AGRICULTURAL STATEGIES IN THE AGRICULTURAL STATEGIES IN THE POST PREFERENTIAL POST PREFERENTIAL MARKET ACCESS ERAMARKET ACCESS ERA

Ranjit H. SinghRanjit H. Singh

Andrew JacqueAndrew Jacque

Department of Agricultural Department of Agricultural Economics, University of Economics, University of the West Indies, the West Indies,

St AugustineSt Augustine

Ministry of Agriculture Ministry of Agriculture Trinidad and Tobago Trinidad and Tobago

DISCUSSION POINTSDISCUSSION POINTS Background IssuesBackground Issues

PreferencesPreferences Trade IssuesTrade Issues Features of the Regional Agrifood SectorFeatures of the Regional Agrifood Sector

Reflecting on Development Paradigms Reflecting on Development Paradigms over the Past 40 – 50 yearsover the Past 40 – 50 years

The Post Preference Era - A Shift in The Post Preference Era - A Shift in ParadigmParadigm

The Broad StrategiesThe Broad Strategies Key Drivers for the Development of the Key Drivers for the Development of the

CARICOM Agrifood SectorCARICOM Agrifood Sector

PREFERENCESPREFERENCES

Relevance to CARICOMRelevance to CARICOM

Contribution of PreferencesContribution of Preferences Preferences have benefited the CARICOM Preferences have benefited the CARICOM

agriculture, economies and peopleagriculture, economies and people• Foreign exchange earnings; Foreign exchange earnings; • employment, employment, • rural development, rural development, • higher incomes; higher incomes; • Multiplier effects -- supported the input Multiplier effects -- supported the input

supply, transportation and other industries; supply, transportation and other industries; • provision of social services; provision of social services; • contribution to the environmentcontribution to the environment• Food securityFood security• Contribution to Government revenueContribution to Government revenue

Preferences Cont’dPreferences Cont’d

Preferences have also had some negative Preferences have also had some negative effects:effects:• Failed to provide incentives for developing Failed to provide incentives for developing

competitive production; competitive production; • stymied efforts at diversification; stymied efforts at diversification; • led to a concentration on primary as opposed led to a concentration on primary as opposed

to processed products (raw versus refined to processed products (raw versus refined sugar; cocoa beans versus chocolates)sugar; cocoa beans versus chocolates)

Examples of the Importance of Examples of the Importance of PreferencesPreferences

Trinidad and Tobago in 2002 – Trinidad and Tobago in 2002 – Sugar cane cultivated on 31% of the agric landSugar cane cultivated on 31% of the agric land sugar and distilleries employed 10,100 persons sugar and distilleries employed 10,100 persons

(5.1% of national labour force; 37.7% of Agric labour (5.1% of national labour force; 37.7% of Agric labour force); force);

Wages in sugar 50% higher than in other agricultureWages in sugar 50% higher than in other agriculture raw sugar export earnings --raw sugar export earnings --0.7% of total export 0.7% of total export

earnings and 1.76% of non-oil export earningearnings and 1.76% of non-oil export earning 0.54% of national GDP; 41.81% of agricultural GDP0.54% of national GDP; 41.81% of agricultural GDP Rent transfers from the EU of US$16 millionRent transfers from the EU of US$16 million High cost producer of sugar – cost was more than 2x High cost producer of sugar – cost was more than 2x

preferential pricepreferential price

Examples of the Importance of Examples of the Importance of PreferencesPreferences

Guyana Sugar –Guyana Sugar – • 50% of agriculture50% of agriculture• 17% of national GDP17% of national GDP• 25% of forex25% of forex• 8% of internal Government revenues8% of internal Government revenues• 17.5 US c per lb -- Second lowest 17.5 US c per lb -- Second lowest

producer in CARICOM behind Belizeproducer in CARICOM behind Belize• GNP per worker in sugar 2.7x national GNP per worker in sugar 2.7x national

averageaverage

Preferences --ImplicationsPreferences --Implications Loss of preferences is not only Loss of preferences is not only

about loss of foreign exchange but about loss of foreign exchange but involves loss of much more – at the involves loss of much more – at the same time that it demands change same time that it demands change and realignmentand realignment

Strategy for the post-preferential Strategy for the post-preferential era must take account of era must take account of • External challengesExternal challenges• Internal weaknessesInternal weaknesses

Trade IssuesTrade Issues

Trade DependenceTrade Dependence

food imports by PTA:food imports by PTA: • 57% from NAFTA, 57% from NAFTA, • 15% CARICOM; 15% CARICOM; • 13%EU1513%EU15

Food imports by Food imports by countries:countries: • 51.8% from USA;51.8% from USA;• 7.57% from T&T; 7.57% from T&T; • 4.98% from UK; 4.98% from UK; • 4.73% Canada4.73% Canada..

FoodFood exports: exports: • 45.4% to EU; 45.4% to EU; • 27.9% CARICOM; 27.9% CARICOM; • 19.8% NAFTA19.8% NAFTA

CARICOM-Imports from Regional Trade Blocks

NAFTA57%

MERCOSUR2%

CEN AM1%

CARICOM16%

EU 1514%

OTHER8%

ANDEAN2%

Trade is concentrated with a few regions and within those regions with a few countriesTrade is concentrated with a few regions and within those regions with a few countries

• CARICOM --CARICOM --Net food Net food importers, importers, except except Guyana and Guyana and BelizeBelize

• Food imports Food imports exceed food exceed food exports by exports by 52% (T&T) to 52% (T&T) to 7,422% 7,422% (Antigua and (Antigua and Barbuda) with Barbuda) with most most countries< countries< 200%200%

Excess of Import Value over Export Value

0.52

0.64

0.69

0.73

1.02

1.08

1.51

2.00

3.45

5.79

6.69

9.22

-0.26

-0.53

-2.00 0.00 2.00 4.00 6.00 8.00 10.00

Guyana

Belize

Trinidad and Tobago

St. Vincent/Grenadines

Jamaica

CARICOM (excl Haiti)

Dominica

Grenada

Barbados

St. Lucia

Suriname

St. Kitts and Nevis

Bahamas

Haiti (mirror data)

Ratio (Imports/Exports)

Montserrat= 117,805%; Antigua and Barbuda=7,423%

Intra-regional food tradeIntra-regional food trade•Top 3: Top 3:

Trinidad & Tobago-48.75%; Trinidad & Tobago-48.75%; Guyana 14.65%; Guyana 14.65%; Barbados 9.39%;Barbados 9.39%;

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

48.75

14.659.39 8.97 6.08 4.02 3.57 1.9 0.91 0.53 0.52 0.38 0.2 0.11 0.01

0

10

20

30

40

50

60

Highlights – Some recent Changes Highlights – Some recent Changes in the Caribbean Agrifood Sectorin the Caribbean Agrifood Sector

HighlightsHighlights

The Primary Production Component The Primary Production Component of the value chain earns only a small of the value chain earns only a small % of the final Consumer Expenditure% of the final Consumer Expenditure – – as low as 25% for fresh produceas low as 25% for fresh produce• As low as 10 % for manufactured foodsAs low as 10 % for manufactured foods

Consumers are spending and Consumers are spending and increasing share of their food budget increasing share of their food budget on FOOD AWAY FROM HOMEon FOOD AWAY FROM HOME

Highlights (cont’d)Highlights (cont’d)

The Food Industry / Food Service Industry in The Food Industry / Food Service Industry in the Region is one of the Fastest growing the Region is one of the Fastest growing

An increase in post farm services in value An increase in post farm services in value added for more added for more ready to cook and prepared ready to cook and prepared foodsfoods

Earnings at the farm gate as a % of final Earnings at the farm gate as a % of final product value is expected to continue to product value is expected to continue to decline as the Remainder of the Value Chain decline as the Remainder of the Value Chain expandsexpands

AGRICULTURAL DEVELOPMENTAGRICULTURAL DEVELOPMENT

PARADIGMS: PARADIGMS:

Regional ExperiencesRegional Experiences

Development Paradigm of the 1960s & 1970sDevelopment Paradigm of the 1960s & 1970sFeaturesFeatures

Import Substitution Import Substitution

Self Sufficiency Self Sufficiency

Industrialization via Industrialization via SubstitutionSubstitution

Highly protected Highly protected domestic marketdomestic market

Regional Production Regional Production Allocation Eg Corn & Allocation Eg Corn & Soy ProjectSoy Project

Direct state trading Direct state trading and involvement in and involvement in production production

Price Controls and Price Controls and trade controltrade control

FailureFailure On Account of various structural On Account of various structural

FactorsFactors

Domestic market Limited in SizeDomestic market Limited in Size

ConsequencesConsequences Frequent shortagesFrequent shortages

High Prices - Consumers taxed High Prices - Consumers taxed

Quality issuesQuality issues

Domestic market limited in Size/ Domestic market limited in Size/ Absorption capacityAbsorption capacity

Restricted Competition – the Restricted Competition – the Existence of Existence of Monopolies/oligopolies in the Monopolies/oligopolies in the Food tradeFood trade

Development Paradigm of the 1980s & Early 1990sDevelopment Paradigm of the 1980s & Early 1990s

The Issues:The Issues: Macroeconomic Macroeconomic

DisequilibriaDisequilibria

Deficit on the External Deficit on the External AccountAccount

The Bitter Medicine: The Bitter Medicine: Structural AdjustmentStructural Adjustment

Strategies Strategies Focus on Export led Focus on Export led

growth to Enhance FOREX growth to Enhance FOREX earningsearnings

Agricultural Diversification Agricultural Diversification - Non traditionals for the - Non traditionals for the Export MarketExport Market

Exchange rate Exchange rate adjustmentsadjustments

The Experience: Major The Experience: Major Deterrents in Accessing Deterrents in Accessing Export MarketsExport Markets

Significant Non Tariff Significant Non Tariff BarriersBarriers

Transport logistics: cost, Transport logistics: cost, unreliability & availabilityunreliability & availability

High marketing transaction High marketing transaction cost resulting from low cost resulting from low volumesvolumes

Difficulty in accessing Difficulty in accessing Mainstream MarketsMainstream Markets

High levels of Competition High levels of Competition in Commodity markets in Commodity markets

Absence of market Absence of market development and promotion development and promotion activitiesactivities

The Post WTO Period: 1995 +The Post WTO Period: 1995 +

FeaturesFeatures

Globalization & Liberalization Globalization & Liberalization of Marketsof Markets

Erosion of Preferences – Erosion of Preferences – Decline of the Traditional Decline of the Traditional Export SectorExport Sector

Market Access now Governed Market Access now Governed More by SPS and Other More by SPS and Other Regulatory measures rather Regulatory measures rather than Tariffs; egthan Tariffs; eg• HACCPHACCP• GAPGAP

Limited role for National Policy Limited role for National Policy in Tradein Trade

ResultResult

Declining export Declining export performance (FOREX)performance (FOREX)

Increasing Levels of Increasing Levels of Food importsFood imports

Impact on Impact on Employment & Employment & Poverty Poverty

Food Security Food Security Concerns Concerns

PARADIGM SHIFTPARADIGM SHIFT

FOR FOR

AGRICULTUREAGRICULTURE

Implications for Future DevelopmentImplications for Future Development

Loss of Trade Preferences/GlobalisationLoss of Trade Preferences/Globalisation• imperatives of developing competitive imperatives of developing competitive

industriesindustries

Trade profileTrade profile • Limits to growth possibilities based solely on Limits to growth possibilities based solely on

primary perishable productsprimary perishable products• Data highlights the importance of processed Data highlights the importance of processed

products in expanding trade opportunities products in expanding trade opportunities (intra and extra-regional)(intra and extra-regional)

Implications Cont’dImplications Cont’d

Trade profileTrade profile (Cont’d) (Cont’d) • Data suggest that there is a lot of scope for Data suggest that there is a lot of scope for

expanding the regional food marketexpanding the regional food market

• Some countries are more integrated (southern Some countries are more integrated (southern Caribbean) into the intra-regional food market Caribbean) into the intra-regional food market than others (Belize, Suriname, Haiti, Bahamas) than others (Belize, Suriname, Haiti, Bahamas) scope for building the intra-CARICOM market scope for building the intra-CARICOM market

Implications Cont’dImplications Cont’d

Changing Structure of Agri-Food Changing Structure of Agri-Food MarketsMarkets• Significant growth in the food retailing Significant growth in the food retailing

and food service industry segments and food service industry segments • Declining share of farm-gate receipts as Declining share of farm-gate receipts as

a percent of expenditure on fooda percent of expenditure on food• ImplicationImplication

The real economic opportunities lies with the The real economic opportunities lies with the integration of all segments of the value-integration of all segments of the value-chain.chain.

Implications Cont’dImplications Cont’d Development Paradigms Development Paradigms

• CSMECSME Expands the economic space for sectoral developmentExpands the economic space for sectoral development

• Most recent paradigm suggests need to shift focus Most recent paradigm suggests need to shift focus from mainly on primary to integrated industry from mainly on primary to integrated industry approachapproach

• Need for efficiency in all segments of the value Need for efficiency in all segments of the value chainchain

• Development must be industry-led but with strong Development must be industry-led but with strong public sector support in the provision of public public sector support in the provision of public goodsgoods

• Mechanisms must be built in to ensure balanced Mechanisms must be built in to ensure balanced development among countries and equity in the development among countries and equity in the distribution of benefits distribution of benefits

Broad Strategies in the Post Broad Strategies in the Post Preference ParadigmPreference Paradigm

1. Creating/Broadening/integrating the New 1. Creating/Broadening/integrating the New Economic Space that CSME OffersEconomic Space that CSME Offers

2. A Focus on the Agrifood Industry rather 2. A Focus on the Agrifood Industry rather than the Farming Component in the Mainthan the Farming Component in the Main

3. Integration of markets into a fully 3. Integration of markets into a fully functional & efficient CARICOM Market:functional & efficient CARICOM Market:

Broad Strategies (cont’d)Broad Strategies (cont’d)

4. Efficient & Cost Effective Provision of 4. Efficient & Cost Effective Provision of Critical Public Goods to the Agrifood Sector Critical Public Goods to the Agrifood Sector - (the Drivers of Competitiveness) - (the Drivers of Competitiveness)

5. Adopting a Strategic Development 5. Adopting a Strategic Development Approach with a Focus on Priority Approach with a Focus on Priority IndustriesIndustries• Prioritization of Industry for Development Prioritization of Industry for Development

(resource constraints requires this)(resource constraints requires this)• Focus resources on key industry constraints for Focus resources on key industry constraints for

enhanced competitiveness enhanced competitiveness

Broad Strategies (cont’d)Broad Strategies (cont’d)

6. Creating an Enabling Environment for 6. Creating an Enabling Environment for Investment Mobility throughout the Region Investment Mobility throughout the Region with a focus on the agrifood sectorwith a focus on the agrifood sector

7. Developing the Institutional Framework to 7. Developing the Institutional Framework to Facilitate strong Regional Public Sector/ Facilitate strong Regional Public Sector/ Private Sector Partnership and Stakeholder Private Sector Partnership and Stakeholder LinkagesLinkages

Broad Strategies (cont’d)Broad Strategies (cont’d)

8. Monitoring & Evaluation of the total 8. Monitoring & Evaluation of the total Contribution of the Agrifood sector to Contribution of the Agrifood sector to the Regional Economy the Regional Economy

• The negative effect of inaccurate The negative effect of inaccurate economic accounting wrt Resource economic accounting wrt Resource allocation to the Sectorallocation to the Sector

DriversDrivers

Creating the CSME Economic Creating the CSME Economic Space: Key ImpedimentsSpace: Key Impediments

Provision of Timely & Reliable Information: Provision of Timely & Reliable Information: • MarketsMarkets• OpportunitiesOpportunities• Investments optionsInvestments options

Transport Infrastructure Transport Infrastructure

Provision of Appropriate Fiscal Incentives, Provision of Appropriate Fiscal Incentives, harmonization of Regulatory Measuresharmonization of Regulatory Measures

Market DevelopmentMarket Development

The Concept of the Agrifood Industry is one The Concept of the Agrifood Industry is one Comprising the entire VALUE CHAIN:Comprising the entire VALUE CHAIN:

Primary productionPrimary production Primary value added/ pre-processing Primary value added/ pre-processing

post farmpost farm Food / Industrial Product ManufacturingFood / Industrial Product Manufacturing WholesalingWholesaling Distribution / BrokerageDistribution / Brokerage Food Service (fast foods, convenience Food Service (fast foods, convenience

foods, restaurantsfoods, restaurants))

Markets (cont’d)Markets (cont’d)

A large % of food for retailing or fast A large % of food for retailing or fast foods restaurants & the Tourism foods restaurants & the Tourism Sector are sourced from outside the Sector are sourced from outside the regionregion

Limited & Weak linkages of the food Limited & Weak linkages of the food chains with Domestic Agriculture chains with Domestic Agriculture

Little conscious attempts to Little conscious attempts to development the linkagesdevelopment the linkages

A fragmented and underdeveloped A fragmented and underdeveloped regional food marketregional food market

Market Development Cont’dMarket Development Cont’d

OpportunitiesOpportunities

• The attractiveness of Retail Food & Food The attractiveness of Retail Food & Food Service Industry in the region Service Industry in the region

• is evidenced by the number of foreign is evidenced by the number of foreign food chains in both retailing and food food chains in both retailing and food service (fast foods and restaurants)service (fast foods and restaurants)

RetailingP

rim

ary

Pro

duct

ion

Agro-

Procs

sing

Wholesaling

Fo

od

Service

Distribution

A FRAGMENTED AGRI-FOOD INDUSTRY WITH WEAK LINKAGES

A FULLY INTEGRATED AND FUNCTIONAL AGRI-FOOD INDUSTRY

EFFECTIVE COORDINATION

CREATING STRONG LINKAGES

RetailingP

rim

ary

Pro

duct

ion

Agro-

Procs

sing

Wholesaling Fo

od

Service

Distribution

A FRAGMENTED AGRI-FOOD INDUSTRY WITH WEAK LINKAGES

Retailing

Distribution

Agro-Processing

Wholesaling

Food Service

Primary Production

A FULLY INTEGRATED AND FUNCTIONAL AGRI-FOOD INDUSTRY

EFFECTIVE COORDINATION

CREATING STRONG LINKAGES

Retailing

Distribution

Agro-Processing

Wholesaling

Food Service

Primary Production

Critical Public Goods Support: Drivers of Critical Public Goods Support: Drivers of

CompetitivenessCompetitiveness Efficient & Cost Effective Provision of Critical Public Goods to the Efficient & Cost Effective Provision of Critical Public Goods to the

Agrifood Sector– Requires effective multi-sectoral coordinating Agrifood Sector– Requires effective multi-sectoral coordinating institutionsinstitutions

Technology Support (Research, Development & Innovation)Technology Support (Research, Development & Innovation)

Agricultural Health and Food SafetyAgricultural Health and Food Safety

Drainage & IrrigationDrainage & Irrigation

Access RoadsAccess Roads

Land Policy & Access to Arable lands Land Policy & Access to Arable lands

Protection of Water resources to ensure Sustainable Agriculture Protection of Water resources to ensure Sustainable Agriculture Protection and maintenance of Suitable Water Quality to ensure food Protection and maintenance of Suitable Water Quality to ensure food

safety safety Risk management Risk management

Technology Support (Research, Technology Support (Research, Development & Innovation)Development & Innovation)

• A more appropriate institutional frameworkA more appropriate institutional framework

effective coordination and mobilisation of the research effective coordination and mobilisation of the research capability in the region to support the entire value chaincapability in the region to support the entire value chain

Greater stakeholder involvement in establishing research Greater stakeholder involvement in establishing research agenda and prioritiesagenda and priorities

Performance-based funding for research/contract Performance-based funding for research/contract research/Contestable R&D fundsresearch/Contestable R&D funds

• Importance of labour-saving technologies;Importance of labour-saving technologies;

• Biotechnology (e.g., improvements in productivity, Biotechnology (e.g., improvements in productivity, quality and pest resistance) quality and pest resistance)