over the next 10-15 years is estimated at
some 75 million. Increased population and changing food habits
mean that by 2020, the world will need to produce about 40% more
grain than it currently does. The vast bulk of this increased
demand will be in developing countries.
Within the realm of broad agricultural policy
there are a number of key priorities. Secure land tenure with
an appropriate legal underpinning is of central long-term importance.
In the shorter term peasant farmers need to have access to seeds,
fertiliser and credit. This is not currently the case in many
countries. Rural infrastructures (roads, small markets) need to
be improved. There has to be a major push to increase agricultural
productivity.
Too few resources have been invested in agricultural
research, much of the research is irrelevant to farmers' needs
and even when relevant, extension services have not adequately
disseminated it.
There is insufficient recognition of the crucial
role of women in contributing to food security. They are frequently
discriminated against in terms of property on land tenure rights,
are neglected by extension services and do not have access to
inputs. In many countries, girls do not have the same access to
education as do boys, notwithstanding the high returns from investing
in the education of girls. A study by the International Food Policy
Research Institute (IFPRI) found that improvements in women's
education and status together accounted for 55% of the total reduction
in child malnutrition in the developing world between 1970 and
1995.
The impact which HIV/AIDS is having on current
and longer term food security and on development possibilities
needs to receive much greater recognition. In sub Saharan Africa,
over 30 million people have the virus, 3 million died last year.
FAO estimates that 16 million agricultural workers will die from
HIV/AIDS over the next two decades. Labour shortages are beginning
to affect agricultural production systems and the level of food
production. The transmission of knowledge about crop and livestock
husbandry from one generation to the next is being compromised.
Action on all of the above issues, which are
crucial to development, ultimately lies within the responsibility
of national governments. Developing country governments need to
give more emphasis, and resources, to their agricultural sectors
and need to be supported in this by the wider donor community.
A number of the actions which need to be taken in order to enhance
food security lie outside agricultural policy (consistent macroeconomic
policy; rural infrastructure; education of girls; tackling AIDS)
but will crucially complement sound agricultural policies. The
outcome of the Doha Round will not affect most of these issues.
INTERNATIONAL CONTEXT
The international context for development is
determined by a wide variety of factors, including private investment
flows, and the quantity and quality of development assistance.
Given the terms of reference of the inquiry, this submission will
concentrate on the agricultural aspects of the Doha Round. Specifically
it will discuss:
— The changes which developing countries
should be seeking as part of the Doha Round.
— The changes in the EU's CAP which
are necessary to facilitate a wider international agreement on
agricultural trade, so as to enhance the development prospects
of certain developing countries.
DOHA ROUND
One of the major achievements of the last WTO
Round, the Uruguay Round, was that it brought agriculture into
an international rules based system for the first time. Different
types of import mechanisms were brought to a similar basis—a
tariff equivalent—which was bound at certain upper limits.
Disciplines were introduced, and commitments made, in relation
to domestic support and in export subsidies.
A commitment was also made in the Uruguay Round
Agreement that negotiations on agriculture would continue in the
next WTO Round. These negotiations began in March 2000, and were
advanced at the Doha Ministerial Conference in November 2001.
They will continue in March 2003 when the offers from the contracting
parties in relation to the "modalities" of further reform
will be made. These "Modalities" will be the basis to
proceed to the final negotiations, which, it is hoped, will be
concluded in January 2005.
It is important to note that, from a developing
country perspective, some progress was made at Doha. Without prejudice
to the outcome of the final negotiations, the parties committed
themselves to "comprehensive negotiations aimed at: substantial
improvements in market access; reductions of, with a view to phasing
out, all forms of export subsidies; and substantial reductions
in trade distorting domestic support. We agree that special and
differential treatment for developing countries shall be an integral
part of all elements of the negotiations and shall be embodied
in the Schedules of concessions and commitments and, as appropriate,
in the rules and disciplines to be negotiated, so as to be operationally
effective and to take account of their development needs, including
food security and rural development."
This submission does not attempt to speculate
on the degree to which developing countries are likely to be successful
in making progress on these various points. Clearly there will
be further progress on the broad areas of increased market access,
reduced domestic support and export subsidies. Certain developed
countries as well as developing countries are pushing for progress
in these areas. While there is also resistance to such change,
an acceptable compromise will have to emerge if an agreement is
to be reached.
There are, in addition, some specific issues
which developing countries should legitimately press for.
Tariff escalation whereby the import tariff
rises as the level of processing and value added increases, needs
to the tackled.
The complexity of import regimes and of accessing
tariff rate quotas causes serious obstacles to market expansion
for many developing countries.
Finally, in relation to the Doha Round, the
complexity and range of the negotiation puts the administrations
of many developing countries at a considerable disadvantage by
comparison to developed countries. Notwithstanding this, developing
countries appear to have been more effective in asserting their
interests in this negotiation than in the Uruguay Round or in
previous WTO Rounds. The acid test will, however, be in the conclusion
of the negotiations. The provision of additional technical assistance
to agencies assisting developing countries in the negotiation
process is important.
EU CHANGES
The EU's CAP has been undergoing significant
change over the past decade. The 1992 (MacSharry) CAP reform brought
about a major shift from price support to income support for EU
farmers. This shift facilitated the Uruguay Round Agreement on
Agriculture in 1993. During the remainder of the 1990s, the CAP
was further changed with increased emphasis on rural development
and environmental schemes.
The Agenda 2000 Agreement represented a further
shift from price support to income support. It also defined the
policy and financial framework for the CAP until 2006, while envisaging
that a number of sectors (milk, cereals) would be subject to a
Mid Term Review, which the Council of Agricultural Ministers will
take decisions on over the coming months.
A key proposal in the Mid Term Review is that
there should be a decoupling of support from production and a
divertion of funds from income support to rural development measures.
At this point, it is not possible to predict what the outcome
of the Mid Term Review will be. However, the direction of change—a
continuation along the lines over the past decade—is certain.
The outcome of this process is also relevant to what the EU will
be willing to agree to in the Doha Round.
An assessment of the current balance of political
forces, within the EU and within the WTO, would point to some
greater degree of agricultural trade liberalisation being achieved
in the Doha Round than in the Uruguay Round. Trade distorting
agricultural supports, such as the EU's export refunds scheme
and the US's export supports scheme, are the most likely mechanisms
to be subject to more serious disciplines over time. Market access
is likely to improve on a phased basis while other supports (environmental,
rural development) are less at risk.
If pressed to articulate a central scenario
arising from the Doha Round, it would be an agreement in 2005,
to be phased in from 2006 over a five to 10 year period; involving
a phased reduction in agricultural support in developed countries
but not eliminating support; and an equivalent phased improvement
in the international agricultural trading environment which should
benefit a number of developing countries. At the end of the implementation
period of the Doha Agreement, there would clearly be pressure
for another WTO Round which would take this process further.
CONCLUSIONS
We believe that the discussion on trade and
development in relation to the Doha Round needs to be put into
a wider development context. This means acknowledging the different
circumstances and interests of different categories of developing
countries.
Many of the poorest developing countries, particularly
in sub Saharan Africa, are becoming increasingly marginalized
from the global economy. Food security is one of the key development
priorities for such countries. If food security is to be achieved,
it will require countries to support their agricultural sectors
to a greater degree than has been evident in the past. It will
also require action outside the area of agricultural policy, for
example in tackling the HIV/AIDS pandemic. The Doha Agenda in
relation to more agricultural trade liberalisation will not be
particularly relevant to this category of country, at least in
the medium term future.
By contrast, a number of middle income developing
countries, particularly those with a potential to expand agricultural
exports, have a major interest in securing from the Doha Round
an improvement in access to the markets of developed countries
and a fairer world trading system for agricultural products. However,
if they are to capitalise on the opportunities which may arise
from a positive outcome to the Doha Round, such countries will
also need to focus on increase the productive and trade capacity
of their agricultural sectors. Improved regional trading arrangements
should be a key priority for such countries.
The most likely outcome in relation to agriculture
in the Doha Round will be further liberalisation along the lines
agreed in the Uruguay Round which brought agriculture into an
international rules based framework for the first time. The three
areas of market access, domestic support and export subsidisation
will also be subject to greater disciplines, which will be phased
in over a period which will certainly extend beyond 2010. It is
assumed that some measure of agricultural support system will
continue to exist beyond this period which may be subject to further
negotiation in a future WTO Round.
The central vision spelled out is of a world
agricultural system which will continue to change and which will
be more benign to the interests of developing countries than over
the past decade. But, for this to provide increased development
opportunities, there must be much greater emphasis on enhancing
the productive capacity of the agricultural sectors of developing
countries. This must be a key policy priority for both the government
of developing countries and donors.
Concern Worldwide
January 2003
68 Tom Arnold was appointed Chief Executive of Concern
Worldwide in October 2001. Before that he worked in the Irish
Government's Department of Agriculture, Food and Rural Development
for 13 years as Chief Economist and Assistant Secretary General.
At an earlier point in his career he worked for 10 years with
the European Commission in Brussels and in Africa. Between 1993
and 1998 Mr Arnold served as Chairman of the OECD's Committee
of Agriculture. Back
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