UNEP Country Project on Trade Liberalization in the Agriculture Sector and the Environment

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UNEP Country Project on Trade Liberalization in
the Agriculture Sector and the Environment
The rice sector in Colombia 19 February
2003Geneva

• Project Leader Néstor Gutiérrez
• Economic Research Director

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Background semi-annual crops
Trade liberalization in the Colombian rice sector
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AGICULTURAL PRODUCTS TOTAL IMPORTS (TONS),
1991-2001
Trade liberalization in the Colombian rice sector
Background semi-annual crops
(Miles Tons)
Crops
1991
2001
Cotton
0.6
61.0
Rice
0.4
321.8
Barley
130.8
212.8
Kidney Beans
11.1
31.6
Corn
8.1
1,759.7
Sorghum
0.9
1.4
Soy Beans
18.4
353.0
Wheat
646.3
1,245.1
TOTAL
816.6
3,986.4
Preliminar Data
Source DNP-UDA. Rice Fedearroz
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Background semi-annual crops
Trade liberalization in the Colombian rice sector
COMPARISON OF PLANTED AREA, BY PRODUCT,
1990 100
1990
2001
SOURCE SAC, CEGA,FEDEARROZ.
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Trade liberalization in the Colombian rice sector
Background rice sector
RICE HARVESTED AREA, COLOMBIA, 1990 - 2002
Source FEDEARROZ
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PADDY RICE REAL PRICE, COLOMBIA, 1989-2002
Trade liberalization in the Colombian rice sector
Background rice sector
REAL
PRICES of 1978 / Ton
1989
9.290
1990
7.959
1991
7.336
1992
6.889
1993
5,824
1994
6.785
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1995
6.192
1996
6.270
1997
6.636
1998
7.042
1999
5.946
5.485
2000
6.331
2001
2002
5.741
Source FEDEARROZ
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Background
Trade liberalization in the colombian rice sector

• By the end of 1980s, a unilateral openness
  process was held by Colombia before Uruguay
  Round. By the time, a free trade agreement was
  held with CAN countries
• The rice sector had enough protection since 1994
• However, Colombian rice sector is a world price
  taker

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Trade liberalization in the colombian rice sector
WHITE RICE MONTHLY PRICE, 1996 - 2003
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Project Approach and Process
Trade liberalization in the Colombian rice sector

• RESPONSIBLE INSTITUTION
• RICE GROWERS ASSOCIATION-FEDEARROZ
• Steering Committee
• Néstor Gutiérrez, project leader, Fedearroz
• Edwin García Researcher, Fedearroz
• José Levis Barón Researcher, Fedearroz
• Jaime Jiménez Int. Trade Director,
  Ministry of Agriculture
• Héctor Martínez Economist, IICA
• Jairo Homez Researcher, Ministry of
  Environment
• Diego Herrera Economist, Universidad del
  Rosario
• Stakeholders Approach Initial project
  presentation, first results discussion, final
  paper discussion.
• The acceptance of this initiative has been
  fantastic for most of the Stakeholder
  participants because of the subject opportunity
  when it is a broad discussion on agriculture
  trade topics (WTO, ALCA, ATPA, CAN).

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Trade liberalization in the Colombian rice sector
Stakeholders Committee
MINISTERIO DE AGRICULTURA JAIME JIMENEZ Assesor
DEPARTAMENTO NACIONAL DE PLANEACION OSCAR
BALLESTEROS Resource Department
Chief UNIVERSIDAD DEL ROSARIO FERNANDO BARBERI
Graduate Course Dean - Expert in International
Commerce - Trade Ministry Assesor DEPARTAMENTO
ADMINISTRATIVO NACIONAL DE ESTADISTICAS
(DANE) Alejandro Pelaez Director of Sistema de
Información del Sector Agropecuario y Pesquero
Colombiano (SISAC) Jaime Perez,
SUBDIRECTOR BOLSA NACIONAL AGROPECUARIA NOHORA
HELENA CRUZ Technic Director MINISTERIO DEL
MEDIO AMBIENTE JESUS E PEINADO Environment
Ministry Assesor MINISTERIO DE COMERCIO
EXTERIOR ANA FABIOLA GUZMAN- Trade Ministry
Assesor Andean Integration CIVITAS DEI
(ONG) ELIZABETH CALDERON Director MARTHA
RODRIGUEZ Assesor ASOCIACION DE USUARIOS DE
LOS RIOS CHINA Y TOTARE (ONG) JUAN JOSE SIERRA
Principal member, Rice Producer COOPERATIVA DE
SERVICIOS ESPECIALIZADOS PARA LOS ARROCEROS
(SERVIARROZ) ALBERTO MEJIA President, Rice
Producer
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Trade liberalization in the Colombian rice sector
Stakeholders committee -2
CORPORACION COLOMBIANA DE INVESTIGACION
AGROPECUARIA (CORPOICA) IRMA BAQUERO Main
Researcher from Programa Nacional de Estudios
Socioeconómicos FRANCISCO ACEVEDO Researcher
Programa Nacional de Estudios Socioeconómicos
FERNANDO CARDOZO FEDERACION NACIONAL DE
ARROCEROS DE COLOMBIA (FEDEARROZ). RAFAEL
HERNANDEZ LOZANO CEO Fedearroz UNIVERSIDAD
JAVERIANA LORENA PRIETO CRUZ Economics Faculty -
Apprentice SOCIEDAD DE AGRICULTORES DE COLOMBIA
(SAC) ALEJANDRO VELEZ Trade Director DELSA
MORENO Agronomics Department Director ASOCIACIO
N DE USUARIOS DEL RIO COELLO (USOCOELLO) (ONG)
ESPINAL HENRY RAMIREZ Management Assistant.
YESID CASTRO Andean Community Consultor
Trade FONDO LATINOAMERICANO DE ARROZ RIEGO -
FLAR LUIS SANINT Director INDUARROZ IVAN
SOMBREDERO Manager MOLIARROZ JORGE ENRIQUE
CUBILLOS Manager UNIVERSIDAD DE LOS LLANOS -
UNILLANOS JORGE ENRIQUE MUÑOZ AGUILERA Researcher
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Project objectives
Trade liberalization in the Colombian rice sector

• Enhance country understanding of multilateral
  trade impact on agriculture by product
• Develop in-country methodologies to assess the
  environmental, economic and social impact of
  trade liberalization
• Carry out integrated assessments of trade
  liberalization for the rice sector
• Enhance coordination and knowledge of people
  working around agricultural trade issues
• Develop policies to correct identified negative
  impacts of liberalized trade and maximize
  positive ones

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Development of In-country Methodology
Trade liberalization in the Colombian rice sector

• Within the steering committee discussion the
  specific methodology was selected, in each
  specific topic
• Ex-ante analysis, econometric models, and ex-post
  analysis were used
• Indicators in socio-economics and environmental
  topics were implemented

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Methodology Steps
Trade liberalization in the Colombian rice sector

• First step was an ex-post analysis about last 10
  years performance of agricultural sector response
  to trade liberalization
• Second, analysis focused in the rice sector
• Third, study of Colombian trade agreements
• Fourth, socio-economic evaluation of their
  impact on rice sector, we used econometrics
  modeling (co integration, long term elasticities)
• Fifth, study of environmental issues related with
  rice production
• Sixth, evaluation of inputs and total factor
  productivity (Seemingly Unrelated Regressions and
  Törnqvist Indexes)
• Seventh, ex-ante analysis to evaluate 3 scenarios
  

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Integrated Assessment of Impacts of Trade
Liberalization and WTO AoA
Trade liberalization in the Colombian rice sector
Trade liberalization had impact on rice
socio-economic variables through the increase in
imports, relative prices and developed countries
subsidies. On the environment side, it affected
in the use of low price inputs (seed) and more
agrochemicals/ha
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Environmental Impacts
Trade liberalization in the colombian rice sector

• It was necessary to increase mechanization and
  mono-culture to increase the planted rice area
• Low prices induced the use of low quality seed
  and more contamination of fields. The use of
  herbicides and fungicides/ha increased. Besides,
  agrochemical productivity decreased, and total
  use of these products increased per hectare
• Mono-culture means more fertilizer and
  herbicide/ha
• The extensive use of agrochemicals damages not
  only environment but also human health

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Social and Economic Impacts
Trade liberalization in the colombian rice sector

• Low agricultural prices induce decreases in
  agricultural income, planted area of semiannual
  crops, and production costs (total value/ha).
  They also increase unemployment and consumption
  of imported food

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Valuation of the effects
Trade liberalization in the colombian rice sector

• Cost of trade liberalization
• Increase in Food Imports 388 (1990-2001)
• Decrease in Area in Semiannual Crops 29
  (1990-2001)
• Rice real price decrease 38 (1989-2002)
• Colombia Switched from net exporter to net rice
  importer (1990-2002)
• Average imports of rice per year around 234,000
  tn (1992-2002)
• Increase on national unemployment rate 80
  (1990-2002)

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Development of Policy Package
Trade liberalization in the colombian rice sector

• Policies to mitigate/eliminate negative impacts
  of trade liberalization
• To mitigate the impact of relative prices (wheat)
  on rice price, it is necessary to implement the
  same protection scheme of rice and the substitute
  products
• To mitigate impact of developed countries
  subsidies it is necessary to implement a tariff
  system in function of production cost for the
  exporter countries
• It is necessary to improve concluded agreements
  for a cleaner production between growers and
  industry, Environment and Agriculture Ministries
  and Associations
• It is important to implement a Rice Sector
  Environmental Issues Guide under responsibility
  of Environment Ministry and Fedearroz.
• Some engagements relating sustainability exist
  inside of Efficiency Agreement of Rice Agro
  industrial Productive Chain, it is necessary to
  accomplish them. Agriculture Ministry,
  Associations

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Development of a policy package 2
Trade liberalization in the colombian rice sector

• On the future irrigation projects the
  environmental component must be supervised by
  Environment Ministry
• It is urgent to promote a diversification program
  on irrigated land to avoid mono-culture.
  Agriculture Ministry
• It is mandatory to improve research in management
  practices to decrease the use of agrochemicals.
  Fedearroz
• It is necessary to improve agrochemicals
  management practices. Fedearroz must implement
  training courses, at every level.

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Project Experience
Trade liberalization in the colombian rice sector

• It was surprising to find in the substitute
  (wheat) prices the connection of the colombian
  rice sector with the world market
• It was interesting to set a project to show the
  environmental impact of the rice activity and to
  know that we have enough legislation to protect
  the environment, but we do not have the enforce
  power to implement it
• It was the first time economists, biologists,
  trade specialists, associations leaders,
  producers and industry, meet together to discuss
  trade related issues on an specific crop.
• During the discussion process we found the high
  relevance of environment issues on the last
  development on trade

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Steps Forward
Trade liberalization in the colombian rice sector

• Evaluate three sceneries for the mean time
• Build 30.000 ha of irrigated area for rice CAN
  agreement (free trade Ecuador, Venezuela, Peru)
• Build 30.000 ha of irrigated area for rice 0
  subsidies in the rice exporter countries
• Build 30.000 ha of irrigated area for rice ALCA
  agreement