Why Food Import Surges Are an Issue at The WTO

Monday 17 March 2008 by LRAN

Analysis by Aileen Kwa

The second article in a two-part series (END/2008)

GENEVA, Mar 7 (IPS) - Food import surges have had devastating consequences for the rural poor and local economies in Africa. Such surges have taken place with alarming frequency in the past decade or two.

This explains why the Group of 33, which represents 46 developing countries at the World Trade Organisation (WTO), has placed such high importance on their proposed special safeguard mechanism in the current Doha Development Round talks.

In the past year, the Food and Agricultural Organisation (FAO) in its ‘‘FAO Briefs on Import Surges’’ has released a number of case studies documenting some of these surges and their effects. The following are some examples.

In Ghana rice imports increased from 250,000 tonnes in 1998 to 415,150 tonnes in 2003. Domestic rice, which had accounted for 43 percent of the domestic market in 2000, captured only 29 percent of the domestic market in 2003. In all, 66 percent of rice producers recorded negative returns, leading to loss of employment.

Tomato paste imports from the EU increased by a staggering 650 percent from 3,300 tons in 1998 to 24,740 tons in 2003. Farmers lost 40 percent of the share of the domestic market and prices were extremely depressed.

In Cameroon, poultry imports increased nearly 300 percent between 1999 and 2004. Some 92 percent of poultry farmers dropped out of the sector. A massive 110,000 rural jobs were lost each year from 1994 to 2003.

In Cote d’Ivoire, poultry imports increased 650 percent between 2001 and 2003, causing domestic production to fall by 23 percent. As a result, prices dropped, forcing 1,500 producers to cease production and the loss of 15,000 jobs.

In Mozambique, vegetable oil imports (palm, soy and sunflower) saw a fivefold increase between 2000 and 2004. Domestic production shrank drastically, from 21,000 tonnes in 1981 to 3,500 in 2002.

About 108,000 smallholder households growing oilseeds have been affected, not to mention another 1 million families involved in substitute products (soy and copra). Small oil processing operations have closed down, resulting in the termination of thousands of jobs.

The effects of import surges were also seen elsewhere in the developing world. For example, onion imports in Jamaica led to the virtual collapse of the industry over the last 15 years. Dairy imports saw 50 percent of diary farmers selling their animals and going out of business since the liberalisation of the 1990s. Employment in the sector in 2004 had fallen by two-thirds that of 1990 levels.

Dairy imports in Sri Lanka increased from 10,000 tonnes in 1981 to 70,000 tonnes in 2005, consuming 70 percent of the domestic market. Domestic producers have not been able to develop and expand their market share. During this period, local production expanded by less than 15 percent.

There are countless more such cases which FAO and others have documented: dairy, maize and sugar in Kenya; rice and vegetable oils in Cameroon; onions and rice in the Philippines; rice and soy in Indonesia; maize, sugar and milk in Malawi; rice, dairy and maize in Tanzania; poultry in Jamaica; oilseeds in India; onions and potatoes in Sri Lanka; tomato paste in Senegal; soy and cotton in Mexico; rice and poultry in the Gambia; rice in Haiti and so forth.

Import surges follow in the wake of liberalisation of trade. Liberalisation brings into play multiple factors that are often beyond the control of importing countries. These include firstly the domestic support and dumping policies of exporting countries. The products in which import surges occur most frequently are also the products which receive the highest subsidies from the EU and the U.S..

Other factors are: currency fluctuations in third countries; dumping of food aid when it is not required; and policy whims of exporting countries, such as destocking exercises which cause surges on the world market.

When Ghana reduced its rice tariffs from 100 to 20 percent as a result of the structural adjustment policies enforced by the World Bank, rice imports doubled.

In Cameroon, lowering tariff protection to 25 percent saw poultry imports increase by about six-fold. The EU’s domestic supports to poultry farmers have had a devastating effect elsewhere too. In Senegal, 70 percent of the poultry industry has been wiped out in recent years because of EU poultry.

EU milk exports have had similar effects on countries from Jamaica and the Dominican Republic to Kenya and Uganda.

Currency fluctuation of third countries also plays a role. When the Brazilian real lost a third of its value against the U.S. dollar in 2001, there was a sharp increase in Brazilian poultry exports. Cameroon, simply because it had porous borders, saw poultry imports originating from Brazil increase by 885 percent.

When the Russian ruble fell against the dollar in 1998, the U.S. as the primary exporter of poultry to Russia directed its poultry to third countries. Cameroon, which had not imported poultry from the U.S. in 1999, imported 639 tons in 2000, again with devastating consequences on local producers.

These cases, documented by the FAO, should lead negotiators to exercise caution in the current Doha talks on the special safeguard mechanism. Import surges are already happening, even before yet another round of liberalisation as is under negotiation in the current Doha Round.

Effective measures should be made available to developing countries if food security and rural livelihoods are to be given priority.

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