The G8, Obama, and food insecurity in Africa
Martin Khor
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US President Barak Obama’s visit to
Ghana after the G8 Summit pledged funds to boost Africa’s food security.
But Africans will continue to be food dependent unless the West changes
its own policies towards African agriculture.
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During his visit to Ghana, his first trip to Africa as President of
the United States, Barack Obama stressed the role of good governance and
the need for democratic practices and correct policies if the continent
is to develop out of poverty.
Just before that, the G8 Summit in Italy agreed on a US$20 billion
program to promote food security in Africa, to help the countries
produce their own food instead of relying on food aid or imports.
In a press conference, Obama compared Kenya to South Korea, saying
that both countries once had the same per capita income but Kenya
remains poor while Korea had become an economic powerhouse.
The implication of all this is that East Asian countries like South
Korea did well because they had good governance and democracy while
African countries have lagged behind because of undemocratic practices
and bad policies.
The assumptions of the G8 Summit, and of Obama, are correct only to a
limited degree (for example, Korea’s development took off while the
country was under dictatorship) and miss the main reasons why Africa has
become food dependent.
As a result, the large funds pledged may miss the opportunity of
helping Africa become food secure.
Of course, governance and good policies are crucial elements. But any
comparison between developments in Africa and East Asia must take into
account that most African countries were unfortunate enough to come
under the influence of the World Bank and IMF (International Monetary
Fund) conditionalities whereas most East Asian countries did not and
were free to adopt their own policies.
The decline in agriculture in many African countries was due to the
structural adjustment policies of the IMF and World Bank. The countries
were asked or advised to dismantle marketing boards and guaranteed
prices for farmers’ products; phase out or eliminate subsidies and
support such as fertilizer, machines, agricultural infrastructure, and
reduce tariffs of food products to very low levels.
Many countries that were net exporters or self-sufficient in many
food crops experienced a decline in local production and a rise in
imports which had become cheaper because of the tariff reduction. Some
of the imports are from developed countries which heavily subsidize
their food products.
The local farmers’ produce were subjected to unfair competition, and
in many cases could not survive. The effects on farm incomes, on human
welfare, on national food production and food security were severe.
The case of Ghana itself, which Obama chose for his first African
visit, illustrates this.
The policies of food self-sufficiency and government encouragement of
the agriculture sector (through marketing, credit and subsidies for
inputs) had assisted in an expansion of food production.
The policies were reversed starting from the mid-1980s and especially
in the 1990s, when Ghana relied on loans from the World Bank and IMF and
these two bodies conditioned their loans on new agriculture policies.
The fertilizer subsidy was eliminated, and its price rose very
significantly. The marketing role of the state was phased out. The
minimum guaranteed prices for rice and wheat was abolished, as were many
state agricultural trading enterprises and the seed agency responsible
for producing and distributing seeds to farmers, and subsidized credit
was also ended.
Applied tariffs for most agricultural imports were reduced
significantly to the present 20%, even though the WTO bound rate is
around 99%. This, together with the dismantling of state support, led to
local farmers being unable to compete with imports that are artificially
cheapened by high subsidies, especially in rice, tomato and poultry.
Rice output in Ghana in the 1970s could meet all the local needs, but
by 2002, imports made up 64% of domestic supply. In 2003, the US
exported 111,000 tonnes of rice to Ghana. In the same year, the US
government gave US$1.3 billion in subsidies for rice.
A government study found that 57% of US rice farms would not have
covered their cost if they did not receive subsidies.
In 2000-2003, the average costs of production and milling of US white
rice was US$415 per tonne, but it was exported for just $274 per tonne,
a price 34% below its costs. No wonder farmers in Ghana could not
compete with imported American rice.
Tomato was a thriving sector in Ghana. As part of a privatization
program, tomato-canning factories were sold off and closed, while
tariffs were reduced. This enabled the heavily subsidized EU tomato
industry to penetrate Ghana, and this displaced livelihoods of tomato
farmers and industry employees.
Tomato paste imported in Ghana rose from 3,200 tonnes in 1994 to
24,077 tonnes in 2002. Local tomato production has stagnated since 1995.
Tomato-based products from Europe have made inroads into African
markets.
In 2004, EU aid for processed tomato products was 298 million Euros,
and there are many more millions of Euros in indirect aid such as export
refunds.
Ghana’s poultry sector started its growth in the late 1950s, reached
its prime in the late 1980s and declined steeply in the 1990s.
The decline was due to withdrawal of government support and the
reduction of tariffs. Poultry imports rose by 144% between 1993 and
2003, and a significant share of this were heavily subsidized poultry
from Europe.
In 2002, 15 European countries exported 9,010 million tonnes of
poultry meat for Euro 928 million, at an average of Euro 809 per tonne,
while the subsidy for the exported poultry was an estimated Euro 254 per
tonne.
Between 1996 and 2002, EU frozen chicken exports to West Africa rose
eight-fold, due mainly to import liberalization. In Ghana, half a
million chicken farmers have suffered from this situation.
In 1992, domestic farmers supplied 95% of Ghana’s market, but this
share fell to 11% in 2001, as imported poultry sells cheaper.
In 2003, Ghana’s parliament raised the poultry tariff from 20% to
40%. This was still much below the bound rate of 99%. However, the IMF
objected to this move and thus the new approved tariff was not
implemented.
Another major problem facing Ghana and other African countries is the
free trade agreements (known as the Economic Partnership Agreements)
they are scheduled to sign with the European Union this year.
Under the EPA, African countries are asked to lower their tariffs to
zero on 80% of their products. Agricultural products are among those
affected. This will lock them into a trade policy that will perpetuate
what the IMF and World Bank started, with artificially cheapened imports
continuing to overwhelm the domestic food market.
Thus, if the G8 countries really want to assist Africa to boost its
domestic food production, their US$20 billion in funds has to be
accompanied by a change in policies. Unless this is done, the program
will not succeed. And Africa will most likely continue to be blamed for
its lack of good governance.
The following needs to be done if Africa is to increase its domestic
food production:
1. The countries’ economic and trade policies, often the result of
advice of international financial institutions, have contributed to the
stunting of their agriculture sector. African countries must be allowed
to provide adequate support to their agriculture sector and to have a
realistic tariff policy to advance their agriculture, especially since
developed countries’ subsidies are continuing at a high level. The
developed countries should quickly reduce their actual levels of
subsidy.
2. The agriculture policy paradigm in developing countries must be
allowed to change. Countries should have the policy space to expand
public expenditure on agriculture. African governments must be allowed
to provide and expand support to the agriculture sector.
3. Developing countries should place high priority on expanding local
food production. Accompanying measures and policies should thus be put
in place. The countries should be allowed to calibrate their
agricultural tariffs in such a way as to ensure that the local products
can be competitive and the farmers’ livelihoods and incomes are
sustained, and national food security is assured.
4. The proposals of developing countries (led by the G33) on special
products and special safeguard mechanism, aimed at food security,
farmers’ livelihoods and rural development, at the WTO should be
supported. Effective instruments that can meet the aims should be
established.
5. The policies of the World Bank, IMF and regional development banks
should be reviewed and revised as soon as possible, so that they do not
continue to be barriers to food security and agricultural development in
developing countries.
6. The actual levels (and not just the bound levels) of agricultural
domestic subsidies in developed countries should be effectively and
substantially reduced. There should also be new and effective
disciplines on the Green Box subsidies to ensure that this category does
not remain an “escape clause” that allows distorting subsidies that are
detrimental to developing countries.
7. There should be a review of the EPAs between the EU and African
countries. In light of the food crisis and the global economic crisis,
developing countries that have signed or are in the process of
negotiating FTAs should ensure that the FTAs provide enough policy space
to allow sufficiently high tariffs on agricultural imports that enable
the fulfillment of the principles of food security, farmers’ livelihoods
and rural development. In the case of the EPAs, there should not be any
pressure on African countries to sign them until the proper policy
framework is put in place.
(The writer is the Executive Director of the South Centre in
Switzerland).
- Third World Network Features
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