AGRICULTURAL STATEGIES IN THE POST PREFERENTIAL MARKET ACCESS ERA

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AGRICULTURAL STATEGIES IN THE POST PREFERENTIAL
MARKET ACCESS ERA

• Department of Agricultural Economics, University
  of the West Indies,
• St Augustine
• Ministry of Agriculture Trinidad and Tobago

• Ranjit H. Singh
• Andrew Jacque

2
DISCUSSION POINTS

• Background Issues
• Preferences
• Trade Issues
• Features of the Regional Agrifood Sector
• Reflecting on Development Paradigms over the Past
  40 50 years
• The Post Preference Era - A Shift in Paradigm
• The Broad Strategies
• Key Drivers for the Development of the CARICOM
  Agrifood Sector

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PREFERENCES

• Relevance to CARICOM

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Contribution of Preferences

• Preferences have benefited the CARICOM
  agriculture, economies and people
• Foreign exchange earnings
• employment,
• rural development,
• higher incomes
• Multiplier effects -- supported the input supply,
  transportation and other industries
• provision of social services
• contribution to the environment
• Food security
• Contribution to Government revenue

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Preferences Contd

• Preferences have also had some negative effects
• Failed to provide incentives for developing
  competitive production
• stymied efforts at diversification
• led to a concentration on primary as opposed to
  processed products (raw versus refined sugar
  cocoa beans versus chocolates)

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Examples of the Importance of Preferences

• Trinidad and Tobago in 2002
• Sugar cane cultivated on 31 of the agric land
• sugar and distilleries employed 10,100 persons
  (5.1 of national labour force 37.7 of Agric
  labour force)
• Wages in sugar 50 higher than in other
  agriculture
• raw sugar export earnings --0.7 of total export
  earnings and 1.76 of non-oil export earning
• 0.54 of national GDP 41.81 of agricultural GDP
• Rent transfers from the EU of US16 million
• High cost producer of sugar cost was more than
  2x preferential price

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Examples of the Importance of Preferences

• Guyana Sugar
• 50 of agriculture
• 17 of national GDP
• 25 of forex
• 8 of internal Government revenues
• 17.5 US c per lb -- Second lowest producer in
  CARICOM behind Belize
• GNP per worker in sugar 2.7x national average

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Preferences --Implications

• Loss of preferences is not only about loss of
  foreign exchange but involves loss of much more
  at the same time that it demands change and
  realignment
• Strategy for the post-preferential era must take
  account of
• External challenges
• Internal weaknesses

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Trade Issues
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Trade Dependence
Trade is concentrated with a few regions and
within those regions with a few countries

• food imports by PTA
• 57 from NAFTA,
• 15 CARICOM
• 13EU15
• Food imports by countries
• 51.8 from USA
• 7.57 from TT
• 4.98 from UK
• 4.73 Canada.
• Food exports
• 45.4 to EU
• 27.9 CARICOM
• 19.8 NAFTA

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• CARICOM --Net food importers, except Guyana and
  Belize
• Food imports exceed food exports by 52 (TT) to
  7,422 (Antigua and Barbuda) with most countrieslt
  200

Montserrat 117,805 Antigua and Barbuda7,423
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Intra-regional food trade

• low shares for
• Suriname (0.38)
• Belize (3.57)
• Haiti (0.11)
• Bahamas (0.53)

• Top 3
• Trinidad Tobago-48.75
• Guyana 14.65
• Barbados 9.39

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Highlights Some recent Changes in the Caribbean
Agrifood Sector
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Highlights

• The Primary Production Component of the value
  chain earns only a small of the final Consumer
  Expenditure
• as low as 25 for fresh produce
• As low as 10 for manufactured foods
• Consumers are spending and increasing share of
  their food budget on FOOD AWAY FROM HOME

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Highlights (contd)

• The Food Industry / Food Service Industry in the
  Region is one of the Fastest growing
• An increase in post farm services in value added
  for more ready to cook and prepared foods
• Earnings at the farm gate as a of final product
  value is expected to continue to decline as the
  Remainder of the Value Chain expands

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AGRICULTURAL DEVELOPMENT PARADIGMSRegional
Experiences
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Development Paradigm of the 1960s 1970s

• Features
• Import Substitution
• Self Sufficiency
• Industrialization via Substitution
• Highly protected domestic market
• Regional Production Allocation Eg Corn Soy
  Project
• Direct state trading and involvement in
  production
• Price Controls and trade control

• Failure
• On Account of various structural Factors
• Domestic market Limited in Size
• Consequences
• Frequent shortages
• High Prices - Consumers taxed
• Quality issues
• Domestic market limited in Size/ Absorption
  capacity
• Restricted Competition the Existence of
  Monopolies/oligopolies in the Food trade

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Development Paradigm of the 1980s Early 1990s

• The Experience Major Deterrents in Accessing
  Export Markets
• Significant Non Tariff Barriers
• Transport logistics cost, unreliability
  availability
• High marketing transaction cost resulting from
  low volumes
• Difficulty in accessing Mainstream Markets
• High levels of Competition in Commodity markets
• Absence of market development and promotion
  activities

• The Issues
• Macroeconomic Disequilibria
• Deficit on the External Account
• The Bitter Medicine Structural Adjustment
• Strategies
• Focus on Export led growth to Enhance FOREX
  earnings
• Agricultural Diversification - Non traditionals
  for the Export Market
• Exchange rate adjustments

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The Post WTO Period 1995

• Features
• Globalization Liberalization of Markets
• Erosion of Preferences Decline of the
  Traditional Export Sector
• Market Access now Governed More by SPS and Other
  Regulatory measures rather than Tariffs eg
• HACCP
• GAP
• Limited role for National Policy in Trade

• Result
• Declining export performance (FOREX)
• Increasing Levels of Food imports
• Impact on Employment Poverty
• Food Security Concerns

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• PARADIGM SHIFT
• FOR
• AGRICULTURE

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Implications for Future Development

• Loss of Trade Preferences/Globalisation?
• imperatives of developing competitive industries
• Trade profile ?
• Limits to growth possibilities based solely on
  primary perishable products
• Data highlights the importance of processed
  products in expanding trade opportunities (intra
  and extra-regional)

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Implications Contd

• Trade profile (Contd)?
• Data suggest that there is a lot of scope for
  expanding the regional food market
• Some countries are more integrated (southern
  Caribbean) into the intra-regional food market
  than others (Belize, Suriname, Haiti, Bahamas) ?
  scope for building the intra-CARICOM market

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Implications Contd

• Changing Structure of Agri-Food Markets?
• Significant growth in the food retailing and food
  service industry segments
• Declining share of farm-gate receipts as a
  percent of expenditure on food
• Implication
• The real economic opportunities lies with the
  integration of all segments of the value-chain.

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Implications Contd

• Development Paradigms ?
• CSME
• Expands the economic space for sectoral
  development
• Most recent paradigm suggests need to shift focus
  from mainly on primary to integrated industry
  approach
• Need for efficiency in all segments of the value
  chain
• Development must be industry-led but with strong
  public sector support in the provision of public
  goods
• Mechanisms must be built in to ensure balanced
  development among countries and equity in the
  distribution of benefits

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Broad Strategies in the Post Preference Paradigm

• 1. Creating/Broadening/integrating the New
  Economic Space that CSME Offers
• 2. A Focus on the Agrifood Industry rather than
  the Farming Component in the Main
• 3. Integration of markets into a fully functional
  efficient CARICOM Market

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Broad Strategies (contd)

• 4. Efficient Cost Effective Provision of
  Critical Public Goods to the Agrifood Sector -
  (the Drivers of Competitiveness)
• 5. Adopting a Strategic Development Approach with
  a Focus on Priority Industries
• Prioritization of Industry for Development
  (resource constraints requires this)
• Focus resources on key industry constraints for
  enhanced competitiveness

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Broad Strategies (contd)

• 6. Creating an Enabling Environment for
  Investment Mobility throughout the Region with a
  focus on the agrifood sector
• 7. Developing the Institutional Framework to
  Facilitate strong Regional Public Sector/ Private
  Sector Partnership and Stakeholder Linkages

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Broad Strategies (contd)

• 8. Monitoring Evaluation of the total
  Contribution of the Agrifood sector to the
  Regional Economy
• The negative effect of inaccurate economic
  accounting wrt Resource allocation to the Sector

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• Drivers

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Creating the CSME Economic Space Key Impediments

• Provision of Timely Reliable Information
• Markets
• Opportunities
• Investments options
• Transport Infrastructure
• Provision of Appropriate Fiscal Incentives,
  harmonization of Regulatory Measures

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Market Development

• The Concept of the Agrifood Industry is one
  Comprising the entire VALUE CHAIN
• Primary production
• Primary value added/ pre-processing post farm
• Food / Industrial Product Manufacturing
• Wholesaling
• Distribution / Brokerage
• Food Service (fast foods, convenience foods,
  restaurants)

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Markets (contd)

• A large of food for retailing or fast foods
  restaurants the Tourism Sector are sourced from
  outside the region
• Limited Weak linkages of the food chains with
  Domestic Agriculture
• Little conscious attempts to development the
  linkages
• A fragmented and underdeveloped regional food
  market

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Market Development Contd

• Opportunities
• The attractiveness of Retail Food Food Service
  Industry in the region
• is evidenced by the number of foreign food chains
  in both retailing and food service (fast foods
  and restaurants)

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A FRAGMENTED AGRI-FOOD INDUSTRY WITH WEAK LINKAGES
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A FRAGMENTED AGRI-FOOD INDUSTRY WITH WEAK LINKAGES
Agro- Procssing
Wholesaling
Food Service
Primary Production
Retailing
Distribution
EFFECTIVE COORDINATION
CREATING STRONG LINKAGES
A FULLY INTEGRATED AND FUNCTIONAL AGRI-FOOD
INDUSTRY
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CREATING STRONG LINKAGES
EFFECTIVE COORDINATION
A FULLY INTEGRATED AND FUNCTIONAL AGRI-FOOD
INDUSTRY
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Critical Public Goods Support Drivers of
Competitiveness

• Efficient Cost Effective Provision of Critical
  Public Goods to the Agrifood Sector Requires
  effective multi-sectoral coordinating
  institutions
• Technology Support (Research, Development
  Innovation)
• Agricultural Health and Food Safety
• Drainage Irrigation
• Access Roads
• Land Policy Access to Arable lands
• Protection of Water resources to ensure
  Sustainable Agriculture
• Protection and maintenance of Suitable Water
  Quality to ensure food safety
• Risk management

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Technology Support (Research, Development
Innovation)

• A more appropriate institutional framework
• effective coordination and mobilisation of the
  research capability in the region to support the
  entire value chain
• Greater stakeholder involvement in establishing
  research agenda and priorities
• Performance-based funding for research/contract
  research/Contestable RD funds
• Importance of labour-saving technologies
• Biotechnology (e.g., improvements in
  productivity, quality and pest resistance)