GMF - The German Marshall Fund of the United States - Strengthening Transatlantic Cooperation

When world leaders meet in Gleneagles in July to discuss healing Africa, much will be made of the need for Africa to be better equipped to help itself. Meanwhile, the development round of WTO negotiations is nearing its endgame. As up to 80 per cent of Africans rely on farming for their livelihoods, reducing agricultural trade barriers ought to help. But will it?

 

Calculations by World Bank economist Kym Anderson show that under various possible scenarios in the WTO’s current Doha development round, sub-Saharan African countries stand gain only very slightly or even lose out. How can this be? Oxfam, Christian Aid and other development NGOs have spent millions on advertisements to convince us of the evils of rich country agricultural protectionism. They are, of course, right to point to the damage done to West African cotton producers by the dumping of heavily-subsidised US and EU cotton on world markets, and it is hard to justify the extent of European sugar beet cultivation when cane sugar can be grown for half the price in the tropics. It goes without saying that most of the $1 billion spent every day by OECD countries on supporting their farmers represents pretty poor value for taxpayers’ money and that anything that can be done to reduce this makes sense. But there are two main reasons why Africa may not stand to gain much in the short term from agricultural liberalisation.

 

First, Africa lags way behind other developing countries in terms agricultural productivity and export competitiveness. It will be lower-cost producers in countries like Brazil, India, China, Thailand, Australia and New Zealand who sweep up the gains from any liberalisation and Africa will continue to be left out in the cold.

 

Second, most poor African countries currently have preferential access to markets in the EU and US and a side-effect of removing trade barriers is the gradual erosion of these trade preferences. As things stand, 19 sugar-producing former colonies of France and Britain (nine of them in Africa) have special access to an EU sugar market where prices are fixed at three times the world market price. Liberalisation will introduce competition from Brazil, which has both the efficiency and the capacity to suck up all the gains. In terms of economic efficiency this is to be welcomed, and there are many very poor farm labourers in Brazil who will benefit, but the losses to less efficient African, Caribbean and Pacific producers will be substantial. 

 

An African model of agriculture that combines staples for local and regional markets with export-oriented cash crops will always be preferable to a subsistence agriculture that guarantees no more than “sustainable poverty.” So it is to be welcomed that the 53 member countries of the African Union and the G8 agree that “agriculture must be the engine for overall economic growth in Africa.” But what does that mean?

 

First, more irrigation is critical. Only 7 per cent of Africa’s arable land is irrigated, compared with around 40 per cent in Asia. Irrigation projects require that small-scale credit be made more readily available to those working the land, which most of the time means women.  Developing new strains of African staple crops with higher yields and greater disease and drought resistance is also essential. This need not mean GM: the development of new strains of rice and other grains that enabled Asia to boost its yields was entirely the result of conventional plant breeding.

 

The improved strains of crops that have enabled Asia to feed itself were mostly developed by research funded by governments and philanthropists like the Rockefeller Foundation, so it is worrying that the balance of agronomic research has now shifted to the private sector, who by contrast are primarily in the business of making profits. In the US farmers who hold seeds over from one year’s harvest to plant the next year are sued by seed companies who hold the patents.

 

The power of global corporations is also felt as the food industry consolidates into a handful of enormous, vertically integrated global supply chains. The likes of Wal-Mart, Tesco and Carrefour apply exacting standards and squeeze every penny out of their suppliers’ margins. For African farms servicing overseas markets for high-value products like fresh vegetables or fruit, it is a real challenge to meet ever-changing standards of food safety regulation. But it is not impossible, as Homegrown, Kenya’s largest exporter of fresh vegetables has shown, employing 8,500 people in its own operations as well as contracting with many smallholders as well.

 

Mitigating the damaging effects of preference erosion requires care and commitment on the part of rich countries. On sugar, the EU is proposing to give domestic beet farmers a tax-funded payment to cover 60 per cent of their losses from liberalisation. The same offer should be made to developing countries who have been drawn in to the same degree of dependency on artificially high EU prices, and they should be encouraged to spend the money on productivity-boosting investment in their agricultural sectors. It is utterly misguided to seek the long term preservation of preferences as this places into the hands of politically powerful rich country farm lobbies.

 

The current round of WTO trade negotiations lacks development focus it once promised. The only breakthrough so far is that developing countries have organised themselves into a negotiating bloc with a strength and solidarity that they previously lacked. The long-overdue offer by the EU and the US to end export-dumping is the only real bankable benefit for African countries and this is symbolic of how far expectations have been diminished. As far as Africa is concerned, trade cannot be seen as a substitute for aid.