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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Tuesday, November 29, 2005

Agriculture-Poverty Nexus and mixed blessings of WTO

Daily Mirror: 24/11/2005" By Poornima Weerasekara

Department of Commerce Deputy Director Gothami Indikadahena, yesterday highlighted the mixed blessings from the ongoing WTO agriculture liberalisation talks and its effect on Sri Lanka’s poverty alleviation efforts.

She made these observations on Monday at a National Dialogue on Trade and Development organised by the Law and Society Trust, a part of the project on “Linkages between Trade, Development and Poverty Reduction” initiated by the Centre for International Trade, Economics and Environment (CUTS-CITEE) based in India, Ministry of Foreign Affairs, The Netherlands and the Department of International Development, UK.

First, shedding light on yet unresolved issues, Ms. Indikadahena said, “it is imperative to ask whether there is an equal impact of liberalisation on domestic agriculture and export-led agriculture and whether further liberalisation of the sector results in future gains.”

She also expressed her concerns over the protectionism in the sector via relatively high applied tariffs and noted that “reductions of applied tariffs could generate adverse effects which would subsume the productive gains of trade liberalisation.”According to Ms. Indikadahena, Sri Lanka’s agriculture tariffs would have to be cut drastically after the sixth WTO ministerial conference in Hong Kong, this December.

Sri Lanka's agriculture tariffs are already much lower than most developing countries with over 90% of tariffs bound at the average of 50%. In contrast, India has bound its tariffs at 100%, 150% and 300% for different item categories.

Further, Ms. Indikadahena noted that “Sri Lanka’s actual applied rates are lower than even the bound rate, averaging around 28%.”

“Under the proposed Swiss formula tariffs on agriculture can come down to 25 %. Under the linear formula it can come down to 35%,” she added.

The Swiss and linear formulas are the two formulas that are being considered for countries to reduce their agriculture tariffs.

In the Sri Lankan context both formulas will reduce the ceiling on duties for agricultural goods to a very low level, directly affecting small farmers by making imported goods more competitive than local produce.

However, Ms. Indikadahena highlights that “the Doha Development Agenda provides clear language on Special and Differential Treatment for developing countries, including the possibility of different rules and disciplines in recognition of the particular needs of these countries including food security and rural development.”

However, she bemoaned the lack of initiative from policy makers to leverage on these flexibilities to provide better support to domestic farmers.

“We have not been able to afford even the permitted green box subsidies for our farmers,” she added.

To safeguard majority rural communities, Sri Lanka is also pushing for a list of special products that will be sheltered from the inevitable tariff cuts. “We are suggesting that products bound at less than 50 percent be designated as special products. Then most of Sri Lanka’s agricultural products will come under it,” Ms. Indikadahena quipped.

Sri Lanka has already identified around 20 product sectors including crops grown by small farmers like rice, potatoes, coconut, onion, maize, cucumber, cereal and poultry. The special products concept has already been accepted by the WTO but the items and reduction in tariff cuts are yet to be decided.

However, Ms. Indikadahena stresses the urgent need to “implement the special safeguard mechanism to cover all agricultural products defined in the agreement on agriculture (AOA) and not only the import-sensitive products.”

A similar mechanism for developing countries is under discussion at the WTO for agricultural imports.

The objectives of the ongoing World Trade Organisation negotiations on agriculture aims to iron out the fierce differences in opinion between the developing, emerging and developed economies obtain new commitments to lower tariff levels to agricultural goods, reduce the level of domestic support and eliminate the provision of export subsidies.

According to Ms. Indikadahena the negotiations provide both opportunities and threats to domestic and export-oriented agriculturalists. She notes that "success in making developed countries increase market access and reduce domestic support for their agricultural sector can result in enormous benefits for the export agriculture sector in developing countries and for poor communities. However, unrestrained trade liberalisation would adversely affect small farmers in developing nations. This is specially true if cheap imports tend to glut the market precisely when the domestic crop is to enter the market.”

Further, Ms. Indikadahena assures that “the benefits of improvement in living standards and reduction in food insecurity and poverty are likely to far outweigh the cost of any distortion in the world agricultural markets.”

Lowering duties, removing other non-tariff barriers, removing the export support provided to the export agriculture sector, reducing domestic support to the sector and the lack of infrastructure facilities were highlighted by Ms. Indikadahena as the key reasons for the poor performance in the export and domestic agriculture sectors.

The two latter reasons, i.e. removing agriculture subsidies, inaccessibility to irrigation, lack of storage facilities, exorbitant cost of transportation and inaccessibility to markets had a severe impact on small farmers and in-turn on rural poverty (Fig 1and 1).

Therefore, Ms. Indikadahena stresses the urgent need to “increase, rather than decreas, support to agriculture in order to accelerate agriculture productivity and growth.”

Agriculture -poverty : The hard facts
Agriculture accounts for
Around 20% of Sri Lanka’s GDP.
18% of merchandise exports and
Supports 40% of the population.

The number of small farmers employed in the sector is 70% – 90%,
Food consumption averages 2,300 calories per day,

An estimated 25-30% of the population is undernourished.
Sri Lanka is food deficit country – It is a Net Food Importing

Points to Ponder
“The world produces more than enough food to feed everyone. Yet, about 480 million people, or almost one sixth of the world’s population, still suffer from under nourishment. The overwhelming majority of these – about 92%– suffer from chronic under nutrition, rather than acute hunger.”

Nash J and M Donald [March 2005] Finance & Development p.34

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