Date: Sat, 8 Aug 2015 22:59:46 +0200
By keeping the rich-country farmers rich, factors such as subsidies also encourage the poor farmer to remain poor
IN the wake of the creation of the Sustainable Development Goals many wonder how much their predecessor, Millennium Development Goals, have in fact achieved. After all, the much-criticised MDG’s seem to be ending their journey leaving Africa lagging behind the rest of the world.
The SDG’s are somewhat more specific and try to tackle more issues than their MDG cousins, but once again they do not mention one of the very important problems affecting the continent. This problem is not of African making, but that of Africa’s business partners – the very countries developing its goals.
The struggle lies in the tariffs and quotas imposed on African products by their Western trade partners. International trade between countries isn’t fair, and never has been. The rules and regulations developed by governments and international organisations are skewed in favour of the rich nations.
In the words of Trevor Manuel, South Africa’s Finance Minister between 1996 – 2009:
“The problem is not that international trade is inherently opposed to the needs and interests of the poor, but that the rules that govern it are rigged in favour of the rich.”
Nowhere is this more apparent than in Africa.
Restrict trade – Tariffs and quotas
Looking at the most recent comprehensive world tariff profiles 2014 prepared by World Trade Organisation (WTO), International Trade Centre (ITC) and the United Nations Conference on Trade and Development (UNCTAD), the data shows the way in which the international trade game is played.
The exports that constitute the largest share in trade among most African countries’, which aren’t oil producers, is agriculture. However, this primary sector does not require advanced skills or machinery, rather land and manpower - two things that the continent has in abundance.
Following the Great Depression of the 1930’s and, subsequently, the Second World War, the developed nations grew concerned about their agricultural production and implemented subsidy supports and trade barriers on imports in order to nourish and protect their own production.
As a result, agricultural products such as cereals, meat, dairy products, sugar, fruit and vegetables are subject to uncommonly tough trade barriers vis-à-vis other commodities.
In the European Union more than 1/3 of agricultural tariffs carry duties of over 15%. Typically, an average agricultural tariff is double that of manufacturing products.
The EU requires 106% duty on sugar, 118% on cereal, 147% on tobacco and 191% on animal products. This agricultural produce is often a paramount feature of Africa’s economic survival. Since most labour force in Africa is employed in the agriculture sector, the dependence of most of the population is on the ability of this produce to be sold.
The high-income countries, considering Africa’s comparative advantage in agricultural production, protect their producers in a manner which diminishes the idea of “free trade” to only its last word. They impose high tariffs to minimise the ability of African countries to infiltrate their markets. Rendering a typical African farmer with only limited local demand.
Discourage production - Technical barriers to trade
Even if the African farmer does find agricultural trade profitable from a financial point of view, the woes and hurdles are still in abundance ahead.
In order for an African product to be allowed on an EU market it needs to comply with the EU standard requirements. The so-called Hurdles To Pass (HTP).
Herbs and spices require 5 HTP’s and so do nuts and seeds. Fish and fishery produce must comply with 10 HTP’s, while fruit and vegetable produce requires as many as 11 HTP’s, namely: check for mycotoxins, microbiological contaminants, heavy metals, unauthorised food additives, product composition, pesticides residues, genetically modified organisms/novel food, foreign bodies, radiation, parasitic infestation and a very vague requirement labelled “other”.
Apart from HTP’s, there are also SPS – sanitary and phytosanitary measures. The SPS is a non-tariff barrier, an arbitrarily imposed rule aimed at further regulating the markets.
The Kenyan institute of Public Policy Research and Analysis underlines that even though the SPS aims to safeguard the health of the populations it also creates an avenue for exaggerating the levels of protection in order to discourage competition.
The US Department of Agriculture and OECD reported dubious technical barriers to trade in 62 countries. Most commonly the developed economies were the birthplaces of these barriers.
The trade barriers aren’t only a domain of rich countries. In 2012 the World Bank stated that only 5% of Africa’s imports of cereals come from other African countries. Clearly, there is room for improvement also on the continent.
Kill competition – Western Subsidies
Arguably the biggest deterrent to African trade in agriculture, however, is the astronomical amount of subsidies the western countries pay their farmers to stay competitive.
In February’s The Economist a figure of $20 billion is cited as the official American subsidy to agriculture sector. The European Union, on the other hand, supports its farmers to the tune of $65 billion. Combined, these agricultural subsidies are roughly of the same value as the whole economy of Tanzania or the equivalent of 2013 official Overseas Development Assistance (ODA) to the whole African continent.
By keeping the rich-country farmers rich, the subsidies also pushing the poor farmer to remain poor.
While the farmer has access to sell his produce on the domestic market, he or she is excluded from the international market. And this, in a global world, is a big problem; because not only does it prevent the developing country farmer from reaching a far larger potential demand base but, at the same time, makes him vulnerable to the subsidised competition coming from rich countries where suddenly production is competitive despite comparative disadvantages.
Dumping agricultural products on the market below its market value, a technique commonly practiced by the United States, has a further effect of decreasing the price of agriculture commodities on the global market (as supply goes up, price drops) and, in turn, further stabs the African farmer in the back as his wealth depletes.
As much as it is clear that Africa’s trade needs to increase within the continent, some steps could be made to make free trade truly free.