. ..
Edited by
Merlinda D. Ingco
~ohn D. Nash
Dominique Njinkeu
. -
..
I I
Liberalizing ~gricultural Trade:
Issues and Options for Sub-Saharan Africa
intheWTO •
Edited by
Merlinda D. Ingco
JohnD. Na,sh
DominiqueNjinkeu
·M~
Macmillan
. Nigeria
© The World Banic, 2003
All rights reserved .. No part of this publication may be reproduced, stored
in a retrieval system or transmitied in any fa.rm or by any means,
electronics, mechanical, photocopying, recording or otherwise, without
·t4e prior pennission of the publisher · . · '
First published, 2003
Published by
Macmillan Nigeria Publish.ers Limited
Ilupeju Industrial Estate, P.O. Box 264, Yaba, Lagos
New Oluyole Industrial Estate, P.O. Box 1463, Ibadan
Companies and representatives throughout the world
ISBN 978-018-353-1
Printed by Potygraphics Ventures_ Limited, Ibadan
Contents
List of Tables ...................................................................................... iv
List of Figures ..................................... ,............................................... ix
List of Abbreviations ............................ :............. ;................................. x
List of Contributors .......................................................................... xiii
Author Biographies .................. .'........•............ :.................................. xiv
Acknowledgements ............................................ ,.............................. xvii
1. Introduction
Merlinda D. lngco, JohnD. Nash andDominique Njinkeu
2. Liberalizing Agricultural Trade: Issues and Options 9
for Sub-Saharan Africa in the WTO
Merlinda D. lngco, Tonia Kandiero, John D. Nash, and
Dominique Njinkeu
3. Agriculture and the New Trade Agenda in the WTO: 35
Interests, and Options for Cameroon
Ernest Bamou, Dominique Njinkeu, and Emmanuel Douya
4. Kenya's Agricultural Trade Reform in the Framework 97
of the World Trade Organization
Hezron Omare Nyangito
5. Agriculture and the WTO: Economic Interests and 137
Options for Nigeria
E. Olawale Ogunkola
6. Agriculture and the New Trade Agenda in the WTO: 183
Interests and Options for Tanzania
Flora Mndeme Musonda
7. Agriculture and the New Trade Agenda in the WTO 229
2000 Negotiations: Economic Analyses oflnterests and
Options for Ghana
Abena D. Oduro
Index 264
iii
List of Tables
2.1 A Selected Number of Tariff Peak Products from Sub- 12
Saharan Africa (per cent)
2.2 Tariff Escalation of Agricultural Products in QUAD
(per cent) 13
2.3 Average Tariffs by Region and Level of Processing
(per cent) .13
2.4 Sub-Saharan Africa's Agricultural Exports to the United
States Receiving the Highest Preferential MFN Margin,
2000 15
2.5 Nominal Protection Rates in Kenya (per cent) 20
2.6 Price Shares for Export Crops 22
2A.l Summary of Urugua)'. Round Commitments in
Agriculture 34
3.1 Cameroon and the WTO Multilateral Agricultural
Negotiations 38
3.2 Pre-and Post-Uruguay Round State Agricultural
Extension Services Enterprises. 41
3.3 Real Nominal Rate of Protection of: Selected Export
Products, 1980-99 46
3.4 Cameroon's Agricultural Products Subject to Trade
Restrictions Before 1989 48
3.5 Post-January 1994 Reform of Tariff and Tax Structure 50
3.6 Evolution of Effective Rate of Protection in Key
Agricultural Sectors (per cent) 51
3.7 Agricultural Tax and Tariff Structures Before and After
the 1994 Reforms (per cent) 53
3.8 Main Market Destinations of Cameroon's Agricultural
Products 54
3.9 Pre-and Post-Uruguay Round Most Favored Nation
Rates of Selected Cameroonian Products to EU and US
Markets ( per cent) 55
3.10 Impact on Agricultural, Food Security, and
Macroeconomic Indicators Percentage Change from
Base Run Model 60
3.11 CEMAC Tariffs and Taxes in 1998 (per cent) 64
3.12 Summary of Cameroon's Negotiation Position 68
IV
3A.I Main Export Product Competitors in 1996 82
3A.2 Products with Potential Loss of PJ;eferences for CEMAC
Countries 83
3A.3 Implications for Non-LDC ACP Systematic Income
Differentiation within the GSP 87
4.1 Agricultural and Trade,Related Policy Reforms,
1993-98 100
4.2 Specific Policy Changes for Various Agricultural
Commodities IOI
4.3 Import Tariffs (per cent) on Selected Agricultural
Commodities into Kenya 103
4.4 Government Expenditures for All Sectors, I 982/1983 -
1999/2000 (millions of Kenyan Pounds) 105
4.5 Expenditure on Agricultural Production Services, 1980-
98 (millions of Kenyan Pounds) 106
4.6 Coefficients of Variation for Production of Major
Commodities in Kenya Before and After the Agreement
on Agriculture (1995) 109
4.7 Real Prices per Tonne of Food Crops I 990-2000 110
4.8 Real Prices per Tonne of Industrial Crops 1990-2000 Ill
4.9 Real Prices per Tonne of Export Crops I 990-2000 112
4.10 Price Indices for Agricultural Inputs for Kenya 1994-99 113
4.11 Nominal Protection Coefficients for Major Agricultural
Commodities in Kenya, I 990-99 115
4.12 Destination of Kenya's Exports to Major Markets,
I 994-99 (per cent of total exports) I 16
4.13 Composition of Kenya's Exports,1994-98 (per cent) 117
4.14 Composition of Kenya Imports, 1994-98 (per cent) I 18
4.15 Origin oflmports as a Share of Total Imports,
I 994-99 (per cent) 118
4.i6 Irnports of Major Food Commodities, I 980-98
(thousands of tons) 119
4A.1.I Applied Tariffs for Imports of Agricultural Commodities
and Related Products into Kenya I 994 - I 999 129
4A.2.1 Kenya's Exports by Country of Destination 1990-1998
(thousands of Kenyan Pounds) 132
4A.3.I Kenya's Imports by Country of Origin (thousands of
K'enyan Pounds) 133
v
--!- --- ----- -
4A.4.l Value of Kenya's Exports by Principal Conunodities,
1990-98 (thousands Kenyan Pounds) 134
4A.5.l Value of Kenya's.Exports of Agricultural Conunodities
(thousands of Kenyan Pounds) 135
5.1 Structure of Nigeria's Imports and Exports, 1980-96 141
5.2 Ratio of Producer Prices to World Market Prices,
per cent, 1970-85 144
5.3 Evolution of Agricultural Macroeconomic Policies in
Nigeria, 1970-1999 145
5.4 Nigeria's Import Duties in Agriculture, Forestry and
Fisheries, 1990 and 1998 147
5.5 Effective Tariff Protection, Aggregate Model 152
5.6 Effective Rates of Protection for Nigerian Agriculture,
1990 and 1998 153
5.7 Destination of Nigerian Exports, by Value, 1980-95 155
5.8 Tariff Peaks in the European Union, Japan, and the
United States on Agricultural Products of Interest to
Nigeria 159
5.9 Principal Administration Methods for Tariff Rate Quotas,
1995-99 (number of tariff quotas) 160
5.10 Potential Application and Action of Special Agricultural
Safeguards, by WTO Members 161
5.11 Potential Application and Action of Special Agricultural
Safeguards, by Product Category 161
5A.l.l Sununary of Export Incentive Schemes Abolished'in
1999 (August) 167
5A. l.2 Summary of Export Incentive Schemes Currently in
Operation in Nigeria, as at August 1999 168
5A.2.l Changes in Nigeria's Import Prohibition List (trade),
~?95 - 1998 169
5A.2.2 Import and Export Prohibition Lists 1991 - 1998 170
5A.4.l Trends in Domestic Support Measures in the European
Union, Japan, and the United States, 1995-97 175
5A.4.2 EU Exports Subsidies; 1995-98 (million ECU) 177
5A.4.3 U.S. Exports Subsidies, 1995-98 (US dollars) 178
6.1 Tanzania's Exports by Type of Conunodity 185
6.2 Food Crop Production in Selected Regions of Tanzania
(thousands of tons) 188
vi
- - 1 __
6.3 Cereal Yields and Average Annu.al Growth Rate of
Agricultural Food Production in East Africa, Selected
Periods 189
6.4 Agriculture as Share of Total GDP at Factor Costs in
Constant 1992 Prices, Mainland Tarizania (per cent) 190
6.5 Real Producer Prices for Food Crops, 1981-99 (constant
1998-99 Tshs/kg) 191
6.6 Private and Social Domestic Resource Costs for
Selected Tanzanian Crops 192
6.7 Food Balance, 1985/86 - 1997/98 (tons) 193
6.8 Major Destination Countries for Tanzania's Agricultural
Commodity Exports Before the Uruguay Round
(millions of Tsh) 195
6.9 Major Sources of Tanzania's Imports of Agricultural
Commodities before the Uruguay Round (millions of
Tsh) 196
6.10 Real Budget Allocation to Agricnlture, 1990/91 to I 999/
2000 201
6.11 Changes in Import Tariffs, 1996/97 - 1998/99 202
6.12 CGE Model Simulation Results Based on Tariff Cut of
50 per cent and Exchange Rate Change of 20 per cent 208
6.13 Simulation Results, Micro and Activity Prices 210
6A.l Nominal and Effective Rates of Protection in Key
Products since the- Uruguay Round Agreement on
Agriculture 224
6A.2 Effective Rates of Protection 225
7.1 Market Access Conditions for Selected Agricultural
Products, 2000 234
7.2 Evolution of the Agriculture Import Trade Regime 236
7.3 Decomposition of Changes in Real Wholesale Prices 238
7.4 Estimates of Effective Protection Coefficients 239
7.5 Indices of Agriculture and Food Production 1989-91 =
100 240
7.6 Production of Selected Food Crops (000 metric tonnes) 241
7.7 Production of Industrial Crops (Mt) 242
7.8 Composition of Agriculture Trade 1990-2001 243
vii
7.9 Trends in Export Volumes of Selected Agricultural
Products (metric tonnes) 243
7.10 Market Share for Ghana's Major Trading Partners for
Selected Agricultural Exports 244
7.11 EU Share of Selected Agricultural Exports 1995,
1997,1998 (%) 244
7.12 Developments in Agriculture and Food hnports (1989-
91=100) 245
7.13 Developments in the Structure of Agriculture Imports,
1995, 1998 246
7.14 Source of Ghana's Major Agricultural hnports 246
7.15 Production and Domestic Supply of Selected Cereals 248
7.16 Trends in National Level Food Security Indicators 249
7.17 Reasons for Refusal of Entry into .the United States of
hnports from Ghana in 2002 250
7.18 Estimates of Revealed Comparative Advantage 1995-
1998 252
7.19 Tariffs and Trade Control Measures in the EU market
1994, 1996, 1998 254
Vlll
List of Figures
2.1 Sub-Saharan Africa's. Share in.World Agricultural
Exports Revenue !l
2.2 Distribution of Sub-Saharan Africa Exports by Market 11
2.3 Applied and Bound Tariffs for a Selected Number of
Sub-Saharan African Countries (per cent) 17
2.4 WTO Member Expenditure on Export Subsidies, 1995-
1998 (per cent of total world export subsidies) 24
4.1 Production Levels of Selected Food Commodities 1990- 108
1998
4.2 Production Levels of Selected Cash Crops 1986-1998 108
4.3 Commodity World Market Prices 1993-2000 113
5.1 Share of Agriculture in Gross Domestic Product, %
1960 to 1998 138
5.2 Growth Rate of Agricultural Production in Nigeria,
1961-2000 140
5.3 Nigeria's Agricultural Trade,$ billion, 1990-1998 140
5.4 Agricultural Expenditure, Share in Total Expenditure
and Value in Dollar, 1986,1988 151
5.5 Nigeria: Average Expenditure on Agriculture, 1986-88
and 1995-98 151
5.6 Tariff Escalation in Cotton in EU, Pre-and Post-UR 156
5.7 Tariff Escalation in Cocoa: Pre-and Post-UR 157
5.8 Tariff Escalation in Hides and Skin, Pre-and Post-UR 157
5.9 Tariff Escalation in Wood Product: Pre-and post-UR 157
IX
-~--
'
- ---'-----
List of Abbreviations
ACP African Caribbean and Pacific
AEC African Ec.onomic Commlmity
AERC African Economic Research Consortimn
AGOA African Growth and Opportunity Act
AMS Aggregate Measurement of Support
AoA Agreement on Agriculture
ASAP Agricultnral Sector Adjustment Program
CBI Caribbean Basin Initiative
CEMAC Central African Monetary and Economic Community
CET Constant Elasticity of Transfonnation
CES Constant Elasticity of Substitution
CGE Computable General Equilibrium
CPI Consmner Price Index .
COMESA Common Market for Eastern and Southern Africa
CREDIT Centre for Research in Economic Development and
International Trade
CV Compensating Variation
DRC Domestic Resource Cost
EAC East African Community
EBA Everything But Anns
ECA Economic Commission for Africa
ECOWAS Economic Community of West African States
EPAs Economic Partnership Agreements
ERB Economic Research Bureau
ESRF Economic and Social Research Foundation
EU European Union
EV Equivalent Variation
FAO Food and Agriculture Organization
FEPA Federal Environmental Protection Agency
FGN Federal Government of Nigeria
FIF Foreign Input Facility
FIMAC Financing of Investment in Community-based Micro-
Agricultural Projects
GAMS General Algebraic Modeling System
GPJ:T General Agreement on Tariffs and Trade
x
GOP Gross Domestic Product
GMP Good Manufacturing Practice.
GP\1]) Good Practice in the Use of Veterinary Drugs
GSP Generalized System ofPreferences
1
GSTP Global System of Trade Preference
HACCP Hazard AnaJysis Critical Control Points
HUB Hunting and\Breeding . i
IFPRI Internationa Food Policy Research Institute
IMF International Monetary Fund
IPPC International Plant Protection Convention
MAC Ministry of Agriculture and Cooperatives
MFN Most-Favored Nation
LOCs Least Developed Countries
NACB Nigerian Agricultural and Cooperative Bank
NAFDAC National Agency for Food and Drug Administration and
Control
NCPB National Cereals and Produce Board
NEPC Nigeria Export Promotion Council
NEWS National Early Warning System
NEXIM Nigeria Exports and Imports Bank
NGOs Non-Governmental Organizations
NISER Nigerian Institute of Social and Economic Research
NPR Nominal Protection Rates
NTBs Non-Tariff Barriers
OECD Organization ofEconomic Co-operation and Development
ODC Other Duties and Charges
RRF Refinancing and Rediscounting Facility
SACU Southern African Customs Union
S&D Special an.d Differential Treatment
SADC Southern African Development Community
SAG Subsistence Agriculture
SAM Social Accounting Matrix
SAP Structural Adjustment Program
lei
SEATIN Southern and Eastern Africa Trade Information and
Negotiations Institute
SSA Sub-Sahara Africa
SPS Sanitary and Phytosanitary Measures
TBT Technical Barriers to Trade
TRIPS Trade-Related Aspects on Intellectual Property Rights
TRQs .Tariff Rate Quotas
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Program
URM Uruguay Round Agreement on Agriculture
URT United Republic of Tanzania
vxr Value Added Tax
WFP World Food Program
WIDER World Institute for Development Economics Research
WTO World Trade Organization
xii
List of Contributors
Ernest Bamou
University of Yaounde II
Emmanuel Donya
University of Yaounde II
John D. Nash
World Bank
Merlinda D. Ingco
World Bank
Tonia Kandiero
University of Pretoria
Flora Musonda
The Economic and Social Research Foundation
Dominique Njinkeu
African Economic Research Consortium
Hezron Omare Nyangito
Kenyan Institute for Public Policy Research and Analysis
Abena Oduro
Centre for Policy Analysis
E. Olawale Ogunkola
University of Ibadan
xiii
--- - I
. Author Biographies
Ernest Bamou is a Senior Lecturer in the Department of Economics,
University of Yaounde 11-Soa, and a Senior Economist in the Department
of Forecasts, Ministry of Finance and Budget-Cameroon. He is co-
author of Elaboration et Evaluatioin des Politiques Agricoles: Techniques
etMethodes available from 'Presses Universitaires du Cameroun' (PUC).
He has also written in professional journals on trade and agricultmal
policy analysis.
Emmanuel Douya is a Senior Lecturer at the University of Yaounde 11-
Soa in Cameroon. He is a specialist of rural economy with a particular
focus on Agricultural Policies and Economic Growth in Developing
Countries. He is currently working on a CGE Approach to Agricultural
Policies and Poverty Alleviation in Cameroon.
Merlinda Ingco, Ph.D., is a Senior Economist with the World Bank
staff since 1988, working with International Commodities Markets
Division (1988-92), Commodity Policy and Analysis Unit (1993-94),
Development Research Group (1994-98), East Asia Department and
Development Economics Research Group (1998-99) and Senior
Economist (1999 - present). She is the Project Leader of the Bank's
integrated program of research, policy analyses and capacity building in
international trade and WTO issues, with a Ph.D. and M.Sc. in Economics
and Agricultural and Natural Resource Economics (Michigan State, 1986)
and B.S., Management (Polytechnic University of the Philippines, 1976).
Publications topics include trade policy, agricultural trade and developing
countries and the WTO, South Asia, and Africa.
Tonia Kandiero, Ph.D., is a Senior Lecturer and Coordinator of the
Trade and Investment program at the University of Pretoria. She is a
consultant for the World Bank, focusing on Agriculture and the New
Trade Agenda in the New Millennium: Economic Analysis ofIssues and
Options for Developing Countries. In 1998, she spent several months
at the IMF. Her research program focused on foreign aid in Mozambique.
She received her Ph.D. in Economics from Howard University in 200 I.
Abena D. Oduro, is a Research Fellow at the Centre for Policy Analysis
in Accra and previously Senior Lecturer, Department of Economics,
xiv
University of Ghana. She holds M.A and M.Litt degrees and has
undertaken work for a Ph.D. (1983-87) at the University of Glasgow.
Her main areas of research interest are poverty analysis, trade policy and
the economics of education.
John D. Nash, Ph.D., is the Adviser to the Commodities and Trade
Group in the Agriculture and Rural Development Department of the
Enviromnentally and Socially Sustainable Development, Vice-Presidency,
World Bank. He has an M.Sc. artd a Ph.D. in Economics, University of
Chicago (1982). Publications topics include trade policy in Latin America,
Africa, South Asia, and transition economies; agricultural policy
adjustment; agricultural price policy; commodity price stabilization; and
capital mobility.
Dominique Njinkeu, is currently the Executive Director oflntemational ·
Lawyers and Economists Against Poverty (!LEAP). He served as Deputy
Director of Research of the African Economic Research Consortium
(AERC) between 1998 and 2003. While at AERC he managed, among
others, the trade policy research program. He has also worked as
Research Co-ordinator of the Reseau Politiques Industrielles in Dakar
(Senegal), a trade research capacity building program for Francophone
Africa. Prior to that he taught at the University of Yaounde (Cameroon),
at the Universite Laval in Quebec (Canada) and at Southern Illinois
University at Carbondale (USA). He holds a Ph.Din Economics, a Masters
Degree in Economics and Statistics and a Masters Degree in Agribusiness
Economics. His research interests are in trade policy and African
Development. His new institution provides assistance to developing
countries for effective participation in international negotiation!;. Dominique
Njinkeu is a Cameroonian citizen.
Hezron Omare Nyangito, Ph.D., is an Agricultural Economist and is
currently a Principal Policy Analyst and Head of Productive Sector Division
at the Kenyan Institute for Public Policy Research and Analysis (KIPPRA),
leading programs in agriculture, manufacturing, trade, and natural
resources. He has a Ph.D. (the University of Tennessee, Knoxville, USA
in 1992), and an M.Sc. in Agricultural Economics (1987) and a B.Sc. in
Agriculture (1983) from the University of Nairobi, Kenya. He is also a
Senior Lecturer, Department of Agricultural Economics, University of
Nairobi and since 1995 on leave of absence. He has published over 70
xv
professional papers and articles and worked for the Government of Kenya
and numerous non-governmental organizations.
E. Olawale Ognnkola, Ph.D., is a Senior Lecturer, Department of
Economics, University of Ibadan and a Senior Research Fellow both at
the Centre for Econometric and Allied Research (CEAR) and at the Trade
Policy Research and Training Program (TPRTP) in the Department of
Economics at the University of Ibadan, Ibadan, Nigeria.
Flora Mndeme Mnsonda is a Senior Research Fellow at the Economic
and Social Research Foundation, Tanzania. She has worked at the
University of Dar es Salaam as a researcher, at the University of Zambia
as a lecturer and at the Common Market ·for Eastern and Southern Africa
(CO MESA) as a research coordinator. She was a visiting researcher at
the Institute of Federalism in Switzerland for one year. Her areas of
interest are international trade, trade policy, regional studies and
development issues.
XVI
A,cknowledgements
I
Selected papers in this volume result from the World Bank's initiative to
strengthen developing countries' participation in the Doha Development
Round. The project, which was funded by the United Kingdom's
Department for International Development (DFID), the World Bank-
Netherlands Partnership Program (BNPP) and the Research Advisory
Staff of the World Bank, began in October 1999 and includes an array of
publications relating to agricultural trade and developing countries.
We would like to thank the authors: Earnest Bamou (University of
Yaounde II), Emmanuel Douya (University of Yaounde II), Merlinda D.
lngco (World Bank), Tonia Kandiero (University of Pretoria), Flora
Musonda (The Economic and Social Research Foundation), John D.
Nash (World Bank), Dominique Njinkeu (African Economic Research
Consortium), Hezron Omare Nyangito (Kenyan Institute for Public Policy
Research and Analysis), Abena Oduro (Centre for Policy Analysis), and
E. Olawale Ogunkola (University of Ibadan). Their leadership and
participation in the project, providing different skills, backgrounds, and
experience, make the publication an especially valuable tool for developing
countries in the negotiations and also for the World Bank in furthering its
understanding of the steps necessary to accomplish its Millennium Goals.
Reducing by half the number of people who live on less than $1 dollar
per day by 2015 requires confronting the economic realities of agricultural
trade in developing countries.
The case studies in this publication represent the final product of an
ongoing work to identify and expand upon topics of interest to developing
countries in Sub-Saharan Africa. In particular, papers included were
discussed and reviewed at meetings in Dakar, Geneva and Kampala. On
October 2-6, 2000, in Dakar, Senegal, a workshop was held on Capacity
Building in International Agricultural Trade in Central and West Africa.
This workshop was funded with partners from the Conference of West
and Central African Agriculture Ministers (CMA-AOC) and from Germany
(the German Federal Ministry of Economic Cooperation and Development
(BMZ), the German Foundation for International Development/Centre
for the Development of Food and Agriculture (DSE-ZEL), the Technical
Centrefor Agricultural and Rural Cooperation (CTA), the German Agency
for Technical Cooperation (GTZ).
In Geneva, Switzerland on March 9, 2001 a seminar was held on
Enhancing the Capacity of African Countries for Trade Policy and Trade
XVI!
r---
Negotiations. This provided the opportunity for Geneva-based African
representatives and officials from the United Nations system to discuss
World Trade Organization (WTO) trade negotiations issues of agriculture
and trade standards, services and capacity building proposals. ANovember
13-16 2002 workshop in Kampala, Uganda under the anspices of the
World Bank Institute and the African Economic Research Consortium
(AERC) provided the opportunity for case stndy authors to review their
analyses in the context of the Doha Development Round, which was the
outcome of the Fourth WTO Ministerial Conference held in November,
2001 in Doha, Qatar.
Many organizations and individuals contributed to this effort and we
would like to recognize their work DFID, BNPP, GTZ and the World
Bank provided the financial contributions that made this research and its
dissemination possible. Our authors, collaborators and our publisher, the
AERC, continue to expand the knowledge base available to readers here
and through other publications like this one. We would also like to thank
the reviewers of the case studies, especially Dr. Ravene Poonyth of the
University of Pretoria, South Africa and Dr. Kofi Kissi Dompere of Howard
University, Washington DC, USA. We recognize the very helpful work
of World Bank staff Phil English, Joe Carroll and Tonia Kandeiro for
their comments and suggestions. Finally, we recognize the editorial support
provided by Meta de Coquereaumont (Communications Development
Incorporated) and World Bank staff and consultants Fluvia Toppin, Helen
Freeman, Laura Ignacio, and Matt Lexcen .
.xviii
1 Introduction
Merlinda D. lngco, 1ohn' D. Nash and Dominique Njinkeu
During the 1960s and 1970s, inward-oriented import substitution policies
dominated the trade policies of many Sub-Saharan African countries,
which were then members of the GATT. Their relationship with developed
country GATT members was mostly non-reciprocal and their negotiating
efforts were concentrated. on obtaining preferential treatment in market
access and exemptions from many GATT rules. Access under the General
System of Preferences (GSP) schemes (not part of the GATT) of a
number of developed countries resulted from these negotiations. Such
special and differential treatment was the yardstick for judging their
links to the multilateral trading system. Further exemptions from GATT
rules were provided by the provisions on balance of payment restrictions
or development policies in Article XVIII or in other general GATT
exemption provisions.' The Uruguay Round was the first round to
incorporate agriculture fully into the framework of disciplines. Developing
countries were again granted partial exemptions from the general
commitments to liberalize trade regimes, although many had already
undertaken in the 1980s significant unilateral liberalization in the context
of structural adjustment programs. But in developing, as in high-income
countries, trade barriers in agriculture have been maintained at levels
higher than in other sectors. For the Doha Development Agenda to
succeed in its objective of creating a more pro-development international
trading system, it is clear that agriculture is the key sector in which
concrete results must be achieved and these barriers reduced significantly.
The importance of the new round of trade negotiations in the World
Trade Organization (WTO) for countries in Sub-Saharan Africa cannot
. be overstated, as their economic prospects will be greatly enhanced by
the full integration of agriculture into the global trading system under
1
2 Liberalizing Agricultural Trade: Issues and Options .
multilateral rules. Many countries in the region with potential to expand
exports stand to gain from greater openness in global markets. Even
net-food importing countries that face food security challenges stand to
benefit from a more transparent and more predictable. world trading
system in agriculture. World agricultural markets that reflect underlying
production costs rather than protectionist government interventions will
ultimately help resolve not just the food· insecurity faced by many
c6untries, but also help maintain the fundamental macroeconomic
conditions that lead to progressive, predictable economic growth. This
kind of world trading system will also reduce the volatility of agricultural
markets, which will reduce and make more manageable the risks faced
by both importers and exporters of foodstuffs.
What should African countries do differently in the new WTO round
of trade negotiations from a development perspective? In agriculture,
African countries face important decisions, challenges, and risks. While
the relevant issues and options are different in each country of the region,
there are important areas that are cominon. Key issues in traditional
areas (e.g., market access - reforms in tariffs and non-tariff ba:riers)
remain very i1nportant, while several second-generation trade issues have
come to the forefront. In the current trade negotiations, major issues
raised by the African countries include how to improve market access to
high-income countries, improved WTO rules in several areas, and the
safeguarding of existing preferences under the various GSP programs
and the EU's Lome Convention/Cotonou Agreement with Africa,
Caribbean and Pacific com1tries. Several African countries have tabled
proposals to strengthen the WTO rules and implementation of specific
provisions of the Uruguay Round Agreement on Agriculture (URAA),
such as new specific measures and assurances of compensation to
address any adverse effects on food insecure countries of higher world
food prices from further liberalization.
This volume presents the key findings of analytical work on important
issues facing selected countries in Sub-Saharan Africa in the context of
the new WTO round of trade negotiations in agriculture. In contrast to
many previous studies, the analysis here focuses upon com1try-specific
issues in Cameroon, Ghana, Kenya, Nigeria, and Tanzania. The analyses
are intended to be useful in carrying out well-informed country-specific
evaluations of alternative options for further trade and agricultural policy
reform. To facilitate ownership of findings, to build local analytical
capacity, and to expand the base of local expertise, the studies were
Introdnction 3
performed by experts residing in the respective countries, in a partnership
between the World Bank' and the African Economic Research Consortium
(AERC)'.
Background research undertaken for each country case study included
four general systemic and thematic issues:
(i) the trade barriers facing major agricultural exports from the country;
(ii) whether the WTO negotiations were pushing domestic reform in
the right direction; ·
(iii) the best approach to market access negotiations based on the
country's experience with implementing the Uruguay Round, and
(iv) lessons learned as a result of the implementation of sanitary and
phyto-sanitary measures and technical barriers to trade.
Depending on available data, the analytical work in these countries
also provides recent estimates of import protection levels in key agricultural
commodities. The analysis also evaluates remaining biases in agricultural
policy regimes during the implementation period' , of the URAA compared
to the pre-URAA period. URAA implementation coincided with important
macro-economic and agriculture-specific policy reforms, which may
have reduced or even reversed the bias against agriculture in these
countries. The studies include the effects of changes in tariff structures,
preferential treatment, rules relating to sanitary and phyto-sanitary
concerns, and technical barriers to trade. The analyses consider
preferences and terms-of-trade losses from potentially higher food prices
to net importers of food as export subsidies are reduced. The analyses
provide evidence on whether the implementation of the URAA resulted
in a significant burden to Sub-Saharan African countries'. Results show
that some African countries where liberalization occurred in the 1980s
were disappointed at least in the short rnn with the outcomes of structural
adjustment programs and the URAA. But African countries that resisted
liberalization during this period missed opportnnities to anchor domestic
policy reforms in an international framework.
In particular, each of the analytical studies focuses on the following:
+ Key issues for the country;
+ Where the country's policies stand today relative to its development
objectives and WTO commitments;
+ What has been achieved at the country level and the implications
of these achievements for the new WTO negotiations;
+ Experience and lessons from actual implementation of
commitments;
4 Libera/Wng 4gricultural Trade: Issues and Options ...
• Impacts of actual implementation of URAA, including domestic
policy adjustments;
• Market access options in agricnlture and other key sectors; (What
are the main barriers facing exports from the country in the rest of
the world? How large are preference margins in OECD countries?);
• Impact of macro, trade, and sector specific policies on domestic
incentive regimes;
• The domestic trade policy agenda in agriculture; and
+ Non-tariff barriers to agricultural trade post-Uruguay Round;
sanitary and phyto:sanitary measures, food safety standards and
other technical barriers to trade.
Some of the key messages from these countries case studies are as
follows:
+ In evaluating the effects of implementation of key URAA provisions
relating to disciplines on domestic support, and export subsidies, it
is evident that the URAA itself had little direct impact because the
1980s reforms, resulting from structural adjustment programs,
had already changed goverrunent involvement in agriculture. These
reforms resulted in the elimination of support for agriculture through
inputs, prices and marketing interventions, essentially covering the
URAA provisions on domestic support and export subsidies. African
countries generally made commitments in the URAA on tariff
bindings that were far above those that they were actually applying.
+ Sub-Saharan African countries' own high tariffs on agricultural
products and restricted access in input markets (including
manufactured goods, seeds, and other inputs for agricultural
production) creates great potential for them to make significant
cuts in the next trade agreement.
• On market access issues, these countries benefited from preferential
tariffs into developed country markets and the studies all note that
a reduction in MFN tariffs in these markets, as required by URAA,
will erode their preferential tariff arrangements. This will result in
increased competition from other exporters into developed country
markets. The studies also note that in the tariffication proces~,
developed cotmtries increased their border protection, using the
opportunity to apply higher tariffs to processed agricultural
products. This has negatively impacted the competitiveness of
developing country exports in those markets. Cameroon and
Tanzania note that the major constraint associated with market
Introduction 5
access was a domestic one of lacking capacity to respond to market
opening opportunities. The Tanzanian study lists rules of origin,
environmental requirements, labeling and quality standards as also
impacting on market access.
+ All the studies point to the problems with implementation of the
Agreement on the Application of Sanitary and Phytosmntary
Measures (SPS) and the possibility of SPS provisions being used
for protectionist purposes. All of the country studies attach great
importance to financial and technical support for capacity building
(both scientific and diplomatic personnel and their attendance at
standard setting bodies), and the establishment of a legal framework
and institutions. While noting the longer implementation periods
for implementation of SPS measures which is in accordance with
special and differential treatment provision of URAA, the Ghana
study comments that this could lead consumers to question the
standards of developing country products and lead to a loss. of
markets.
+ The studies recognize the impact that developed country reductions
in domestic support and export subsidies may have on food security
issues for net food importing countries, and the Kenya study notes
that dumped subsidized product impacted on local production.
+ The issues for these countries in the new round of trade negotiations
are affected by both their approach in the negotiations and the
continuing and new issues that the negotiations will have to address.
On negotiating style, the studies point to the relationships that each
country has with neighboring regional groups and the regional
efforts to increase trade using preferential arrangements or to limit
access. The efforts associated with regional integration will have
an indirect effect on the multilateral negotiations as these provide
additional trade negotiating frameworks and experience in trade
negotiations. The Tanzania study notes emerging regional protection,
including safeguard actions, following the removal of quantitative
restrictions. The Cameroon study states that a more liberalized
international trading environment was to that country's long term
advantage. Several of the papers point to the importance of
coalitions in the negotiations, particular with more reform-minded
countries on the key provisions of discipline~ on domestic support,
market access and export subsidies. Several of the studies also
point to how some developed countries "manipulated" the effects
6 Liberalizing Agricultural Trade: Issues and Options
on both reductions in domestic support and tariffs with the use of
aggregates instead of product specific approaches, effectively
limiting tariff reduction. The shifting of support from the most
distorting category ("boxes") of"amber" to less distorting support
of"blue" and "green" also resulted-in limited reduction in domestic
support. The Nigeria study notes that the "request-offer" approach
to tariff negotiations used in the Uruguay Round had an impact, as
countries did not have the capacity to analyze proposals, and hence
in the current round, Nigeria would prefer to use the "Swiss
formula" approach to tariff reductions.
• On specific issues such as further tariff reductions, the studies
note that their high tariffs ceiling reflected in each Schedule of
Commitment may be a problem. As their applied rates are much
lower, the negotiations provide an opportunity to return to this
issue. One country study comments that high bound tariffs act as
a negative factor for investment. Some studies (e.g. Nigeria and
Cameroon) suggest that there should be some flexibility in the
countries' ability to use domestic support to address rural
development or to provide incentives (given the failure of the private
sector) to increase agricultural productivity.
• On Article 16 of the URAA, the Decision on Measures in Favour of
Least Developed Countries Concerning the Possible Negative Effects
of the Reform Programme on the Least Developed and Net Food
Importing Countries, the studies recommend legally binding
language on technical support and financial assistance, recognizing
that implementation has been disappointing.
• On the establishment of a Development Box, the Nigeria stud)'
notes that there should be strict rules for eligiOility.
• On special safeguards, the Cameroon study wants the approach to
be simplified and made more nondisc.ciminatory.
• On Green Box measures, while these are important the studies
recognize their somewhat limited use, given the reductions in
domestic agricultural budgets.
• The Ghana study notes the effect of other WTO work on investment
and competition policy, environmental and intellectual property
issues.
• On export subsidies, all studies note the impact of these on food
security issues but the Camernon study states that these should
"ultimately be banned".
Introduction 7
These studies should serve as a resource to detail how countries in
the Sub-Saharan region of Africa have experienced the implementation
of trade liberalization reforms. The level of ambition in relation to
liberalization in the three pillars (i.e. market access, export competition,
and domestic support) should be of equal interest as thete is a need to
ensure adequate linkages between these three pillars in the negotiations.
In the area of market access the modalities followed in the negotiations
should ensure significant reduction (or elimination) of tariff peaks and
tariff escalation. This should be coupled with adequate special safeguard
measures to take into account the special conditions of African and other
less developed countries. As preferences will be further eroded by the
negotiations, adequate compensation should be provided in the form of
technical assistance to African countries to enable them to diversify their
agriculture.
In the areas of export competition and domestic support, which are
primarily used by developed countries with significant negative impact
on African production and export, there is urgent need for their significant
reduction. This could be attained through a redefinition of the various
boxes. Several non trade issues constrain the development of African
agriculture and should be recognized and discussed.
In all these specific issues and others that emerge in the new
negotiations, it is hoped that the studies of implementation of the URAA
are of use to policy makers as they formulate negotiating positions for
the present round of agricultural trade negotiations. Conclusions of
these studies can also assist other countries in identifying more clearly
their own mterests in trade negotiations.
8 Liberalizing Agricultural Trade: Issues and Options ...
End-Notes
I. These and other GATT exemptions available for all countries to
justify trade restrictive measures include
(i) General Safeguards (Article XIX);
(ii) General and Public Policy Exemptions (Article XX);
(iii) exemptions with General Shortages (Article XI); and
(iv) State Trading Enterprises (Article XVII).
2. These analyses were undertaken as part of the World Bank's
integrated program of research, policy analyses, and capacity
building in agricultural trade and WTO issues.
3. The involvement of AERC researchers was part of a larger program
of trade capacity building; in particular an ongoing collaborative
research project "African Imperatives in the New World Trade
Order". See www.aercafrica.org for details.
4. From 1995, six years for developed countries and up to ten years
for developing countries.
5. Other studies on the effects of the outcome of the UR on Africa
that were undertaken pre-UR implementation showed that the UR
Agreements did not result in many obligations and that most African
countries were not required to and so did not make meaningful
liberalization commitments in the UR. On the other hand, high
costs of complying with the new obligations resulting from the
previous WTO agreements and limits on development strategies .
2 Liberalizing Agricultural
Trade: Issues and Options for
Sub-Saharan Africa in the
WTO
Merlinda lngco, Tonia Kandiero, .John D. Nash and Dominique Njinkeu
2.1 Introduction
The challenges facing Sub-Saharan Africa today include economic
stagnation, a widening disparity in international living standards, high
international debt, HIV/AIDS, and rural poverty. Of the J .2 billion world
population that lived below $1 a day in 1998, approximately 24% were in
Sub-Saharan Africa (World Bank, 2001). And of these, majority Jive in
rural areas. This situation poses a serious concern not only for Sub-
Saharan Africa but also for the international community.
Unfortunately, in an age ofrapid globalization and liberalization, Sub-
Saharan Africa's share of global agricultural export value declined from
8.4% in 1965 to approximately 2.0% in 2000. Factors contributing to
this marginalization remain open to discussion. Yeats, Amjadi, Reineke,
and Ng (1997) argue that African countries' domestic policies led to the
decline in the region's share of global exports. Hoekman, Ng, and
Olarreaga (200 I) point to restrictive market access policies in developed
countries as a source of Africa's marginalization. Others maintain that
global demand for primary products (Africa's major agricultural export)
has been considerably weaker than demand for high value-added
agricultural products, thereby causing a decline in the region's share of
world agricultural trade. Greater integration of the countries' economies .
9
10 Liberalizing Agricultural Trade: Issues and Options ...
into the .world market could play an important role in the promotion of
sustainable development and poverty alleviation in the region. Full
participation in the Doha Development Agenda has the potential to help
Sub-Saharan Africa to resolve some of these challenges.
In this chapter, we identify key policy issues relevant to Sub-Saharan
African countries in the context of the new multilateral trade round in
the World Trade Organization (WTO), referred to as the "Doha
Development Round". We recognize the need for Sub-Saharan Africa to
capture the benefits and increased opportunities offered through the
multilateral trading system. Jn this context, the paper evaluates the
progress in implementation of agriculture and trade policy reforms agreed
to under the auspices of the Uruguay Round. Drawing on these findings,
we address some of the high prioricy areas for Sub-Saharan Africa in the
Doha Development Agenda. We focus on the following questions:
1. What is the impact of market access policies in developed countries
on Sub-Saharan Africa's agricultural exports?
2. Are trade preferences beneficial?
3. Did Sub-Saharan African countries expand import market access
during the implementation of the Uruguay Round?
4. Have domestic agricultural policies improved?
5. What is the way forward?
2.2 What is the Impact of Market Access Polices in Developed
Countries on Sub-Saharan Africa's Agricultural Exports?
The issue of market access is of great importance to the countries of
Sub-Saharan Africa. Many agricultural exports from these cQUntries
continu~ to face high protection levels in developed countries,
exacerbating the concern over Sub-Saharan Africa's declining share of
global agricultural exports. Between 1965 and 2000, the region's share
of global agricultural export value dropped to a quarter of its previous
level (Figure 2.1 ).
Liberalizing Agricultural Trade: Issues and Options ••. 11
Figure 2.1. Sub-Saharan Africa's in World Agricultural Exports Revenue
9 - - - - - - -- ----------- . -···
8
7
6
~ 5
~
1965 1990 1995 2000
Source: Author1s calculation using data from UN Comtrade
In 2000, 45% of Sub-Saharan Africa's exports went to the (EU),
7% to the United States, 6% to Japan, and I% to Canada (Figure 2.2).
In each of these four markets (also known as the Quad), tariff peaks
and tariff escalation are relatively common. Despite most-favo~ed nation
(MFN) status and in some instances preferential tariffs, many products
of trade interest to African countries continue to be subject to tariffs in
excess of I 00% in developed countries.
Items of major export interest to developing countries which are subject
to tariff peaks include: sugar, cereal, tobacco, vegetables, fish, and fruit.
Tariff peaks and tariff escalation have a disproportional in1pact on exports
from Africa and other developing countries. Hoekman, Ng, and Ola1reaga
(2001) estimate that if Quad countries extended complete market access
to developing countries on products currently subject to tariff peaks and
quotas, Africa's exports would increase by $2.5 billion (I I%).
Figure 2.2. Distribution of Sub-Saharan Africa Exports b)' l\.·1arket
Canada Japan
United Stites
The restofthe
~Wied Tariff Rates (%)
Source: Author calculations based on Finger, Ingo, and Reineke (1996)
18 Liberalizing AgriculLural Trade: Issues and Options ...
Three countries (Cote d'Ivoire, Ghana, and Zimbabwe) offered minor
tariff reductions on a few items. While their tariff 'bindings include the
customs duty and other duties and charges (ODC), the ODC rates were
not listed in the country schedules in the GAIT. Not all African participants
reported their ODC rates in their Uruguay Round schedules, although its
application is common in these countries.' For a number of countries
which had previously established bound tariffs (e.g. Cote d'Ivoire),
reduction commitments in the UR were made on the previously bound
duties, to which the ODC rates were then added. For example, in Cote
d'Ivoire, a 7% bound duty on fresh milk was reduced to 6%, but a
200% ODC was added to this tariff item. The end result was a substantial
increase in the bound rates of these products.
The experience so far from implementation of Africa's Uruguay Round
commitments indicates the following:
First, high tariff bindings have affected the level of applied protection
of agriculture in a number of African countries. The URAA has not
resulted in "real" liberalization in African agriculture in the sense of reducing
applied tariff rates. Although countries do not generally apply tariffs at
their bound rates, the higher bindings do not impose any discipline nor
require rationalization by African countrie.s of their protection in
agriculture.
Second, high tariff bindings have not imposed an effective constraint
on policy reversals, although bindings can provide a basis for future
tariff reductions. In some African countries, very high tariff binding has
undermined the market objectives of stability and transparency. In a
number of countries, the applied rates within the bindings are dispersed.
Hence, countries are able to change applied tariffs within the margin
provided by the bindings. Indeed, most of the maximum tariff rates are
too high to provide a meaningful cap on applied tariff rates t" improve
the security of market access.
Third, the ways that applied rates and other charges have been
established and changed undermine the objective of tariffication to
abolish non-tariff barriers and convert them into- fixed tariffs. The use
of ODCs as noted above is one example. In addition, countries are still
charging tariff duties at varying levels within the margin of the binding.
Iu some countries, the applied rates are still linked to a domestic threshold
or reference price. The applied duty is estimated as the difference between
a given domestic price and a reference price as long as the duty charged
does not exceed the binding. 7 Thus, in practice, implementation of
Liberalizing Agricultural Trade: Issues and Options ... 19
tariffication has resulted in a system with characteristics similar to those
created by non-tariff barriers such as the variable levy or minimum price
systems. While these types of arrangements are in principle not permitted
under the Uruguay Round Agreement', implementation appears to provide
some flexibility. The peace clause provision in the Agreement on
Agriculture prevents any challenge to ::he use of these measures under
the dispute settlement system for six years.
2.5 Have Domestic Agricultural Policies Improved?
Agricultural prices remain a critical component of the production incentive
provided to farmers in Sub-Saharan Africa. The price relationship~ faced
by these agricultural producers are dependent on a complex nexus among
the structures of the broader agricultural economy (marketing systems,
transportation costs, infrastructure) and the macroeconomic environment
(trade, exchange rates) in which agriculture operates. Several studies
have examined these price relationships to assess the extent to which
agriculture has been taxed or subsidized (Schiff and Valdes, 1992;
Herrman, 1997).
Many policies have tended to tax agriculture excessively, with farmers
receiving producer prices lower than the world price equivalent, thereby
inhibiting improvements in farm profit and welfare. The extent of these
severe price distortions was highlighted by Schiff and Valdes (1992).
According to their study, among all developing country regions Sub-
Saharan African countries imposed the highest level of taxation (both
explicit and implicit) on agriculture, ranging from 46-59 %. The direct
tax on agriculture in these countries was similar to the level of the indirect
tax. Agricultural pricing policies taxed agriculture about as much as the
implicit tax resulting from industrial protection and macroeconomic
policies. This differs markedly from findings in other developing
countries where the combined implicit and explicit tax on agriculture
was lower, and explicit taxes were about a third of the implicit taxes.
Herrman (1997) conducted a similar study which focused on individual
crops (coffee, wheat and rice) and found significant policy biases against
agriculture, which were more excessive for export crops (coffee) than
for food crops (rice and wheat). Nonetheless, favorable agricultural
policies for food crops were often found to be offset by distorted
macroeconomic policies with a resulting decline in the real producer ·
price. Both of these studies used pre-1985 data which limits their use in
identifying current distortions facing today's African farmers.
20 Liberalizing Agricultural Trade: Issues and Options ...
During the most recent decade, there were significant reforms in
both macroeconomic and agricultural policies in most African countries
which have alleviated the effects of some of these biased policies. Since
the early 1980s many of these countries have pursued structural
adjustment programs with macroeconomic, trade and sector reforms.
The intended impact in the agricultural sector was to increase incomes
to smallholder farmers primarily through an expansion in the production
of export crops, thereby accelerating rural growth and poverty reduction.
Some of these reforms are detailed in ·the 1994 World Bank study
Adjustment in Africa, which docmnents the changes in real producer
prices for export crops during thel980s. Of the 27 countries analyzed,
10 experienced an average increase of 25% in real producer prices of
export crops, while 17 experienced an average decline of 28% in the
real producer price of exports. The explanation provided for the large
decrease was the fall in wcrld prices, coupled with countries' inability to
reduce both explicit and implicit taxation simultaneously, thus the benefits
of the reduction in one was normally offset by the losses from the increase
in the other.
To demonstrate how price changes have affected producer incentives
in Kenya, nominal protection rates (NPR) for si;i: major products - wheat,
maize, rice, coffee, tea, and sugar are used (Table 2.5). Wheat and
maize are Kenya's main imports. Positive NPRs provided farmers with
an incentive to increase production.
Table 2.5
Nominal protection rates in Kenya (per cent)
Year Wheat Maize Rice Coffee Tea Sugar
1990 9 -25 -36 -6 -7 -47
1991 22 -24 -45 '13 '12 -66
1992 '14 -22 -8 -21 -49 -63
1993 ~52 -31 -33 -21 -7 -42
1994 108 11 -6 ,12 -9 -63
1995 27 '11 -49 -2 '18 -51
1996 7 -2 -50 -2 -9 -39
1997 55 14 -3 1 '12 -36
1998 43 '16 -7 1 6 -22
Source: Author calculations based on Nyangito (2001)
Liberalizing Agricultural Trade: Issues and Options ... 21
After 1993, the domestic price of wheat was higher than the world
price, with 1994 having the highest NPR of 108%. The price of maize
remained below the world price until 1993, but showed some favorable
signs in 1994 (11%) and 1997 (14%). NPRs for rice were negative from
1990 to 1998, although there were signs of improvement in the later
years. In Kenya, the govermnent generally keeps ·producer prices higher
than world prices, with the intention of boosting productior.. Higher
domestic prices are encouraged through the marketing involvement of
the National Cereal Produce Board (NCPB) and the imposition of high
tariffs. Changes in import duties on maize and wheat are used as a tool
to restrict imports when domestic supply is high and encourage them
when domestic supply is low.
The main exports, tea and coffee, had negative NPRs for the majority
of the years in the 1990s, but there was some improvement in 1998.
The NPRs for tea increased from -12% in 1997 to 6% in 1998. The
negative incentives to farmers in the earlier years were greatly caused by
primary taxes on exports and deductions by marketing boards on these
products. The producer price of sugar remained below the export
price in all years studied. The main cause was due to poor marketing
arrangements, which translated into high service charges to the farmers,
and greatly reduce the producer price.
2. 5.1 Estimates ofPrice Border Wedges in Sub-Saharan Africa
Due to the poor quality of data on transportation costs and marketing
margins, the approach taken in this chapter is to simply estimate the
producer's share of the border price, which is determined for several
crops and countries and sununarized in Table 2.6. Policies that influence
producer share include activities such as transportation, marketing,
pricing, distribution and storage.
22 Liberalizing Agricultural Trade: Issues and Options ...
Table 2.6
Price shares for export crops
Country Commodity Producers Share of f.o.b.
Price (percent)
Benin Cotton 37
Burkina Faso Cotton 35
Cameroon Cocoa 76
Coffee 73
Cotton 5I
Chad Cotton 36
Cote d'Ivoire Cocoa 46
Coffee 62
Cotton 47
Ghana Cocoa 39
Guinea Cocoa 68
Kenya Coffee 73
Tea 53
Madagascar Coffee 70
Vanilla 33
Malawi Tobacco 60
Mali Cotton 44
Mauritius Sugar 94
Mozambique Cotton 64
Cashew 5I
Nigeria Cocoa 98
Rubber 100
Senegal Cotton 47
Groundnuts 5I
South Africa Maize 93
Oranges 50
Apples 93
Sugar 92
Wool 89
Tanzania Coffee 77
Cotton 64
Tea 58
Cashew 71
The Gambia Groundnuts 60
Togo Cotton 39
Uganda Coffee 72
Zimbabwe Tobacco 79
Cotton 88
SourCe: Townsend (1998). World Bank and IMF data
Liberalizing Agricultural Trade: Issues and Options ... 23
Townsend (1998) uses an econometric approach to explain cross
country differences in producers' share of border prices. His results
suggest that if agricultural and macroeconomic policies are improved,
road density increased, road quality improved, more credit made available,
and larger crop volumes traded, then producers will receive a higher
share of the border price. According to his study, controlled marketing
systems continue to distort market price signals in many countries. Three
existing marketing systems can be identified in Sub-Saharan Africa,
• the free market system,
• the Caisse de Stabilisation and
• Marketing Boards.
Under the latter two systems with interventions in physical handling,
price setting, taxation, and marketing costs, farmers receive a lower
share of the producer price. Exchange rate pass-through to producer
prices has also been inhibited. in these two systems. The free market
system has resulted in substantially higher prices for farmers and lower
fiscal costs.
The overall macroeconomic policy stance in African countries
improved significantly after 1990/91. In particular, exchange rate policies
have improved substantially, with most countries analyzed having low
parallel market exchange premiums in recent years.
Rural infrastructure also plays a significant role in producer price
determination. Evidence suggests that it is not only the lack ofroads that
reduces the producer price/border price ratio, but also the quality of
these roads. Feeder roads in rural areas remain scarce and are in poor
condition in most Sub-Saharan African countries. Transportation is a
particular problem for landlocked countries with large distances between
the coastal prices and the border prices. The volume of credit extended
to the private sector as well as real interest rates have also had a significant
effect on private sector activities and indirectly on the producer price
margin. Development of efficient markets requires volume and
consistency in supply. Indeed, private sector entry into storage,
transportation, and marketing of agricultural products requires some
assurance of supply to induce investment.
24 Liberalizing Agricultural Trade: Issues and Options . , .
2.5.2 Subsidies in Developed Countries and their Impact on Prices in
Sub-Saharan African Countries
The discipline on the use of export subsidies was considered to be one
of the most important accomplishments of the URAA and was expected
to have the most direct quantitative effect on agricultural trade. The
reduction in export subsidy expenditures was to be applied in equal
installments starting from either the 1986-90 base period or the 1991-92
period, whichever was higher. In any case, the final year's commitments
have to meet the 21 % and 36% reduction levels from the 1986-90 base
period. Unfortunately, export subsidies continue to be used rather
extensively by developed countries. In 1998, the EU accounted for
approximately 89% (US$5.8 billion) of the world's total expenditure on
export subsidies (figure 2.4). This sum not only far exceeded SSA export
subsidies, it was approximately four times larger than the average
agricultural value added (GDP) of the entire Sub-Saharan Africa region.
Figure 2.4. WTO Member Expenditure on Export Subsidies, 1995-1998
(per cent of total world export subsidies)
lte rest rf tte
Urited States Now>{ Wiid
1%
2%
SWtB!an:J
SYo
EU
89%
Source: IA1RC (2001)
When export ;mbsidies are significant, as in the case of the EU, they
have the potential to depress world market prices, leading to lower
producer prices received by farmers in developing countries. In the
short-run, the elimination of export subsidies could have an adverse
impact on net importing countries. However, in the long-run, Sub-Saharan
Liberalizing Agricultural Trade: Issues and Options ... 25
Africa would likely benefit from the elimination of export subsidies as
countries will be encouraged to provide the right incentives to boost
food production. Of course, the actual impact of the elimination of export
subsidies on Sub-Saharan Africa will depend upon the policies adopted
by individual countries, and on the impact on world prices of their
elimination.
2.6 What is the Way forward?
Some of the high priority issues for Sub-Saharan Africa in the new trade
round are a revisiting of the issues of market access, domestic support,
and export subsidies. In addition to these traditional issues, other major
areas of interest include food security and relate to other WTO Agreements
and provisions such as Sanitary and Phytosanitary Measures (SPS),
Technical Barriers to Trade (TBT), The Agreement on Trade-Related
Aspects on Intellectual Property Rights (TRIPS), and Special and
Differential (S&D) Treatment.
2. 6.1 Market Access Issues in Developed Countries
Tariffpeaks and escalation: Sub-Saharan Africa is interested in expanded
market access to developed countries, in particular the Quad market
countries - the EU, United States, Japan, and Canada. However, in each
of these markets tariff peaks and escalation are widespread. For both
Japan and the EU, more than 26% of all agricultural tariffs are greater
than 20%. Tariff peaks are more visible in food staples, fruit and
vegetables, and processed food products, while tariff escalation is more
evident in commodities, such as meats and oils. According to Ingco,
Kandiero, and Randa (2003), a 1 % tariff reduction by OECD countries
is likely to increase Sub-Saharan Africa's trade to GDP ratio by 2%.
More simplified and transparent TRQs: The main objective behind the
use of TRQs is to allow minimum market access for commodities
previously protected by nontariff barriers. So far very few developing
countries have established TRQs and for those that have (e.g., Brazil
Morocco, and Thailand), there is little information available to report. In
this regard, the issue of TRQs pertains more to developed countries.
Therefore, in order for developed countries to improve market access
conditions for products from Sub-Saharan Africa, it is still critical to
identify the conditions under which TRQs are effective. This involves
putting in place simplified and transparent TRQs.
26 Liheralidng Agricultural Trade: Issues and Options ...
2. 6. 2 Sub-Saharan Africa's Market Access Policies
Bound and applied tariff rates: The URAA made significant efforts to
improve market access conditions. However, it is crucial that countries
in Sub-Saharan Africa further reduce and move toward greater
uniformity across products in their bound and applied tariff rates to
capture the gains from the liberalization process. So far, the region has
average tariff rates in agriculture higher than the global tariff average
(62%). The average protection for Sub-Saharan Africa is between 71 %
and 75%. Gibson, Wainio, Whitley, and Bohman (2001).
A tariff regime characterized by non-uniformity among products,
escalation, and overall high rates has adverse effects on the domestic
economy. Among these are implicit taxation of exports, creation of
productive inefficiencies, regressive taxation of domestic consumers,
promotion of rent-seeking, and corruption. Lowering bound tariff rates
in the context of multilateral trade negotiations sends a powerful signal
of the govenunent' s intentions to permanently adopt an open, pro-export
trade regime. In this way, it guides and promotes investment in appropriate
sectors and technologies. Sub-Saharan Africa did not take full advantage
of the Uruguay Round to lower bound rates and lock in reforms. The
region has a higher average tariff rate than the global rate, and should
increase its effort in the Doha Round. Concerns about effects on local
producers from lowering protection should be addressed by negotiating
for transition periods, adjustment assistance, and safeguard mechanisms,
not by seeking to avoid reducing bound rates.
2. 6. 3 Domestic Support
Apart from South Africa, which negotiated in the URAA as a developed
country, most countries in Sub-Saharan Africa declared an aggregate
measurement of support (AMS) level of zero, while developed countries
had a positive AMS. Disciplines on the use of domestic support in OECD
countries proved to be less binding than many had envisioned as over
60% of their support programs in agriculture were exempted from URAA
reductions. A major objective for Sub-Saharan African countries in the
Doha Development Agenda will be to put in place a more structured
operational framework for the exemption from reduction provisions.
Liberalizing Agricultural Trade: Issues and Options ... 27
2. 6.4 Export Subsidies
Sub-Saharan Africa continues to be concerned about the use of export
subsidies by developed countries. Policy makers can not ignore the
distorting nature of these subsidies. Sub-Saharan African countries fear
that export subsidies amount to dumping of surplus production,
depressing world prices and eventually, lowering producer prices to
farmers in developing countries. While in the short-run the removal of
export subsidies by developed countries may raise import costs, the
long-run impact on import prices has not been convincingly quantified.
In the near term, assistance can be provided to help meet domestic
demand, and in the long-run the best solution is to stimulate domestic
production. The impact of reforms in this area will depend on policies
adopted by the individual countries, and the impact of the liberalization
package on world prices. Nevertheless, it is clear that a more efficient
system to reduce subsidies an.d to minimize their price distorting effects
needs to be adopted.
2.6.5 Sanitary and Phytosanitary Measures (SPS) and Technical
Barriers to Trade (TBT)
Sub-Saharan African countries face many constraints associated with
the implementation of the SPS and TBT Agreements. The major
constraints pertain to lack of resources, infrastructure, and expertise.
In trying to help developing countries cope with the provisions of the
SPS and TBT Agreements the multilateral trade system should allow
sufficient time for Sub-Saharan Africa to adjust and implement new
regulations. To help enforce and assess standards, it is critical that
developing countries are provided with appropriate technical assistauce
to enhance their expertise. While developing countries are in the process
of improving their capacity in the area of SPS measures and TBT,
developed countries should not use standards as a means to reject imports
originating from developing countries. Otsuki et al. (2000) analyzed the
impact of EU aflatoxin standards on food exports from nine African
countries and found that they decreased relevant exports by approximately
64% or $700 million.
In the new trade round members have to consider the following issues:
• Formation of a Development Box and whether a Transition Box
will be needed;
28 Liberalir,jng Agricultural Trade: Issues and Options ...
• Whether AMS measures should be applied on a product or sector
basis;
+ Inclusion of multifunctionality into AMS provisions;
• Whether AMS should be adjusted for inflation or exchange rate
changes; and
• A push for an increase in de-minimis by developing countries.
2. 6. 6 Trade-Related Aspects ofIntellectual Property Rights (TRIPS)
Apart from market access issues, domestic support and export subsidies,
Sub-Saharan Africa is expected to identify some related issues to the
Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS). The TRIPS Agreement grants minimum standards for levels
of protection to innovators of intellectual property in numerous fields.
This Agreement is considered to be the most comprehensive multilateral
agreement on intellectual property rights. However, its relation to
agriculture is complex and controversial. Since the TRIPS agreement
came to effect, Sub-Saharan Africa and other developing countries have
had to deal with issues on technology transfer and the treatment of
indigenous knowledge. In this context, better property rights may offer
an incentive to developed country innovators: to provide a different
wave of innovations that are appropriate for the developing countries.
Pertaining to indigenous knowledge, companies in developed countries
in the areas of pharmaceuticals and agricultural sectors are starting to
·recognize the importance of biodiversity and indigenous knowledge of
local communities regarding plants and medicines. The serious issue is
that researchers in developed countries have invented patented products
using materials from developing countries. The TRIPS Agreement can
play an important role in ensuring that the inventions benefit both
developing and developed countries. It is important to note that the TRIPS
is of huge importance to Africa regarding AIDS.
2.6. 7 Special and Differential (S&D) Treatment
Member countries agree that S&D Treatment for developing countries,
including Sub-Saharan Africa, shall be a central part of all the elements
of the negotiations in the Doha 'Development' Agenda. S&D Treatment
shall be included in the schedules of concessions and commitments and
if necessary in the rules and disciplines to be negotiated. The rationale
behind S&D provisions is based on two main considerations: first, to
Liberalizing Agricu/Jural Trade: Issues and Options ... 29
ascertain that there is equity and fair competition where structural
conditions differ; and second, to ensure that developing countries
effectively take into consideration key development need such as rural
poverty and food security. It is clear that the S&D treatment agenda in
the Uruguay Round did not meet its goal. Snb-Saharan Africa and other
developing countries, in particular, believe that many promises were made
and ve1y little was delivered. Elements dealing with technical assistance
implementation time must be readdressed since they appear to have
been reached in an ad hoc manner and lack structure. The uniform
transition period for policies to be implemented does not take into
consideration the different speeds at which Sub-Saharan African countries
can adjust to new provisions. Other proposals in this area of S&D
Treatment include redefining classification ofWTO members and issues
in relation to special market access through trade preference schemes.
With all these issues considered, the region should also recognize
that blocking the negotiations with S&D proposals that will never be
implemented is not the way forward. In deciding on S&D provisions,
these countries should also focus on those provisions that would have
maximum developmental impact and would not postpone or avoid
undertakings necessary for domestic reforms.
2. 7 Concluding Remarks
This chapter has shown that Sub-Saharan Africa's share of global
agricultural export value has declined over the past several decades.
This marginalization has been caused by domestic policies employed in
the region and by protectionist policies in developed countries. Assessing
its own progress during the implementation of the URAA, Sub-Saharan
Africa made some improvement in the area of market access, but the
work is still incomplete. Africa maintains high tariff bindings and, in
addition, export taxes and activities by marketing boards continue to
adversely affect producer prices. In order for Sub-Saharan Africa to
more fully capture gains fromtrade it is essential to reduce further applied
· and bound tariff rates as well as reduce taxation in the agricultural sector.
This can be done by eliminating policies that protect the industrial sector,
impose taxes on export products, or that maintain govermnent controlled
domestic prices below world prices. On their trading partners' side,
there is clear evidence of tariff peaks and escalation, in particular in the
Quad countries (EU, US, Japan, and Canada). The post-Uruguay tariff
30 Liberalizing Agricultural Trade: Issu,es and Options ...
rate for tobacco reached a maximum tariff rate of 350% in the United
States; those of groundnuts and coffee as high as 550% and 30%,
respectively, in Japau; aud the rate for maize was around 84% in the EU.
For Sub-Saharau Africa to capture the gains from trade in the Doha
Development Round, concurrent domestic polices in terms of low tariffs
aud sector pricing policies must improve along with market access policies
in developed countries. Reducing its own import protection will make
Africau exports more competitive in international markets. But it will
also be importaut for developed countries to create better market access
so that countries cau realize the full benefits of liberalization. Apart
from traditional issues in the area of market access, domestic support,
aud export subsidies, Sub-Saharan Africa countries are interested in
making progress on the issues of SPS!TBT, TRIPS, S&D treatment,
among others.
What does the Doha Development Agenda meau for Africa? Sub-
Saharan Africau countries must pay more attention to multilateral trade
negotiations, increase participation in the processes, aud must redouble
efforts to affect the outcomes of the negotiations as they did in the 2001
Doha WTO Ministerial Conference. These countries can use the
opportunity to lock in reforms and so increase investor confidence in
their approach to trade reform. Sub-Saharau countries cau, in partnership
with coalitions, negotiate to achieve clearly defined goals such as the
dismautling ofrestrictive trade practices that inhibit export diversification
in poor countries.
Liberalizing Agricultural Trade: Issues and Options ... 31
End-Notes
1. The authors gratefully acknowledge Joseph Carroll for the helpful
comments and suggestions.
2. Tariff escalation is a characteristic of tariff regimes in which higher
rates are levied on processed products than on products closer
to raw materials in the processing chain. This protects the domestic
processing industries.
3. Preference margin is the difference between MFN and preferential
tariff rates.
4. This means that countries can apply tariffs at or below the bound
maximum, but not raise them above the binding level unless it is
renegotiated in GATT and compensation given to affected trading
partners.
5. Only least-developed countries were exempt from cuts in bound
rates. The lack of reduction commitments by African countries
was accepted by their trading partners.
6. According to the Understanding on Article II:l (b) the ODC rates
that are listed as part of the binding should reflect actual applied
rates on April 15, 1994. Failure to report ODC may under-state
protection.
7. This is also occurring in a number of industrial countries (e.g.,
European Union) and other developing countries (e.g., Latin
American countries' price bands).
8. The footnote in Article II states that variable levies, etc., are
forbidden. Also, the Agreement in Customs Valuation forbids the
use of minimum price systems, except for developing countries
that make a special reservation for it.
32 Liberalizing Agricultural Trade: Issues and Options ...
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Tariffs in Global Agricultural Markets', Agricultural Economic
Report Nmnber 796. Washington, D.C.:USDA.
Finger, J.M., MD. lngco, and U. Reineke (1996), 'The Uruguay Round
Commitments: Statistics on Tariff Concessions Given and
Received', (Washington, D.C: World Bank).
Herrman, R. ( 1997), 'Agricultural Policies, Macroeconomic Policies,
and Producer Price Incentives in Developing Countries: Cross-
country results for Major Crops:, Journal of Developing Areas,
No. 31 :203-220.
Hoekman B., F. Ng, and M. Olarreaga. (2001), 'Tariff Peaks in the Quad
and Least Developed Country Exports', Seminar presented at the
World Bank, Washington DC.
Hoekman, B. and M. Kostecki. (200 I), The Political Economy of the
World Trading System. (Oxford: Oxford University Press).
IMF. (2001), 'Market Access for Developing Countries'
Exports',(Washington, D.C.: IMF).
lngco, Merlinda, Tonia Kandiero, and John Randa( 2003), "Agricultural
Exports: Important Issues for Sub-Saharan Africa," DRAFT
Nyangito H. 0.(2001), 'Kenya's State of Agricultural Trade Reform in
the Framework of the World Trade Organization', Commissioned
Paper, coordinated by M. Ingco.
Otsuki, T., J. S. Wilson and M. Sewadeh.2000), 'Saving two in a billion:
A case study to quantify the trade effect of European food safety
standards on African Exports', Mimeo, (Washington, D.C: World
Bank).
Schiff, M., Valdes, A. (1992). 'The Plundering of Agriculture in
Developing Countries', World Bank, Washington D. C.
Tangermann S. (200 I), 'The future of Preferential Trade Arrangements
for Developing Countries and the Current Round of WTO
Negotiations on Agriculture', Prepared for FAO/ESCP.
Liberalizing Agricultural Trade: Issues and Options ... 33
Townsend, R.F. (1998), 'Policies, Prices and Agricultural Performance
in sub-Saharan Africa. World Bank Policy Research Paper.
Forthcoming.
Yamazaki F. (1996), 'Potential Eros10n of Trade Preferences in
Agricultural Products', Food Policy. 21: 409-18.
Yeats, A., A. Amjadi, U. Reineke, and F. Ng. (1997), Did Domestic
Policies MarginalizeAfrica in International Trade? (Washington,
D.C: World Bank). World Bank.
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D.C: World Bank).
World Bank (200 I), World Development Indicators, (Washington, D. C:
World Bank).
34 Liberalizing Agricultural 1'ratk: /Ssues and Options ...
Appendix 2A.1
Table 2A.1: Summary of Uruguay round commitments in agriculture
Country GAIT Average Average Total Average Average Domestic Export
Status Bound Bound Tariff Binding Applied Support Subsidies
Duty ODC (Duty+ODC) Rates
% % % %
Angola D 80 0.1 80. l
Benin LD 60 18 78
Botswana D 40 40**
Burkina Faso LD 100 50 150
Burundi LD 100 30 130
Cameroon D 80 230 310 24.5*
Central African
Republic LD 30 16 46
Chad LD 80 80
Congo D 30 0 30
Cote d'Ivoire D 15 200 215 20
Djibouti LD 42 100 142
Gabon LD 60 200 260
Gambia LD 102 10 112
Ghana D 98 0.2 98.2 22•
Guinea LD 38 24 62
Guinea Bissau LD 40 26 66
Kenya D 100 0 100 44'
Lesotho LD 200 200
Madagascar LD 30 250 280 39
Malawi LD 124 20 144
Mali LD 60 50 110
Mauritania LD 37 I5 52
Mauritius D 120 17 137 52
Mozambique LD 100 300 400
Namibia D 40 0 40**
Niger LD 80 50 130
Nigeria D 150 80 230 47•
Rwanda LD 80 80
Senegal D 30 150 180 44'
Sierra Leone LD 40 20 60
South Africa IND 40 40$$ 7• by 2000 by 2000
Swaziland D 40 40** 34
Tanzania LD 120 120 240
Togo LD 80 7 87
Uganda LD 80 0 80
Zaire LD 98 98
Zambia LD 124 125
Zimbabwe
Notes: ..
*
D 146
Reduced from 70% to 40°/o
Ttade-weighted average
15 161 24'
D developing
LD least developed
Source: Finger, J.M., MD. Ingco, and U. Reineke (1996)
3 Agriculture and the New Trade
Agenda in the WTO: Interests
and Options for Cameroon
Ernest Bamou, Dominique Njinkeu and E11111Ulnuel Douya
3.1 Introduction
Current negotiations under the Doha Development Round of the World
Trade Organization (WTO), which are expected to lead tp greater
liberalization of agricultural trade worldwide, present exceptional
opportunities for Cameroon. Since the late 1980s, Cameroon has
progressively shifted from protectionist policies to policies based on
market fundamentals and the policy environment is crucial. hnproving
agricultural performance in the more liberalized emerging global tracling
environment requires that more attention be given to measures for
enhancing agricultural productivity. The WTO negotiations could allow
Cameroon to capitalize on the efficiencies gained in this process to
stimulate further development of both food and nonfood agricultural
sectors and revitalize its economy.
For that to happen, Cameroon needs to clearly identify opportunities
and constraints, and the positions it wishes to take in the negotiations. A
priority would be to ensure adequate market access in all markets. Given
its small economic power and current export orientation, market access
issues are also related to progress on regional integration. The adoption
of common regional policies increases market size, reduces transaction
costs, and boosts economic efficiency. And a larger, more integrated
group can more readily mobilize the human and financial resources
necessary to formulate sound negotiating positions. Properly designed,
35
36 Liberalizing Agricultural Trade: Issues and Options ...
regional integration can therefore be a building block toward Cameroon's
integration in the world trading system.
A second priority should be measures to enhance agricultural
productivity and minimize price variability in food and other agricultural
products. The relevant WTO policy instruments include export subsidies
and restrictions, and the special measures available to food-insecure states.
A third priority relates to WTO rules that treat developing countries
differently from developed countries, the rules on Special and Differential
Treatment. One important aspect is domestic support. Improving
agricultural performance in the more liberalized emerging global trading
environment requires that more attention be given to measures for
enhancing agricultural productivity. Cameroon has fewer options for
enhancing productivity since it removed many trade-distorting measures
unilaterally, even those permitted under WTO rules. Thus, Cameroon
should use the international trade negotiations to permit measures
comparable to those used by developing countries for sustaining
development of the agricultural sector.
3.2 The Importance of Agriculture to Ca1J1eroon's Economy
Agricultural development is at the center of Cameroon's growth
performance. Perennial agriculture (tree crops), forestry, and fishing
have been the main drivers of growth in the agricultural sector. Food
production, though it does not feature prominently in the economic
performance of the sector because of the high level of subsistence
agriculture, plays an important role in overall development, especially
rural poverty alleviation.
Agriculture has always been Cameroon's main economic activity. Up
to the mid-1980s it contributed close to one-third of GDP and more
than 90% of exports, with 55% of those exports comprised of cocoa
and coffee. Close to 80% of the population was rural and relied essentially
on agricultural activities. The country's dynamic food production base
had average annual growth of 14% against 3% for agricultural exports
(F.A.O., 1995). Beginning in 1982, as both the industrial and agricultural
sectors stagnated, oil exports began to substitute for agricultur~ as the
main export.
Agriculture made a comeback from 1985/86 to 1992/93 when an
economic crisis created by a crash in world oil prices caused farm exports
to total one-third of GDP and more than 50% of export earnings and
employment (see MINEFI, 1999). Agriculture also contributed to
Cameroon 37
Cameroon's economic revival after 1993/94. During this revival,
agriculture's share of GDP increased by close to 10% and stabilized at
slightly more than one-third until 1997. Its share in overall exports
stood at over a third in 1995/96-and reached up to 79% of non-oil
exports after the 1994 currency devaluation.
To achieve high economic growth rates and expand international trade,
Cameroon must increase productivity and competitiveness in the
agricultural sector. The structure of incentives should change to eliminate
the anti-agricultural bias of macroeconomic policy. Enhancing the
incentives for agriculture also requires deeper reforms, even at the sector
level. Cameroon also needs to enhance its resistance to external shocks
without significantly changing its long-term development priorities-
because of its small size, external shocks can easily disrnpt the growth
process. Diversification of production and exports is crucial. That will
require better access to credit for farmers and a coherent government
program for rural infrastructure, basic education, and technology and
extension services. Marketing channels, intellectual property rights, and
patent rights are very important as well.
3.2.J Food Security and other Nontrade Concerns
A country's food security can be domestic production-based, trade-
based, or transfer- (aid) based. Production-based food security can be
changed through policies that affect domestic demand and supply. Trade-
based food security can be influenced through policies that affect the
level and variability of the relative food price or the ability to generate
sufficient foreign exchange to pay for food imports. Food insecurity
can arise because production is insufficient or irregular or because of
inadequate technologies for marketing and distribution or poor overall
agricultural policy. Table 3 .I sununarizes these policies for Cameroon
with a focus on those that are relevant to WTO negotiations.
38 Liberalizing Agricu/Jural Trade: Issues and Options ...
Table 3.1. Cameroon and the WTO multilateral agricultural negotiations
Policy WTO negotiation focus
Food production
Input credit Domestic subsidies
Subsidized or free inputs Domestic subsidies
Research and extension TRIPS
Capital expenditure and investment promotion Domestic subsidies
Marketing (trade)
Market development and regulation No direct focus
Parastatal reform State trading ente.rprises
Food price stabilization (buffer stock or funding) Domestic subsidies and tariff:
Green Box conditions, export
regulation
Labor
High-value export crops Market access, domestic sub.!.idie
Micro-finance No direct focus
Minimum wages Process criteria
Transfer and safety nets
LaborMintensive public works programs Export subsidies
Targeted~eding programs Export subsidies
Food price subsidies Dom,estic subsidies
Enabling macro and sectoral policies
Infrastructure (transport, communication) No direct focus
Exchange rate policy No direct focus
Health No direct focus
Education No direct focus
Source: Authors.
Despite remarkable performances in food production, Cameroon's
food self-sufficiency coefficient has been low. The contribution of
traditional production to domestic consumption decreased from 86% in
1970 to 63% in 1990, with the gap filled by imports and agro-industrial
production (FAO, 1995). This growing dependence on imports puts
food security at the mercy of external shocks and involves significant
outflows of foreign exchange that weaken the country's balance of trade.
The domestic food deficit can be explained by a rapidly growing
population, with an annual growth rate of 2.8%, and rapid urbanization
(Herbel, 2000). Rising food exports to neighboring countries (regional
trade partners and Nigeria) in recent years has worsened the deficit.
Cameroon 39
To improve food security, in the 1970 's the government initially adopted
an interventionist policy, creating public enterprises such as the Cereal
Authority and the Foodstuff Development Authority to stabilize food
prices and supply. Despite annual subsidies amounting to some 700 million
CFAF, these objectives were not attained and the enterprises were
liquiaated. Since the .structural adjustment program reforms implemented
in 1989, the food security strategy has been based on private initiative.
To ensure food of adequate quality and quantity, the govermnent set up
a new food security program in 1991 jointly with the IBRD and the
Japanese government to cover the organization of food markets in
secondary towns, nutrition education, phytosanitary control, financing
through the Fund for Agricultural and Communal Microprojects, and a
National Early Warning System (NEWS). The early warning system is
intended to provide information on food markets, harvests, and forecast,
especially in ecologically fragile areas (MINAGRI, 1998). Its effectiveness
has been limited, however, largely because of underfunding.
3.2.2Agricultural Policy in Cameroon
The agricultural sector has, until the mid 1980s, been dominated by
govermnent intervention and failure in the supply of inputs and marketing
of products and the high taxation rates applied to agricultural exports.
Liberalization brought about major changes in government policies on
subsidies. The strnctural adjustment programs eliminated all subsidies,
including those for which developing countries are eligible for exemptions
under the WTO. Instead of direct subsidies, the government is
endeavoring to indirectly assist farmers and other operators in the
agricultural sector through grants and the provision of scientific,
technical, and business information. Thus, for example, FIMAC was
created in 1996 to facilitate the financing of agricultural microenterprises.
In conjunction with international organizations such as the World Bank
and the African Development Bank, government structures (National
Project for Extension Work and Agricultural Training, Support for Peasant
Strategies and Professionalism in Agriculture ) were set up to provide
farmers and other agricultural agents with economic, business, scientific,
and technical information. Non-govermnental organizations (NGOs),
cooperatives, and private service providers are assisting the govermnent
in this information and extension work.
Several aspects of food and agricultural policy are related to the
agricultural agreements under the Uruguay Round. In particular,
40 Liberalizing Agricultural Trade: Issues and Options ...
Cameroon's unilateral liberalization ofinput supply and extension services
and its still weak capabilities. in sanitary and phytosanitary protection
affect its negotiation position in Doha Round of trade talks.
Input policy: Input policy is atthe center ofCaineroon's efforts to increase
agricultural productivity and competitiveness. In the period before the
Uruguay Round negotiations, the government intervened heavily in the
supply of inputs to agricultural producers, especially fertilizer-proper
use of fertilizer can lead to production increases of as much as 40-5 0%
(MINAGRI, 1999). This included the National Fertilizer Program, set up
in the 1960s and replaced in 1980 by the National Rural Development
Fund (FONADER), which in addition to fertilizers supplied other types
of agricultural inputs such as phytosanitary products. Inputs were heavily
subsidized and distributed to farmers by the Ministry of Agriculture or
by the development corporations in charge of cocoa (SODECAO) and
cotton (SODECOTON).
This active promotion and subsidized provision of inputs significantly
increased demand for agricultural inputs, but state monopolies proved
ineffective in distributing the inputs and the program became increasingly
costly to the treasury (Ntsama, 2000). A turning point came in the 1986/
87 agricultural season, as a sharp drop in the prices of major export
commodities led to increasing financial tensions.
With the backing of international donors., a new strategy in 1987 sought
to liberalize and privatize the fertilizer sector through an efficient and
sustrunable program for the import, distribution, and use of fertilizers.
Fertilizer imports declined (Ntsama, 2000) until the 1994/95 season, due
to rising prices with the progressive phasing out of subsidies; the
oligopolistic character of the market; the fall in the prices of agricultural
products, which lowered the purchasing power of farmers; and a high
indirect tax burden on agriculture, which penalized agriculture relative to
the rest of the economy.
Agricultural extension service's and crop development: In 1994 most
services were provided by cartels or monopoly state enterprises; by
200 I few were. Agricultural development corporations have played a
critical role in Cameroon's agricultural development (see Table 3.2 listing
the pre- and post-Uruguay Round state agricultural extension service
enterprises). The reform led to some rationalization, with areas previously
under state monopoly liquidated, restructured, or privatized.
Cameroon 43
Direct intervention in the agricultural sector by state enterprises has
at times contributed to the transfer of valuable knowledge and the adoption
of modern teclmiques, and even to the provision of social services
(schools, dispensaries). For example, the Cameroon Development
Corporation, in a partnership agreement with Del Monte, made major
investments in the banana sector in exchange for exclusive marketing
rights. In return, the government imposed an export tax of CFAF 4,500
per ton on bananas. The state enterprise Organisation Camerounaise de
la Banane was involved in the production of bananas and helped create
thousands of direct and associated jobs.
Other fonus of intervention included the provision of agricultural inputs
and the development offarmlands for private producers. The Societe de
Developement du Cacao served as an intermediary to FONADER,
supplying subsidized inputs to cocoa producers and it directly carried
out certain production operations such as phytosanitary treatment. Its
intervention helped ensure the maintenance of plantations and the
production of good quality cocoa. Three state firms focused on developing
farmlands, employing independent subsistence farmers in irrigated rice
farming, supplying inputs and credit, and processing paddy rice. In the
cotton growing regions, SODECOTON trains and supervises producers,
employing more than 1,000 extension workers and prefinancing inputs.
This continuous training and. supervision helped sustain the growth of
cotton production while growth of other export commodities collapsed.
State marketing of agricultural products has been less successful.
MIDEVIV°was responsible for securing a regular and stable supply of
staple foodstuffs for the urban population. The National Produce
Marketing Board was in charge of marketing export crops, especially
coffee, cocoa, and cotton. On the whole, the marketing board was unable
te buffer price changes for producers once world prices started their
downward spiral toward the end of the 1980s. As part of the agricultural
liberalization reforms, the marketing board was liquidated and replaced
by the National Coffee and Cocoa Board and by professional organizations
including a group of exporters.
The last area of intervention for public authorities was in the traming
and supervision of farmers in the use of improved varieties, notably
maize, cocoa hybrids, coffee clones, and a variety of oil palm. Farm
credit is provided by many agencies including the Financing of Investment
in Community-based Micro-Agricultural Projects (FIMAC), which in
less than a decade has granted CFAF 1.1 billion in credit to 2,885 groups.
44 Liberalizing Agricultural Trtide: Issues and Options ...
Despite the efforts of FIMAC, funds mobilized and distributed remain
far below the needs of producers.
Sanitary and phytosanitary protection: The WTO Agreement on Sanitary
and Phytosanitary Measures (the Agreement or SPS) permits individual
members to apply phytosanitary standards on imports as long as they
are consistent with the provisions of the Agreement, are based on scientific
principles, and are not used to protect domestic firms. The Agreement
specifies that import restrictions to protect human, animal, or plant life
should be the minimum necessary to achieve their objectives. Like most
other developing countries Cameroon does not yet have the capacity to
apply these international standards relating to risk assessments, data
provision, and. other standards.
Before the structural adjustment program, the National Rural
Development Fund (FONADER) financed phytosanitary inputs and
agricultural equipment for farmers. Though phytosanitary treatment was
left to farmers, the government was heavily involved in treatment
campaigns against insect pests, often across entire agricultural zones.
Both government distribution of phytosanitary products and treatment
of vast infected areas came to an end with the economic crisis and later
reforms.
Law 90/013 of August IO, 1990 on phytosanitary regulations in
Cameroon specifies the conditions governing the. importation, exportation,
conditioning, storage and distribution of pesticides for agriculture. Decree
92/223/PM of May 25, 1992, defines the terms and conditions of
enforcement of the law. It is aimed at preventing the introduction or
propagation of plant diseases and at ensuring the legality, quality, and
safety of phytosanitary products. Imports of plants, plant products, or
soils require a country of origin document and import authorization,
while exports also require a phytosanitary certificate on sanitary status,
origin, and destination. Authorization and certificates are issued by the
phytosanitary services at the request of the importer or exporter according
to the terms set by the Ministry of Agriculture. The decree also regulates
authorizations to market and to use pesticides for agricultural purposes.
The procedure is long and costly.
Real nominal rates ofprotection: The real nominal protection rate assesses
the effects of all factors such as tariffs, non-tariff barriers, fraud,
corruption, weak infrastructure that influence the prices paid to local
Cameroon 45
producers. Nominal rates of protection on Cameroon's chief agricultural
exports have worsened since the reforms, from -4 7. 6% for cocoa, -
54.5% for robusta coffee, and -61.0% for arabica coffee in 1980-89 to
-50.6%, -56.3%, and -61.2% in 1990/1999, reducing producer prices
by some 30-40% (Table 3.3). Contributing factors include excessive
regulation of exports, the poor state of roads, insufficient storage facilities,
and delays in loading, which increase transportation and transaction costs.
Direct transport costs are also high. Douala port, Cameroon's main transit
port, is the most expensive port in West Africa-a ton of rice is charged
CFAF 861 at Douala port, but only CFAF 666 in Libreville, CFAF 550 in
Conakry, CFAF 357 in Dakar, and CFAF 250 in Abidjan (Njinkeu and
Monkam, 2002). Telecommunication services costs are also higher in
Cameroon. All of these factors add to the costs of Cameroon's exports,
making them less competitive.
The extent of domestic distortion is also reflected in how far producer
prices fall short of the border price, which can be influenced by·
transportation, marketing, pricing, distribution, and storage policies. That
share is 70% for cocoa and coffee for Cameroon producers. Factors
explaining these price wedges include agricultural and macroeconomic
policies, road density and quality, credit availability, and crop trade
volumes (Townsend, 1998).
48 Liberalizing Agricultural Trade: Issues and Options ...
3.3 Unilateral and Multilateral Trade Policy Commitments
3.3.1 Unilateral Agricultural Trade Policy
A comparison of policy outcomes prior to 1988/89 and since 1989/90
gives an indication of the extent of liberalization achieved and of what
outcome can be attributed to unilateral reforms and which to the
multilateral framework.
Agriculture and trade until 1988: The main objective of trade policy
during the two decades following independence was development of the
industrial sector. To protect this infant sector from foreign competition,
policy instruments included tariff barriers and quantitative restrictions,
import and export authorization requirements, import and export· price
adjustments (using tax revenues from imports of a particular product to
subsidize local producers of the same product and authorizing imports
in proportion to local purchases of the product), local content
prescriptions, and a wide range of price control measures. Table 3.4
shows the products subject to those trade restrictions.
Table 3.4. Cameroon's agricultural products subject to trade restrictions before 1989
Product Trade distortions
Wheat flour Import and export authorization and price controls
Pasta Import and export authorization and price controls
Fungicides, herbicides, Import and export authorization and price controls
and insecticides
Plastic bags and sacks Import and export authorization and price controls
Concentrated sweetened milk Import and export authorization and price controls
Salt Import and export authorization and price controls
Cotton wool Import and export authorization, price controls,
and import and export price adjustments
Tea Import and export authorization, price controls,
and import and export price adjustments
Maize Import and export authorization, price controls,
and import and export price adjustments
Rice Import and export authorization, price controls,
and itriport and export price adjustments
Cameroon 49
Corn meal Import and export authorization, price controls,
and import and export price adjustments
Soya-bean and groundnut oil Import and export authorization, price controls,
and import and export price adjustments
Palm, cotton and coconut oils Import and export authorization, price controls,
and import and eXport price adjustments
Raw and refined sugar Import and export authorization, price controls,
and import and export price adjustments
Edible meat Import and export authorization, price controls,
and import and export price adjustments
Fishery and livestock products Import and export authorization, price controls,
import and export price adjustments, and
Supervisory ministry's visa
FOod for animals Import and export authorization, price controls,
import and export price adjustments, and
Supervisory ministry's visa
Medicaments for cattle Import and export authorization, price controls,
import and export price adjustments, and
Supervisory ministry's visa
Other pharmaceutical product Import and export authorization, price controls,
import and export price adjustments, and
Supervisory ministry's visa
Alcoholic beverages Import and export authorization, price controls,
import and export price adjustments, and
Supervisory ministry's visa
Source: Authors' compilation, based on MINDIC (1989).
The protectionist trade policy of this period is reflected in multiple tax
and tariff rates (more than 20 different taxes). Applied in a discretionary
manner, they sometimes reached 90% of the cost, insurance, and freight
(c.i.f.) value (see tables 3.5 and 3.6). Numerous state-owned corporations
also indirectly managed the agricultural market during that period and
provided subsidies for agricultural inputs (fertilizers, phytosanitary
products). Nominal and effective rates of tariff prntection for the
agricultural sector were only around 20%, while most industrial sectors
had nominal and effective rates of tariff protection from 50% to 70% in
1989/90 (Nguidjol, 1998). Nontariffbarriers such as import and export
licenses and local content requirements significantly protected important
foodstuffs.
50 Liberalizing Agricultural Trade: Issues and Options ...
The complex protectionist policy regime imposed heavy losses on
producers and discouraged new investments in the sector. The effective
rate of taxation on cocoa farmers was estimated at 24-76% between
1970 and 1985 and that on coffee farmers at35-76% (World Bank,1989).
Agriculture and trade since 1989190: Although Cameroon did not
participate in the Uruguay Round negotiations (1986-1993), it achieved
significant liberalization unilaterally during the negotiation period through
its structural adjustment program policy reforms. Quantitative restrictions
and price controls were gradually lifted. Today, protection is limited and
1s provided almost exclusively through tariffs. Heavy government
Table 3.5: Post-January, 1994 reform of tariff and tax structure
Tax/tariff Field Base Rate range
Customs duty Import Ad valorum
5 to 30%
Entry tax Import Ad 5 to 70%1
valorum
Turnover tax Import Ad valorum
10%
Complementary tax Import Ad valorum
0 to 90%
Unique tax UDEACimports Ad valorum 10%
Exit tax Export Ad valorum O to 40%t
Unloading tax Import Specific, 595 to 6,200 CFAF/ton
Warehouse tax Import Specific na
Petrol tax Import Specific na
Animal circulation tax Import/Export Ad valoi'um 100 CFAF/lOOkgs
Sanitary and veterinary tax lmportf.Export Specific, 1 to 3o/o
Council tax Export Specific na
Packaging tax Export Ad valorum 5°/o
Additional tax Import Ad valorum na
Computer dues Import Ad valorum 1.5%,
Fees for establishment
of loading slip (customs) Export Specific na
Fees for registration in
the permanent survey on
merchandise transactions
Sanitary control fees Export Specific na
Conditioning tax Export Ad valorum 50 CFAF/ton
Loading tax Export Specific Oo/o
Cameroon National Loaders Export Ad valorum 247.2 - 588.5 CFAF
Board (CNCC) tax Export
Toll and weighting charges Export Ad valorem 0.30 - 0.39%
Credit distribution tax Export Specific 1%
ASECNA royalties Export Ad valorem 2 CFAF/kg
na = not available.
Source: Authors' compilation based on "Tart[ Douanier UDEAC" (1988) and Bamou
(1999)
Camerovn 51
involvement in input supply and distribution have largely been replaced
by greater private sector participation. For. some products, howi;ver,
market failures still impede the development of competitive market
conditions. And the inexperienced exporters who entered the market
often lacked the skills to assess product quality, resulting in a reduction
in export quality (Douya, 1995) .
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52 Liberalizing Agricultural Trade: Issues and Options ...
Another significant post-1988 policy undertaking was the Agricultural
Sector Adjustment Program (ASAP) of 1994, which sought to create a
favorable envirorunent to boost production in agriculture, ensure food
security, and increase agricultural competitiveness (M!NAGRI, 1994).
This reform coincided with the Regional Fiscal Reform Program of the
Central African Economic and Customs Union (UDEAC), which sought
to reduce tariffs, indirect taxes, and the scope of exemptions and customs
duties among members by simplifying the fiscal system, increasing the
transparency of administration, strengthening revenue collection, and
improving the efficiency and competitiveness of enterprises through a
wider tax base and reduced and uniform tax rates.' The reforms were
reinforced by the devaluation of the currency, which removed most of
the bias against agricultural development introduced by past
macroeconomic policies. These sets of reforms resulted in a substantial
reduction in the number of taxes and rates in Cameroon (see table 3. 7).
3.3. 2 Cameroon's Experience with the Uruguay Round Agreement on
Agricultural
The Uruguay Round Agreement on Agriculture established new multilateral
rules for market access, domestic support, and export subsidies. What
has this meant for Cameroon?
Market access and agricultural tariffs: The European Union remains the
main outlet for Cameroon products, thanks to the preferential trade
agreements of the Lome Conventions (and the successor Cotonou
Agreement) (table 3.8). The average tariff facing Cameroon exports on
international markets is low. For the European Union, the main destination,
exports in 95 of514 lines of the European Union's 9,506 customs schedule
lines faced a zero most favored nation duty rate. Overall, 98% of the
schedule lines in which Cameroon exports to the European Union pay no
tariff once restrictions such as on rules of origin are met (see table 3. 7
for tax l!Ild tariff rates on some agricultural products before and after
the 1994 reforms).
56 Liberalizing Agricultural Trade: :fssues and Options ...
The low tariff does not necessarily. mean easy access, however, most
competitors have been trading at most favored nation rates, and these
are due to fall. Some preference schemes, such as the African, Caribbean,
and Pacific countries-EU accords are due to be renegotiated. One of the
main consequences of the Uruguay Round negotiations, therefore, is the
erosion of preferences affecting the competitive positions for Cameroon's
agricultural exports as products face competitors, many with better cost
structures. In 1992, Cameroon's non-oil exports faced a 3.81% average
tariff into EU markets, but a zero rate was applied because of special
treatment, yielding a 3.81% preference margin. The EU's most favored
nation rate in the post Uruguay Round is 1.62%, a level that erodes
Cameroon's tariff preference margin. And agricultural imports are
protected relative to exports by the taxes imposed by Cameroon on its
main agricultural exports and by the improvements in tax collection
following computerization of customs and duties. ·
Cameroon undertook most of its liberalization measures unilaterally
rather than within the Uruguay Round framework, binding agricultural
products at a ceiling rate of 150% and a maximum 80% for other .duties
and charges. The bound rates for most products are considerably higher
than applied custom duties. While a step in the right direction, rates will
need to be bound at levels closer to current applicable rates. •
Average border protection for agricultural products rather than
decrease as a result of the Uruguay Round negotiations actually increased
in developed countries. Tariff escalation, which is the difference between
tariffs on raw goods and processed goods, is found on important
agricultural product categories, and limits Cameroon's opportunities for
developing a strong agro-industrial sector and continues to provide
incentives for exporting low valued-added primary products.
Market access and nontarif.fbarriers: Cameroon has significantly reduced
or eliminated all nontariff barriers on agricultural imports. Biit the
agricultural exports of Cameroon and other African countries still face
heavy nontariffbarriers in other countries, including safeguards, sanitary
and phytosanitary measures, technical barriers, and antidumping
measures. The sanitary and phytosanitary measures are probably the
biggest constraint. Products affected by sanitary and phytosanitary
measures include most of Cameroon's nontraditional agricultural exports
(fresh fruits and vegetables, food preparations, meat and meat products).
Lack of access to information on the sanitary and phytosanitary
Cameroon 57
requirements for products in target markets and lack of capability in
meeting them are constraining diversification of Cameroon's agricultural
exports.
3.3.3 Domestic Policies and Constraints to the Forthcoming WTO
Round
Cameroon made no specific commitment under the WTO on domestic
support for agricultural production. Nor did Cameroon incorporate special
safeguards measnres in its WTO· submission (which give members the
right to increase tariffs above bound rates in response to a snrge in
imports or a decline in import prices) because it lacked the expertise
needed to do so. Domestic supports still in place since the structnral
adjustment programs are generally WTO compatible and cover
government assistance for inputs, export transport and marketing,
research, pest and disease control, infrastructure, and food secnrity.
Constraints to export-led development come mainly from weak export
support services and institutions for production and export (sea and air
transport, storage, and packaging), investment promotion for domestic ·
and foreign investors, export promotion schemes, dnty exemption
schemes, bonded houses, and entrepreneurship or private sector
development programs.
3.4 Impact Assessment of Unilateral Liberalization
Partial equilibrium and general equilibrium analysis are used to assess the
impact of Cameroon's unilateral liberalization of the agricultural sector.
3.4.1 Partial Equilibrium Analysis
Analysis of the impact of the 1994 currency devaluation on selected
export and food products shows an overall increase in profits for cocoa,
coffee, and cotton after the devaluation despite a 35% increase in
production costs. These results. confirm the existence of a potential
comparative advantage for Cameroon's agricultnral products (see Douya
1998 and Bamou, 1999). Though the devaluation led to a reduction in
imports, while some local products, like maize and palm oil, recorded a
high upsurge in demand, the absence of a coherent policy environment
prevented producers from taking advantage of this opportunity. The
expected effects of the devaluation on exports were also inhibited by
such government measnres as the introduction of excise duties on key
58 Liberali:ing Agricultural Trade: Issues and Optibm ...
agricultural exports (15% on cocoa, cotton, sugar, rubber and medicinal
plants; 25% on coffee; 30% on palm oil; and CFAF 6500 per ton on
bananas). The 25% tax on coffee exports reduced the price paid to
farmers by about 30%. This helped to erode the incentives offarmers to
increase production and encouraged the smuggling of goods into Nigeria.
Analysis of the impact of overall trade reform on the agricultural
sector shows a direct and significant effect on the agricultural structure
and level of protection. Because of a lack of data on tax rates for individual
agricultural products, nominal and effective rates of protection (NRP
and ERP) are calculated for the main agricultural subsectors. 2
Agricultural sector reforms led to a reduction in the level of tariff
protection. For perennial agriculture the effective rate of tariff protection
went from 74% in 1992/93 to 26% in 1994/95 to 18.4% at the entry into
force of the Uruguay Round Agreement on Agriculture (I 995/96).
3. 4. 2 Computable General Equilibrium Analysis
To assess the overall impact of agricultural trade liberalization options,
simulations were conducted using a computable general equilibrium model
to test five key assumptions:'
• There exists a competitive market where price, quantity of goods
and services, and factors are adjusted to determine supply and
aggregate demand at equilibrium.
• Because the sectoral supply of capital is fixed, there can be different
sectoral rates of return to capital. Technological parameters
characterize the heterogeneity of the sectors.
• Cameroon's share in international trade is too small to influence
international prices.
• There is underemployment of labor.
• Sectoral production is homogeneous.
Six liberalization options are considered:
• Scenario I: Tax exemption of all agricultural imports.
• Scenario 2: Same as scenario 1 but with the exemption of all
industrial food products imported from the Central
African Monetary and Economic Community (CEMAC)
zone. 4
• Scenario 3: Tax exemption as in scenario 2 but with a further 25%
tax rebate on industrial food products imported from
the rest of the world.
Cameroon 59
• Scenario 4: Same as scenario 3 but with tax exemption of all
agricultural exports.
• Scenario 5: Same as scenario 4 but with increased transfer from
the rest of the world equal to the fiscal revenue
deterioration in scenario 4.
• Scenario 6: Same as scenario 5 but with double the transfer and
exemption of subsistence agricultural products sold
locally.
Results analysis: The analysis looks at the impact of simulated measures
on agricultural and agro-industrial sectors, household incomes, and food
consumption. The results are summarized in table 3.10.
Scenario I, exempting agricultural imports from taxes generates positive
effects on the overall production of foodstuff commodities and on the
food security of households. The immediate impact of this measure is
the reduction of import prices relative to local products. The slight decrease
in production for the hunting and agroindustrial sectors, which are in
competition with liberalized imports, is more than compensated for by
production increases in the three remaining agricultural sectors.
Under scenario 2, the additional tax exemption of food product imports
from CEMAC members reduces the budgetary surplus and, as a result,
investment. A slight reduction in economic activity follows, accompanied
by a slight increase in unemployment and a drop in household income.
But the positive price effects have led to increased food consumption,
resulting in a positive change in household welfare and an increase in
food security. The macroeconomic, sectoral, and food security impacts
of scenario 2 are similar to those of scenario I, except for a clear reduction
in the trade balance surplus with CEMAC. This suggests that a sound,
discriminatory regional agricultural and agroindustrial policy toward the
rest of the world could revive regional cooperation within CEMAC.
In scenario 3, which adds a 25% tax reduction to industrial food
imports from the rest of the world, the positive effects on food security
and agricultural production are stronger. However, the negative effects
on industrial production, including agroindustry, intensify the negative
macroeconomic effects. GDP falls 0.5% and unemployment rises I%.
Not only does the price of domestic products relative to imports deteriorate,
but the drop in local agroindustrial product demand affects supply 1in the
62 Liberalizing Agricultural Trade: Issues and OptiDns ...
agroindustrial sector. This drop (the agroindustrial sub-sector dominates
the industrial sector), coupled with a decline in global economic activity,
results in relatively high rates of unemployment. Once more, the positive
price effects due to tax rate decreases more than compensates for the
negative revenue effects and results in a relative increase in household
food consumption and food security.
In scenario 4, the strengthening of the positive effects on overall
agricultural production offsets the negative effects on industrial
production in scenario 3, spurring a revival in global production that
results in a notable drop in unemployment rates. The repeal of taxes on
exports !roost farmers' prices, stimulating supply. The perennial
agricultural sector, with a heavier tax burden than other agricultural
sectors, is the main beneficiary. Deterioration in the price of local
agricultural products relative to exports results in a significant upswing
in exports to CEMAC and the rest of the world. The increase in imports
reflects the increase in the country's overall volume of international trade,
confirming the theoretical expectations for trade liberalization. The positive
revenue and price effects on agroindustrial imports, due to the positive
income effects and negative price effects, have a significantly positlve-
impact on food security. However, tax exemptions on imports shrink the
budgetary surplus by more than half.
Scenario 5, in which international organizations (World Bank,
International Monetary Fund, and WTO) assist agricultural liberalization
programs in developing countries, is an attempt to solve the budgetary
problem that could arise from agricultural trade liberalization. In general,
the effects of scenario 5 are positive, at sectoral (agriculture,
agroindustry), food security, and macroeconomic levels. There is a notable
improvement in agricultural production as well as a clear increase in the
volume of food consumption and in household welfare. The GDP growth
rate is higher than in scenario 4, so the decline in the unemployment rate
is almost double that in scenario 4. The budgetary surplns of the base
year is regained and even exceeded by more than 20%.
Sector demands being addressed through a basket of composite
prodncts, increase of these demands is accompanied by producer price
increases, which react by boosting supply. This then has a positive
bearing on households' income. The combined positive effects of
producer price and household revenue which adjust to demand and supply
trends, are balanced by a substantial spur of households' welfare due to
food consumption and, consequently, .by an improvement of their food
Cameroon 63
. security. These positive effects are more than strengthened in scenario
6.
3,5 Regional Analysis
The regional analysis, conducted within the framework of CEMAC,
focuses on two points: the regional trade protocol and the constraints
and opportrmities of CEMAC countries for negotiating together in the
WTO framework.
3. 5.1 Regional Agriculiural Trade Protocol
CEMAC's framework for coordinating and harmonizing economic and
social polices has been liberalized since 1994, resulting in a more neutral
and flexible trade and fiscal incentive system.
CEMAC has no provisions on export subsidies and leaves to individual
states the decision on export taxes. Cameroon, Central African Republic,
and Gabon (see table 3.11) have some agricultural export taxes, largely
intended to c~pture some of the windfall profits due to the 1994
devaluation. Agriculture, dominated by five products, represents about
25% of the value of regional trade. Trade data for 1988 and 1996 show
that Cameroon dominates in agricultural trade and Cameroon and Chad
in livestock trade.
There are two characteristics of regional liberalization that are relevant
for WTO negotiations on agriculture. First, WTO participation is low.
Only Cameroon and Gabon have submitted notification to the WTO.
Second, the commitment level on tariffs is also low. While the average
applied tariff on agricultural goods in Cameroon and Gabon is moderate
(18.7% and 22.6%), the maximum notified bound rates are some 9 and
12 times higher. Since there are no quantitative restrictions on agricultural
trade, the bindings would have been expected to be close to the actual
maximum Common External Tariff (TEC) value of 30% plus the
maximum surtax rate of 30%.
What this means is that regional liberalization could offer several
desirable features, the most important being policy commitment. For
this reason, a properly designed regional liberalization framework can
complement integration in the world trade system. The CEMAC offers
scope for policy harmonization across member states that could be used
to further members' participation in WTO negotiations on agriculture.
Member countries have more than 50 years of experience consolidating
Cameroon 65
the external tariff and harmonizing internal tax structures. Regional trade
reform already suggests the level at which consolidated and coordinated
regional binding can be made. And a regional approach could help to
address the main constraint facing all CE MAC members: increasing
productivity for an expanded range of products. Failure to realize the
benefits of regional integration has been due primarily to difficulties in
sharing the benefits and costs of regional integration. This has in turn
limited the benefits that agreement at the regional level could provide
with such a high level of policy harmonization.
Thus the main question to be addressed"is j:he extent to which regional
and multilateral approaches can become reinforcing processes.
3. 5. 2 Regional or Multilateral Liberalization-or Both?
While regionalism is a breach of WTO's rule on most favored national
treatment of partners, the WTO allows for such free trade areas,
transitional time frames and technical assistance for developing countries
in implementing various agreements in recognition of their special needs
and weak capacity in some areas. Overall, weaknesses in human and
physical infrastructure and institutions related to international trade have
been identified as key impediments to full participation by developing
countries.
The main problem with complementary regional and multilateral
approaches is the heterogeneity of CEMAC members. Congo and Gabon
depend largely on oil exports, while Cameroon has a more diversified
export base. Cameroon, Congo and Gabon are developing countries while
the other members are least developed countries, and the two groups are
treated differently in the WTO. That differentiated treatment could
circumscribe efforts to deepen policy harmonization commitments made
at the regional level.
Nonetheless, there are several reasons for Cameroon to coordinate its
negotiations with other CEMAC members, other African regional groups,
the African, Caribbean, and Pacific group, and other trading partners
with converging interests on particular issues. Coordination within
CEMAC would require that multilateral negotiations sustain the regional
undertakings. With both developing countries and least developed countries
in CEMAC, this would call for turning regional achievements into building
blocks for multilateralism. Market access conditions need to be consistent
with current regional reform. Countries in CEMAC should all opt to bind
their CE MAC tariff structure in the WTO. The regional achievements
66 Liberalizing Agricultural Trade: Issues and Options ...
made in food policy could be consolidated. Further liberalization of
nonagricultural trade in the region would help reduce the effective rate
of protection and stimulate efficiency and regional trade. In turn,
Cameroon and other CEMAC countries would be in a better negotiating
positioP to request a reduction in tariff escalation in their traditional OECD
markets.
3.6, Policy Issues, Options, and Strategies for Negotiation
There is a need for Cameroon to understand the context and the
instruments of international trade negotiations to determine appropriate
strategies and to harness regional alliances to strengthen its negotiating
position (see table 3 .12 for proposals for Cameroon's negotiating position).
The extent of agricultural liberalization will depend on the tariff bindings
and tariff commitments and other commitments on domestic support
and export subsidies. The focus of the negotiations, already agreed to
during the Uruguay Round, will be on lowering bound rates and on the
use of export subsidies. The agricultural negotiations should take into
account experience with implementation of reduction commitments made
under the URAA, the effects of these commitments on world trade in
agricultural products, the special and differential treatment to be accorded
developing countries, and the overall objective of establishing a fair and
market-oriented trading system.
Cameroon should coordinate its negotiating position with that of other
relevant trading partners, talcing into account what can be obtained from
the negotiations. A more liberal international trading environment is, in
the long run, to the advantage of Cameroon. Such a long-term objective
is however attainable only if proper actions are taken in the short-run.
The short-term actions include redressing the imbalances in the current
trading system.
The most outspoken WTO liberalizers, such as countries that make
up the Cairns Group, are prepared to include in negotiations the principle
of special and differential treatment for developing countries, as well as
othe: issues of interest to developing countries such as tariff peaks and
tariff escalation. However, these issues will have to be negotiated by
Cameroon and other developing countries, as will improved market access
for products in which Cameroon has an actual or potential competitive
advantage. Improvements in market access will be largely a matter of
tariff bargaining, but the general formula for tariff reduction is yet to be
Cameroon 67
decided. Cameroon, in coordination with other African countries, should
lobby for more balance between trade in agricultural and industrial
products, with a particular focus on tropical products and on the factors
that have constrained expansion of agricultural production and better
use of preferences available in previous agreements.
Because the European Union is the main market for Cameroon's
agricultural exports, negotiations should be coordinated with those on
the Cotonou Agreement (successor to the Lome convention) and cover
issues ofreciprocity, special and differential treatment, and the European
Union's proposal to create economic partnership arrangements. A related
issue is the compatibility between economic partnership arrangements
and GATT article XXIV or GATS article Von regional groupings. Special
attention should also be given to preferential treatment of EU commodity
protocols. The European Union's Common Agricultural Policy, and the
potential importation of subsidized European products that could affect
domestic production of food crops, should also be considered.
Trade liberalization and market access alone may not be enough to
improve trade and economic performance. A new trade agreement should
include the "missing links" of production and supply capacities, human
resource development, physical infrastructure, trade-related technical
standards, and support for regional integration as an instrument for
enhancing competitiveness and easing integration into the global economy.
Agricultural development in Cameroon needs to properly integrate
short- and long-term dimensions, to prevent short-term solutions from
impeding increased productivity in the long term. And that means
distinguishing food import capacity and agricultural tradability.
Food import capacity (the ratio of food import expenditures to total
export revenue) is an indicator of the demand for foreign exchange to
finance food imports. It shows that in the post-Uruguay Round period
(l 9"15-97) Cameroon, the Republic of Congo, Equatorial Guinea, and
Gabon are the only CEMAC countries with acceptable levels of food
security. Agricultural tradability (the ratio of the value of agricultural
trade-the sum of import costs and export revenues-to GDP) captures
the extent to which the agricultural sector is directly affected by
developments in world markets for agricultural products. Together, these
indictors shed light on a country's interests in agricultural negotiations.
African net exporters would be helped by improved market access in
developed countries, combined with a reduction in export subsidies and
domestic snpport, whereas African net importers are likely to have
contrary interests.
Cameroon 71
Like the Uruguay Round, the Doha Round has as its long-term objective
establishing a fair and market-oriented agricultural trading system that
provides for substantial, progressive reductions in agricultural support
and protection to correct and prevent distortions in world agricultural
markets. This should also be Cameroon's objective, and that of other
countries at the same level of agricultural. development, as long as their
specific conditions and needs are properly factored into the agreements.
The main elements of Cameroon's negotiating position will focus on
preference erosion, tariff escalation and tariff peaks, tariff rate quotas,
export subsidies, domestic subsidies, capacity building, state trading,
special and differential treatment, and consideration of multi-functional
character of agriculture, especially as it relates to food security. The
negotiations could provide an opportunity to examine key issues with
important implications for developing countries .
.Market access: Contrary to expectations, implementation of the Uruguay
Round Agreement on Agriculture provisions on market access did not
benefit developing countries. Exports of both primary and processed
agricultural products from the developed countries to developing countries
increased, while the share of developing countries in world agricultural
exports was almost the same in 1997 as in the early 1970s. Upcoming
negotiations need to correct this imbalance.
Several factors led to the imbalances and interfered with the .
achievement of simplified and transparent tariff protection reductions in
developed countries. The 36 percent tariff reduction by developed
countries had far less impact than intended because the base tariff was
often higher than applied levels and sensitive products were differentiated
from nonsensitive products. Non-ad valorem tariffs have been introduced
and are being increasingly used. Up to 42% of EU tariff lines are expressed
in non-ad valorem form (WT0/37, 2000). The discipline on the use of
tariff rate quotas by developed countries also has not worked as intended.
In converting nontariff barriers to tariffs, developed countries often
converted to levels higher than the nontariff equivalents, especially on
temperate-zone food products. Several tariff peaks are also found,
especially on major agricultural staples and other expm:ts of interest to
Cameroon and other developing countries, such as sugar, tobacco, cotton,
and fruits and vegetables. Furthermore, tariffs for several key agricultural
cormnodities rise along the processing chain, limiting prospects for
production and trade diversification by developing countries that would
72 Libera/izi.ng Agricultural Trade: Issues and Options ...
allow them to shift to trade in high value-added products with their more
stablecterms of trade. Variable tari:fl); used by developed countries such
as price band schemes, as well as seasonal tariffs, should be eliminated.
Variable tariffs should be allowed only under the provisions for special
and differential treatment for developing countries.
Special safeguards also need to be simplified and made more
nondiscriminatory. Market access commitments were based on the
average price level in 1986-88. Members are allowed to introduce import
control measures when prices are higher than the average. Complicated
guidelines for calculating the reference price are subject to abuse.
Safeguards should either be broadened in scope to make them available
to all markets or abolished altogether.
Agreements such as the Sanitary and Phytosanitary Agreement that
constrain exports of agricultural commodities need to be revised to ensure
that they are not used as an indirect means of protection. Developing
countries often lack the human, technological, and financial resources
to comply with the more stringent sanitary and phytosanitary
requirements. A negotiation objective, therefore, is to ensure that
requirements are revised so that only the most necessary standards are
applied and that a binding technical assistance program be established
for developing countries.
Cameroon's competitive position could be' significantly eroded by the
continued reduction in tariffs within the multilateral framework, including
the outcome of ACP-EU negotiations and the generalized system of
preferences (GSP). Cameroon's agricultural products will be pitted against
competitors with better cost structures. Market access negotiations
therefore need to properly account for the preferential access enjoyed
by Cameroon and other African countries in their traditional export
markets, where agriculture is highly protected.
In sum, to improve market access for Cameroon's agricultural
products, negotiations should strive to remove remaining nontariffbarriers
and reduce tariff peaks and tariff escalation in developed country markets. '
The reduction formula should avoid differentiated treatment of sensitive
and nonsensitive products and should link tariff levels on primary
commodities to those on processed forms of the commodity.
Cameroon should offer to reduce the level of its agricultural tariff
binding and set it closer to the current applied tariff level by locking in at
the current level of commitment within CEMAC. Further liberalization
of nonagricultural tariffs could reduce the bias against agricultural exports.
Cameroon 73
This would improve policy predictability and encourage investment and
associated spillover effects on efficiency and market access.
Domestic support: Overall, implementation of the agreement on domestic
support to agriculture increased imbalances in the legitimate use of these
trade- and incentive-distorting measures. The agreement legalized the
use of these measures by developed countries while developing countries
were curtailing their use, and it failed to properly define the nontrade
concerns that should be taken into account in implementing them
(Shirotori, 2000). Green box measures have resulted in higher overall
domestic snpport levels in developed countries, meet the nontrade interests
of developed countries only, create loopholes that developed countries
can more readily take advantage of, and impose administrative burdens
that are especially heavy for developing countries.
Cameroon should request reform of each of these dimensions, so
that there are new incentives for deeper liberalization in inpnt sectors
and for enhanced reliance on market mechanisms to promote crop
development.
Export subsidies: The Uruguay Round Agreement on Agriculture required
that ·export subsidies be reduced (20 percent in quantity and 36 percent
in budgetary outlays) by the end of the six year implementation period
and that no new subsidies be introduced. Cameroon, largely for fiscal
reasons, phased out its agricultural input subsidies, resulting in reduced
agricultural productivity.
Negotiations on agricultural subsidies need to provide for market-
based mechanisms for raising productivity, including adequate support
to agricultural research and extension activities. Some export support
mechanisms that are not currently available in Cameroon should have
been included among the special and differential treatment measures.
Cameroon should negotiate to have the option of using export support
measures that can enhance the competitiveness of its agricultural products.
Developing countries should be allowed greater flexibility on export
subsidies and taxation. In the long run, however, these instruments should
be banned.
Cameroon and other African countries eliminated subsidies as part of
their unilateral structural adjustment program-driven liberalization. It
makes sense for these countries to receive credit for these undertakings.
The credits could be in the form of assistance in completing agricultural
reforms in the least painful manner.
74 Liberalizing Agricultural Trade: Issues and Options ...
Food security: Although Cameroon is not on the list of net food importers,
analysis points to a deteriorating food situation, giving Cameroon an
interest in negotiations on this issue. Cameroon's concerns relate to the
capacity to meet food consumption requirements through domestic
production and imports at prevailing income levels and prices.
Multilateral liberalization could reduce the availability of adequate
supplies and result in short-term difficulties in financing imports of basic
foodstuffs at commercial prices. The Marrakech Decision on Measures
Concerning the Possible Negative Effects of the Reform Programme on
Least-Developed and Net-Food Importing Developing Countries was
meant to cushion these negative effects. Its key elements include support
for domestic production rather than trade, technical and financial
assistance to improve productivity and infrastructure, and food aid
commitments.
Implementation has been poor, however, largely because of design
weaknesses. There is a need to ensure that the framework contains
binding and feasible commitments that can assist-or at least not
impede-agricultural development and food security. ht negotiations,
Cameroon could request that key elements of the Marrakech Decision,
especially on food aid, compensatory fmancing, and technical and financial
assistance, be revised and put in legally binding terms; that agricultural
support measures that impede domestic food production be eliminated
or substantially reduced; that low-income countries be allowed the
flexibility to pursue their food security objectives primarily through
increased domestic production; and that all low-income African countries
be allowed greater flexibility in domestic support measures under special
and differential treatment.
Cameroon could ask to be allowed to introduce measures to increase
export diversification. These measures could include the cost of searching
new markets in view of the likely underinvestment by the private sector.
It could also ask for specific assistance in building local capacity, providing
a discussion forum on trade-related issues, maintaining trade-related
databases and information, undertaking high-quality analyses, providing
technical assistance on norms and standards and dispute settlement,
advocating better market access in industrial countries, aud helping
developing countries to build coalitions and reach common positions in
multilateral trade negotiati0ns.
Cameroon should also join with its partners in CEMAC, for whom
food security is a grt:ater concern. Solidarity with other CEMAC members
Cameroon 75
could contribute to enhanced productivity of tbe couutty's agriculture
and could win CEMAC members' support for some agricultural export
crops tbat are of interest only to Cameroon.
Taking into account lingering supply and capacity constraints needs
to be a pre-condition for new negotiations. Commitments by developed
countries to help developing countries to overcome these constraints
should be in binding terms and with a focus on the needed structural
transformation of production and distribution that is required by the
liberalized international markets.
Most agricultural exports are currently under zero or relatively low
tariff. It is important to have these tariff preferences "bound" in the
current round.
3. 7 Conclusion
Cameroon's agricultural sector appears to be constrained more by its
lack of capacity to respond to emerging opportunities offered by Uruguay
Round tban by lack of market access. Supply-side constraints as well as
institutional and human capacity have limited competitiveness.
Consequently, tbe country's ability to meet its WTO commitments is
limited because of inefficient administration and low levels of human
and financial resources. The WTO negotiations provide an opportunity
for examining key issues with potentially important implications for
Cameroon and other developing countries. These countries need to
participate more actively and commit themselves to go beyond their
current unilateral efforts at trade liberalization.
End-Notes
I. SeeNjinkeu (1997), Kamgnia(l997) and Bamou (1997 and 1999a)
for more developments on that fiscal reform.
2. The output-based NRP is used for calculating tbe ERP The following
formulas are thus used for tbe calculations:
NRP, + La" NRP,
= J -1 (1)
1- ~a
j ij
76 Liberalizing Agricultural Trade: Issues and Options ...
with,
(!+ t) . (1 + tm,)
NRP, -1 (2)
(1 + td,)
Where t, tm, , td,, au, NRP,, NRP; are ad-valorem total imports
tariff rate, sub-sector imported products tariff rate, domestic sub-
sector products tax rate, input/output coefficients and nominal rate
of protection on output and input respectively.
The Balassa calculation approach of the ERP is preferred to
Corden's. Data used are from the recent input-output tables
published by MINEFI/DSCN (1999).
3. The structure of the model and the list of variables and parameters
are given in the annex.
4. The Communate Economique et Monetaire d' Afrique Centrale,
begun in 1994, replaced UDEAC in 1999. Members include
Cameroon, Central African Republic, Chad, Congo, Equatorial
Guinea, and Gabon. ·
5. The database of the earlier models for Cameroon is dated 1984/85
and 1989/90. See Njinkeu (1997) for developments on the
advantages of using a recent da\abase in the CGE model analysis.
6. See Bamou (1997), Njinkeu and Bamou (2000) and Dissou and
Decalnwe (1994) for alternative closures of the labor market in
CGEmodels.
References
Amin, A. A. 1999. Policies Changes and Agricultural Sector in Cameroon
ISNAR, The Hague, The Netherlands.
Amjadi, A., Reineke, U. and Yeats, A.J. 1996. "Did External Barriers
Cause the Marginalization of Sub-Saharan Africa in World Trade?"
World Bank Discussion Paper, No. 348. The World Bank,
Washington, D.C. ·
Bamou, E. 1997. "Cameroon and Gabon Comparative Analysis of the
Impact of Fiscal Reform Within UDEAC: A CGE Model Approach".
African Journal ofEconomic Policy. Vol. 4, Number 2, December.
pp. 115-145.
Cameroon 77
Bamou, E. 1999. Trade Liberalization and Economic Performance of
Cameroon and Gabon: A Comparative Analysis with a CGEModel.
AERC Research Paper No. 97. Nairobi, Kenya.
Banque Mondiale 1989. Cameroun: Rapport sur /'Agriculture. Volume
1 : Rapport Principal. Rapport No. 7486-CM.
CEMAC. 1999. Bulletin des Statistiques Genera/es. Bangui, RCA.
CIRAD. 1993. Re lance Regionalisee de la Production Paysanne du Cafe
et du Cacao au Cameroun. Yaounde, Cameroun.
Decaluwe, B., Njinkeu, D., Bela, L and Cockburn, J. 1999. Regional
Integration and Trade Liberalization in SSA: A UDEAC Case Study,
in Oyejide, A., Elbaclawi, I. and Yeo, S. (eds) MacMillan Press,
Dissou, Y., and B. Decaluwe. 1994. Chocs Externes et Ajustement en
Cote d'Ivoire : Une Analyse en Equilibre General Dynamique.
Paper presented at Second International Conference on African
Economic Issues. Arusha, Tanzania, 11-14 October.
Douya, E. 1995. Analyse de I 'Impact de la Devaluation du FCFA sur la
Production Agricole et la Securite Alimentaire au Cameroun.
F.A.O., Yaounde, Cameroun.
Douya, E. 1998. Cotton Supply Response in Cameroon. African Journal
of Economic Policy. Vol. 5, Number 1 (June).
Dunlop, A. 1999. "What Future for Lorne's Commodity Protocols?"
ECDPM Discussion Paper No:5.
FAO-, CEEAC et UDEAC. 1993. Programme Comp/et de Securite
Alimentaire pour l'Afrique Centrale. CEEAC RAF/88/049 et
UDEAC RAF/89/061.
F.A.O. 1995. Analyse de /'Impact de la Devaluation du Franc C.FA.
sur la Production Agricole et la Securite Alimentaire et Proposition
d'Action: Camefoun. Rapport Technique TCP/CMR/3452 (A).
FAD- 1998. Rapport d'Evaluation: Appui au Programme National de
Recherche et de Vulgarisation Agricoles, CAM/PSAN98/01.
Republique du Cameroun.
Goldin, I. et Knudsen, 0. 1990. -eds- Liberalisation des £changes
Agricoles: Implications pour !es Pays en Developpement. OCDE,
Paris, France.
Harre, D et Engola Oyep, J. 1992. La Redefinrtion des Roles dans la
Commercialisation duRiz au Cameroun Apres la Liberalisation du
Marchnf)
8.1
5.8
1984/85 90.4 39.0 129.4 1521.7 8.5
1985/86 62.2 77.6 139.8 1628.4 8.5
1986/87 122.7 99.7 222.4 2063 .1 10.7
1987/88 168. I 67.7 135.8 2198.9 6.1
1988/89 310.0 91.6 401.6 3101.9 12.9
1989/90 82.7 71.1 153.8 3156.0 4.8
1990/91 38.6 40.2 78.8 2815.7 2.8
1991/92 13.3 4.9 18.2 4926. 7 0.4
1992/93 117.0 177.2 294.2 6064. 7 4.8
1993/94 160.6 302.9 463.5 9007.7 5.1
1994/95 184.4 192.2 376.6 9205.6 4.1
1995/96 216. l 170.5 386.6 9170.4 4.2
1996/97 229.5 331.8 561.3 10147.8 5.5
1997/98 213.4 174.4 387.8 1213.5 3.2
1998/99 243.4 229.9 473.3 1364.6 3.4
1999/2000 221.1 265.8 486.9 1917.4 2.5
Note: One Kenyan pound is equal to 20 Kenyan shillings and US$1 was equal to about 78
Kshs in June 2002.
Source: Kenya, Statistical Abstracts (Various Years)
The government has increased its funding of such support services
as research, market information, and seed inspection in nominal terms
since 1990 relative to such direct production support measures as artificial
insemination, tractor hire, aerial spraying, veterinary services, and farm
planning (Table 4.5), raising the costs of these services to farmers. Yet
such direct support services are permitted for developing countries under
the special and differential clause for developmental activities.
106 Libera/hing Agricultural Trade: Issues and Options . , ,
-
Table 4.5 Expenditure on agricultural production services, 1980-98
-
(millions of Kenyan pounds)
'\\Dr Artif"odal Amal Thartor v~ Fann
and imemination spraying ,...;,., ,...;,., inspection planning
1980
""""""
2,624 17 120 2,363 31
"""""'
46 I
1981 2,703 17 124 2,435 32 47 l
1982 2,919 18 130 2,523 32 48 l
1983 3,066 19 135 2,6 l l 35 48 2
1984 3,126 19 137 2,676 38 48 2
1985 3;28 l 20 139 2 944 50 82 2
1986 3,081 15 141 l,052 174 113 4
1988 3,174 18 140 2,073 112 104 6
1989 3,139 17 144 l,783 143 11 l 6
1990 9,315 18 141 2,027 122 110 6
1991 9,789 17 144 2,030 125 110 6
1992 9,559 17 . 144 l,843 141 117 5
1993 10,700 16 145 l,800 146 119 4
1994 9,815 15 140 l,805 148 12 l 5
1995 10,450 16 149 l,924 158 129 5
1996 11,240 17 160 2,071 170 139 5
1997 l l ,688 18 166 2,152 177 144 5
1998 12,621 19 179 2,324 ;[ 9 l 156 5
Source: Kenya, Statistical Abstracts (various years).
Export subsidies: Developing conntry members of the WTO made
commitments to reduce export subsidies by 24 percent in value over
eight years. Developing countries may exempt existing subsidies that
rednce costs associated with export marketing and internal transportation,
although they cannot introduce new ones. Importing countries can
undertake countervailing measures if export subsidies by other countries
cause serious injury to their domestic industries.
For Kenya and many other developing countries the key issue in export
subsidies is underuse (Oyejide, 1997). In most cases subsidies are much
smaller than allowed. Since few developing countries provided export
subsidies at the time of the Agreement on Agriculture, the disciplining of
this practice has no direct consequence for them. The indirect effects of
export subsidies can be substantial, however. For net food exporters
export subsidies by competitors can cut into their market share and
earnings, while net food importers may face higher import bills once
subsidies are withdrawn.
Kenya 107
Other Issues: The Agreement on Agricultnre also contains three other
elements that are importllllt to Kenya. First, it contains new rules on
sanitary and phytosanitary measures. Although intended only to protect
food safety and animal and plant health, application of the rules can
constitute unfair technical barriers to trade when used indiscriminately.
Provision is also made for possible technical assistance for developing
countries to help them comply with standards imposed by importing
countries.
Second, the Agreement recognizes special and differential treatment
for developing countries and least developed countries, granting them
10 years to implement their reduction commitments (least developed
countries are not required to make reduction commitments in any of the
three areas of market access, domestic support, and export subsidies).
Third, while the Marrakech Declaration noted the special difficulties
of least developed countries and net food importing developing countries,
which may suffer sharply increased food import bills following reductions
in food export subsidies by developed countries, no operational
mechanisms have been developed for implementing this decision to assist
these countries.
4.3 Impacts of the Agreement on Agriculture on Kenya
This section analyses the impact of the Agreement on Agricultnre on
agricultnral production and on adjustments in prices, tariffs, and' trade in
agricultnral commodities.
4. 3.1 Agricultural production
The agricultural sector is dominated by production of a few export
commodities (tea, coffee, and horticultnre), food crops (maize, wheat,
and rice), industrial crops (sugar, pyrethrum, cotton, and sisal) and
livestock products (milk and beef). Performance of the sector in the
1990s was dismal. Annual growth in agricultnral GDP averaged 2 percent,
down from 4 percent in the 1980s. Trends were mixed for most
commodities (Figures 4.1 and 4.2). The worst declines in production
occurred in maize, milk, coffee, and sisal.
Contributing to the decline were climate, price, market, and
technological factors, but the major contributors were more likely policy
related, particularly market reforms. For example, the shift from
government controls on pricing and marketing to liberalized market
108 Liberalizing Agricultural Trade: Issues and Options ...
Figure 4.J, Production levels of selected food commodities 1990 - 1998
i
'
1=
'
i 1500
•
i ·=
~
·~· ·~'
... ·~·
Figure 4.2. Production levels of selected cash crop 1986 - 1998
350
i 300
~ 250
0
-;; 200
-·:e 150
:ii 100
b
g 50
<..- 0
.1>. ~ .o."> Ri"' ~ Ri100 Number Share in
(SITC) percen percent percent of peaks total (percent)
European Union
Fish and crustaceans (3) 373 45 0 0 45 12
Dairy products ( 4) 197 21 77 9 107 54
Fruit and vegetables (7-8) 407 10 5 1 16 4
Cereals, flours etc. (I 0-11) 174 29 75 0 104 60
Veg. Oils, fats, oilseeds (12,15) 211 0 8 2 10 5
Canned and prep.meat, fish (16) 105 17 8 0 25 24
Sugar, cocoa and prep. (17,18) 75 34 6 0 40 53
All agri., fishery products (I-24) 2,726 343 334 33 701 26
Japan
Fish and crustaceans (3) 189 0 0 0 0 0
Dairy products ( 4) 146 45 57 22 122 84
Fruit and vegetables (7-8) 209 1 2 7 10 5
Cereals, flours etc. (10-1 I) 132 37 24 10 71 54
V~g. oils, fats, oilseeds (12,15) 161 1 1 3 5 3
Canned and prep. meat, fish (16) 101 21 3 3 27 27
Sugar, cocoa and prep. (17,18) 80 26 19 6 51 64
All a~ri., fishery products (1-24) 1,890. 307 132 75 514 27
160 liberalizing Agricultural Trade: Issues and Options ...
Table 5.8 continues
Number of tariff Jines within a tariff range
Country, product group Total 20-29 30-99 >100 Number Share in
(SITC) percent percent perceni of peaks total (perc~
United States
Fish and crustaceans (3) 114 0 0 0 0 0
Dairy products ( 4) 251 29 58 9 96 38
Fruit and vegetables (7-8) 269 13 0 0 13 5
Cereals, flours etc. (10-11) 59 0 0 0 0 0
Veg. oils, fats, oilseeds (12,15) 124 0 2 2 4 3
Canned and prep. meat, fish (16) 90 1 1 0 2 2
Sugar, cocoa and prep. ( 17,18) 144 6 13 2 21 15
All agri., fishery products (I-24) 1,779 70 99 26 195 11
Note: Tariff peaks are defined as tariff rates of 20 percent or more. All are most-
favored nation rates. Source: FAO (1999), Table 5.4
Table 5.9. Principal administration methods for tariff rate quotas, 1995-
99 (number of tariff quotas)
Principal Administration Method 1995 1996 1997 1998 1999
Applied tariff 49 36 38 26 20
First-come, first-served 1_, 3 1 1 -
Licenses on demand 13 22 25 25 32
Auctioning 2 - 8 10 10
Historical Importers 6 20 25 35 35
State Trading 3 3 1 - 1
Producer groups 2 2 1 1 1
Other 5 6 - - -
Mixed methods 4 6 9 10 9
Non-specified 23 10 - -
Total sample 108 108 108 108 108
Source: WTO (2000), Committee on Agriculture Special Session, Changes in Tariff
Quota Administration and Fill Rate, G/AG/NG/S/20, 08 November.
Nigeria 161
Table 5.10. Potential application and action o~ special agricultural
safeguar.ds, by WTO members
Potential application of Safeguard action by member and
safeguards number of tariff items, 1995-98
Member Number of Number of Price-based Volume-based
tariff items product groups action action
(HS 4-digit
headings)
.
Developed countries: 3856 967 64 128
European Union 539 72 26"' 47"'
Japan 121 27 4" 73 bl
United States 189 26 24 "' 6"'
Develnping countries: 2216 728 8 0
Korea 111 34 8"
Total 6,072 1,695 74 128
Source: FAQ (1999), Table 5.5 a/ HS 8-digit items. b/ HS- 9-digit items. c/ HS 6-digit items.
Table 5.11. Potential applicatiori and action of special agricultural
safeguards, by product category
Potential application of Safeguard action by member an
safeguards number of tariff items, 1995-91
Product category Number of Percentage of Price-based Volume-based
tariff items total number action action
of tarriff items
Cereals 1,087 17.9 7. 2
Oil seeds, fats and oils
and products 706 11.6 5
Sugar and confec-
tionarv 291 4.8 23 .
Dairy products 715 11.8 15 20
.
Animal and product
thereof 1327 21.9 5 47
Eggs 74 1.2 I
Beverages and spirits 329 5.4 I
Fruit and vegetables 809 13.3 I 48
Tobacco 73 1.2
Agricultural fibers 13 0.2 5
162 Liberalizing Agricultural Trade: Issues and Options ...
Potential application of Safeguard action by member and
safeguards number of tariff items, 1995-98
Product category Number of Percentage of Price-based Volume-based
tariff items total number action action
of tarriff items
Coffee, tea, mate,
cocoa and preparations; .
spices and other food
preparations 277 4.6 6 1
Other agricultural
products 371 6.1 8
All commodity
categories 6,072 100.0 72 123
Source: FAO (1999), Table 5.6
The total EU export subsidy on agricultural products, though within
its connnitment level, is on an upward trend, rising from ECU 6.9 billion
i.'l 1995 to ECU 7.3 billion in 1998. Rice, sugar, milk products, beef,
alcohol, and ''incorporated products" were highly subsidized, with some
subsidies higher than the connnitted level. TheAgreement on Agriculture
allows for export subsidies on a given product to exceed the annual
commitment level under certain conditions. One condition is that
budgetary outlays not be greater than 64 percent of the 1986-90 based
period by the end of the implementation period. Available data suggest
that substantial reductions will be required in certain groups of products
·if these conditions are to be met. For example, export subsidies on sugar
have not only been greater than commitment levels since 1995 but
budgetary outlays have more than doubled, from ECU 379 million in
1995 to ECU 795 million in 1998. Similar trends are observable for "other
milk products."
U.S. export subsidy connnitments on about a dozen food products or
product groups were to decrease from $1.17 billion in 1995 to $0.71
billion in 1999 (Annex 5A.4 Annex Table 5A.4.3). Actual subsidies were
provided only on butter and milk products, however. Budgetary outlays
on subsidies are on an upward trend, increasing from $26 million in
1995 to $14 7 million in 1998. While expenditures on most items increased
over the year, they were within product commitment levels until 1998,
when export subsidies on skinuned milk and other milk products were
about 130 percent above connnitment levels. Substantial reductions in
Nigeria 163
these subsidies will be required if the United States is to meet its overall
commitment by the end of the implementation period.
5.5 Regional, Bilateral, and Preferential Trade Agreements
Nigeria is a member of the African Economic Community (AEC).
Established in 1991 with the aim of becoming a pan-African economic
and monetary union over a 34-year period, the AEC has yet to fully take
off. Thus Nigeria has not taken any specific measures under the AEC
treaty. Nigeria is a founding member of the Economic Community of
West African States (ECOWAS), which has provisions for trade and
investment liberalization commitments. However, the ECOWAS Trade
Liberalization Scheme has remained ineffective as a result of a
preponderance of informal trading activities. Nigeria has also signed
bilateral trade agreements with Benin, Bulgaria, Equatorial Guinea, Jamaica,
Niger, Romania, Turkey, Uganda, and Zimbabwe, to facilitate trade and
provide for joint committees to monitor and advise on measures for
improving the volume and balance of trade among parties. It has signed
investment promotion and protection agreements with China, France,,
the People's Democratic Republic of Korea, the Netherlands, Turkey, ·
and the United Kingdom. In addition, Nigeria is a signatory to the UNCTAD
agreement on the Global System of Trade Preferences among Developing
Countries (GSTP). Under the GSTP Nigeria offers lower tariffs for
imports from other participating countries on a limited number of
products, including pharmaceuticals and certain machinery.
Nigeria is also a signatory to several preferential trade agreements
with developed countries. The Cotonou Agreement (the former Lome
Convention) between the European Union and developing countries of
Africa, the Caribbean, and the Pacific (ACP) grants Nigeria and other
signatories duty-free access to the EU market for exports of all industrial
and agricultural products not subject to provisions under the EU's
Common Agricultural Policy. With exports of ECU 4.9 billion, or 22
percent of total EU-ACP imports in 1996, Nigeria is the largest exporter
to the EU. Crude oil accounts for most of these exports.
Preferential trade relationships such as the ACP-EU Cotonou
Agreement and Generalized System of Preferences (GSP) offered by
some developed countries to developing countries are based on
complementruy rather than competitive aspects of trade (Olofin 1977;
Ogunkola and Oyejide 2001), making them of limited usefulness for
long-term development. In a study of preferences under the GSP and
164 Liberalizing Agricultural Trade: Issues and Options ...
theACP-EU Wang and Winters (1998) found thatthemargin ofpreference
is usually very small and encumbered by other requirements such as
strict rules of origin and tariff rate quotas. They concluded that there is
little future in trade preferences, which will continue to erode with future
multilateral trade liberalization.
Trade relationships among developing countries, for their part, are
beset by constraints. ECOWAS, expected to be a building block of the
AEC, has been more involved with peacekeeping operations than with
trade issues. It has not served as an effective restraint on members'
trade policy. Trade infrastructure facilities such as effective payments
system, telecommunications, and transport are still underdeveloped.
Since the ultimate goal is integration with the world economy, ECOWAS
should focus on aligning policies with those of the WTO and on assisting
members in developing the capacity for effective participation in
multilateral negotiations.
5.6 Nige;ria's Interests and Optioms for the New Round of
Negotiations
The Doha Development Round is an important opportunity for addressing
some of the remaining domestic and trade policy issues impeding
developing countries' realization of the full benefits of trade liberalization.
/To make the round a true pro-development round, Nigeria should tari.ffy
its remaining nontariff barriers and shift from ceiling to floor binding
and from uniform binding to binding that reflects comparative advantage
in the agricultural sector. It should call for the establishment of a
development box with strict rules on eligibility of use. Nigeria should
also seek more effective implementation of Uruguay Round provisions
and ministerial decisions, especially those relating to technical and financial
assistance to developing countries for capacity building in trade-related
issues. Especially important are improved market access conditions for
its exports, stricter application of the rules on the use of domestic supports
by developed countries, and elimination of export subsidies by developed
countries.
5.6.1 MarketAccesslssues
On the domestic side Nigeria should convert its remaining nontariff
barriers to tariffs, relying on special safeguard measures for addressing
balance of payment problems resulting from a surge in imports. Nigeria
should bind tariffs on agricultural products at floor rather than ceiling
Nigeria 165
rates as a means of locking in unilateral trade liberalization, ensuring
transparency, attracting foreign direct investment, and ensuring policy
stability. Uniform agricultural tariffs should give way to rates that reflect
comparative advantage, development priorities, and intersectoral linkages.
Tariffs on agricultural inputs and raw materials should incorporate the
priority accorded to the sector, which is a necessary step for making
nominal rates effective.
To improve market access for its major agricultural products, Nigeria
needs. to push for reduced tariff peaks and tariff escalation in its major
markets.
Also important is the negotiation modality for reductions in tariffs.
Lack of technical capacity make the "request and offer" approach to
tariff reductions currently proposed for multilateral trade negotiations
inappropriate for meeting Nigeria's needs. Nigeria should request a
formula-based approach for reducing high tariffs, such as the Swiss
·formula used in the Tokyo Round or the setting of limits on the ratio of
the maximum most-favored-nation tariff rate to the average rate.
On special safeguards Nigeria has two concerns. One is to secure its
right to use special safeguard measures as an alternative to nontariff
barriers, and the other is to seek a review of the rules on application of
safeguards to ensure that they do not constitute a trade barrier.
Nigeria should seek clearer rules on tariff rate quotas to ensure
transparency and to prevent their use for circumventing the objective of
greater market access. Efforts should be geared toward expanding and
disaggregating the tariff rate quotas to create conditions for fair market
access.
5. 6.2 Domestic Support
Nigeria should argue for product-specific reductions in domestic support
in place of calculations based on averages, which leave too much room
for manipulation at the product level. Total support (exempted and
nonexempted expenditures) has been on an upwl!J"d trend (OECD 2000),
made possible by the absence of a cap on exempted expenditures or on
total support. Nigeria should seek caps on total support and exempted
expenditure. In addition, de minimis allowances for countries with high
Aggregate Measurement of Support levels should be reviewed. Items
on the list of exempted expenditures should be rationalized and some
should be reserved for developing countries.
166 Liberalizing Agricultural Trade: Issues and Options.,.
On the domestic front the need to develop domestic capacity for
agricultural production includes, among others, improvement in
production technology, distribution and processing. While Nigeria favors
market-based incentives, market failures in the agriculture sector and
the need to ensure food security may require government intervention.
Nigeria should seek greater latitude in the forthcoming negotiations, within
the confines of the Agreement on Agriculture to apply domestic support
measures that address rural development (roads, water, housing, drainage,
sewerage, and other infrastructure), rural poverty, environmental
problems, and food security.
Securing the right to provide such domestic support does not mean
that the country will do so. Some of these previously-used support
measures were dropped because of budget constraints. One possibility
is to set aside revenue from agricultural tariffs for developing the sector.
External sources of finance would also be important, whether as grants
or as foreign direct investment.
5. 6. 3 Export Subsidies
Export subsidies depress world prices and thus distort true comparative
advantage. While removing subsidies will increase the food bill of net
food importing developing countries such as Nigeria in the short run, the
country should still press for abolition of export subsidies, which will
improve incentives over the long run. Assistance may be required in the
short run to meet food demand, and it should be directed at stimulating
domestic production of food to meet basic food requirements locally.
Nigeria should argue for effective implementation of the WTO Ministerial
Decision on the possible negative effects of subsidy reform on the least
developed countries and net food-importing developing countries. Nigeria
should also seek to be officially categorized as a net food-importing
developing country. 9
5. 7 Conclusion
Trade policy reforms under thel986 Structural Adjustment Programs
did not have a sustainable impact on development of the agricultural
sector since little or nothing was done to address the fundamental
problems of agricultural production. While Nigeria has gone a long way
in reducing trade barriers, development of the agricultural sector remains
constrained by nontrade factors, especially agricultural production
Nigeria 167
infrastructure. Developing these should be a priority. Further liberalization
of the sector without addressing the infrastructure bottleneck could
aggravate rather than improve the trade situation. To ensure that the
benefits of reform reach peasant farmers, who make up most of the
sector, farmers need to be protected while efforts are directed at land
reform and other measures to encourage large-scale farming.
Agricultural sector reform in Nigeria is far ahead of that of reform in
its major trading partners. The country should take advantage of the
next round of multilateral trade negotiations not only to seek greater
latitude in the use of support measures but also to push for reform of the
Agreement on Agriculture and its effective implementation by developed
countries. Nigeria should also use the new round to bind its agricultural
products at floor levels and possibly to liberalize nonstrategic subsectors.
Annex SA.1. Summaries of Nigeria's export incentive schemes
Annex Table 5A.l.1 Summary of export incentive schemes abolished,
in 1999 (August)
Incentive scheme Operating agent Objective and remark
Duty Drawback Customs Department; Standard To reimburse customs duty paid by
Scheme Organization of Nigeria, Nigeria exporters on imported input used
Export Promotion Council for export production. This bas not
(NEPC), Conmercial and been widely utilized by exporters due
Merchant Banks and CBN to the cumbersome procedural
requirements involved, although the
fund has been increased to $50 million
(US 42.5 million)
Export Expansion NEPC To encourage companies to engage
Grant in export business rather than
domestic business, especially exporters
who have exported N50,000 worth
of semi-manufactured or manufactured
, products.
Export Developmetl NEPC To assist exporters in partly paying
Fund the costs of participation in trade
fairs, foreign market research, etc.
Manufacturing in Federal Ministry of To assist potential exporters of
Bond Scheme Commerce and Tourism manufactured products to import free
of duty, raw materials for production
Of exportable products.
Source: Ministry of Finance, Abuja, Nigeria
168 Liberalizing Agricultural Trade.< Issues and Options , ..
Annex Table 5A.1.2 Summary of export incentive schemes currently in
operation in Nigeria, as at August 1999
Incentive scheme Operating agent Objective and remark
Refinancing and Central Bank of Nigeria(CBN) To provide liquidity to banks in support
rediscounting facilit) Nigeria Exports and Import Banl of their export finance business,
(RRF) and foreign (NEXIM). directed on exports promotions and
input facility (FIF) development.
Currency Retentior CBN, Commercial and Merchant To enable exporters to hold export
Scheme Banks proceeds in fofeign currency in their
banks.
Tax relief earned by Banks -and Federal Board of To encourage banks to finance
banks on export Inland Revenue exports by reducing their tax burden.
credit
Export Credit CBN and NEXIM Assists banks to bear the risks in
Guarantee and export business and thereby facilitating
Insurance Scheme export financing and export volumes.
Export Price NEPC This is a form of export subsidy
Adjustment designed to compensate exporters of
products whose foreign prices become
relatively unattractive, due to factor
beyond the exporters control.
Subsidy Scheme for NEPC To encourage exporters to use local
use of local raw raw·materials in export production
materials in export
production
Abolition of export Federal Ministry of Commerce To remove administrative obstacles
licensing and Tourism from the export sector as much as
possible.
Supplementary Federal Ministry of Commerce To extend supplementary incentive
allowance in favQ1 and Tourism to pioneer companies that exports
of piqneer companies their products.
Accelerated depre- Federal Ministry of Commerce To eXtend supplementary incentive
ciation and capital and Tourism to industrial organizations for export
allowance of their products.
Eiqx>rt Liberalization Federal Ministry of Commerce To liberalize and promote export
Measures Buyback and Tourism trade.
Arrangement
Export Processin~ Federal Ministry of Commerce Opened in mid - 1996 in Calabar, to
. Zone and TouriSm facilitate and enhance exports.
Source: Ministry of Commerce and Tourism, Abuja, Nigeria
Nigeria 169
Annex SA.2 Nigeria's import and export prohibition lists
Appendix Table SA.2.1 Changes in Nigeria's import prohlbition list (trade),
1995 to 1998
Date Old applied New, applied Reason
emoved Rate, 1995 rate, 1998
percent percent
Live or dead poultry (i.e. fowls, ducks, geese, 1998 25-35 150
turkeys; and guinea fowls) excluding day old
chicks, grand parent and foundation stocks
for research and multiplication purpose
(H.S. 0105.1200-0105.9990 and 0207.
1100-0207.3600); Eggs in the shell,
including those for hatching (0407.0000)
Maize (1005.1000-1005.9000) 30 30 BOP
Sorghum (1007.0000) 150 150 SDP
Millet (1008.2000) 150 150 SDP
Wheat flour ( 110 1.0000) 60 60 SDP
Vegetable oils, excluding licensed and
castor oils used as industrial raw material
(1515.1100.1515.1900 and 1515.3000) 15-45 15-45 BOP
Beer and stout (2203.0000, 1998 80 100
Barley (I 003.0000) 15 20
Malt (1107.1000-! 107.2000) 40 20
Evian and similar waters 65 100
(220 I. I 000-2202.9000)
Baryes and Bentonite (2511 l I00-2511. 1996 5-20 5-20
2000.2508.1100)
Gypsum '(2520.1000) 150 150 BOP
Mosquito Repellant coils (3808.1110) 55 55 SAF
Domestic articles and wares made of plastic 30-40 30-40 BOP
materials excluding babies' feeding bottle
(3922. l 000-3922.9000.3924.
1000-3924-9000)
Retreated/used tyres (4012.1000-4012.9000) 50 50 BOP,SA
Textile fabrics of all types and articles thereof, 1997 I 0-5 5 10-75
Chapters 50-63, but excluding:
(a) Nylon- tyre cord (5902.100-5902.9000)
(b) Multifilament Nylon chaffer fabric and
tracing cloth (5111.2000.5112.2000
and 5901.9000)
(c) Mattress tickings (5901.1000-5903.9000)
(d) Narrow fabrics (58p6.l000-5806.4000
(e) Made-up fishing nets (5608.1100) and
mosquito netting materials (5608.1900
and 5608.90001
170 Liberalizing Agricultural Trade: Issues and Options ...
Date Old applied New, applied Reason
removed Rate, 1995 rate, 1998
percent percent
'
(f) Gloves for industrial use
(6116. l 000-6116.9900)
(g) Canvas fabric for the manufacture of
fan belt (5907.0000 and 5908.0000)
(h) Moulding cups and lacra (6212.90000
Elastic bands (5604.9000) Motifs
(5810.1000 - 5810.9000)
(i) Textile products and articles for
technical use (5911. l 000-5911.9000)
G) Transmission or Conveyor belt or
belting of textile material (5910.0000)
(k) Polypropylene primary backing
material (5512.1100-5512.9000)
(l)Fibre rope (5607.1000-5607.9000)
(m) Mutilated rags (6310.1100)
(n) Sacks and bags (6305.1000 and
6305.2000)
Motor Vehicles and motor cycles above 1998 5-40 5-40
eight (8) years from the date of
manufacture (8702.1100-8702. 9900,
8703 .1000-8703 .9000, 8704. l 000-8704
.9900, 8711.1000-8711.9000)
Furniture and furniture products 1996 30-50 45-65
(9401.1000-9401.9000, 9403.1000 to
9406.0000)
Gaming machines (9504 1000-9504.3000) 55 55 PMO
Key for reason: BOP = Balance of Payment; SDP = Safeguarding domestic production;
SAF = Safety; PMO = Public morals
Source: Based on the information from the Federal Ministry of Finance, Abuja, Nigeria
Annex SA.2 Nigeria's import and export prohibition lists
Appendix Table SA.2.2 Import and Rxport Prohibition Lists 1991 to 1998
Conditional import prohibition list, 1991
I Live or dead poultry, that is, fowls, ducks, geese, turkeys, fowls
excluding grand-parent and foundation stocks for research and
multiplication purpose, eggs in the shell, including those for
hatching.
2 Vegetable, including tomato puree and paste, roots and tubers, fresh
or dried, whole or sliced, cut or powdered and sago pith.
Nigeria 171
3 Processed wood excluding wood in the rough, squared or half
squared but not further manufactured and particle board; furniture
and furniture products; wooden cabinets for radio and television
sets. Fruits fresh or preserved and fruit juices.
4 Mosquito repellant coils (HS Code 3808.111).
5 Textile fabrics of all types and articles thereof excluding:
(a) Nylon tire cord;
(b) Multifilament nylon chafer fabric and tracing cloth;
( c) Mattress ticking;
(d) Narrow fabric, trimmings and linings;
(e) Made-up fishing nets, mosquito netting materials;
(f) Gloves for industrial use;
(g) Canvas fabric for the manufacture of fan belt;
(h) Molding cups and lycra, elastic bands and motifs;
(i) Textile products and articles for technical uses;
(j) Transmission or conveyor belt or betting of textile material;
(k) Polypropylene Primary backing material;
(!) Fiber rope product (HS Code 56.07).
6 Domestic articles and wares made of plastic material including
babies feeding bottles.
7 Evian and similar waters, soft drinks and beverages, beer and stout,
malt and barley.
8 Maize and maize products.
9 Wheat and wheat products.
I0 All sparkling wines including champagne.
I! Vegetable oils excluding linseed and castor oils used as industrial
raw materials.
12 Aluminum sulfate including alum.
13 Retreaded sulfate including alum.
14 Branched alkyl benzene, bentonite and baryes.
Import prohibition list, 1995
1. Live or dead poultry (i.e. fowls, ducks, geese, turkeys; and guinea
fowls) excluding day old chicks, grand parent and foundation stocks
172 Libera/king Agricultural Trade: Issues and Options ...
for research and multiplication purpose (H.S. 0105.1200-0105 .9990
and 0207.1100-0207.3600); Eggs in the shell, including those for
hatching (0407.0000)
2. Maize(l005.1000-1005.9000)
3. Sorghum (1007.0000)
4. Millet (1008.2000)
5. Wheat flour (1101.0000)
6. Vegetable oils, excluding licensed and castor oils used as industrial
raw material 1507-1517 (excluding 1515.1100.1515.1900 and
1515.3000)
7. Beer and stout (2203.0000, Barley and Malt (1003.0000 and
1107.1000-1107.2000 evian and similar waters (2201.1000- ·
2202.9000)
8. Barytes and Bentonite (2511.1100-2511.2000.2508.1100)
·. 9. Gypsum (2520.1000)
~O. Mosquito Repellantcoils (3808.1110)
'11. Domestic articles and wares made of plastic materials excluding
babies' feeding bottle (3922.1000-3922.9000.3924.1000-3924-
9000)
12. Retread/used tyres (4012.1000-4012.9000)
13. Textile fabrics of all types and articles thereof, Chapters 50-63,
but excluding:
(a) Nylon tyre cord (5902.100-5902.9000)
(b) Multifilament Nylon chaffer fabric and tracing cloth
(5111.2000.5112.2000 and 5901.9000)
(c) Mattress ticking (5901.1000-5903.9000)
(d) Narrow fabrics (5806.1000-5806.4000)
(e) Made-up fishing nets (5608.1100) and mosquito netting
materials (5608.1900 and 5608.9000)
(f) Gloves for industrial use (6116.1000-6116.9900)
(g) Canvas fabric for the manufacture of fan belt (5907.0000
and 5908. 0000)
(h) Molding cups and lycra (6212.90000 Elastic bands
(5604.9000) Motifs (5810.1000 - 5810.9000)
Nigeria 173
(i) Textile products and articles for technical use (5911.1000-
5911.9000)
(j) Transmission or Conveyor belt or belting of textile material
(5910.0000)
(k) Polypropylene primary backing material (5512.1100-
5512.9000)
(I) Fiber rope (5607.1000-5607.9000)
(m) Mutilated rags (6310.1100)
(n) Sacks and bags (6305.1000 and 6305.2000)
14. Motor Vehicles and motor cycles above eight (8) years from the
date of manufacture (8702.1100-8702.9900, 8703.1000-
8703.9000, 8704.1000-8704.9900, 8711.l 000-8711.9000)
15. Furniture and furniture products (9401.1000-9401.9000,
9403.1000 to 9406.0000)
16. Gaming machines (9504.1000-9504.3000)
Import prohibition list, 1999
I. Maize (1005.1000-1005.9000)
2. Sorghum (1007.0000)
3. Millet(I008.2000)
4. Wheat flour (llOl.0000)
5. Barytes and Bentonite (2511.1100-2511.2000.2508.1100)
6. Gypsum (2520.l 000)
7. Mosquito Repellant coils (3808. ll!Q)
8. Retread/used tires (4012.1000-4012.9000)
9. Gaming machines (9504.1000-9504.3000)
Export prohibition list, 1995
I. Beans
2. Rice
3. Cassava
4. Maize
5. Yam
174 Liberalizing Agricu/Jural Trade: Issues and Options ...
6. Timber, rough or sawn
7. Raw hides and skin
8. Scrap metals
9. Unprocessed rubber latex and rubber lumps
Export prohibition list, 1995
}. Timber, rough or sawn
2. Raw hides and skin
3. Scrap metals
4. Unprocessed rubber latex and rubber lumps
Source: Based on the information from the Federal Ministry ofFinance,
Abuja, Nigeria
Annex 5A.3 Computation of effective rate of protection
The effective rate of protection is the percentage increase in value-added
per unit of economic activity made possible by the tariff structure relative
to the situation in the absence of tariffs, given the same exchange rate.
Two levels of aggregation were involved in calculating the effective rate
of protection. The first consisted of the 36 tradable sectors (21 in
agriculture-crops, livestock, forestry and fishery; 3 in mining and
quarrying; and 12 in manufacturing). The analysis a, this level is used
for inter-sectoral comparisons in the agricultural sector at commodity
level. The second level of analysis involved highly aggregated sectors:
crops, other agriculture, mining and manufacturing.
The effective protective rate for industry j (T.)J
is defined as the
difference between industry's value added under protection (VAP,) and
the value added under free market condition (V)
J
expressed in percentage
of free market value-added. That is
(1)
It should be noted that value-added can be expressed as sales value of
industry j's product net the sum of intermediate inputs. Using this
definition for free market value-added, equation 1 becomes
(2)
Nigeria 175
where S. is the sales value of industry j in domestic market prices and
L"M.. is'the sum of intermediate inputs valued in domestic market prices.
Defnimg t.• and t.J as nominal tariffs on inputs and final output respectively
and deflating the new expression for value added under free market by
these rates, equation 2 becomes
TJ = [VAP/({S/l+t.}·{L
J J J
M./l+t.})]-1
IJ l
(3)
Equation 3 is used for calculating the effective rate of protection. 10
Annex SA.4 Domestic support and export subsidies in major
markets for Nigeria's agricultural exports
Annex 5A.4 Table 5A.4.1 Trends in domestic support measures in the
European Union, Japan, and the United States, 1995-97
USA (million $) Base 1995 1996 1997
Green Box measures 24098.0 46041.0 51825.0 51249.0
Development program measures 0.0 0.0
Direct payment under production-limiting 7030.0
Non-exempt categories I 25470.0 7696.9 7052.8 7042.7
Non-exempt categories II 6213.9 5897.7 6238.4
TOTAL SUPPORT 49568.0 60767.9 58877.8 58291.7
Total aggregate measurement of support
commitment level 23083.1 22287.2 21491.2
Japan (billion yen) Base 1995 1996 1997
Green Box measures 2204.6 3169.0 2818.0 2652.0
Development program measures
Direct payment under production-limiting
Non-exempt categories I 4959.0 3544.7 3367.0 3207.1
Non-exempt categories II 3507.5 3329. 7 3170.8
TOTAL SUPPORT 7163.6 6713.7 6185.0 5859. I
Total aggregate measurement of support
commitment level 4800.6 4635.0 4469.5
European Union (million ECU) Base 1995 1996
Green Box Measures 9233.4 18779.2 22138
Deve.Jopment Program Measures 0.0 0.0 0.0
Direct Payment Under production-limiting 20845.5 21$20.~;
176 Liberalizing Agricultural Trade: Issues and Options . , .
European Union (million ECU) Base 1995 1996
Non-exempt categories I 73644.9 50600. l 51478.0
Non-exempt categories I I 50030.0 51000.00
TOTAL SUPPORT 82878.3 90224.8 95137.4
Total aggregate measurement of support
commitment level 78670.0 76370.0
Note: The figures in row for non-exempt categories I were calculated from product by
product notification of expenditure. This did not distinguished from whether de minimis
clause was satisfied or not. On the hand, the figures in row for non-exempt categories II
only included expenditure within the de minimis level (see paragraph of Article 6 Domestic
Support Commitments of the URAA). Thus, all the sampled countries violated the de
minimi"s clause. The rate of violation was more pronounced in the United States.
Source: Based on (1) WTO (2000), Conuajttee on Agriculture, Special Session, Domestic
Support, GA!G!NG/S/l (2) WTO (2000), Committee on Agriculture, Special
Session, Green Box Measures, GA/G/NG/S/2
Nigeria 179
End-Notes
I. At various periods the Ministly of Trade and Tourism, Ministly of
Commerce and lndustly, and currently Ministly of Commerce.
2. According to WTO (1998), the area under cultivation was about
34 million hectares. This translates to about 37 percent of total
arable landmass.
3. The overvalued currency altered the competitiveness and profitability
of agricultural practice and hence dampened agricultural production.
SAP had reversed the trend in such a way that exports of cash
crops were encouraged.
4. The analysis is based on the United Nations Conference on Trade
and Development (UNCTAD) coding system of trade control
measures. The system is arranged into nine broad categories: tariff
measures (I 000), para-tariff measures (2000), price control
measures (3000), finance measures (4000), automatic licensing
measures (5000), quantity control measures (6000), monopolistic
measures (7000), technical measures (8000), and miscellaneous
measures (9000). Within these categories the measures are further
subdivided according to their nature or objective. An example of
classification by nature is prohibitions (total prohibition, seasonal
prohibition, and suspension of issuance oflicense) under the broad
category of quantity control measures. In sub-categorization by
objectives, measures for sensitive products, be it internal taxes or
charges levied on imports or technical measures, are further
classified according to objectives of protecting animal health and
life, plant life, environment, wildlife, control drug abuse, ensure
human safety, ensure national security, and the like.
5. Customs duties on 333 six-digit HS tariff lines were also bound a1
between 40 and 80 percent.
6. Although customs duties for a period of seven years are published,
changes are usually made during the annual budget presentation.
For example, in 1998, the import duty rate applicable to textile
fabrics in HS Chapters 50 to 60 was 65 percent instead of the
published rate of 45 percent. Similarly, several items were removed
from the import prohibition list and assigned high duty ra:tes.
7 In the 1999 budget, all rebates were cancelled.
8 Under licenses on demand importers' shares are generally allocated,
180 Libera/king Agricultural Trade: Issues and Options ...
or licenses issued, in relation to quantities demanded and often
prior to the commencement of the period in which imports are to
take place. This includes methods involving licenses issued on a
first-come, first-served basis and those in which license requests
are reduced to pro-rata where they exceed available quantities.
9 The current list ofnet food-importing developing countries includes:
Barbados, Botswana, Cote d'Ivoire, Dominican Republic, Egypt,
Honduras, Jamaica, Kenya, Mauritius, Morocco, Pakistan, Peru,
Saint Lucia, Senegal, Sri Lanka, Trinidad and Tobago, Tunisia,
and Veneznela.
10 It should be noted that the equation recognizes tariff as the only
trade distortion in the Nigerian economy. This assumption is
particularly so because of lack of data on other forms of trade
distortion. To a reasonable extent the assumption holds noting that
ad valorem tariff dominates Nigeria's trade control measures.
However, the formula can be extended to take into consideration
other non-tariff trade control measures. Another important point is
that ERP model has been criticized on many grounds especially on
the basis of input-output assumptions.
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6 Agriculture and the New Trade
Agenda in the WTO: Interests
and Options for Tanzania
Flora Mndeme Musonda
6.1 Tanzania's Economy and Trade
Tanzania has liberalized its economy since 1986 under World Bank and
International Monetary Fund structural adjustment programs. However,
despite extensive sectoral and trade reforms, the country still faces
major challenges in reducing poverty, improving food security and
nutrition, and protecting the environment. With agriculture the dominant
sector in the economy and the major foreign exchange earner, these
challenges cannot be met without raising agricultural productivity. Doing
so will require switching from traditional and subsistence farming
methods to modem and commercial methods, especially by smallholder
farmers, who make up most of the agricultural sector. It will also require
making the right policy responses to the 1994 Urugµay Round Agreement
on Agriculture, (URAA) and in the new multilateral trade negotiations of
the World Trade Organization (WTO) known as the Doha Development
Round.
6.1.1 The Economy Today
Agriculture (including fisheries and forestry) dominates Tanzania's
economy, from employment to exports. It is the major source of raw
material for industry, the main purchaser of simple tools and services,
and the main consumer of locally produced consumer goods. Gross
domestic product (GDP) has historically moved in tandem with
183
184 Liberalizing Agricultural Trade: Issues and Options ...
agriculture. In 2000, agriculture contributed 48 percent of GDP and
accounted for about 80 percent of employment for Tanzania's population
of 34 million. Coffee and cotton alone have accounted for as much as a
third of exports, but have recently been surpassed by cashews. Other
important agricultural exports are tea, tobacco, and sisal. As a group,
agricultmal commodities comprised over half of Tanzania's merchandise
exports in 1998.
The manufacturing sector is small, accounting for 8 percent of GDP
in 1998. For years the sector was dominated by state enterprises and
enjoyed a high level of protection. The resulting anti-export bias
(compounded by an overvalued exchange rate) discouraged production
for export. Manufactures averaged just 13.8 percent of exports between
1995 and 1998.
Tanzania's dependence on primary commodities means that variability
in world commodity prices and vulnerability to weather conditions
constrains its export performance, in addition to many other development
related factors. Govermnent efforts to diversify exports achieved some
success, especially following trade liberalization in the 1980s.
Nontraditional exports increased in value, but the promising perfomiitnce
was not sustained. As the country has liberalized, the highly sheltered
industries could not compete with cheaper imports.
6.1. 2 Trade Structure
Traditional export crops such as coffee, cotton, tea, cashew nuts, tobacco,
sisal, and pyrethrum that had contributed more than 66 percent of export
earnings in 1990 were contributing 52 percent in 1999. Nontraditional
exports include processed manufactured goods, minerals, and services,
with tourism at the top of the list
Exports of cash crops during the past decade have been uneven,
reflecting unreliable rainfall and surges in international commodity prices.
During the 1990s the value of coffee exports increased until 1995 and
then declined (Table 6.1). Prices nearly doubled in 1994, but volumes
declined considerably, falling from 64;000 tons to 37,000 tons. Supp}x
was slow to respond to the price increase, in part because export prices
were not fully translated into producer prices, but mainly because coffee
crops take years to mature. By 1996, production and exports had
increased, but by then prices were falling. Tea values fluctuated as well.
Price increases led to production increases, but again with a lag. When
prices dropped sharply in 1995, value was sustained by the increase in
Tanzania 185
volume. Cotton values peaked in 1996 _and then dropped. Sisal, an
important export crop in the 1960s, has decreased in importance, although
there are signs of an upswing. Tobacco export values peaked in 1996,
nearly doubling as a result of increase in volume. Prices, which fell in
1994, recovered in 1997, but failed to regain their 1991 high. The value
of cashew nut exports has soared from $5.6 million in 1990 to $112
million in 1998, thanks mainly to production increases in response to
liberalization and greater private sector participation.
Tanzania's semi-autonomous region of Zanzibar exports cloves which
are Zanzibar's most important agricultural export, accounting for more
than 90 percent of the value of exports, and a source of income for
many rural people, have fallen dramatically in value since the mid-l 980s,
with producer prices falling more than the world market prices in real
terms. Yields are low, because many trees are old, and husbandry practices
are generally poor.
Table 6.1: Tanzania's Exports by 'fype of Commodity
Commodity January-December
1990 1991 1992 1993 1994 1995 1996 1997 1998
Coffee
Value 85.0 77.3 59.5 96 115.4 142.6 137.8 117.4 114.9
Volume 62.7 52.5 51.0 58.6 37.0 48.0 64.0 46.6 53.6
Unit price 1,355.6 1,472.3_ 1,166.7 1,639.8 3,117.8 2,972.7 2,152.7 2,518.9 2,143.6
Cotton
Value 74.6 153.3 97.6 78.4 105.1 120.2 137.8 116.5 54.1
Volume 46.3 38.7 72.8 61.2 60.0 70.9 64.0 77.3 37.3
Unit price 1,611.2 1,635.7 1,340.7 1,281.6 1752 1,695.6 1,535.1 1,518.9 1,450.1
Sisal
Value 4.0 2.2 1.3 3.3 5.1 6.3 4.8 8.5 6.8
Volume 7.7 4.5 4.9 4.9 7.2 11.3 7.6 13.7 10.9
Unit price 519.5 488.9 317.0 672.7 71 l.1 556.4 631.6 623.8 619.3
T•a
Value 21.5 21.7 22.4 38 39.5 23.4 26.3 30.1 32.2
Volume 14.8 17.5 20.4 19.7 21.7 2L6 24.7 20.4 22.7
Unit price 1,452.7 1,240.0 1,098.0 1,925.6 1,823.7 1,081.5 1,065.6 1,473.2 1,421.0
Tubacco
Value 10.6 16.7 27.2 17.0 20.6 27.l 47.0 12.9 25.5
Volume 5.8 8.0 12.7 10.6 15.4 17.0 24.0 6.3 12.7
Unit price 1,827.6 2,087.5 2,141.7 1,607.3 1,335.0 1,588.4 1957 2,065.3 2,012.3
Cashewnut
Value 5.6 16,7 23.5 23.3 51.2 64.0 93.8 75.1 112.0
Volume 7.4 19.Q 29.3 32.2 65.0 75.6 121.2 103.3 140.0
Unit price 756.8 878.9 802.0 724.8 787.0 847.0 774.0 727.0 798.3
• Provisional data
Note: Volume in 'ODO' Tohs; value in millions of US $; and unit price in· US $/ton.
Source: Bank of Tanzania, International Economics Department.
186 Liberali.zing Agricultural Trade: 'Issues and Options ...
Producer prices did not decline in real terms for copra and chilies;
Zanzibar's other main exports, between the early 1980s and mid 1990,
though prjces were volatile (World Bank, 2000). When prices have been
good, producers have responded by increasing production. The new
agricultural policy intends to encourage the production of preferred
varieties of chilies and to help improve yields through extension services.
Nontraditional exports have grown in importance since liberalization.
Several fish species and seaweed have shown great potential, but
oligopolistic private buyers reportedly pay only 10 percent of the export
price of seaweed to producers. The government is exploring ways to
facilitate a more competitive environment so that producers can receive
a higher return. Other nontraditional export crops in Zanzibar include
citrus fruits, rambutan, mango, sugarcane, ginger, turmeric, black pepper,
and cinnamon.
Tanzania depends heavily on imports, especially of machines (capital
goods constituted 42.3 percent of imports in 1998) and other intermediate
inputs (27.2 percent in 1998), but also of consumer goods (30.5 percent
in 1998). Low exports and high imports translate into persistent trade
d~cits, which requires borrowing.
Despite its vast arabkland, Tanzania must often import food to meet
its needs. With agriculture entirely dependent on rainfall, food production
drops drastically during periods of drought. A joint assessment by the
World Food Program (WFP) and the Food and Agriculture Organization
(FAO) projects grain deficits of 560,000 tons through the mid-2000. An
earlier government evaluation estimated a deficit of about 600,000 tons.
Fertilizers, pesticides and herbicides, and other farm inputs and equipment
are also imported, which severely diminishes the positive trade balance
effects of agricultural exports.
6.1.3 Regional Trade Blocs
Tanzania is actively pursuing a regional integration strategy. Regional
protocols will deepen the. ongoing processes of economic integration
and development in the region, improving competitiveness and promoting
integration into the global economy. Regional integration is important
for expanding Tanzania's markets and increasing its capacity for
participation in the multinational trading system, including more effective
negotiations in the WTO. Tanzania expects to maximize its influence in
the negotiating process by coordinating on preparations with other si\nilar
countries and through the use of common negotiating. positions.
Tanzania 187
Liberalization of regional agricultural trade requires that regional group
members harmonize government policies, including tariffs, special
safeguard measures, technical barriers, and sanitary and phytosanitary
measures. Agricultural policies in many developing countries are already
drawing closer, and the commitments provided under the Agreement on
Agriculture will serve as the basis for even greater coherence in trade
policy through tariffication and tariff reduction.
Tanzania is a member of the Southern African Development Community
(SADC) and has been strengthening the East African Cooperation (EAC)
agreement with neighboring Kenya and Uganda. These regional efforts
are intended to harmonize economic policy and facilitate trade. Expected
benefits from regional cooperation include increased trade, rural
employment, and income generation; reduced informal trade; improved
food security; lower marketing costs; and effective resource allocation
in a long-run process of technology change and transfer. For net food
importing countries like Tanzania, regional groups also offer the promise
of increasing productivity in agriculture through joint regional efforts in
research and development.
Under the Lome Convention and its successor, the Cotonou Agreement,
Tanzania received the full range of aid made available to African Caribbean,
and Pacific countries by. the European Union (EU). Under Lome IV,
many Tanzanian exports to the EU enjoyed nonreciprocal preferential
treatment in the form of exemption from import duties. Tanzania's goods
also enjoyed nonreciprocal preferential access to the markets of other
developed countries through the Generalized System of Preferences.
Because of Tanzania's limited export capacity, however, the benefits
Tanzania reaped from these preferential arrangements have been minimal.
6.1.4 The Pre-reform Years
In the first six years of independence (in 1961 Tanganikyka became
independent and in 1964 united with Zanzibar to form one nation -0f
Tanzania), economic policy aimed at faster incoJlle growth, with import
substitution-based industrialization and wide room for private and foreign
investment. Private enterprise responded enthusiastically to government
promises of tariff protection and guarantees against nationalization. In
1967, however, policies shifted toward socialism, emphasizing inward
orientation and a strong, direct role in the economy for the public sector.
The result was policies that not only discriminated against agricultural
exports and but also dampened prospects for manufactured exports.
188 Liberalizing Agricullural Trade: Issues and Options ...
After growing rapidly until the late 1970s, the economy faltered from
1979 to 1985. Inflation shot up to 36 percent in 1984. Accommodation
of public sector deficits added to inflationary pressures. Weak export
performance meant that there was inadequate foreign exchange for
imports of vital inputs needed to sustain domestic productive capacity,
so manufactured goods were in short supply.
Efforts were made to encourage diversification of export markets,
and an export promotion department was established at the Bank of
Tanzania in 1972. In response to the emerging foreign exchange crisis
of the late 1970s, a new export drive became a cornerstone of the early
1980's adjustment efforts. Export promotion schemes, from duty
drawbacks to foreign exchange retention schemes, failed to yield the
intended results because of operational problems and an unfavorable
macroeconomic enviromnent, especially an overvalued real exchange
rate.
6.2 Agriculture and Food Sector Performance
Over the last two decades, food production in Tanzania (Table 6.2) has
failed to keep pace with population growth, remaining one percentage
point below the population growth rate. That means that Tanzania is
dependent on food imports and food aid to help meet its food needs.
Because of heavy protection of agriculture in many developed countries,
surplus production is exported at artificially low prices, depressing world
market prices, so that Tanzania's food prices and food import bill are
determined by events outside Tanzania, mainly in developed countries.
Table 6.2: Food crop production in selected regions of Tanzania (thousands of tons)
Crop 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98
(estimated)
Maize 2,219.7 2267 2,188.l 2,874.4 2,648.2 1.831.2 2,750.0
Sorghum 587. l 719. l 473.0 838.8 872.4 498.5 673.2
Millet 451.8 424.l 435.3 342.0 585.0 347.0 195.0
Paddy 393. l 640.9 654.5 622.6 806.8 549.7 811.5
Wheat 65.8 83.5 59.7 75.3 83.6 78.5 110.5
Sweet potatoes 256.9 258.8 283.5 448.8 418. l 477.7 394.4
Pulses 31 l.6 397.5 279.3 374.2 467.3 368.7 447.6
Banana 793.7 798.2 733.4 650.9 640.9 604.l 949.4
Cassava l,J77.7 1,708.2 1,802.3 1,492.2 1,498.4 1426.0 1,528.5
Sub-total 6,857.4 7 ,297.3 6,909. l 7,719.2 8,020.7 6.,181.4 7,860.l
Source: Ministry of Agricµlture and Cooperatives, 1998
Tanzania 189
6.2.1 Food Crop Production
Tanzania has enormous agricultural potential in terms of land resources
and range of climatic conditions, but agricultural performance is poor
for both cash and food crops. Cereal yields are far below those of the
other states in East Africa (Table 6.3). During 1991-95, when the
agricultural growth rate averaged 2.6 percent a year in Uganda and 3.2
percent in Kenya, it averaged -2. 4 percent in Tanzania.
Agriculture is the main source of domestic food supply, raw materials
for domestic industry, investible capital, and demand in other sectors.
Food crops dominate production, accounting for 55 percent of
agricultural GDP at current prices. Much of agriculture is subsistence
production (an estimated 44 percent) and never enters the internal or
external trading system (Table 6.4).
Nearly all production is rain-fed. In addition to drought, late onset of
rains, and pest infestations, weak agricultural performance is attributed
to inadequate investment and maintenance of the economic infrastructure,
weak institutional structures, poor management, and inadequate technical
capacity. Poor transport infrastructure, for example, costs the economy
nearly US$200 million a year, almost half the country's total export earnings
(World Bank 1989).
Table 6.3: Cereal yields and average annual growth rate of agricultural food
production in East Africa, selected periods
Cereal yields Average annual growth
rate of food production
Country Kilograms per hectare Percent
1979-81 1994-96 1986-90 1991-95
Tanzania l,063 l,310 0.9 -2.4
Kenya 1,364 1,822 0.9 3.2
Uganda 1,555 1,552 4.1 2.6
Average 1,327 1,561 2.0 l.O
Tanzania, percentage
below average -19.9 -16. I -54.2 -3 l l.8
Source: Maro 1999.
;---
190 Liberalizing Agricultural Trade: Issues and Options ...
Table 6.4: Agriculture as share of total GDP a:t factor costs in constant 1992
prices, mainland Tanzania (per cent)
-Economic Activity 1992 1993 1994 1995 1996 1997 1998 1999 2000
Monetary
Agriculture 26,6 27.3 27.5 28.3 28.4 27.9 27.4 27.3 26.9
Crops 18.3 18.8 18.9 19.8 19.9 19.4 19 .1 19. l 18.7
Livestock 4.5 4.6 4.6 4.6 4.5 4.5 4.4 4.4 4.3
Forestry and hunting l.3 l.3 1.3 1.3 l.3 l.3 1.3 l.2 l.2
Fishing 2.5 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.7
Total monetary GDP 73.3 72.6 72.4 72.2 72.4 72.4 72.4 73.l 73.4
Nonmonetary
Agriculture 21.4 22.0 22.l 22.4 22.2 22.2 21.7 21.6 21.2
Crops 17.0 17.5 17.6 17.9 17.7 17.8 17.4 17.3 17.0
Livestock 2.2 2.2 2.2 2.2 2.2 2.2 2.1 2.1 2.1
Forestry and hunting l.9 2.0 2.0 2 2 l.9 1.9 l.9 l.8
Fishing 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3
TOtal nonmonetary
. GDP 26.7 27.4 17.6 27.8 27.6 27.6 27.6 26.9 26.6
Total monetary and
nonmonetary 100.0 lOO.O 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: Bureau of Statistics.
During the 1980s price controls kept real producer prices low. Prices
rose following the reforms of the late 1980s, reaching 50-165 percent
of previous levels. Prices fell again between 1993 and 1999 (wheat and
paddy fell the most but maize and millet as well as world prices for
cereals and traditional commodity exports trended downward (Table
6.5).
i
191
Table 6.5: Real producer prices for food crops, 1981-99 (constant 1998-99 Tshs/kg)
Year ].>rice index" Maize Paddy Wheat Millet Beans Cassava
Official procurement prices
1981-85 1.4 140 232 195 117 334 na
1986-90 5.6 149 250 170 109 369 na
Market Prices
1990-91 12.3 106 212 473 279 471 na
1991-92 14.7 279 370 495 289 508 73
1992-93 18.6 298 491 525 365 533 91
1993-94 25.2 256 424 497 376 712 84
1994-95 32.7 181 254 452 484 797 76
1995-96 43.3 165 216 423 538 571 75
1996-97 58.3 138 245 362 245 475 67
1997-98 77.3 117 195 272 175 431 61
1998-9.9b 100 118 151 228 175 317 53
a. National Consumer Price Index where 1998-99 = 100
b. To April 1999.
Source: World Bank, 2000a
A key impediment to more rapid agricultural sector growth is the legal
and regulatory framework. Among priority measures for improving the
regulatory framework are reform of the business licensing system,
implementation of the Land Act and the Fair Trade Practices Act, and
coordination of industrial, environmental, privatization, and investment
policies with export development initiatives. But Tanzania lacks the
resources to put regulations and institutions in place to operationalize the
laws.
Sensitivity analysis on various food and cash crops in Tanzania indicates
that lowering prices and taxes has different impacts on these crops.
Input subsidies may not be the best way to promote better cotton
management, for example (World Bank, 2000). Local market taxes and
levies seem to account for a substantial share of total crop income. If all
cashew taxes were eliminated, for example, farmers' profits would rise
by 19-30 percent.
Calculations of private and social domestic resource costs for selected
crops using average technology levels show that these crops are
internationally competitive (Table 6.6). The only exceptions are tea and
maize.
192 µbera/idng Agricultural Trade: Issues and Options ...
Table 6.6: Private and social domestic resource costs for selected Tanzanian crott!J
Commodity PrivateDRC SocialDRC
Average Improved Potential Average Improved Potential
Maize (Iringa) 0.89 0.71 0.61 0.93 0.72 0.61
Maize (fabora) 0.79 0.84 0.77 o_,73 0.80 0.72
Maize (Dodoma 1.02 1.23 2.26 0.66 0.71 0.96
Rko(ramfud, upland) 0.58 0.82
Rice (rainfed, lowland) 0.37 0.47 0.60 0.78
Rice Irrigated, Morogoro) 0.32 O;l4 0.31 0.63 0.72 0.66
Sesame (Mtwara) 0.62 0.44 0.50 0.31
Cotton (Shinyanga) 0.59 0.66 0.74 0.43 0.50 0.53
Tobacco ((flue cured) 0.77 0.70 0.59 0.62 0.56 0.47
Tobacco(fire cured) 0.76 0.77 0.60 0.56 0.56 0.44
C"hew (Mtw"") 0,35 0.48 0.41 0.27 0.26 0.22
Cashew(Tanga) 0.69 2.57 2.51 0.50 0.90 0.81
Coffee (arabica) 0.50 0.35 0.28 0.39 0.27 o.zi
CofTue (robooa) 0.66 0.65 0.58 0.59 0.56 0.49
Tea (smallholder) Iringa l.40 l.48 0.97 0.92
Tea(estate) Iringa 1.30 1.01 0.55 0.43
Sugarcane Morogoro 0.68 0.65 0.80 0.77
Average means average of the sector, improved is improved technology, potential is
'what can be achieved with changes in technology. DRC is Domestic ~esource Cost.
Source: World Bank. 2000b. "Tanzania, Agriculture: Performance and Strategies for
Sustainable Growth." Washington D.C. Ministry of Planning Tanzania for
Methodology.
6. 2. 2 Poverty Reduction and Food Security
Progress in reducing poverty and malnutrition and in increasing food
security .in Tanzania is highly dependent on performance in the agricultural
sector. The incidence and severity of poverty are twice as high in rural
areas as in urban areas, and rural households lag behind urban households
in almost every quality oflife indicator. And with about 80 percent of the
workforce involved in agricultural production, no development strategy
could improve the lives of the majority of the population without
significant investment in agriculture (WTO, 2000).
Unstable agricultural production coupled with fluctuations in
commodity prices has adversely affected food security. Food aid serves
as a mechanism for lessening the tension of structural deficits and a
weakening economy. The World Food Program (WFP) and Food and
Agriculture Organization (FAO) estimated a national food deficit of
560,000 tons for the period through mid-2000, and an earlier evaluation
by the government estimated a deficit of about 600,000 tons. That means
that the country continues to need food aid.
Tanzania 193
However, food aid does not always reach the most vulnerable groups,
and it can act as a disincentive to local food production. Subsidization of
food imports can accelerate substitution of imports for domestic
production. Local coarse grains, owing to discriminatory domestic pricing
policies, tend to lose in the competition with imported grains.
Although aggregate data on food crop production indicate a surplus,
food insecurity (defined by the FAO to encompass food supply, access
to food, and stability of flows over time) is common in some parts in the
country (Table 6.7). The reason lies mainly in the difficulty of moving
the surplus from one area to another due to problems associated with
internal trading and marketing (Maro, 1999). Limiting factors include
inadequate production and supply of food by households, reliance on
subsistence fanning, high population growth rate, poor infrastructure,
and trade restrictions and market-related policies, including regulations
that impede interregional trade.
Table 6.7: Food balance, 1985/86 -1997/98 (tons)
Deficit Surplus Total Surplus/Deficits percent
Years Regions Regions Production Production
1985/86 1,622.82 2,241.62 3,864.44 618.80 16.01
86/87 1,511.46 2,247.42 3,758.88 735.96 19.58
87/88 892.45 2,711.95 3,604.40 1,819.50 50.48
88/89 1,141.83 -J,083.0S- 4,224.88 1,941.22 45.95
89/90 1,014.02 2,903. 70 3,917. 72 1,889.68 48.23
90/91 972.93 2,471.60 3,444.53 1,498.67 43.51
91/92 1,190.37 2,513.60 3,703.97 1,323.23 35,72
92/93 1,194.20 2,857.30 4,051.50 1,663.10 41.05
93/94 1,011.00 2,768.20 3,779:20 - 1,757.20 46.50
94195 1,333.00 3,345.00 4,678.00 2,012.00 43.01
95196 1,546.40 3,345.00 4,891."40 1,798.60 36.77
96197 838.60 2,427.50 3,266.10 1,588.90 48.65
97/98 1,692.90 2,799.40 4,482.30 1,106.50 24.63
Average 1,227.84 2,747.33 3,975.18 1,519.49 38.47
Source:Based on Mjema 1999.
6.3 Liberalization before the Uruguay Ronnd
Tanzania began trade liberalization and other economic reforms in the
mid-1980s under World Bank- and IMF-sponsored adjustment programs,
well before WTO agreements came into force in 1_995. In June 1986 the
govermnent launched the Economic Recovery Program (1986-89) to
continue and intensify earlier adjustment initiatives. Macroeconomic and
sectoral measures were designed to increase the output of food and
194 Liberalizing Agricultural Trade: Issues and Options ...
export crops, channel investment resources into rehabilitation of physical
infrasttucture and productive activities, boost capacity utilization in
industr)', restore internal and external balance, and increase foreign
exchange earnings. Measures included devaluation, tight fiscal and
monetary policy, and a schedule for dismantling controls over prices
and distribution.
Jn 1988 an open general license scheme was implemented, which
allowed a more market-oriented allocation of foreign exchange. The
F6reign Exchange Act of 1992 made it legal for citizens to possess and
sell foreign exchange through foreign exchange bureaus, which became.
another window for fmancing imports.
The Second Economic Recovery Program (1989-92) focused on
strengthening social services delivery by increasing efficiency,
accountability, and community support and accelerating employment
creation and income generating activities in small-scale manufacturing
and services.
Starting with the First Economic Recovery Program in 1986, trade
policy has increasingly relied on market incentives and less on controls.
Trade and exchange rate liberalization and macroeconomic reforms were
the hallmarks of outward-oriented policies. Tariff rates were lowered
and compressed, and quantitative restrictions were reduced. In 1992, the
Tax Commission proposed further measures to simplify customs duties,
reduce exemptions, increase efficiency in revenue collection, and reduce
import duties on raw material inputs for exporting firms (CREDIT, 1998).
Tanzania has steadily liberalized its tariff regime. Tariff rates were
reduced from the high level of 120 percent prevailing in the 1980s to 40
percent in 1995. Nontariff barriers, including quantitative restrictions,
discretionary licensing, and variable levies, have largely disappeared. Jn
1980-8.6, nontariff barriers covered more than 50 percent of imports.
By 1993/94 nontariff barriers covered 15 percent of goods. Remaining
nontariff barriers are restrictions on petroleum imports, which mainly
reflect limitations in physical capacity at the port and storage capacity.
6.3.1 Reforms in Agriculture
Liberalization of food crops started as early as 1981/82, but not until
1988/89 was the marketing of all food crops decontrolled at the level of
cooperative unions and a year later at the level of primary societies
(Ministry of Agriculture, 2000). Marketing boards were made the agents
of cooperative unions, and cooperatives became private institutions, with
minimal government intervention. Crop boards took on regulatory
functions on behalf of the Ministry of Agriculture and Cooperatives.
!an:ania 195
Most nontariff barriers have been removed. Tariff barriers are lower
for agricultural commodities than for manufactured imports. Nuisance
taxes on cash crops have also been removed, and the national goveniment
has tried to harmonize local and national taxation to avoid double taxation
of exportable crops.
Private traders began to operate legally in the coffee and cotton sector
in 1994"95 and in the tobacco sector the following year. Private traders
were allowed to buy, process, and export these crops. The Pyrethrum
Board's factory was closed in 1997 due to financial problems and
privatized in 1998. Private tea estates already ae<;ount for 70 percent of
production, and the remaining estates and processing plants of the
Tanzania Tea Authority are being privatized.
The government replaced fixed producer prices for food crops. with
indicative prices, dropping even those in 1993/94. Over time, as they
lost their monopoly power, cooperative unions diminished in itifluence,
as did the National Milling Corporation, which once enjoyed a ~onopoly
of domestic food crop marketing for domestic and imported food.
Table 6.8: Major destination countries for Tanzania's agricultural coinmodity
exports before the Uruguay Round (millions of Tsh)
Country EXPORTS-1986
0 1 2 3 4 Total Grand Total
Exports-1987
France 2,579 19 21 1 2,620 2,678
United Kingdom 564 258 32 l 855 1,367
Finland 933 l 934 934
Netherlands 577 96 46 719 774
Italy 389 0 127 516 540
India 465 9 474 503
Exports-1990
India l l,589 l,610 13,199 13,527
France 6,548 123 309 l 6,981 7-,422
United Kingdom 2,925 820 70 l 33 4,479 6,267
Taiwan 3,322 3,322 3,329
Netherlands 2,340 312 120 6 2,778 2,993
Singapore 1,610 946 1 2,557 2,565
Note. 0 ts food and hve animals; 1 IS beverage and tobacco; 2 ts crude, materials
except fuels; 3 is mineral fuels; 4 is animal and vegetable oils. Total,' is total of
subgroup 0, 1,2,3,and 4 while grand total is total for all groups for that country.
Source: Tanzania Foreign Trade; Bureau of Statistic, se_veral issues.
196 Libera/king Agricu/Jural Trade: Issues and Options ...
Before the conclusion of Uruguay Round in 1994, industrial countries
in Europe, including France, United Kingdom, Netherlands, Finland, and
Italy, were the major markets for Tanzania's agricultural commodity
exports (Table 6.8). Other important markets included India, Taiwan
(China), and Singapore. Agricultural imports also came mainly from
European markets, reflecting historical ties (Table 6.9). Other important
partners were Japan, the United Arab Emirates, Iran, and Kenya.
Table 6.9. Major sources of Tanzania's imports of agricultural commodities
before the Uruguay Round (millions of Tsh)
Country IMPORTS-1986 Grand total
0 1 2 3 4 Total
United Kingdom 200 20 75 24 34 353 3,613
Japan 76 0 44 7 1 128 3,471
France 154 6 44 86 86 376 3,203
Italy 18 4 105 340 3· 470 2,011
United Arab Emirates 3 0 3 1,451 17 1,474 1,653
_K~nya 17 3 3 416 2 441 1,256
IMPORTS-1987
United ·Kingdom 118 24 143 32 20 337 8,987
France :.____-=-=-- - 285 5 244 50 29 613 7,689
Japan 34 0 128 11 5 178 6,955
Italy 20 25 141 295 10 491 5,749
Netherlands 173 6 257 108 143 687 3,136
Denmark 5 2 293 3 258 561 2,884
IMPORTS-1990
United Kingdom 194 128 1,120 466 34 1,942 34,104
France 591 23 225 93 261 1,193 20,059
Japan 7 0 23 11 33 74 15,426
United Arab Emirates 97 7 286 2,955 79 3,424 8,861
N~therlandS 700 21 285 79 62 1,147 8,719
Iran 6 8,561 8,567 8,608
Note: 0 is food and live animals; 1 is beverage and tobacco; 2· is crude materials except
fuels; 3 is mineral fuels; 4 is animal and vegetable oils. Total is total of subgroup 0,1,2,'3,and
4 while grand total is total for all groups for that country.
Source: Tanzania. Foreign Trade; Bureau of Statistic, several issues.
6.3,2 Impact of Policy and Macroeconomic Reforms in Agriculture
Overall, the reforms moved Tanzania from a plarmed to a market-based
economy (see Box 6.1 ). Inputs, production, processing, marketing, and
international trade functions are in private sector hands. Though marketing
boards are still in place for most of Tanzania's major export crops (Coffee
Tanzania 197
Marketing Board, Cotton and Lint Marketing Board, Pyrethrum Marketing
Board, Tea Marketing Board, Tobacco Marketing Board, Cashew
Marketing Board, and Sisal Marketing Board), the boards no longer set
prices for export crops or buy crops, as they did in the 1970s and
1980s. Today, the boards regulate marketing and exporting, advise the
government on matters relating to production and marketing, set quality
standards and inspect products before marketing and exporting, issue
licenses and permits for purchasing and marketing products, provide
extension services, collect data and disseminate information to producers
and buyers, conduct and finance research, and solicit funds for crop
development.
Farmers are free to sell their crops to cooperatives or private traders.
Greater efficiency in marketing systems for some crops has enabled
farmers to market their crops more quickly. Farmers are no longer
confined to a single source for fertilizers, agro-chemicals, seeds, farm
implements, and veterinary drugs. For some crops, however, liberalization
has meant hardship for farmers whose marketing systems have been
disrupted and not yet replaced by new ones.
Box 6.1. The trade regime in agriculture 1961-1994
l ~8 Libera/;,ing Agricukural Trade: Issues and Options ...
Economic reforms have included removal or reduction of government
subsidies on basic commodities, which had become unsustainable.
However, the fiscal savings from eliminating fertilizer subsidies and the
loss-making activities of the National Milling Corporation and other state
enterprises have. not been reallocated to investments in agricultural
research, extension, and market development activities. And in Zanzibar,
despite the policy reforms, the share of the development budget going to
subsidies for agriculture has increased from 4 percent in 1994 to more
tha.n 6 percent, even though development budget resources have been
dwindling rapidly. Agricultural subsidies tend to be somewhat sticky in
nominal terms, falling less than overall expenditure (World Bank, 2000).
Internal trade has not been a strong engine of economic growth for
several reasons:
e Weak marketing infrastructure has delayed full integration of the
economy. Most of the country is not easily accessible by road,
rail, sea, or air. Telephones, telex, and telefax facilities are poorly
developed, greatly slowing commercial transactions from one
part of the country to another and adding to their cost.
" Low productivity, particularly in peasant agriculture, has further
slowed integration. Low productivity means low income earning
capacity and so low effective demand and weak incentives for
trade to act as an engine of growth.
Tanzania 199
• Low levels of education lead to weak managerial capabilities and
low efficiency. Human resources development is essential for
raising productivity across the economy (ERB, 1994).
6.4 Trade Policy Regime and Agricultural Sector after the 1994
Uruguay Round Agreement on Agriculture
When iii 1994 Tanzania signed the Final Act of the Uruguay Round and
the Marrakech Agreement establishing the WTO, all WTO agreements
became bi.tiding on Tanzania. While Tanzania has attempted to comply
with certain requirements, such as establishing a National Inquiry Poi.tit
and Acceptance of Code of Good Practice on Voluntary Standards under
the Sanitary and Phytosanitary Agreement, effective implementa!Ion of
most WTO commi!Inents is hampered by a lack of adequate information
and fmancial, institutional, and technical capacities. Tanzania would need
to rely on technical cooperation from the WTO and other development
agencies to strengthen its capability toimplement WTO agreements· and
negotiate effectively iii further WTO multilateral trade negotiations.
As a member of the WTO, Tanzania has bound certain of its tariffs
(mainly on goods that are not produced locally). As a least developed .
country, Tanzania has a longer period for implementing .many of the
WTO agreements. But while the WTO allows least developed countries
to reduce subsidies on a longer schedule, Tanzania cannot take advantage
of that flexibility because of commi!Inents to the World Bank and IMF.
Tanzania's export policies have generally taken the form of export
restraints (taxes, quotas, and prohibitions) rather than subsidies. However,
Tanzania and other developing countries will be affected by developed
countries' commi!Inent to remove or reduce export subsidies and domestic
support measures, which may reduce the supply of developed country
exports and increase import demand in developed countries. While the
reduction in export subsidies and market access commitments by
developed countries (through tariff quotas) should increase opportunities
for developing countries, Tanzania's access to developed country markets
has frequently been provided under bilateral and preferential terms under
the Lome Convention/Cotonou Agreement and the bilateral Generalized
System of Preferences schemes provided by developed countries. These
trade preferences are being eroded in the liberalized global trading
environment as developed countries further reduce their tariffs.
For implementation of the WTO Agreement on Agriculture, food
security is an extremely important issue for Tanzania and other least
200 Liberalizing Agricultural Trade: Issues and Options ...
developed COWltries that are net food importers. Tanzania should take
advantage of provisions for special and differential treatment to ensure
its food security. Another concern is standards and technical barriers,
which present problems of market access for.Tanzania's agricultural
commodities. Tanzania will need technical assistance to achieve required
standards. Regional cooperation can also assist Tanzania in reaching
agreed standards thereby ensuring that their products can be traded
globally.
The government has emphasized the importance of opening markets
abroad to expand exports, but the COWltry's severely limited export
capacity has hindered any significant export-led growth. Tanzania, like
most African countries, does not subsidize agriculture or agricultural
exports but rather taxes them either implicitly through protection of
industry or explicitly through taxation of exports or government controls
to keep domestic prices below world prices. Thus Tanzania and other
African coWltries are not taking advantage of the provisions of the
Agreement on Agriculture allowing developing coWltries greater leeway
in subsidizing agriculture.
The real value of bndget allocations to the Ministry of Agriculture and
Cooperatives has declined since the 1990/91 budget (World Bank, 2000).
In 1997/98, for example, it was about a third the annual average for
1991/92 to 1993/94 (Table 6.10). The declining share of research and
development is especially worrisome for future productivity growth in
agriculture, falling from 25-30 percent in the early years to an estimated
12 percent in the 1999/2000 budget.
Tanzania's export promotion activities have included tariff rebates
(although implementation has been difficult), local-content requirenients,
. and for some products, higher tariffs. Export controls have been imposed
on certain products for a variety of reasons, inclnding conservation
concerns in the case of timber. Subsidies on agricultural inputs and
equipment, long viewed as fWldamental for increasing agricultural
productivity, have been removed.
Although trade policy is generally similar for mainland Tanzania and
for Zanzibar, there are some differences in practice. The establishment
of the Zanzibar Freeport Authority in 1992 was an important incentive
for external trade. The authority controls and manages the free port
zones, promotes trade in goods including transshipment, and provides
facilities, including infrastructure and storage, for licensees in freeport
zones.
Tanzania 201
Table 6.10: Real budget allocatiOn to agriculture, 1990/91 to 1999/2000
::.. ~
.,, 0 • 0
-oo
"'
.- .
00
Budget item ~
N
~
~
~ "'
~
~
~ ~ ~ ~ 00 "
> 0 -
o "
o N~";
0 ~
N
~
~
~
"'
~
~
~ "'
~
~
~
~
~
0
e
N
~ ·.;::: ~
-~ -i
- - "' -
~
Tola! amount
- -
~ ~
"'
~
~ ~ ~
- 15:
< - "'
~
~~
~-
(million 1998 -99 57;293 64,432 71,001 62,6% 63,252 40,161 26,420 21,829 37,047 44,421 386,839
Share (percent)
Administration 33 10 10 10 5 4 9 13 29 32 13
Crop development 4 47 39 44 47 55 49 48 34 36 s42
Research and
d~Iopment 29 25 34 22 30 18 10 15 15 12 20
Cooperative
development 0 6 5 6 3 4 5 9 4 4 5
Food security and
strategic grain
reserve 0 0 0 7 5 6 12 11 3 3 5
Livestock develop 33 12 12 12 9 13 16 4 15 13 13
Total 100 100 100 100 100 100 100 100 100 100 JOO
a. 1990/91 distribution by sector includes only recurrent expenditure because development
expenditure figures are not allocated by sector.
Note: Total amount includes recurrent and development expenditure. "AdminiStration"
includes policy and planning. "Crop development" includes input trust _funds.
Totals may differ by I percent from 100 due to rounding error.
Source: Quoted. from World Bank, Agriculture in Tanzania since 1986, Follower or
Leader of Growth?, 2000, pl4.
6.4.J Tariffs and Nontarijf Barriers
The government's trade policy objective is to open up the economy and
provide incentives for investment in priority sectors such as agriculture,
tourism, mining, and transport. Tanzania has been making a concerted
effort to create an environment conducive to domestic and foreign
investment. The Tanzania Investment Centre offers incentives for setting
up projects, including incentives for imports of capital goods. Import
duties have been eliminated on all farm inputs and equipment to support
development of the agricultural sector. Reforms undertaken since 1985
have resulted in a trade policy framework based largely on tariffs. Most
nontariff barriers have been dismantled. Export restrictions and foreign
exchange controls have been eliminated.
202 Liberalizing Agricultural Trade: Issues and Options ...
In 1996/97 tariffs were widely dispersed, from 0 to 40 percent (5,
10; W, 25, 30, 40). Recent reform has resulted in a simplified five-tier
structure: 0, 5 percent, 10 percent, 20 percent, and 25 percent, depending
on the degree of processing (Table ·6.11 ). The maximum rate fell from
40 percent to 25 percent in 1999. The trade-weighted tariff fell from 25
percent in 1993/94 to 20 percent in 1997/98 (URT, 1999). The zero rate
is maintained for strategic and lead investment sectors, including
agricultural inputs and infrastructure.
Import duties for agricultural inputs are fairly low, with most between
0 and 5 percent. Effective rates of protectioll rise along the processing
chain, providing greater protection to higher-level processing activities,
causing resource misallocation and increasing costs for Tanzanian
consumers. The govenunent still relies heavily on tariff revenues, creating
pressure to maintain revenues through high tariff levels.
Table 6.11. Changes in import tariffs, 1996/97-1998/99
Fiscal year Tariff bands and percentage
1996197 5, 10, 20, 25, 36, 40
1997/98 5,10,20;30
1998/99 0,5, 10,20,25
6.4.2 Safeguards
The Agreement on Agriculture permits developing countries to apply
emergency protection measures to safeguard domestic producers from
an unforeseen surge in imports that could result following removal of
quantitative restrictions. Tanzania has suspended duties of 20 percent
on selected conunodities (dairy products, edible oil, sugar, eggs, hatching
and tomato products) originating from CO MESA member states to protect
local industries-(Ministry of Agriculture, 2000). The suspended duties
are used as safeguard measure in the manner that if Tanzania believes
that its domestic industries or economy is affected by lower COMESA
member imports due lo liberalization program, it can use the suspended
duties up· to 20% on those imports. This has been used in for example
imports from Kenya'causii1g disputes between the two countries. 1 Some
imports are also charged a 20 percent value-added tax (VAT). These
Tanzania 203
tariffs are prohibitive to trade and need to be harmonized with those of
Tanzania's trading partners.
6. 4.3 Sanitary and Phytosanitary Standards
The Agreement on the Application of Sanitary and Phytosanitary Measures
(SPS) deals with border control measures necessary to protect human,
animal, or plant life or health. The agreement took effect on 1 January
1995 for all WTO member countries except the least developed countries,
including Tanzania, which have a longer timeframe for compliance.
Although Tanzania is a member of International Office of Epizootic
Diseases and Codex Alimentarius Commission (but not of the International
Plant Protection Convention,(IPPC), like many developing countries it
still finds it difficult to adhere to even minimum international standards
for food safety, including Good Agriculture Practice, Good Practice in
the Use of Veterinary Drugs (GPVD), and Good Manufacturing Practice
(GMP) in food processing and many of its laws governing sanitary and
phytosanitary measures are outdated and ineffective. Among the reasons
are poor technology for processing and inspection and inadequate skills
and knowledge of laws and standards. The fish industry is a case in
point. Fish from Lake Victoria was banned by the European Union in
1998 and 1999 for failing to adhere to EU standards. While Tanzania has
more than 20 phytosanitary inspectorate service posts, they lack adequate
infrastructure and resources.
6. 4A Special and Differential Treatment
Under the WTO principle of special and differential treatment, phased
introduction or longer timeframes for compliance may be granted for
products of interest to developing country members, taking into account
their financial, trade, and development needs. Given its limited technical
capabilities in this area, Tanzania needs to take advantage of the provision
in the Decision on Measures in Favour of Least Developed Countries
(URAAArticle 16) on "substantially increased technical assisiance" related
to production and exports.
In addition, food security concerns for the least developed countries
are addressed in the Decision on Measures Concerning the Possible
Negative Effects of the Reform Progranune OJ1 Least-Developed and
New Food Importing-Developing Countries (URAA Article 16) by
reviewing levels of food aid and providing increasing amounts of food
aid on grant terms. There is also provision for short-term ~ssistance
204 Liberalizing Agricultural Trade: Issues and Options , , ,
from international financial institutions in financing nonnal imports. These
measures are aimed at alleviating the burden on the food import bill and
balance of payments situation and enhancing the ability of developing
countries to increase their agricultural production capacity and reduce
their high dependence on imports.
6.5 Tanzania's Interests and Options for the New WTO Ronnd of
Negotiations
Agriculture has been one of the most politicized and protected sectors in
international trade. Heavy government subsidies in developed countries
with their negative impact on markets and prices are turning Africa from
a food surplus to a food deficit continent. Implementation of the
Agreement on Agriculture on tariffs will erode the tariff preferences of
African countries by an estimated average of 30 percent. Exports of
some tropical products from the Africa, Caribbean, and Pacific countries
will suffer losses of as much as 51 percent due to loss of tariff preferences
(OECD, 1994).
The Agreement on Agriculture is designed mainly to refonn domestic
policies in many developed countries, which tend to subsidize agricultural
production, rather than developing countries, which tend to tax agriculture.
Policies important to Tanzania include policies aimed at providing food
aid to vulnerable segments of the population, including public food stocks
held for food security purposes. Other important policies include de
minimis provisions (subsidies under 10 percent of the value of production
for specific products or the total value of agricultural production for
non-product-specific measures) and Blue Box policies (production
payments with area limitations, which are exceptions to the rule that
subsidies linked to production must be reduced or kept within defined
minimal levels). These policies arnong. others are important for Tanzania
as experience has shown that many producers have failed to use some
inputs and pesticides that are important for production. Private sector
has not been able to assist Tanzanian producers so a fonn of government
support is still needed to make agriculture competitive.
6.5.1 Market Access and Constraints to Trade from OECD Policies
Since the late 1980s Tanzania's exports have been concentrated in six
major traditional crops and a few countries of destination, particularly
the United Kingdom, Italy, Gennany, Netherlands, India, and Japan.
Regional trading has not expanded as expected. The success of measures
Tanzania 205
to stimulate trade will depend on the extent of product and market
diversification. And for diversification to work, issues of market access
are crucial.
African countries including Tanzania tend to be importers of food,
particularly wheat, rice, and dairy products. URAA provisions requiring
cuts of 20 percent in domestic support and 36 percent in export subsidies
by developed countries would raise Tanzania's food import costs by
US$808 million and result in net income losses of US$! I billion
(UNCTAD/WIDER, 1990). Reductions in export subsidies may also lead
to trade creation as the value of agricultural exports will rise. But economic
gains will be reduced or eliminated by the reduction of tariff preferences
into developed country markets. For Tanzania, the overall impact of
trade liberalization on trade creation may be negative and import bills
high. To overcome this, policies to increase food production and promote
export commodity diversification are necessary.
The magnitudes of tariff preference margins in OECD countries are
thus very important. The FAO (1995) estimates that Africa's food import
bill will grow from US$6.0 billion in 1987/89 to US$! 0.5 billion in 2000,
with US$0.5 billion of it due to the effects of the Uruguay Round. Thus
taking advantage of special and differential treatment provisions to meet
its food security needs will continue to be important for Tanzania, given
its level of development and lack of adequate infrastructure.
Under the Uruguay Round, developed countries have lowered their
most-favored nation (MFN) tariffs on industrial products by an average
of 2 percentage points, from 6 percent to 4 percent. Changes have been
greater for some of the most protected products. The "Analysis of the
Draft Final Act of the Uruguay Round, with Special Attention to Aspects
of Interest to Developing Countries" of 1993 found smaller tariff cuts
on goods of export interest to developing countries than on goods of
export interest to developed countries. For example, tariff reductions
for industrial goods averaged 38 percent for imports from all origins but
only 34 percent for imports from developing countries. Peak tariffs
(exceeding 12 percent and going as high as 300 percent in some cases)
resulting from the tariffication of nontariff measures affect many
agricultural items. Tariff escalation remains high on several product
groups of export interest to developing countries, particularly leather,
coffee, tea, jute, fabrics, cocoa products, and tropical fruits, limiting the
scope for expansion of production into value-added and higher priced
products such as coffee. This problem is likely to' be compounded by
206 Liberalizing.Agricultural Trade: Issues and Options ...
Africa's low level of competitiveness. In addition, the preferential treatment ·
on tariffs for exports to major markets that Tanzama and other developing
countries have received under the Generalized System of Preferences
and other arrangements such as the Lome Convention and Cotonou
Agreement are being eroded by reductions in the MFN tariff rates, reducing
their effective level of preference as well as by improving the market
access of more competitive developing countries.
Other factors may be even greater barriers to trade than tariffs for
many developing countries. These include rules of origin, quality
standards, sanitary and phytosanitary requirements, environmental
requirements, and labeling requirements. The impact of agricultural
liberalization on rural employment is another serious concern. All these
issues require priority attention by Tanzania in multilateral trade negotiations
given the centrality of agriculture to the economy. Tanzania needs to
analyze the impact of tarrification, tariff reduction, and other liberalization
measures on market access with a view to identifying strategies to take
advantage of the Agreement on Agriculture. Effective use of the technicaJ
assistance provision provided in the WTO agreement will be critical for .
reducing these barriers to increased access.
6.5.2 What Tanzania Needs to Do
A key prionty for Tanzania is product diversification into nontraditional
food products for export. Achieving this depends on developing a strategy
and understanding the issues involved. For example, Tanzania has a
comparative advantage and high export potential in the prqduction of
tropical fruits and fresh produce. But production of value-added products
is affected by the Agreements on Technical Barriers to Trade and Sanitary
and Phytosanitary Measures, which affect such issues as health
standards, packaging, and labeling requirements. For example, market
access for Tanzanian horticultural products into Japan and Europe has
become increasingly difficult because of packaging requirements, shelf
lifetime requirements, allowable levels of additives, and disease-free-
arearequirements. Constraints such as these can be partly tackled through
requests for technical assistance provided under the WTO framework
By committing to eliminate subsidies, Tanzania has lost one of its
most important instruments for pursuing an export-led growth, while
other constraints severely constrain its ability to impose quantitative
restrictions for balance of payment purposes. Progressive liberalization
of agriculture under the Uruguay Round will inevitably favor countries
Tanzania 207
with high levels of productivity and competitiveness over those like
Tanzania that still have a long way to go. Agricultural exports depend on
efficiency and on management effectiveness is such areas as product
quality and adherence to product specifications and delivery schedules,
among many others.
6.6. Modeling the Effects of Liberalizing Trade on the Agricultural
Sector
This section models the effects of trade liberalization on agriculture
compared with other sectors in Tanzania.'
6.6.J Mode/Description
The simulation uses 1992 data from the social accounting matrix (SAM)
in a static computable general equilibrium (CGE) model for Tanzania.
The SAM covers eight activities, seven production factors, four
households, and other institutions. The activities are agricultural exports,
food, other agricultural, mining, food processing, nonagricultural light
manufacturing, nonagricultural heavy industry, and nonagricultural
service. The factors are urban professional labor, urban white collar
labor, urban blue collar labor, urban unskilled labor, rural labor, land, and
capital. The four households are enterprises, urban farmers, urban
nonfarmers, rural farmers, and rural nonfarmers, and the institutions are
government, rest of the world, and the savings-investment account.
The classification made for different farmers is not very accurate in
Tanzania but was used because of the kind of standardization that was
adopted as the model was developed for many countries in Southern
Africa, countries belonging to SADC under MERISSAprogram ofIFPRI.
Nevertheless urban farmers in Tanzania are important especially in the
area of poultry, pig rearing, cattle and vegetable growing.
The benchmark SAM for 1992 is the base solution for the Tanzania
trade model used for policy changes in the model simulations. Trade
refonns are defined as across-the-board tariff cuts, reductions in the
trade balance using reductions in foreign savings (the current account
deficit), and exchange rate depreciation. Different scenarios of trade
refonns involving micro-and macro-closures are also explored.
The following simulations were perfonned:
• Simulation la, tariff cut without capital mobility. Tariff rate
reduced by 50 percent in five successive moves of I 0 percent
each, with flexible govermnent savings, activity-specific (fixed)
208 Liberalizing Agricqfturtil Trade: Issues and Options ...
capital, and endogenized foreign exchange rate (fixed foreign
exchange rate).
• Simulation 1b, tariff cut with capital mobility. Tariff rate reduced
by 50 percent in five successive moves of IO percent each, with
flexible government savings, capital mobility, and endogenized
foreign exchange rate (fixed foreign exchange rate).
• Simulation 2a, increase in exchange rate (depreciation). Exchange
rate increased by 20 percent in five successive moves of 4 percent
each, with flexible government savings, activity-specific (fixed)
capital, and flexible roreign savings.
• Simulation 2b, increase in exchange rate (depreciation).Exchange
rate increased by 20 percent in five successive moves of 4 percent
each, with flexible government savings, capital mobility, and
flexible foreign savings.
Table 6.12. CGE Model Simulation Results Based on Tariff Cut of 50 Per cent
and Exchange Rate Change of 20 Per cent
Simulation
Base la lb 2a 2b
Real absorntion 1937.7 -5.5 -13.9
Real investment 419.5
Real government consumption 331.6
Real household consumntion 1186.6 -9 -22.8
Total real ex 16".7 2.1 2.< 41.6 l 71.4
Total real imnorts 576.8 0.6 0.8 -5.6 -6.6
Real exchange rate JOO 0.9 0.8 15.2 16.8
Nominal exchanl!e rate JOO I. I I 20 20
Domesti,. nric" index JOO 0.2 0.2 4.1 2.8
Tariff rate 5 2.5 2.5 5 4.9
Percentage of nominal GDP
Investment 27. I "0. J -0.I 3.5 3.2
Priv'1te ~avina~ 0.2 0.1 0.2
Foreion savinE:s 10.2 0.2 0.1 -5.8 -16.4
Trade deficit 26.5 -0.4 -0.4 -3.2 -13.8
Government savinP-S -I. I -0.7 -0.7 0.4 0.5
Tariff revenue 1.5 -0.7 -0.7 0.1 0.1
Direct tax revenue 5.3 0.3 0.1
Tanzania 209
6.6.2 ModelResults
Simulation I a: Total exports increase by 2.1 percent, and total imports
increase marginally by 0.6 percent (Table 6.12). The real exchange rate
depreciates by 0.9 percent. The trade deficit improves by 0.4 while
prices increase by 0.2 percent. As a percentage of GDP government
savings rise by 0. 7 percent, tariff revenues decrease by 0. 7 percent, and
foreign savings increase by 0.2 percent.
Household consmnption increases overall, but decreases among urban
and rural farmers (Table 6. 13). Factor income remains unchanged except
for rural labor, which decreases marginally by 0. 1 percent while capital
gains by 0. 1 percent. Light manufacturing increases by 0. 3 percent and
services by 0.1 percent. Agricultural export prices increase by 0.3 percent,
Nonagricultural light industries and services prices rise by 0.6 percent
each, while heavy manufacturing prices decrease by 0.2 percent.
Simulation I b: All variables move in the same direction as in simulation
1a but the changes are smaller except for total exports and imports. The
real exchange rate depreciates by 0.8 percent, while foreign savings
increase marginally. Total household consmnption increases, activity
output and prices increase, while factor income changes marginally,
perhaps because tradable sectors are more profitable after the tariff cut
and so attract more investment.
Simulation 2a: Total exports increase by 41.6 percent, while total
imports decrease by 5.6 percent. The real exchange rate depreciates by
15.2 percent. The trade deficit decreases by 3:2 percent. As a percentage
of GDP, government savings decrease by 0.4 percent, tariff revenues
increase by 0. I percent, and foreign savings decrease by 5. 8.
The effects on micro variables differ. Consumption decreases for
urban and rural farmers and increases for urban and rural non-farmers.
Rural labor decreases by 6. 6 percent and land by 0.4 percent. Agricultural
export prices increased by 5.3 percent, light manufacturing by 15.5
percent, services by 12.2 percent, and heavy manufacturing by 15.1
percent.
Simulation 2b: Absorption decreases by 13. 9 percent and consmnption
by 22. 8 percent compared with the case of fixed factors. Total real
exports increase by 123.4 percent, imports decrease by 6.6 percent,
while the real exchange rate depreciates by 16.8 percent. The trade deficit
improves by 13.8 percent, while foreign savings decrease by 16.4 percent.
Household consumption in different sectors changes much more. It
decreases by 39.4 percent for urban farmers by 32. 1 percent for rural
210 Liberalizing Agricultural Trade: Issues and Options ...
farmers, and by 10.1 percent for rural non-farmers and increases by
10.3 percent for urban non-farmers.
6. 6.3 What the Model Results Suggest for Tanzania in the Next Round
of Trade Negotiations
The simulation effects are more dramatic with factor mobility than
when factors are fixed. This is important because it shows that when
factors are not mobile, policy changes will not produce the expected
effects. This is a problem for many developing countries such as Tanzania
that have structural rigidities that prevent factors from moving freely.
The simulations showed larger effects on trade variables than on macro
variables such as GDP or govermnent savings. The choice of closure
has a large influence on results.
Table 6,'13: Simulation results, micro and activity prices
Simulation
Base la lb 2a 2b
Disag1rregated real household consumntion
Household urban farmers 165.3 -0.3 -0.2 -18 -39.4
Household nonurban farmers 260.6 0.5 0.5 11.4 10.3
Household rural farmers 705.1 -0.2 -0. l -15 .2 -32.1
Household rural nonfarmers 55.5 0.2 0.1 0.9 -10.1
Total household consumption 1186.6 -9 -22.8
Disai:n:Jregated Factor Income Distribution
Urban professionals 8.1 1 0.9
Urban white color 4.3 0.5 0.5
Urban blue color 8.4 0.9 0.9
Urban unskilled 3.9 0.5 0.5
Rural labor 35.6 -0. l -0.1 -6.6 -6.3
Land 2.8 -0.4 -0.2
Capital 36.9 0.1 4.1 3.7
Total factor income 100
Disaggregated Activity Production Levels
Agricultural exports 75.7 1.8 2.1 61.9 242.2
Agricultural food 338.4 -0.2 -0.3 -6.2 -21.3
Other a!:!ricultural 471.8 -2.9 -12 ..9
Min in!:! 60 -0.4 -0.6 3.5 7.1
Nonagricultural food orocessing 401.2 -0.2 -0.2 -4.7 -18.5
Nonagricultural light manufacturing 227.7 0.3 0.7 3.9 17.3
Nona!:!ricultural heavv industries 360 -0.4 -0.6 2 3.5
Nonae:ricultural sel'.vices 1097.6 0.1 0.1 0.6 1.6
Total production 3032.4 0.6 1.7
Tanzania 211
Disaggregated activity prices
Agricultural exports 100 0.3 0.1 5.3 -I.I
_Agricultural food 100 0.2 -11.3 -9.4
Other agricultural 100 0.1 0.2 -8. l -6.4
Mining 100 0.1 0.4 13.7 · 11.5
Nonagricultural food processing 100 0.1 0.2 -0.8 0.5
Nonagricultural light industries 100 0.6 0.1 15.5 9.5
Nonagricultural heavy industries 100 -0.2 15. l 12.5
Nonagricultural services 100 0.6 0.3 12.2 10.2
Note: Simulation la tariff cut with activity-specific capital; lb tariff cut with mobile
capital; 2a increase in exchange rate with activity-specific capital; 2b increase in
exchange rate with mobile capital.
The model suggests that cutting tariffs will have a positive effect on
agricultural exports, but a negative effect on agricultural food production.
Household income will decline for rural farmers while rising for rural
nonfarmers. Exchange rate devaluation has the same effects, but the
levels of change are much more dramatic. Devaluing the Tanzanian shilling
increases exports by 61.9 percent with no factor mobility and by 242.2
percent with factor mobility. Agricultural food production decreases by
6.2 percent with no factor mobility and by 21.3 percent with factor
mobility. This indicates that Tanzania would not gain or lose very much
in the agriculture sector by cutting tariffs. However, because exports
increase with devaluation, other countries will have to open their markets
in order for Tanzania to reap some of the benefits from liberalizing trade.
And liberalization reduces food production.
Because the increased exports come at the expense of diminishing
levels of agricultural food under the assumption that resources are fully
employed, a kind of substitution in production must take place. Also,
because factor mobility is limited, the positive benefits expected from
greater movement of factors across sectors are limited. This points to
the need to address supply constraints if more positive results are expected
from the Uruguay Round Agreement on Agriculture.
6. 7 Conclusions and Recommendations
The analysis presented in this report and the results of the CGE model
simulations suggest several issues that need to be dealt with in the new
round of negotiations.
For Tanzania, the Agreement on Agriculture will have significant
impacts at various levels. The central challenge of the new negotiations
is to ensure that issues of trade-related development activities are fully
212 Liberalizing Agricultural Trade: Issues and Options ...
addressed. With development in mind, agricnlture, still the backbone of
the Tanzanian economy, can be assisted to grow and contribute to
sustained economic growth and poverty eradication. Achieving that will
require a degree of flexibility to acconnnodate constraints faced by
Tanzania and other least developed countries in the new mnltilateral trading
system.
Tanzania faces many challenges in making its laws and regulations
consistent with WTO commitments. Meeting them will require enhancing
institutional and human resource capacities in trade-related information
management, among other areas. That will require setting up new
institutions and restructuring old ones, requirements that impose relatively
heavy demands on Tanzania. Resources and technical assistance are
needed to establish efficient information systems and to identify market
access constraints in the area of finance and credit facilities, to facilitate
market development and adaptation programs. Reforms shonld be taken
to strengthen the supply response to any new markets that may open up
as a resnlt of developed country reductions in domestic support policies
and export subsidies. Assistance is needed to rationalize and improve the
efficiency of trade support service institutions and for human resource
development. Needs related to policy formuiation and implementation
include enhancing the ability of ministerial departments to formulate,
review, and implement trade policy. Also important is training public and
exporters and institutions in small to medium-size enterprises to take
advantage of the opportunities provided through trade liberalization by
enhancing productivity, product development, and diversification through
improved research and identifying ways of loosening supply capacity
constraints.
The new round of negotiations must take into account the welfare of
people in developing countries that are net food importers. Ensuring that
freer trade in agriculture does not diminish food security is of utmost
importance. Especially important are rising import bills and potential loss
of market share as tariff preference margins erode in developed countries.
It wonld be prudent for Tanzania to formulate domestic policies that
address these issues while complying in content and spirit with the
Agreement on Agriculture. The new rnles for international trade could
benefit Tanzania and other developing countries more if they took full
advantage of the special and differential treatment and capacity building
options provided for in various WTO measures, applying whatever
restrictions or exceptions are allowed under the WTO agreement to
Tanzania 213
protect Tanzania's interest. Policies are needed on a product-by-product
basis, taking into account that the URAA provisions will have more impact
on temperate products than tropical products. Also important are
increasing public awareness of the WTO agreements and reviewing the
regulatory system to align it with WTO rules.
Tanzania should take the initiative to ensure that the current WTO
negotiations address the need for greater access to existing and new
markets. And it should make adequate preparations to make a strong
case for its positions, through research, consultation, and lobbying.
Tanzania needs to ensure that standards and technical requirements do
not remain or become barriers to trade. While technical assistance to
help reach required standards is important, so is using safeguard measures.
Technical cooperation will also be important for helping Tanzania
participate fully and effectively in international meetings of key
standardization bodies (CodexAlimentarius Commission, OIE, and IPPC)
and in the WTO committee sessions on sanitary and phytosanitary
measures. Regional cooperation can also assist Tanzania and other member
countries to reach common agreed standards and reduced trade barriers
can provide the impetus for increased regional and international trade.
Annex 6A.1: Details of the Computable General Equilibrium Model
The model follows the neoclassical specification of general equilibrimn
models'. Markets for goods and factors and foreign exchange are assmned
to respond to changing demand and supply conditions, which in turn are
affected by government policies, the external enviromnent, and other
exogenous influences. The model is Walrasian in that it determines only
relative prices and other endogenous variables in the real economy
(monetary factors are not considered). Sectoral product prices and factor
prices are determined relative to the Consmner Price Index (CPI), the
numeraire. The~e are four blocks of equations in the model, for price,
production, institutions and system constraints.
The price block defines the domestic price of imports as the world
price times the exchange rate adjusted for tariffs, and defines the export
price as the world price times the exchange rate adjusted by subsidy/
export taxes. The prices of imports and exports are given in domestic
currency. The absorption price for each commodity is expressed as the
smn of spending on domestic output and imports, including an adjustment
for sales taxes. The composite price is paid by domestic demanders
(households, the government, producers, and investors). Domestic output
. 214 Liberalizing Agrkultural Trade: Issues and Options ...
value at producer prices is divided between export value and domestic
output sold domestically. This equation reflects a constant elasticity of
transformation (CET) that is linearly homogeneous. The activity price is
the sum of producer prices of different commodities and the yield of
output of commodities per activity. The value added price is the price of
activities times the input cost per activity unit.
In the production and commodity block, the production technology
is presented by a set of constant elasticity of substitution (CES), constant
elasticity of transformation (CET) and linear expenditure functions.
The activity production function is defined by CES technology. Factor
demand is a CES function of wage distortion for factors-land, capital,
and five types of labor (urban professional, urban white collar, urban
blue collar, urban unskilled and rural labor). Intermediate demand is fixed
as a share of level of activities. Output is a function of yield of activity
times its level. The export to domestic commodities supply ratio is a
CET function while the import to domestic demand ratio for commodities
is a CES function. The Armington assumption is used for aggregating
domestic demand and import demand. The model allows for product
differentiation between import and domestically produced goods in
demand and between exports and domestically consumed goods, and
this permits two-way trade. This assumption is realistic in the case of
Tanzania because imported and domestically produced goods are not
perfect substitutes-horizontal as well as vertical differentiation exists.
However, the differentiation varies from sector to sector, and different
levels of elasticities of substitutions and transformation represent this
across sectors.
The institution block detennines transfers of income from factors to
institutions, which are defined as the share to institutions' and factors
and factor income and transfers from the rest of the world. Transfers
are also determined as well as household demand and expenditure,
investment demand, government revenue and expenditure, and
govermnent saving, which is the difference between govermnent revenue
and expenditure (fiscal balance). Household consumption demand is based
on a LES utility function with constant expenditure shares. Household
and enterprise savings are specified to be in fixed proportion to after-tax
income.
The system constraint block specifies four macroeconomic balances:
the external balance (current account), factor demand and supply balance,
commodity supply and demand balance, and the neoclassical
Tanzania 215
macroeconomic closure that total investnient is determined by total
savings. In addition in the system block there is the price normalization
equation (numeraire ).
Based on the small-country assumption (price taker), domestic prices
of imports and exports are expressed in terms of the exchange rate and
their foreign prices, as well as the trade taxes on foreign transfers. The
tariff rate on the import tax rate represents the import duty collected
divided by total imports. The Tanzania data does not include a subsidy,
although specification of the equations allows for policy experimentation.
Different macro and micro closures are used in the model. Savings-
driven investment implies a flexible investment adjustment factor, fixed
foreign savings and therefore a flexible exchange rate, and fixed direct
tax rates for institutions and factors. All factors are fully employed,
available in fixed supply, and mobile in each market so that the average
wage rate is the clearing variable.
Prodncers maximize profits subject to specified production functions
with primary factors as arguments, while households maximize utility
subject to budget constraint.
The model recognizes that an exogenous change (in policy or from
some other source, such as world markets) that has an impact on any
part of the economy can have consequences throughout the system,
direct and indirect effects. The model satisfies Walras's law in that the
set of commodity market equilibrium conditions is functionally dependent.
The equilibrium condition is dropped for one variable using the closure
rules. The model is homogeneous of degree zero in prices to ensure that
only one solution exists. A price normalization equation (consumer price
index) has been added-equal number of endogenous variables and
independent equations. Given the numeraire, all simulated price changes
can be directly interpreted as changes relative to the CPI.
Because the model is static, it is difficult to see the effects of policy
changes on some important variables such as growth. Another limitation
is the level of disaggregation. For trade-based experiments, it would be
helpful to observe the impact of policy changes on different categories
of imports-capital, intermediate, and consumer imports-and to specific
disaggregate data into different categories· of exports, non-traditional
and traditional and even important commodities such as coffee, tea, and
cotton that face frequent price fluctuations.
216 Liberalizing Agricultural Trade: Issues and Options ...
farameters of the model
ad, efficiency parameter in the C-D prod function
adces, efficiency parameter in the CES prod function
a,, share of value-added to factor f
Armington function shift parameter
CET function shift parameter
marginal share of household consumption
spending
cwts, weight of conunodity in the CPI
A.aea CES production function share parameter
A.q, Armington function share parameter
A.t, CET function share parameter
1\. per-capita subsistence consumption
icaca intermediate input per unit of activity
pdwts, weight of conunodity in the PDI
pwec export price(foreign currency)
pwm, import price(foreign currency)
rhoaa CES production function exponent
rhoq, Armington function exponent for conunodity c
rhot, CET function exponent
shrtr ~. household share in distributed enterprise income
shry" enterprise share in factor income
ta
• = enterprise rate
te, export tax rate
_8.ac per unit enterprise output yield
qg, government conunodity demand
qinvc = base-year investment demand
tm, = import tariff rate
tq, rate of sales tax
Tanzania 217
Model Equations
Price block
I. PM, = (1 + tm,) . EXR . pwm,
import price
2. PE, =(I - te) . EXR . pwe,
export price
3. PQ, . QQ, =(PD, . QD + (PM,. QM)) (L + tq)
absorption for commodity
4. P)\ . Q)\ =PD, . QD, + (PE, . QE)
output value for commodity
5. PA = .EPX . ti"
pri~e for ci~ti".'ity
6. PVA a =PA a . (l - ta) - .EPQc . icaca
,,,
value-added price for activity a
Production and commodity block
7. QAc = adces a . .E (Aizfi . QF fi·;'.""") ,~;,, n
feFn
CES production function
- rhon --=.l
8. WF . WFDISTfia
1
= PVAa . adces . .E (Ali~ . QF Jo ') ,,,,,
·~a
factor demand fpEF
9. QINTca = icaca . QA a
intermediate demand
10. QX, = ,£ ti"' . QA,
output of commodity
218 Liberalizing Agricultural Trade: Issues and Options ...
Institution block
11. QQ, = aq, . A.qc. QM, _,hope + (I - deltaq) (QD, -'h''') ,"h,~.
composite supply (Annington) function
12.
import-domestic demand ratio
13. QQ, = QD,
composite supply for non-imported commodities
'°'·
14. QXc = atc . (iltc . QEc (I + iltt)
c
. QD'
c
«)-,;;;;;: 0
output transformation (CET) function
1
PEc I-Atc ) ~'
15. ( PD k-
, '
export-domestic supply ratio
16. QX, = QD,
output transformation for non-exported commodities
- ERX. trbarrowf
factor income
18. TRid,idng = shrtrid,tcing . ( 1- mps1dng) . (l- ~d,,/. YI idng
- EXR . trbarrow,idng
transfer from domestic non-government institution to domestic
institution
Tanzania 219
19. YI.~
I
IYFif
jtF 1
+ EIR,,~
iclng.;l , u"g
+ trbar.1,gov +EXR. trbari, row
income of domestic non-government institution
20. EH.~ (I- Eshrtr, ) . (I-MPS). (!-TY 1. n.-EXR. trbar H
• 1r v -
consumption expenditures for household
21. PQc
.QH•
c
~ PQc.c o• +p •. EH.-
c
fl'Q
cp•Ccpcp,
.o •
LES consumption demand by household for conunodity
22. QINV ~ qinv . !ADJ investment demand for commodity
' '
23. YG ~JD' ·' + IS
IYFgov., EI'Y.
I
Y/1 + JSF
EIY
1
. EWFJ WFDISTfi
1 aEA a
. QFfi -EXR.trbarrow.1 +idngE
Q.
EIR I gO\\I
. + EXR.trbargo\\roW
+ 1Jctq, . PD, . QD, + PM,. QM,
"
+Elm
c&Cc
.QM
.EXR.pwmc c
+ cl:Cc .QE
Ite . EXR.pwec c
+Eta.
cEC a
PA a . QA a
government revenue
24. EG ~ Etr, + fl'Q c . qgc + EXR.trbarrow,gov
idngsl 1 ng,row csC
government expenditures
25. GSAV~ YG~EG
government savings
System constraint block
220 Liberalizing Agricultural Trade: Issues and Options ...
factor markets
27. QQ, = LQINT00 +hl,QHH,h + qg 0 + QINV,
..... '
composite commodity markets
28. .Epwe,. QE, + ..fu;,ow+ FSAV = .Epwm,.QM,
cl:CE i&1 c&CM
+ ir(
..fubar
el row,inf.a
current account balance for RoW (in foreign currency)
29. .EPQ,. QINV, + WALRAS = .EM.PS,. (I - TY)
c&C Jdng&I
- EXR. trbar,,w, + GSAV
+EXR.FSAV
saving-investment balance
30. .EPQc . cwtsc
c&C
= CPI
price normalization
End-Notes
1. "Suspended duties" loosely refers to duties levied on some imported
products, over and above taxes. Under the WTO provisions
suspended duties constitute a NTB. Suspended duties are not
expected to be a lasting feature, but are applied selectively to address
a temporary problem. Because of this leeway, all the countries in
the East African region have been said to levy some percentage of
duty in addition to other taxes.
2. The model, using the general algebraic modeling system (GAMS)
program (a la Sherman Robinson, Hans Lofgren, and Peter Wobst),
was developed and estimated in the CGE course in Bunda, Malawi,
offered by the International Food Research Institute (IFPRI). The
Tanzania 221
model is presented in the working paper on microcomputers in
IFPRI Policy Research 4.
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224 Liberalizing Agricultural Trade: Issues and Options ...
Appendix Table 6A.1 Nominal and effective rates of protection in key
prodUcts since the Uruguay Round Agreement on Agriculture
Total Nominal Protection
Chapter Description Addition of all Trade Taxes)
1995 1996 1997 1998 1999
00 0 0 0.63 0 0
01 Live animals 0.024 0.056 0.121 0.128 0.099
02 Meat & edible meat offal 0.0541 0.346 0.166 0.213 0.213
03 Fish & crustacean, molluscs
& other aquatic invertebrate 0.105 0.382 0.407 0.329 0.080
04 Dairy prod; birds' eggs;
natural honev 0.353 0.389 0.373 0.309 0.300
05 Products of animal origin,
nes or included 0.4271 0.264 0.043 0.180 0.255
06 Live tree & other plant;
bulb, root, cutflower 0.006 0.002 0.015 0.087 0.234
07 Edible vegetables and
certain roots and tubers 0 0.004 0.027 0.008 0.008
08 Edible fruit and nuts; peel
of citrus or melons 0.044 0.236 0.359 0.254 0.234
09 Coffee, tea, mate and spices 0.694 0.584 0.606 0.541 0.263
IO Cereals 0.062 0.081 0.181 0.140 0.102
11 Prod mi11 indust; starches;
insulin; wheat gluten 0.191 0.332 0.254 0.143 0.081
12 Oil seed, oleagi fruits;
miscell grain, seed, fruit O.Q4 l 0.051 0.066 0.093 0.047
13 Lac; gums, resins and other
vegetable saos and extras 0.048 0.255 0.213 0.298 0.225
14 Vegetable plaiting materials;
vegetable products nes 0.019 0.113 0.390 0.101 0.434
15 Animal/veg fats& oil &
their cleavage products 0.249 0.291 0.379 0.350 0.36!i
16 Prep of meat, fish or
crustaceans, molluscs 0.524 0.068 0.177 0.172 0.092
17 Sugars.and sugar.
confectionery 0.181 0.324 0.423 0.471 0.330
18 Cocoa and cocoa
preparations 0.431 0.747 0.709 0.359 0.430
19 Prep of Cereal, flour,
starch/milk; pastrycooks'
prod 0.199 0.668 0.148 0.113 0.367
20 Prep of vegetable, fruit,
nuts or other oarts of vlants 1.949 0.535 0.573 0.485 0.476
21 Miscellaneous edible
preparations 0.335 0.434 0.444 0.353 0.340
23 Residuals & waste from the
food industry; prep ani fodder 0.081 0.366 0.866 0.148 0.109
Tanzania 225
4 Tobacco and manufactured
tobacco substitutes 0.043 1.473 0.158 0.282 0.482
ol Fertilizers 0.043 0.008 0.243 0.001 0.0003
3 Essential oils & resins; perf,
cosmetic/toilet prep 0.010 0.660 Q.019 0.542 0.545
1 Raw hides and skins (other
1
than furskins) and leather 0.416 0.287 0.595 0.346 0.065
3 Furskins and artificial fur;
manufactured thereof 0.046 0.398 0.201 0.592 0.467
4 Wood and articles of wood;
wood charcoal 0.113 0.143 0.240 0.476 0.228
5 Cork and articles of cork 0.030 0.178 0.148 0.302 0.230
6 Mantifactured of straw,
esparto/other plaiting
materials 0.124 0.276 0.060 0.353 0.277
7 Pulp of wood/of other
fibrous cellulosic mat waste 0.407 0.603 0.536 0.571 0.541
8 Paper & paperboard; art of
paper pulp, paper/paperboard 0.124 0.395 0.368 0.300 0.328
Calculated using addition of import duty, sales tax (VAT) for imports and excise duty as
a ratio of imports for home use.
Appendix Table 6A.2. -Effective rates of protection
199112 1994 1995 1996 1997 1998 1999 2000
Growingofmaire -39.0827 -0.62056 -295128 -0.9089 -0.40216 -330544 4.17508 -0.79414
GrowinP-of~ 40.9552 1.104364 -137231 0.051%1 9.509134 9.555479 12.64837 12.4722
Growing of
~"' -38.9214 25.I 1837 17.01198 2355883 23.12094 18D229
-54.8752 15.85421 -0.44627 4337190 3.103186 -026425
14.44269 4.9961
0.35731 0.254639
Growingofwreat
Growingofbmns -20.8471 -2.33795 -2.29279 -2.12038 -1.64032 2976497 -2.42696 19.16102
GrowingofQlS.Sa'\ia -531854 -000036 3896273 38.72783 2803987 29fl49 20.56572 24.20978
Growingofotherreeal..-J -37.5053 -11.6476 -11.7105 -11.7918 -11.8004 15.82328 -11.7932 -11.7702
Grov.~m• ofoil seeds -21.2696 4.362968 -0.116994 18.17997 5.62.2226 25.03837 21.16852 2272819
Growing ofother roots
mrure. -10.5314 -0.00228 14.17373 -0.03975 -0.00603 28.24556 -0.00477 -OJJ0559
Growingofcotton -100.107 .27.5391 -10.9743 -24.3335 5.882492 .S.43885 -26.6835 -22.9905
Gro,..mwofo.:iffue -64A768 36.0378 -8.38571 -3.1)6317 6230485 20.62096 -0.7932 4.64085
1
Growingoftol:ocro -79.0075 -7.05359 2921745 .Jl.20324 -7.63223 10.73018 -7.22741 -722953
Growing oftea -91.3677 10.11359 -3.69197 27.61014 23.71362 15.95283 9.00384 16.03413
Growingofcashewnuts -30.1179 -0.06402 -1.03854 9.08911 I 28.9654 11.43048 25.92121 23.67743
Growingofsisal firnP -72.3735 -2.48064 -2.95597 -2.93614 -328935 5.565117 -2.69795 -3.f>Af,77
Growin.,.ofcoconuts 4.44426 0204847 I1.70114 0.181006 1.843067 0.579302 0.38945 0.481553
Growing ofsugarcane -30.9993 -0.66336 36.40375 1246345 21.64799 20.7P>789 1023578 8.399107
Growingofumanas -9.60964 4.312781 37.73684 21.90071 21.87379 13.74588 12.6069 16.53498
Growine:ofcxher fiuits -30.8676 4.824464 27.90954 20.56348 20.30008 1328627 1228624 15.8292
Growing ofother
~ -15.0676 37.1305 -273197 23.16114 35.05503 27.51105 22.36229 22.78271
Growing ofother oil
0 4.75 3.0914 19.81 6.282 27.3 2306 24.725
""'"
Growing ofothercrops -13.447 4.02861 4.26855 0.517304 0.09092 2.744314 -0.96067 -1.62643
- ---------,--
226 Liberalizing Agricultural Trade: Issues and Options ...
mo -,, -v.. -0.
=··
Fiinng rux!fuh £nm -25.5025 4.58646 10.83366 1.607082 -5.11609 -6.68347 24.91912 19.IITT83
Olherfunning ofaumru -353446 'L""u041 13.04053 17.48712 70.67054 14.52073 0.9".ll404 231S!I054
HmJmg ruxi gane
~m -149979 17A136 9.81639 24.54634 36.87073 24.58492 8.0llJ666 10.162)6
F<=try md Joggmg -162482 -0.30%7 17.65782 10.92169 15.85611 24.01&36 397IB3 5.905244
Qwnyingofstrne,
clay aid sand -229274 2764292 17.13166 1289579 11.63089 10.96SQ9 4.070559 1.736985
Exlractionofsalt -22.7613 3.578884 19.08544 13.866 1228!Xi9 11.92497 4.824269 2.447689
Minmg of g=tooe; -7.38714 28662 -205014 13.45618 1249935 11.56508 14.30133 I.w7389
Otha' mirung md
q.ary;ng -25.9718 -1.72453 -1.86433 -1.87671 9.869167 10.46566 -1.80124 1984051
~igofm::at
ruxidruryc
JXru -64.264 4.38041 -6.53318 •7.6033 -9.04383 -11.299 -5.00492 -6.16417
--
Mamfucfureofpclpm
-67.8W3 -1.67313 -163406 44.54357 16.14412 -4.76614 -13.6708 -103217
PrnEng ruxi publilrung -54.051 -12.3404 -'JA.7g]5 -23.1996 -16.4791 -18.13'.L! -20.864 -30.4855
M•mfudu.mtbs
ruxi iro:blrial cl=icaJ, -353719 -49.6915 -47.4209 429606 -9.44517 -47.73Cf7 -50.7053 -533986
Mmfidu'ootfutili=
eni .--:ticide -34.8688 -57.4469 -529422 -53.0SH -59.6786 -57.4191 -573703 -57."lfl
Pruolrumdinailclay -75.563 -17.1858 -15.()()89 -5.16739 9.074014 -13.0759 -9.68927 -7.63335
Pn=singofnoo,
sta:larrlnoo-temx.is
mi '
~,;,.,,,,.,,
49.9928 -24.0491 -21.5378 -20.9143 -220558 -21.2363 -224268 -228255
Mlnulirueof
ebkai~ -325659 -38.4459 -36.4016 -34.8699 -33.9577 -35.4908 -35.4356 -35.837
Mlnulirueof
-31.8713 -36.4312 -35.7502 -33.8179 -21.5407 -37.3CJ79
-~
-35.501 -329189
O Fruits, nuts, Jruit peel 1994 0-25 18
l qgn fl-? 'l 17 6 10 0
1998 0-21.7 15.4 10
200> Fruit iuices 1994 19-42 30.5
1996 J7-j9 28 100
200919 Orange juice 1998 14.5-36.4 25.5 100
""""' Pineapple Juice ,,,. 16.5-,0. I ~t.7 lO
Source: UNCTAD TRAINS.
255
tariff reductions will erode the advantage it has against non-preference
receiving countries. Since Ghana is unlikely to be able to Stop the process
of tariff liberalisation it should negotiate for a reduction in any domestic
support measures that may discriminate against foreign goods but tend
to favour domestic producers. A second reason for Ghana to support
any proposals for the reduction in domestic support measures is that the
domestic support provided by other countries to products Ghana exports,
gives these countries an undue advantage in third countries.
The trade regime of the Lome Convention was not consistent with
the WTO rules. The issue of compatibility with the WTO was addressed
in the Cotonou Agreement of 2000. It was agreed thatnegotiations for
Economic Partnership Agreements should titlce place between September
2002 and January 2008. Under the Economic Partnership Agreements
obstacles to trade between the EU and the ACP countries will be removed,
i.e. there will be a shift to reciprocal preferences in contrast to the current
non reciprocal arrangement. This changed arrangement has significant
implications extending beyond Ghana's agriculture sector. With this
ahead, discussions on reducing domestic support measures in the current
trade negotiations become even more crucial as under the Economic
Partnership Agreements, imports from the EU will have an undue
advantage if domestic support measures are not reduced substantially at
the same time that Ghana removes duties on imports from the EU.
Non-Tariff measures
Except for bananas, tomatoes, coffee, cassava processed fruit, fish and
fish products, Ghana's agricultural exports are not subject to non-tariff
measures in the EU (Table 7.19). From the discussions with staff of the
Ghana Export Promotion Council and the Ministry of Trade and Industry
non-tariff barriers are the main barriers to entry into the major markets.
One concern is with the costs that these barriers, in particular the SPS
measures impose on export.,rs. There is the fear that increasingly health
and quality standards will become trade control measures and not merely
measures to protect the life and health of plants, animals and people.
The Perspective of E:worters: A limited survey was conducted of
producers/exporters of agricultural products. The export items covered
by the survey were pineapples, papaya, assorted vegetables, yam, cashew
nuts and pifieapple juice. Except for the yam and cashew nut exports
256 Libera/i.zing AgTicu/tuTal TTade: Issues and Options ...
that were sent to the US market, the exporters of fruit and vegetables
were concentrated in the EU market.
S()me of the exporters to the EU market commented that quality
considerations had become increasingly important in the mid-l 990s. In
tl.e case of pineapples for example buyers were becoming more particular
about the minimum residual level of pesticides in the fruit. UK buyers of
papaya regularly inspected the facilities and conditions under which the
workforce operates in order to ensure that work and production
conditions meet their specifications. The exporters attributed the growing
concerns about quality to the rising competition in the fruit market and
the need for buyers to maintain their share of the domestic market. They
did not all perceive the quality requirements to be a problemu One
producer/exporter was. installing a new factory to ensure that quality
requirements were met. All exports require a phytosanitary certificate
issued by the Ministry of Food and Agriculture and for exporters to the
EU, a form had to be completed which would allow them to benefit
from duty-free entry.
7.11.2 Import Policy
Taxes on international trade are the only significant source of indirect
price support received by the agriculture sector: The WTO rules allow
countries to provide domestic support without any limit if this support
does not distort trade and falls into the Green Box category of support
such as extension services. In Ghana, government support is limited.
Tariffs are a subsidy to the producer and a tax on consumers. A further
decline in import tariffs would reduce the indirect subsidy received by
agriculture. Some crop and livestock producers would find it difficult to
compete against imports (often subsidized), and this could increase the
reliance on imports Further, liberalisation may not be an optimal strategy
to pursue from a food-security perspective.
Trade taxes are not the best way to achieve an increase in production.
However in the absence of production and input subsidies and other
measures to support production, trade taxes may be considered a second-
best alternative. If further trade liberalisation is to be implemented, it is
imperative that other support measures be introduc.ed to enable domestic
producers compete with imports coming from countries that provide
their farmers with substantial support 12 • An alternative argument is that
the US and EU are unlikely to reduce significantly their support to
agriculture. If the effect of the actions of these countries is to reduce
Ghana 257
world prices, the low world prices of food imports would benefit
consumers. On the other hand, allowing cheap food imports into the
country could increase rural poverty (whilst proving beneficial to net
food purchasers) especially if alternative forms of rural employment are
not immediately found.
In government consultations with stakeholders in agriculture
conducted in 1995, it was recommended that subsidies be provided the
agriculture sector in order to increase production. A portion of the cocoa
revenue could be allocated to provide a 20% fertiliser subsidy over a 5
year period. It was estimated that the subsidy would cost approximately
US$5 million per annum. Tue advantages of such a measure would be
the increase in agriculture production, reduced feed costs to the livestock
and fish industry as prices fell and the resulting increase in the production
of these sectors. These benefits would have to be weighed against the
loss of part of the cocoa revenue to government.
The degrees of freedom available to Government on the issue of
subsidies are not dictated by WTO rules but largely by the requirements
of the IMF and World Bank agreements and budgetary considerations.
Its obligations with these institutions make it difficult for Ghana to take
advantage of some of the provisions in the URAA.
7.11.3 Export Policy
The possible option for further liberalisation within the cocoa sector is
the increase in the share of the world price received by farmers. In 1998
farmers received approximately 59% of the f.o.b price. This is more
than the target of 55% that was recommended in a consultation with
stakeholders in the agriculture sector. In deciding to liberalise the cocoa
sector with an increase in the farmer's share of the world price, it is
necessary to consider possible repercussions on world prices and the
national budget. An increase in the farmer's share of the world price, if
it is accompanied by an increase in the real producer price of cocoa, will
generate an increase in supply and could encourage the planting of new
trees. Ghana is no longer the world's largest exporter of cocoa beans
and comes a distant second to Cote d'Ivoire in the EU market supplying
not more than 20% of that market. The impact on world prices of an
increase in cocoa bean exports from Ghana may therefore not be very
large, but could still put some downward pressure on prices. Cocoa tax
revenue does not account for more than 20% of total central government
· revenues. A decline in government's share of the world price may not
-------- ----
258 Liberalizing Agricultural Trade: Issues and Options ...
dent revenues to any large extent especially if alternative sources of
revenue generation are tapped. Thus the possibility of liberalising the
cocoa trade regime exists but the benefits of increased real incomes to
farmers in the short run need to be weighed against the possible downward
pressure on world prices and impact on the budget.
The producers/exporters interviewed were not overly concerned about
export taxes. Their preference is for non-price assistance to deal with
the problems such as freight charges for the shipment of pineapples
from Ghana being higher than in Cote d'Ivoire. The larger export volumes
from Cote d'Ivoire, making it possible to take advantage of scale
economies, and higher port charges in Ghana were cited as the causes
of this. The potential to increase production and export of fruits exists,
however some entrepreneurs mentioned that there is a lack of labour
with skills to manage the production of horticultural products. There is
inadequate scientific support to analyse and advice on plant disease. In
some years production and export is low because the crop has become
diseased at1d producers claim that there is inadequate support from
research laboratories to help them deal with these problems. Inadequa{e
storage facilities at the ports and poor road infrastructure contribute to
undermining the quality of the product before it gets to its fmal destination.
7.11.4 The New Issues
Investment Policy
Ghana would like the WTO to set rules that are explicit about the
obligations of the recipient countries and investors. The rules, however,
should not infringe on a host country's capacity to decide where
investment flows should go. Discussions on the rules regarding
investment policy should be guided by the links between development
and investment. Within Ghana, further work needs to be done on the
analysis of the implications of negotiations on an investment policy in
WTO. Thus at the international level, the negotiations should not be rushed
in order for there lo be a full appreciation of what is being agreed upon.
Competition Policy
Ghana is in the process of putting together a restrictive business practices
law. Its concern with discussions on competition policy in the WTO is
the fear that the OECD multilateral agreement on investment will not be
a negotiating framework, but may be imposed on countries. Its view is
Ghana 259
that the WTO negotiations should focus on introducing rules that will
allow countries to monitor the activities of transnational corporations.
This is to reduce the incidence of restrictive business practices amongst
these entities, such as collective bidding.
Environment Issues
A major concern for Ghana is the costs accompanying the introduction
of environmental measures and how the burden of costs is to be
distributed. The fear is that the costs of implementing environmental
measures may result in some of Ghana's products becoming
uncompetitive. Resources will have to be provided to assist in the
development in environment friendly technologies.
Intellectual Property
Ghana had until December 1999 to meet its obligations and commitments
under the TRIPs agreement. The copyright law has be.en updated to
conform to the rules of the TRIPs. A problem with attempts to monitor
the infringement of copyright laws is the lack of basic infrastructure,
such as computers and vehicles. It would be in Ghana's interest as well
as in the interest of other developing countries to lobby for firmer
commitments from the industrialised countries that have been
championing the cause of TRIPs to provide resources to developing
countries to enable them meet their obligations.
7.11.5 Policy Lessons and Recommendations for the Current WTO
Round
Ghana has made more headway (albeit within the context of the structural
adjustment programmes) in liberalising the agriculture sector than have
many other developing and industrialised countries. The experience of
Ghana's agricultural liberalisation is pertinent for other countries even
though it was not implemented as part of its URAA commitments. The
main lesson from Ghana is that as government withdraws from certain
activities, it must ensure 1hat the private sector is in a position to effectively
fill in the gap left by government. For developing countries in particular,
this suggests that the liberalisation process should not be rushed. It is
important that the process is sustained so as not to create time consistency
and credibility problems. The private sector's capacities must be assessed
and analysed and the information obtained used to design the liberalisation
strategy.
260 Libera/bing Agricultural Trade: Issues and Optums ...
The agenda· of the current negotiations mnst include sessions on
assistance to developing countries that need to invest substantial resources
in order to implement the Uruguay Round Agreements. If the objective
of a development round is to be achieved then commitments need to be
made by developed countries to support countries such as Ghana in
tackling the problems associated with implementing and complying with
the SPS and TBT Agreements. Agriculture still constitutes a significant
share of exports and employs a majority of the population. These
arrangements now appear critical to ensuring that Ghanaian agriculture
remains competitive. In addition, the proposed expansion in the production
and export of agro-processed products will be handicapped if Ghanaian
producers are not able to meet minimum international standards of
production, packaging and labelling.
In the new round of trade negotiations Ghana's interests lie in improving
market access conditions for its exports of interest. A two-pronged attack
needs to be adopted. This wonld require agreeing to limited reductions in
tariff rates in order to reduce the erosion of preferential tariffs. Deep
cuts in tariffs would hurt Ghana for two reasons. The tariff cuts would
erode its preference margins. Second, tariffs are the only significant
price support (although indirect) that Ghana's farmers have. Reducing
tariffs, given the constraints to increasing otherforms of support because
of budgetary considerations could hurt farmers and have adverse
implications for food security and rural employment.
The second prong of the attack is to support coalitions that press for
reductions in domestic support measures. These discussions are important
for Ghana not only in the WTO but also in the current negotiations with
respect to the Economic Partnership Agreements with the EU.
Ghana needs more time to be able to analyse the short to long run
implications of any proposed rules. Since Ghana has made much more
progress in liberalising the agriculture sector than have many other
countries, its concerns should be on how it can improve upon agriculture
yields and productivity. If indeed the WTO negotiations are to provide
benefits for developing countries the emphasis should not be only on the
establishment of rules but also in assisting the developing countries adjust
to the new rules and increase their production and incomes.
There are several domestic constraints that ma'ke participation in the
talks and implementation of the various agreements difficult. A great deal
of effort needs to be made for staff of the ministries, departments and
agencies to be informed about the WTO agreements. There does not
appear to be enough co-ordination between the Ministry of Trade,
261
responsible for the WTO and the other ministries and departments that
have to institute the changes that the Agreements reqnire.
The second constraint is the relationship with the Bretton Woods
institutions (the IMF and the World Bank). The conditionalities of the
agreements made with these institutions can act as a constraint on the
ability to negotiate within the WTO and take advantage of provisions in
the WTO agreements.
The third constraint is the limited number of personnel in Geneva to
actually participate in the discussion of issues pertinent to Ghana.
Implementation of the agreements' requirements will be enhanced if
personnel in the implementing institutions are able to participate in the
negotiations. The Ministry of Trade personnel may not have the necessary
competencies to negotiate on issues related to technical barriers to trade
and sanitary and phytosanitary measures. If however there is qualified
personnel from the relevant section of the Ministry of Agriculture also
participating in the negotiations, the negotiating strength of the Ghana
team will be improved and the concern about the flow of information
will be addressed. Limited resources are a major reason why there is
only Ministry of Trade personnel participating in the multilateral trade
negotiations. The WTO agenda should therefore also include a session
on the funding of developing country participation as a means of avoiding
their marginalisation in the discussions.
End-Notes
I. Forestry and logging includes activities such as timber felling,
planting and replanting of trees, transportation of logs up to
permanent transportation links, gathering of uncultivated materials
and charcoal burning in the forest.
2. Traditional exports are exports of cocoa beans, timber, minerals
and electricity. Non-traditional exports are all others.
3. A special import tax of 20% was introduced in April 2000 and is
applicable to about 7% of tariff lines. This tax was imposed in the
aftermath of a decline in the terms of trade in an attempt to stem
the demand for foreign exchange.
4. Unprocessed goods from within ECOWAS with an ECOWAS
Certificate of Origin are expected to enter duty free.
5. This section depends heavily on discussion provided in Helfand
and de Rezende (200 I.
6. Rice, maize and millet are produced for own consumption and for
sale. The response to changing incentive structures is likely to be
262 Libera/izing Agricultural Trade,. Issues and Options ...
determined by the extent to which farmers produce for the market
and the extent to which they utilise marketed inputs.
7. It was anticipated that liberalisation of agriculture under the URAA
would cause international food prices to decline. This did not happen
to the extent anticipated. In retrospect this is not surprising since
the extent of liberalisation was lower than anticipated (Diakosavvas,
2001; Ingco, 1996) ..
8. The US claim is that Ghana has an insect that it does not want to
enter its territories. The insect feeds internally in the yam, hence
the need for fumigation.
9. In 2002 there were 74 refusals of imports of food and drugs into
the United States.
10. The first set of products was obtained from the Ministry of Trade
and Industry. The additional products were obtained from the Ghana
Export Promotion Council.
11. There is a sample selection bias here. Those exporters who cannot
meet the quality standards will probably drop out of the market.
12. This is not a feasible scenario since there is an urgent need to
increase revenues.
References
Assuming-Brempong (1994) Effects of Exchange-Rate Liberalization and
Input-Subsidy Removal on the Competitiveness of Cereals in Ghana
in S. Breth (ed) Issues in African Rural Development Vol. 2 ARPAN
Proceedings.
Diakosavvas, D. (2001) 'The Uruguay Round Agreement on Agriculture
in Practice: How Open are OECD Markets?' Paper presented at
the World Bank Conference "Leveraging Trade, Global Market
Integration, and the New WTO Negotiations for Development"
Washington D.C.
Helfand, S.M. and G. Castro de Rezende (2001) "The Impact ofSector-
Specific and Economy-wide Policy Reforms on Agriculture: The
case ofBrazil, 1980-1998" University of California, Working Paper
No. 01-34, Riverside.
Henson S.J. , R.J. Loader, a. Swinbank, A. Bredahl and N.Lux (2000)
Impact of Sanitary and Phytosanitary Moosures on Developing ~
Countries, Department of Agriculture Economics, University of ·.;
Reading, Reading.
Ghana 263
Ingco, M. (1996) 'Tariffication in the Uruguay Round: How
Liberalisation?' 1he World Economy, Vol. 19, No.4, pp.425-446.
Seini, AW (2002) Agricultural Growth and Competitiveness under Policy
Regimes in Ghana ISSER Technical Paper No.61, ISSER,
University of Ghana, Legon.
Seini, A.W., Y. Asante, V.K. Nyanteng and G.K. Mensah (2000)
Competitiveness in the Agricultural and Industrial Sectors in Ghana,
ISSER, University of Ghana; Legon.
Index Amberbox 104, 124
Acceptance of code of good practice 199 Applied tariff 129, 147, 234, 235.
Acquired Immune Deficiency Syndrome Antidumping actions 148
(AIDS) 9, 28 Arable land 138, 186, 230
African Caribbean and Pacific (ACP) 14, Argentina 117
98, 119, 163, 255 Australia 117, 118
African Caribbean and Pacific European Average MFN Rates 15
Union (ACP-Eu) Group 72, 98, 119, Average tariff 13, 14, 26, 100, 122, 123
163, 164
African Development Bank 39 Barbados 180
African Economic Community (ABC) BankofTanzania 185, 188
163 Base period 17, 24
African Economic Research Consortium, Base tariff 234
(AERC) 1, 3, 8 Belgium 244, 246
African Growth Opportunity Act Benin 143, 163
(AGOA) 14 Bilateral Trade Negotiations 97
African phytosanitary council 235 Blue Box 104, 123, 204
Aggregate Measurement of Support Borderprices 21,23,237
(AMS) 2, 27, 165 Border price ratio 23
Agreement coefficient 109 Border protection 231
Agreement on Agriculture (AOA) I 02, Botswana 17, 180
104, 106, !'07, 108, 114, 115, 116, Bound tariffs 6, 103, 146, 234
118, 122, 125, 138, 141, 142, 149, Bound tariffrate 26, 147
156, 166, 187,200,202,211 Brazil 25
Agricultural commodities 99, IOI, 112, Bretton Woods Institution 261
114, 115, 121, 129, 135, 139, 140, Budgets 6, 142, 149, 179, 198,200,201,
143 247,258
Agricultural Development Projects 151 Budgetary surplus 59, 62
Agricultural exports 9, IO, 36, 39, 117, Bulgaria 163
138, 142 Bureau of statistics 190
Agricultural growth rates 230
Agricultural imports 138 Cairns group 66
Agricultural inputs 113 Caisse de Stabilisation 23
Agricultural negotiations 13 7 Cameroon 2, 4, 7, 35-39, 43-45, 52, 56,
Agricultural policies 3, 19, 20, 39, 144 63, 65-67, 71-75, 85-88
Agricultural policy reforms 2, 99 Cameroon's agricultural exports 56, 57,
Agricultural prices 237 67
Agricultural producers 99, 152 Cameroon's unilateral Hberaliw.tion 57
Agriculturalpr0duct 4,5, 12, 13, 14, 16, Cameroon development corporation 43,
40, 117, 122, 236, 243 44
Agricultural production 107-114 Cameroon's agricultural products 48
Agricultural sector 20, 36, 39, 49, 57,59, Cameroon's non~oil exports 56
99, 107, 126,142, 144, 164, 167, 183, Canada 11, 14, 25, 29, 98, 117, 246
191,230,233 Cash crops 114, 189, 191, 195
Agricultural Sector Adjustment Program Cashew Marketing Board 197
(ASAP) 52 Cassava leaf exports 249
I Agricultural tariff 52 Ceiling bindings 17
264
!
Index
265
Central African Economic and Custom Debt 9, 122
Union 52 Deficit regions 193
Central African Monetary and Economic Delmonte 43
Community(CEMAC) 58,59,62,63, Demand block 90
65, 72,74,93 Demand balance 214
Centra!BankofNigeria(CBN) 144, 152, Development box 6, 27, 121
167 Distort market price 23
Cereal authority 39 Doha development agenda I, IO, 26, 28,
Cereal yields 189 137
China 163, 246 Doha development round 10, 26, 30, 35,
,
C.l.F. borderprices
. .
Coastal pnces 23
237 71, 97, 127, 137, 164, 183,229
Doha WTO Ministerial Conference 30
Cocoa Board 231,232, 233 Domestic agricultural policies 232
Cocoa smuggling 143 Domestic commodity prices 114
Cocoa tax revenue 257 Domestic currency 213
Codex Alimentarius Commission 150, Domestic demand 214
213 Domestic food security 247
Commodity Board Era 144 Domestic food supply 189
Common External Tariff (TEC) 63 Domestic import 246
Common market 100 Domestic incentive regime 4
Common Market for Eastern and Domestic industries 189
Southern Africa (COMESA) 14, 98, Domestic market management I 03
116, 118, 119, 202 Domestic policy 4, 9, 57, 237, 238, 241
Competition policy 258 Domestic price 21, 29, 47, 114, 126,
Computable General Equilibrium (CGE) 139,237
89, 213 Domestic price index 208, 237
CGE model 89, 93, 207, 211,220 Domestic production 141, 247
Congo 17,65,67,83,84,86 Domestic reform 3, 29
Constant Elasticity of Transformation Domestic Resource Cost (DRC) 192
(CET) 214 Domestic supply 23, 247, 248
Constant Elasticity of Substitution (CES) Domestic support 1, 5, 6, 7, 25, 26, 30,
214 52, 57, 73, 97, 104, 107, 123, 124,
Consumer price index 213,215,216,237 126, 146, 149, 155, 158, 165, 166,
Cote d'Ivoire 18, 180, 257, 258 175,229,233,255
Domestic trade policy 4
Cotonou Agreement 2, 14, 16, 52, 67,
120, 163,187,199,206 Douala port 45
Cotton and Lint Marketing Board 197 Draft final act 205
Credit financing 151
Crop boards 194 East African Community (EAC). 98, 100.
Crude oil 163 116, 119, 127, 187
Custom duty 147, 148, 179, 232 East African Custom Union 127
Custom evaluation 235 Economic Community of West African
Custom duty drawback scheme 23-2 States(ECOWAS) 14, 146, 163, 164,
Currency reteption scheme 168 253,261
ECOWAS market 253
Dairy products 156, 158 Economic survey 116, 117, 118
Dakar 45 Economic Partnership Agreement (EPA)
16, 255, 260
266 Liberalizing Agricullural Trade: Issues and Options ...
Economic recovery program 194 Export restrictions 231
Economic reforms 139 Export subsidies 3, 4, 5, 6, 7, 24, 25, 27.
Edible fruits 231 52, 73, 97, 103, 106, 107, 122, 123,
Effective Protection Coefficient 239 124, 146, 149, 155, 159, 166, 175,
Effective rates 153 199, 205, 232, 233
Effective Rates of Protection (ERP) 51, Export taxes 43, 231
58,152,153,154,174,202,224,225, Export trade regimes 231
239,241 External balance 214
Economic recovery program 193, 194 External markets 153
Endogenized foreign exchange rate 208 Export volume 243
Endogenous variables 93, 215
Empirical analysis 237 Fair Trade Practices Act 191
Equatorial Guinea 67 Farm credit 43
Equilibrium bloc 92 Farm gate prices 232
Estimated of Rev_ealed Comparative Farm holdings 139
Advantage, 252 Farm inputs 99
European markets 55, 56, 196 Farm planning services 104
EuropeanUnion(EU) 11, 12,24,25,29 Farm profit 19
31, 52, 67, 98, 116, 118, 121, 155, Farmers 19, 37, 39, 105, 114, 121, 139,
158, 159, 187, 203, 239, 243, 246, 142, 143, 151, 191, 197, 230, 231,
251 232,247
EU export subsidies 177, 178 Federal Environmental Protection Agency
European union market 120, 196, 253, (FEPA) 150
254,256,257 Federal Superphosphate Fertilizer
EU's Lome Convention 214 Company 151
EU market duty free 253 Fertilizer 40, 113, 139, 140, 144, 148,
Everything But Arms (EBA) 14, 16 151, 186,197,230
Exchange rate 144 Financing of Investment in Community-
Exogenous change 215 based Micro-Agricultural Projects
Exogenous variables 94 (Fl11AC) 39,43,44
Explicit tax 19 Finland 196
Export 116-7, 139, 242 Fiscal balance 214
Export credit guarantee 168 Fiscal policies 145
Export crops 19, 22, 112 Fish industry 203
Export earnings 36, 189 Fisheries 230
Export incentive schemes 167, 168 Fixed dried tax rates 215
Export licenses 49, 168 F.o.b. price 22, 257
Export market 188, 229 Food aid import volumes 247
Export policy 257 Food and Agriculture Organization (FOA)
Export prices 49, 168 36,38,122,155, 186, 192,205,235
Export price adjustments 168 Food balance 193
Export processing zone 168 Food budget 247
Export prohibition lists 169, 170, 173, Food crop 107, 189, 191, 193, 198,230,
174 232,240,241
Export promotion 232 Food security 2, 5, 25, 37,39, 57, 59, 60,
Export promotion department 197 69,74,192,247
Export promotion scheme 188 Food exports 141
Index 267
Food import 37, 141,245,249 253,255,262
Food import bill 141, 188, 204 Ghana food distribution corporation 232
Food import-eXport gap 141 Ghana's agricultural exports 242, 253
Food insecurity 2, 37 Ghana's agricultural imports 244, 245,
Food production 141, 240 246
Food security 29, 71, 142, 149, 166, Ghana's agricultural trade 242
183,187,199,205 Ghana seed company 232
Food security indicators 249 Ghana statistical services 244, 246
Food security issues 7, 121, 247 Ghana's major agricultural imports 245,
Foocl security perspective 256 246
Food sector 138, 142, 188 Ghana's major trading partners 246
Food trade balance 248, 249 Ghananian emigrants 232
Foodstuff development authority 39 Global agricultural export IO, 29
Foreign currency IOI, 237 Global System of Trade Preference
Foreign exchange IOI, 102, 117,248 (GSTP) 146, 163
Foreign exchange act 194 Green box 6, 73, 104, 120, 121, 122,
Foreign exchange bureaus 194 123, 124, 158
Foreign exchange crisis 188 Green box category 158, 256
Foreign exchange earning 138, 194, 197, Gross Domestic Product (G.D.P) 24,
230,232 25,36,37,59,62,67,102, 107,138
Foreign exchange rate 208 183, 189,208,209,230 '
Foreign exchange retension 99
Foreign Input Facility (FIF) 168 Hazard Analysis Critical Control Points
Foreign price 237 (HACCP) 120
Forestry 80, 230 Herbicides 186
France 163, 196, 246 Household welfare variation model 92
Free market forces 144 HS code 231
Free market system 23 HS commodity codes 246
Freeport authority 200 Husbandry practices 185
Freeport zones 200
Fumigation process 249 Implicit tax 19
Import 117-8, 139, 245
Gabon 65,67,83,86 Import certificate 148
General Agreement on Tariffs and Trade Import cost 27
(GAIT) 1, 3, 8, 18, 31, 67, 97 Import demand 214
General equilibrium analysis 58 Import duties 187, 231
Generalized System of Preferences (GSP) Import licensing system 231
!, 2, 14, 72, 98, 120, !63, 187, 199, Import policy 256
206 Import prices 27, 114
General Algebraic Modeling System Import prohibition list 170, 171, 173
(GAMS) 220 Import restriction 231
Ghana, 2, 5, 6, 18, 229, 230, 232-236, Import tariffs 103, 114, 231, 236
239-246, 248, 249 ,251, 253, 255-262 Import tax 236
Ghana cotton company 232 Import trade regime 236
Ghana export promotion council 243, Import volume 245
268 Liberali,;ng Agricultural Trade' Issues and Options ...
Incentive structure 236, 241 Kenyan shillings 109, 110, 111, 112, 113,
Income tax rebate scheme 232 114, 127
India 204 Kenya's economy 126
Industrial crops 107, 110, 114 Kenya's exports 115, 116, 117, 126, 132,
Industrial crops prices 110 134, 135
Informal trade 187 Kenya's food imports 121
Infrastructure 19, 47, 57, 67, 122, 126, Kenya's imports 118, 133
139, 149, 151, 166, 189, 193, 194, Kenya's trade 118
202 Kenya's trade policy 97
Input prices 113 Korea 158, 163
Input policy 40
Input subsidies 232, 233 Landact 191
Insurance scheme 168 Lake Victoria 203
Inter African phytosanitary council 235 Latin American countries' price bands 31
Institution block 214, 218 WCs benefit 16
Intellectual property 259 LES utility 214
Internal trading system 189 Livestock marketing board 232
International community prices 184 Livestock products 107
International Food Policy Research Local market taxes 191
Institute o;FPRI) 207, 220 Lome agreement protocols 16
- International inflation index 237 Lome convention 52,67, 117, 119, 163,
International market 122, 142 187, 199, 206
International Monetary Fund (Th.fF) 12, Logistic support 230
22,62, 183, 199,235,257,261 Logging 230
International Organization of Standardi- Luxury goods 231
zation 150
International Plant Protection Convention Macroeconomic balances 214
(IPPC) 203, 213 Macroeconomic policies 19, 23, 37, 45,
International price, 237, 238 52, 99, 145, 237
Investment policy 258 Malawi 220
Italy, 204 Market access 1, 2, 5, 6, 9, 10, 17, 25,
30, 35, 52, 56, 71, 73, 97, 103, 107,
Jamaica 163 116, ll8, 120, 123, 126, 147, 155,
Japan 11, 14, 25,30,98,116, 117, 120, 164, 165,204,233,253
155, 158, 159, 196,204,206 Market reforms 99, 107
Japan market 120 Marketing board 23, 143, 194, 197
Marketing prices 144
Kenya 2, 5, 97-98, 102-107, 109-127, Marrakech agreements 199
189 Marrakech decision 74, 122
Kenya co-operative Creameries mono- Marrakech declaration 107
poly, 101 Medium-size landholders 139
Kenya Dairy Board IO I MERISSA program 207
Kenya statistical abstracts 105 MFN (Most Favored Nation) 4, 20, 31,
Kenyan farmers 114 165
Kenyan pounds 105, 132, 133, 134, 135 MFN preferential margin 15
Kenyan products J 16 MFN rates 12, 13, 15, 31
MFN duty rates 254
Index 269
MFN tariff reduction 255 Nigerian cocoa board 143
Minimum price scheme 232 Nigerian cotton board 143
Mining and quarrying 154 Nigerian Institute of Social and Economic
Ministry of Agriculture and Cooperatives Research (NISER) 144
194,200 Nigeria palm produce board 143
Ministry of Food and Agriculture 256 Nigerian rubber board 143
Ministry of Trade 179 Nigeria's agricultural trade policies 142
Ministry of Trade and Industry 253, Nigeria's export 140, 141, 153, 155, 167
255,262 Nigeria's import 141, 169
Model description 207 Nigeria's interest and options 164
Model equation 217 Nominal border price 237
Model result 209, 210 Nominal coefficient 114
Model structure 80 Nominal exchange rate 237
Monetary policies 145 Nominal rate 45, 152, 153, 237
Multilateral liberalization 65 Nominal prices 237
Multilateral trade negotiations 26, 183,. Nominal ·protection 236
199,206 Nominal protection coefficient 114, 115
Multilateral trade system 1, 10, 98, 137, Nominal Protection-Rates (NPR) 20, 21,
186 224
Nominal tariff rate 152, 153, 154, 236
Namibia 17 Non-automatic licensing 233
National Agency for Food, Drugs Non-Governmental Organization (NGO)
Administration and Control 39
(NAFDAC) 148, 150 Non-traditional exports 116,. 117, 184,
National Agricultural Land Development 186,232
Authority 151 Non-Tariff Barriers (NTBs) 2, 4, 16, 17,
National Cer"e~t Produce Board (NCPB) 18, 19, 44, 47, 49, 56, 72, 104, 115,
21, 101, 114 119, 120, 125, 164, 165, 194; 195,
National Coffee and Cocoa Board 43 201,220,231,233,239
National consumer price index 191 Non-tariff measures 255
National Fertilizer.Corporation ofNigeria Nontrade concerns 37
151 non-trade distorting 124
National fertilizer program 40 Norway 98
National hazardous chemical tracking
program 150 Oligopolistic private buyers 186
National inquiry point 199 Oil boom 142
National Milling Corporation 195, 198 Oil palm production 241
National plant quarantine service 150 Orgariization of Economic Co-operation
National produce marketing board 43 and Development (OECD) 25, 26,
National rural development fund 40, 44 66, 155, 165,204,205,258
Negotiable duty credit certificate 149 Other Duties and Charges (ODC) 18,
Neoclassical macroeconomic closure 219 31,234
Netherlands 163, 196, 204, 246 ODC rates 18, 25, 31
Nigeria 2, 6, 137, 138, 141, 142, 146-
152, 156, 159, 163-170, 232 Pakistan 246
NigCrian Agricultural and Cooperative Partial equilibrium analysis 52
Bank (NACB) 145, 152 Perennial agriculture 36, 60, 80
-- I -
270 Liberali;jng Agricultural Tratk: Issues and OptWm ...
Plant quarantine legislation 235 Real nominal rate 44, 46
Poland 158 Real prices llO, Ill, ll2,238,241
Policy reforms. 100, 102, 198 Real wholesale prices 238
Post-harvest losses 233 Refmancing and Rediscounting Facility
Post-UR ad-va/ore.m tariffequivalent 240 (RRF) 168
Post-Uruguay 12 Regional analysis 63
Post-Uruguay Round 4, 40, 41, 155 Regional fiscal reform program 52
Post-Uruguay tariff rate 29 Regional integration 5, 35, l 86
Poverty 9, 10, 29, 98, 138, 142, 166, Regional protection I 5
183,i92,229 Regional protocols 186
Pre-agreement period 117 Regional trade blocs I S6
Pre-reform years 1187 Revenue/saving block 89
Preferential margins 16, 30 RiVer basin development authorities 151
preferential rates 15, 30 Rural employment 257
Preferential treatment I, 3, 14, Rural farmers 207, 209
Perennial agriculture 36, 51 Rural infrastructure ·23, 37
Prices block 91, 213, 217 Rural poverty 9, 29, 36, 257
Price control 48, 50
Priceincentives 114,237 Safeguard action 5, 161,202
Price indices 113 Safeguard measures 124, 141, 147, 158,
Price instability 112 165, 235, 255
Price stability I 09 Sales tax schedule 236
Pricing policies 19 Sanitary and Phytosanitary Standards
Private prices 239 (SPS) 3, 4, 5, 25, 27, 44, 104, 120,
Private sector 6, 23, 51, 57, 98, 99, 101, 125,203;206,229
204 SPS agreement 72, 104, 199, 249, 250,
Produce buying company 232 260
Producer price 46, IOI, 114, 143, 144, SPS measure 3, 56, 107, 126, 149, 187,
184, 186,190,237,238 203, 213, 249, 250
Production block 89, 217 Simulation 207, 208, 209
Pyrethrum prices 110 Sisal marketing board 197
Pyrethrum board's factory 195 Sisal prices 110, 184, 185
Pyrethrum extract 111 Slovak republic 158
Pyrethrum marketing board 197 Smallholders 139, 230
Smallholder farmers 20, 183
Quad II, 12, 13, 14,25 Social Accounting Matrix (SAM) 207
Quad countries 12, 29 SADECAO 40
Quantitative restrictions 5, ·so, 148 SODECOTON 40,43
Quarantine check list 235 South Africa 17, ll 7
Quota fill rates 156, 158 Southern African Custom Union
Quota tariff 234 (SACU) 17
Southern African Development
Rain-fed agriculture. 139 Community (SADC) 187, 207
Real ·domestic prices 237 Special and Differential (S&D) Treatment
Realexchangerate 237,238 l,25,29,36,69,107,137,203
Real international price 237, 238· Special safeguard 6, 57, 72, 123, 165,
187
Index 271
Structural Adjustment Programs (SAPs) Tea marketing board 197
I,3,20,50,57,98,99,102,104,109, Techriical barriers 3, 56
115, 120, 127, 138, 139, 141, 142, Technical Barriers to Trade (TBT) 3, 4, .
143, 144, 145, 146, 166, 179, 183 25,27,30, 126, 149187,206,235
Sub-Saharan Africa I, 3, 9, 10, 16, 23, TBT agreement 260
26,28 Tobacco marketing board 197
Sub-Saharan Africa's agricultural exports Tokyo round 149, 165
10, 15 Total crop income ·191
Subsistence agriculture 36, 51, 60, 80 Trade and_excha:ngC rate policies 145
Subsistence farming 183 Trade barriers I, 165
Super sales tax 236 .Trade distortions 48
Supply balance 214 Ttade liberaiization 14
Swaziland 17 Trade negotiations 1, 2, 5, 6, 7
Swiss formula 6, 165 Trade policy 49, 142, 187, 194
Switzerland 98 Trade policy reforms ·10, 99
Trade policy regime 199
Taiwan 196 Trade preferences IO, 14, 15, 16
Tanganikyka 187 Trade regime I, 239, 253
Tanzania 3,4, 5, 117, 183-197, 199-207, Trade-Related Aspects on Intellectual
210-215 Property Rights (TRIPS) 25, 28, 30,
Tanzania investment centre 201 38,259
Tanzanian crops 192 Trade taxes 256
Tanzanfan shilling 211 Traditional exports 116, 117
Tanzanian Tea Authority 195 Transition box 27
Tanzanian's economy 183,212 Turkey 163
Tanzania's exports 185, 187, 204
Tanzania's import 196 Uganda 98, 117, 163, 187, 189
Tariff 44, 47, 50, 103, 146, 201 Unilateral agricultural trade policy 48
Tariff barriers 195 United Arab Emirates 196
Tariffbindings 4, 17, 18, 123 United Kingdom (UK) 196, 204
Tariff cut 208 United Nations Comtrade 11
Tariff escalation II, 13, 14, 25, 30, 56, United Nations Conference on Trade and
66, 71, 122,123, 156 Development (UNCTAD) 163 179,
Tariff lines 17, 155, 156, 160,231 205
Tariff margin 14 United Nations Development Program
Tariff peaks II, 12, 25, 71, 122, 123, (UNDP) 115
155,!56,159 United States 11, 12, 29, 98, 117, 118,
Tariff rates 17, 49, 52, 115, 165, 194, 121, 158, 159
231,239, 253 US exports subsidies 178
Tariff rate quotas (TRQs) 25, 68, 71, US market 156, 249, 256
156 Urban farmers 207
Tariff reduction 6, 18, 115, 187, 206 Urban non-farmers 207, 210
Tariff regime 26, 30 Uruguay round I, 3, 10, 12, 16, 18, 26,
Tariff structures 3, 152 29,39,144,!46,193,!96
Tax rate 52 Uruguay round a,Steement on agriculture
Tax structure 50, 153 2,3,4,5,6, 7, 10, 16, 17, 18, 19,24,
Taxes and duties 53 26, 29, 34, 52; 66, 73, 97' 102, 103,
272 Liberalit)ng Agricultural Trark: Issues and Options ...
111, 137, 183, 203, 211, 233, 235, WTO commitments 3, 75, 212
239,247,249,257,259 WTO framework 63, 98, 206
WTO liberalizers 66
Value-added tax (VAT) 147, 202, 236 WTO members 29, 64, 69, 115, 116,
Vietnam 246 123, 149,158,161
Voluntary standard 199 WTO ministerial decision 166
WTO multilRteral agricultural nego-
Walrasian 213 tiations 238
Walras's law 215 WTO negotiations 3, 4, 35, 37, 38, 63,
Wholesale prices 238 75, 213
World Bank 3, 20, 22, 39, 50, 62, 125, WTOrules 2,36,65, 100, 126, 148, 179,
183, 186, 189, 191, 193, 198, 199, 192, 193, 199,213,220,239,257
200,235,257,261
World food program 186, 192 Zanzibar 186, 187, 198, 200
World market JO, 114, 188, 229, 247 Zanzibar freeport authority 200
World market prices 46, 112, 113, 143, Zanzibar's exports 185
144 Zero tariff rate 231
World prices• 19, 20, 21, 25, 27, 238, Zimbabwe 18, 163
257,258
World Trade Organization (WTO)
agreements 8, 25, 44, 150, 199, 206,
213,260,261
-~ ,_ --
This book is a compendium of key findings of analytic
work on important issues facing selected Sub-Sahara
African countries in the context of the new World Trade
Organization (WTO) round of trade negotiations in
agriculture. It differs from previous studies in the sense
that it focuses on country-specific issues in Cameroon,
Ghana, Kenya, Nigeria and Tanzania with the intention
of carrying out well-informed country-specific
evaluation of alternative options for further trade and
agricultural policy reform. Borne out of the collaborative
efforts of the World Bank and the African Economic
Research Consortium (AERC), the authors are experts
residing in the respective countries so as to facilitate
ownership of findings and to build local analytical
capacity for expansion oflocal expertise base. The study
undertaken for each case studies answers general
systemic and thematic questions and evaluates biases in
agricultural policy regimes during implementation
periods.
In particular each ofthe studies focuses on:
* Key issues for the country;
* Country's policy stand relative to development
objectives and WTO commitment;
* Achievement at country level and its implications for
new WTO negotiations;
* Lessons and experiences from implementation of
commitment;
* Impacts ofURAA implementation;
* Market access options in agriculture and other key
sectors;
* Domestic policy agenda in agriculture; and
* Impact of macro-trade and sector specific policies on
domestic incentive regimes.
By bringing together studies which will serve as resource
to detail how countries in the Sub-Sahara regions of
Africa have experienced the implementation of trade
liberalization reforms, it is hoped that it will be of
immense help to policy makers in formulating
negotiating positions and also assist other countries in
identifying more clearly their own interest in trade
negotiations.
Macmillan
Nigeria
ISBN 978-018-353-1