The Special Safeguard Mechanism and Zambia · The paper was researched and written by Mr. Stephen...

November 2005

The Special Safeguard Mechanism and ZambiaTrócaire Research Paper

Zambia SSM Report Cover 11/1/06 9:43 Page 2

This research paper has been produced by Trócaire, the Irish Catholic Agency for WorldDevelopment. Trócaire is a member of CIDSE and Caritas Internationalis.

The paper was researched and written by Mr. Stephen Muyakwa

Trócaire wishes to thank Comic Relief for their financial support

AcknowledgementsI wish to express my sincere appreciation to the management of Trócaire, Ireland, for thefinancial support that enabled me to carry out this study. I wish to single out Mr MichaelO’Brien, Advocacy Officer at Trócaire, for his efforts in guiding and providing readingmaterial for the study.

Further thanks go to my co-researchers, Mrs Lillian Bwalya, Senior Economist, Ministry ofCommerce Trade and Industry and HE Ambassador B Bowa, former Zambian Head ofDelegation at the WTO in Geneva. Their deep insights on the subject matter and inputhave been outstanding.

I also wish to thank my research assistant, Ms Angela Mulenga, for the interviews sheconducted with various stakeholders.

Finally, the interviewees in the various government, private and civil society organisationshave been the pillar of this study. Many thanks for their support.

Stephen L Muyakwa, Development ConsultantLusaka, November 2005

Cover photo: Veronica Robert, African farmer with her two year old child, Awhinne. Noel Gavin/Allpix.Designed and printed by Genprint Ireland Ltd. Tel: 847 5351


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Contents

List of Acronyms 1

Executive Summary 2

1 Background and Rationale for the Study on SSM 4

2 Trade Remedial Measures in the Multilateral Trading System 5

3 Proposals on Special Products and Special Safeguard Mechanism 8

4 Critical Analysis of the SSM 10

5 Responses to the Criticism of SSM 13

6 The Geneva July Package and SSM 15

7 The Case for SSM in Zambia 17

8 Essential Elements of an SSM for Zambia 22

9 Conclusions andRecommendations 24

Appendices 26

Selected Bibliography 31

Acronyms

AoA WTO Agreement on AgricultureCI Caritas InternationalisCIDSE International Cooperation for

Development and SolidarityCSTNZ Civil Society Trade Network of

ZambiaCoA WTO Committee on AgricultureCOMESA Common Market for Eastern and

Southern AfricaCSO Central Statistical OfficeDSB Dispute Settlement Body (WTO)DMD Doha Ministerial DeclarationEC European CommissionEJN Economic Justice NetworkEU European UnionFAO Food and Agriculture Organisation

of the United NationsFEWSnet Famine Early Warning System

networkFTA Free Trade AreaGATT General Agreement on Tariffs and

TradeHS Harmonised SystemIRIN Integrated Regional Information

NetworksLDCs Least Developed CountiesLMG Like-Minded Group (of countries in

the WTO)MACO Ministry of Agriculture and

CooperativesMDGs Millennium Development GoalsNFIDC Net Food Importing Developing

CountriesSADC Southern African Development

CommunityS&D Special and Differential TreatmentSDCM Special and Differential

Countervailing MeasureSP Special ProductsSSG Special Safeguard measures

(existing AoA)SSM Special Safeguard Mechanism

(proposed for the new AoA)TNCs Transnational corporationsTRQs Tariff Rate QuotasUNDP United Nations Development

ProgramUS (A) United States (of America)WTO World Trade OrganisationZNFU Zambia National Farmers’ UnionZRA Zambia Revenue Authority

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ExecutiveSummaryAgriculture is a cornerstone ofeconomic growth in Zambia andhas been designated as one of thepriority sectors in nationaldevelopment policy. However, thecountry faces the serious problemof low productivity, especially inthe small-scale farming sector.Steps to increase agriculturalproductivity are a majorgovernment priority.

Meanwhile, elements of the various WTOagreements generally and the Agreementon Agriculture (AoA), in particular, havehad a negative impact on developingcountries. The main negative impact hasbeen in the form of agricultural goodsbeing “dumped” on developingcountries, whether by developedcountries or other developing countries,as a result of trade liberalisation.

The protection offered by specialproducts (SPs) designation and specialsafeguard mechanism (SSM), as proposedby developing countries within the AoAnegotiations, are essential tosafeguarding their food security and ruraldevelopment interests.

Many developed and some developingcountries members of the WTO whoexport food are opposed to the idea ofspecial safeguard mechanism. Thesecountries wish either that no suchmechanism is introduced or to have itwatered down to such an extent that itwould lose its real value to developingcountries.

Developing countries have so farmanaged to keep the concepts of specialproducts and an SSM on the negotiating

table. The challenge now is to providedetailed ideas on how these conceptsshould be operationalised.

Some developing countries, such asZambia, face human and institutionalcapacity problems in contributingsignificantly to the debate, and will needsupport to capture and process the dataneeded to institute any SSM procedures.

The G33 proposals on special safeguardmechanism to date constitute a viableand implementable formula forimplementing SSM in developingcountries.

After detailed analysis of the Agreementon Agriculture and exploration of itsparticular implications for Zambianproducers, this paper makes thefollowing recommendations in relation tothe negotiations on SPs and SSM:

Special Products• Developing countries, including

Zambia, should continue to fight forthe inclusion of the special productsconcept in the AoA negotiations andfinal agreement.

• The SPs should be exempt from tariffreductions and they should not besubject to restricting conditions.

• Developing countries should have theflexibility to self-declare specialproducts with respect to food security,livelihood security and ruraldevelopment objectives.

• The criteria for selection of SPs shouldinclude: contribution to trade;contribution to agriculturalproduction; link to livelihood, forexample, the number of peopleemployed in making theproduct/products predominantlyproduced by low-income, small-scalefarmers; and the link to food security,for example, contribution to calorieintake.

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Special SafeguardMechanism• Developing countries including Zambia

should continue to fight for theinclusion of SSM in the AoAnegotiations and final agreement.

• SSM should be available to alldeveloping countries.

• All LDC agricultural products should beeligible for treatment under SSM.

• SSM should be a simple and effectivemechanism, which developingcountries should be able to use for allproducts affected by import surges orprice declines.

• SSM should take the form of higherallowable tariffs or quantitativerestrictions.

• SSM could be triggered by an increasein import volume and/or a decrease inimport prices.

And finally• Cooperating partners should, as a

matter of priority, assist the Zambiangovernment to increase agriculturalproductivity, especially in the small-scale farming sector.

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1. Backgroundand Rationalefor the Studyon SSMThe Special Safeguard Mechanism(SSM) for developing countries is aconcept advanced by developingcountries within agriculturalnegotiations being held under theauspices of the World TradeOrganisation. The debate onaccess to a proposed SSM fordeveloping countries is closelylinked to the discussions onSpecial Products (SPs).

In the post-Doha negotiations onestablishing negotiating modalities inagriculture, the SP/SSM concepts werereflected in the first draft modalitiespaper of Agricultural Committeechairperson Stuart Harbinson, producedin February 2003. Discussions of this draftled to revisions on SP and SSM provisionsin a second Harbinson text. Between thesecond Harbinson text and the CancunMinisterial in September 2003, variouscountries and country groupingscontinued to submit proposals.

Based on these proposals, WTO GeneralCouncil chairman Carlos Perez de Castilloput forward, on his own responsibility,the first draft Cancun Ministerial Text,which was further revised during theMinisterial negotiations.

The second revised draft of the CancunMinisterial Text, presented by conferencechairman Mexican Trade Minister LuisErnesto Derbez, stated that “a specialagricultural safeguard (SSM) shall beestablished for use by developingcountries subject to conditions and forproducts to be determined”. The post-

Cancun negotiations leading to the July2004 Framework did not specify how theSSM would be applied.

The July 2004 Framework states that “aSpecial Safeguard Mechanism (SSM) willbe established for use by developingcountry members”. The absence of detailon how the concept of SSM is to bedeveloped indicates a lack of consensuson how it and SP provisions are to beapplied. In June and October 2005, theG33 came up with more detailedproposals on SPs and the SSM.

For Least Developed Country (LDC)members of the WTO, the JulyFramework (annex A) section on marketaccess states that they “are not requiredto undertake reduction commitments”.This implies that LDCs are not required toundertake any further tariff reductioncommitments in this Round and,therefore, will not need the flexibilityprovided by SPs in the context of thecontinuing WTO negotiations.

The fact that LDCs will not have toundertake further tariff reductioncommitments does not mean that they donot need a SSM, however. LDCs arevulnerable to import surges arising fromsubsidised competition and under normalconditions of competition. While somedeveloping countries have access toexisting special safeguard (SSG) measures,most do not, as they did not tarrifyduring the Uruguay Round. Theavailability of SSM is vital to developingcountries’ abilities to deal effectively withthe threat that import surges pose tovulnerable small farmers, food securityand rural economies.

This report aims at assessing thearguments for and against SSM, and usesZambia-specific information and data tosupport the case for the introduction ofSSM in the Agreement on Agriculture. Italso outlines what an appropriate designfor an effective SSM in Zambia wouldlook like.

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2. TradeRemedialMeasures in theMultilateralTrading SystemProvision is made in theMultilateral Trading System fortrade remedial measures thatallow a given country, in certaincircumstances, to mitigate theeffects of trade actions by others.The protection given by a traderemedial measure is not meant tobe perpetual, but remedial innature. A trade remedy issupposed to rectify the problemcaused because of an unfair tradepractice being followed by anothercountry.

The use of trade remedial measures isusually accompanied by heated debatesabout the pros and cons of their use,because such measures are sometimesused for purposes other than combatingunfair trade practices. Extendingillegitimate protection to domesticindustry is a case in point1.

The General Agreement on Tariffs andTrade (GATT), precursor of the WTO,allows for three types of trade remedialmeasures: anti-dumping, countervailingduties, and safeguards. Special SafeguardMeasures are part of the generalprovisions on safeguards. We examinethese safeguard provisions in some detail.

2.1 Safeguard MeasuresA WTO member is not generallypermitted to restrict imports into itsterritory or exports from its territory, butthe provision of safeguard measures is animportant exception to the generalprohibition of quantitative restraints onimports.

Safeguard measures are emergency trademeasures taken temporarily by a WTOmember to provide relief to its domesticindustry where it is being damaged by anincrease in imports. Under certainconditions, members can use trademeasures to restrict imports of a productin order to “safeguard” its domesticindustry. Safeguard measures have alsobeen called an “escape clause”, since theyenable a member to “escape” its generalobligations in specified situations.

The purpose of safeguard provisions inthe international trading system is tolighten the burden on a country whosedomestic industry is facing acuteproblems due to imports. The objective isto disperse the burden over all themembers to enable the affected memberto adjust smoothly to the new situationof international competition in thatparticular product line. By its nature, asafeguard measure has to be temporaryand in support of the adjustment process.Since safety mechanisms are meant toprovide temporary protection to thedomestic industry to facilitate itsadjustment, it is not expected that theywill be used as an instrument of long-term protection2.

The limits and disciplines on safeguardmeasures were initially contained inArticle XIX of GATT 1994. These havebeen clarified, augmented and reinforcedin the Agreement on Safeguards thatforms part of the WTO agreements.

Like most favoured nation (MFN)treatment, safeguards are an importantfeature of multilateralism in internationaltrade: MFN results in the sharing of itsbenefits; safeguards are about sharingthe burdens.1 For details see Consumer Unity and Trust Society (CUTS), (2004):

Protectionism and Trade Remedial Measures, Jaipur, India.

2 For details see Das Lal B. (1999): The World Trade Organisation.Penang, Malaysia. 1.


2.1.1 Nature of Safeguard MeasuresTaking safeguard measures meanswithdrawing or modifying theconcessions that a member has givenunder the WTO agreements in respect ofgoods, or suspending, wholly or partly,other obligations undertaken in respectof goods.

It is important to note that if the tariff isnot bound (or set) under WTOagreements, a member is fully within itsrights to raise the tariff level withoutgoing through the safeguard measureprocess. Also, if the tariff on theparticular product is bound and theapplicable tariff is lower, a member canraise the tariff up to the binding levelwithout following the safeguardprocedure. It is only when the tariff is tobe raised above the bound level thatthere is a need to adopt the prescribedprocedure of the safeguard measure.

2.1.2 Preconditions for TakingSafeguard Measures

Safeguard measures are taken to providetemporary protection for the producersof a specific product. Certainpreconditions must exist before any suchmeasure can be taken. The main elementsof the preconditions are that:

(a) Imports of the product should haveincreased. (there should have beeneither an absolute or an increaserelative to domestic production.)

(b) Imports should be in such quantitiesand under such conditions as to causeor threaten to cause serious injury todomestic producers of like or directlycompetitive products.

2.2 Special Safeguard ProvisionsIn imposing restraints on market access asa safeguard for domestic productionagainst problems caused by imports, thegeneral safeguard provisions, covered byArticle XIX of GATT 1994 and theAgreement on Safeguards, are applicableto agricultural as well as industrialproducts. In addition, some specialsafeguard provisions (SSG) apply to

agriculture under certain conditions (AoAArticle 5).

The difference between these twoalternative steps is that the generalsafeguard action can only be taken if thereis the existence or threat of serious injuryto domestic production. The specialsafeguard action can be taken without thedemonstration of any adverse effect ondomestic production. The latter type ofaction can be taken if the import price fallsbelow a particular level, or if the importquantity rises above a particular level.

A member can make recourse to eitherthe general safeguard provisionscontained in Article XIX of GATT 1994 andthe Agreement on Safeguards or the SSG,but not both.

2.2.1 Conditions for SSGThe initial conditions for a WTO memberto be allowed take SSG measures againsta product are:

i) Tariffication has been undertaken inrespect of the product. In other words,non-tariff measures have beenconverted into equivalent tariffs.

ii) The member has marked a symbol“SSG” against the particular productin its schedule.

2.2.2 Triggers for SSGThere are two alternative triggers for theSSG: measures can be applied only ifeither of these two types of situations hasarisen. These triggers are i) Price: theprice of the import has fallen below aprescribed level; and ii) Quantity: thequantity of the import has reached aprescribed level.

2.2.3 Price TriggerThe trigger price is normally to bedetermined as the average cost, insuranceand freight (or cif) import price of theproduct between 1986 and 1988. If thetrigger price is high, the import price mayfall below this level more often.

The AoA provides that the trigger pricewill be made public so that exporters are

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cautioned well in time. Though theobligation is to announce the triggerprice only after its initial use, somemembers have announced it in theirnotifications to the Committee onAgriculture. The trigger price, oncenotified, has to be continued for the restof the implementation period.

2.2.4 Quantity TriggerThe quantity trigger level (the importquantity level above which SSG action canbe taken) is the sum of two components:the increase in the import quantity, andthe change in domestic consumption.

The component relating to the increase inthe import quantity (called base triggerlevel in AoA Article 5) is calculated on thebasis of the formula explained below:

i) If the import volume is 10% ofdomestic consumption or less, 125%of the average quantity of imports inthe three preceding years for whichdata are available;

ii) If the import volume is above 10%,but not more than 30%, of domesticconsumption, 110% of the averagequantity of imports in the threepreceding years for which data areavailable;

iii) If the import is above 30% ofdomestic consumption, 105% of theaverage quantity of imports in thethree preceding years for which dataare available.

This means that higher importpenetration enables a WTO member totake SSG action at a lower level ofincrease in imports.

The change in domestic consumption ismeasured as the difference between theconsumption in the current year (mostrecent year for which data are available)and that in the preceding year. Ifconsumption has fallen, this change willbe negative.

The sum of the increase in importquantity and the change in domesticconsumption is the actual trigger import

quantity level. The condition mentionedin Article 5.4, however, is that the actualtrigger level must not be less than 105per cent of the average quantity ofimports in the three preceding years forwhich data are available.


3. Proposalson SpecialProducts andSpecialSafeguardMechanism

3.1 Special ProductsSince most developing countries did nottarrify in the Uruguay Round or notifyproducts for treatment under SSG, theexisting trade remedies are unavailable tothem. A group of developing countries isnow advocating for the adoption of anew safeguard called the specialsafeguard mechanism (SSM).

The G333, in their several 2005 proposals,articulated a number of food andlivelihood security concerns andconsiderations in relation to specialproducts. These include:

“The importance of particular productsfor the subsistence strategies of therural poor and small and vulnerablefarmers; the importance that a productmay represent a source of livelihoodfor the population of a disadvantagedregion; the significance of a crop orproduct for the consumption profile ofa country; the potential structuraleffects of an import substitute in theconsumption profile of the country;and the contribution of a product tothe economy as a whole”

Given the profound and complexnature of these considerations, theG33 argued, its member countries“are of the view that theapplication of a common set ofindicators across the developingworld for designating SPs wouldbe very difficult.”

To come up with a “multilaterallyagreed threshold level for eachplausible indicator, capable ofcapturing the size and diversity ofthe agriculture sector in alldeveloping countries, would beeven more difficult,” the G33stated. Therefore, the designationof special products would requiremaximum flexibility.

In its proposal, the G33 assuredWTO members that this flexibilityshould not be equated with“arbitrariness” - but insisted thatonly with this flexibility will thefundamental importance of SPs berecognised, as stated in paragraph41 of the July Framework.

The G33 also pointed out that there wasscope for the list of special products to berevised by the developing countryconcerned to respond to changes indomestic circumstances. In thisframework, the G33 spelt out in greaterdetail the elements that would constitute“more flexible treatment for specialproducts”.

These elements include:

• In accordance with the JulyFramework, only developing countrieswould have the opportunity todesignate an appropriate number ofsuch products.

• No concessions should be required inreturn for having more flexibletreatment for SPs.

• SPs should not be subjected to tariffreduction, and neither should theseproducts be subject to commitmentson TRQs.

• SPs should have access to the SpecialSafeguard Mechanism (SSM).

• Many developing countries, includingthe ACP group, fully supported theG33 proposal on special products.

3.2 Special SafeguardMechanism (SSM)

The G33 put forward a set of parametersto guide agriculture negotiations on

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3 The G-33 countries include Antigua and Barbuda, Barbados,Belize, Benin, Botswana, China, Congo, Cote d’Ivoire, Cuba,Dominican Republic, Grenada, Guyana, Haiti, Honduras, India,Indonesia, Jamaica, Kenya, Korea, Mauritius, Madagascar,Mongolia, Mozambique, Nicaragua, Nigeria, Pakistan, Panama,Peru, Philippines, St Kitts and Nevis, St Lucia, St Vincent and theGrenadines, Senegal, Sri Lanka, Suriname, Tanzania, Trinidad andTobago, Turkey, Uganda, Venezuela, Zambia, and Zimbabwe.


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modalities on SSM. These parameters areas follows:

– The safeguard measure shall beautomatically triggered.

– The safeguard measure shall beavailable to all agricultural products.

– The safeguard measures should beavailable to address situations ofimport surges or swings ininternational prices. Therefore, price-and volume- triggered safeguards shallbe contemplated.

– Both additional duties andquantitative restrictions shall beenvisaged as measures to provide relieffrom import surges and decline inprices.

– The mechanism shall respond to theinstitutional capabilities and resourcesof developing countries; hence itshould be simple, effective and easy toimplement.

In line with this framework, the G33 laiddown in greater detail some more specificelements for the design of the SSM.

On the issue of triggers, the G33 said thatthe SSM may be invoked if:

– the volume of imports of the productconcerned exceeds the average volumeof imports of the three preceding yearsfor which date are available, or

– the price of imports of the productconcerned is below the trigger pricedefined as the monthly average cifimport price of the product concernedover the three preceding years forwhich data is available.

In relation to the remedies availableunder a volume-triggered SSM, anadditional duty can be applied to theextent necessary to address the importsurge. According to the G33 proposal,quantitative restrictions (QR) could alsobe used, although the measure shouldnot reduce the quantity of imports belowthe average volume of imports of thethree preceding years for which data areavailable.

In relation to the price-triggered SSM, theG33 proposed that developing countriesshould be able to use both remedies ofadditional duty and quantitativerestrictions. The additional duty shouldnot exceed any positive differencebetween the cif import price of theshipment concerned and the trigger priceas defined.

The G33 proposed that the QR remedyshould be applied only when the measureis being implemented on a regular timeinterval, rather than on a shipment basis,but the results are ineffective in haltingthe continued fall in prices. As with thevolume-triggered SSM, the QR measureshould not reduce the quantity of importsbelow the average of imports of thethree preceding years for which data isavailable.

According to the G33 proposal, theseremedies should be maintained for aperiod not exceeding one year from thedate the SSM is invoked. At the end ofthe first period, the measure could againbe invoked if the relevant triggers exist.And if the price-triggered SSM is appliedon a shipment basis, no specified durationshould be necessary.

The G33 proposal also laid down sometransparency requirements. It suggestedthat members considering use of the SSMshould give notice in writing to theCommittee on Agriculture as far inadvance as practicable and, in any event,within 30 days of implementation of themeasure. This notice should include anindication of the tariff lines affected bythe SSM measure. Any member takingactions under this mechanism should alsoafford any interested member theopportunity to consult with it in respectof the conditions of application.

The G33 also made clear that alldeveloping country members would haverecourse to this SSM, and that the SSMshould be applied in a non-discriminatorymanner, regardless of the source of theimported agricultural product.


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4. CriticalAnalysis of theSSMThe Cairns Group members of theWTO4 consider that the SSMshould work as an incentive forWTO members to undertakefurther tariff reductions. This, theysay, can be done through makingthe measures available only forproducts in which ‘deep’ tariff cutsare undertaken. They oppose SPshaving access to safeguardmeasures.

Linking access to the SSM to the level oftariffs is mistaken, however, because itconfuses the role and intent of tariffs indeveloping countries.

Safeguard measures aim at responding toemergency situations due to importsurges and are temporary by their verynature. The general level of tariffs, whichconstitute the only means of supportingfarmers’ income and protectingagriculture in many developing countries,cannot be traded off in return forsafeguard measures.

In addition, the need for specialsafeguards in agriculture was recognisedduring the Uruguay Round. Access to suchan instrument was granted to products inwhich the tariffication process resulted inhigh tariffs. It was felt then that theelimination of non-tariff barriers wouldrender agricultural products vulnerable toexternal shocks and import surges, and

that the high tariffs resulting fromtariffication would not be enough toaddress this problem. The SSG provisionswere established to cushion the transitionprocess towards a tariff-only regime.

Developed countries took advantage ofthis flexibility by reserving the right touse the SSG for a large number ofproducts. Canada, for example, reservedthe right to use the SSG for 150 tarifflines, the EC for 539, Japan for 121, theUS for 189 and Switzerland for 961 tarifflines.

However, only 22 developing countriescan use the current SSG. The mostvulnerable members of the WTO, whosetrade in agricultural products takes placeunder a tariff-only regime much the sameas that of the rest of WTO members, havebeen denied access to such an instrumentso far.

The repeated instances of import surgesduring the implementation of the AoAhave made access to the SSM a priorityfor most developing countries.

4.1 Debates on features ofthe SSM

Discussions on the actual mechanism totrigger the safeguard measures and thetrade remedy to be provided arecontinuing. The Chair of the AgriculturalCommittee’s draft texts for Hong Kongprovide for both price and volume-triggered safeguards: safeguards could betriggered either because prices dropbeyond a reference price to beestablished in the mechanism or becauseimport volumes increased beyond astated reference level.

The proposal by the G33 referred to aboveprovides for both price and volume-triggered safeguards. However, somemembers of the Cairns Group, the EC andthe US have indicated that pricesafeguards are not transparent and wouldbe difficult to monitor, given the ease withwhich governments could manipulateprices in order to trigger the SSM.

4 The Cairns Group is a coalition of 17 agricultural exportingcountries. The Cairns Group seeks deep cuts to all tariffs using aformula approach which delivers reductions on higher level tariffs,including tariff peaks, and eliminates tariff escalation. The CairnsGroup proposes special and differential treatment provisions fordeveloping countries and greater access for agricultural goodsproduced in, and exported from, developing countries. The CairnsGroup seeks major reductions in domestic support leading to theelimination of all forms of trade and production-distorting support.It argues that only non-distorting forms of support should bepermitted within the context of declining levels of support. TheCairns Group is in favour of the elimination of all forms of exportsubsidies.


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Regarding the remedy measures to beapplied, it has been suggested that anymeasure to address import surges shouldbe limited to additional tariffs beingimposed on the applied rate (which arelower than bound rates in mostdeveloping countries). Proposals bydeveloping countries to establishquantitative restrictions (such as quotas)as a safeguard measure have beenstrongly opposed by members of theCairns Group as a step backwards in themarket liberalisation process.

In addition, it has been suggested thatthe additional tariffs under safeguardmeasures should not exceed the finalbound tariff level for a specific productagreed during the Uruguay Round.Proponents of the SSM have opposed thisconstraint, in particular those withalready low bound tariffs.

The EC and other developed countrieswith similar positions have tried to maketheir support of the SSM conditional ontheir securing the continued right to usethe current SSG for themselves.Developing countries of the Cairns Groupwould favour the establishment of theSSM as long as imports from developingcountries (that is, their own exports) arespared from its application.

In general, all these countries wouldsupport a very targeted approach andstrict criteria for granting access to theSSM to developing countries, mostlyconditioned on improved market access.

However, the terms and conditionsattached to such a mechanism may bequite demanding and its scope verylimited, to the point of rendering theSSM ineffective as a defence mechanismagainst import surges.

A key concern for developing countries inthe coming months is to guarantee thatSPs have access to safeguard measures

and that the SSM is not conditioned ondeep tariff reductions. This would beparticularly damaging to countries withalready low bound rates, for whichrelinquishing the right to the SSM may bepreferable to undertaking deep tariff cuts.

In such circumstances, these countrieswould, once more, be deprived of theinstruments they need to address importsurges.

Some members5 of the WTO have voicedtheir concern that the bigger picture ofliberalisation and broad market accesswill be watered down by special products,and want the number of them to berestricted. Chile said there should be atrade off between the number of specialproducts and their treatment. Colombiaargued that if a certain amount of aproduct is exported, then that productshould not be designated as a specialproduct. The US opposed the exemptionof SP from tariff reductions. New Zealandwanted to limit the number ofdeveloping countries offered recourse toSSM.

On the issue of product coverage, NewZealand argued that SSM should beapplicable only to those products thathave undergone substantial tariffreduction. Argentina also opposed theidea that all products should be eligiblefor SSM, saying it should only beapplicable to products receiving subsidies.

The US and New Zealand have questionedthe need for having both price andvolume triggers, and suggested that thelatter alone is sufficient. The G33 haverepeatedly rejected such propositions.

The World Bank recently madesubmissions to the WTO, arguing thatSSM is likely to have only limited, short-term benefits to farmers, and is likely tobe counterproductive to the objective oflong-run structural food security. TheBank forwards the following argumentsto support its case6:

• “The benefit of the protection of foodcrops to the rural poor is less than it

5 US, the EU, New Zealand, Australia, Thailand, Malaysia, Chile,Argentina and Colombia

6 For details see World Bank (2004): Contribution of the World Bankto the Annual Monitoring Exercise by the WTO Committee onAgriculture of the Marrakech Ministerial Decision on MeasuresConcerning the Possible Negative Effects of the Reform Programmeon Least-Developed and Net – Food Importing DevelopingCountries. Washington D.C.


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might appear because the poorest are(in many countries) landless and aretherefore harmed in their capacity asnet consumers, and the next poorestclass are generally self – sufficient(non-commercial) producers, whoneither gain nor lose.

• Raising prices via tariffs on food has aone-off impact on farm incomes, butto raise farmers’ incomes on asustainable basis, it is necessary eitherto raise the returns to labour in othersectors, or their productivity inagriculture itself. To reduce the gapbetween farm and non-farm incomespermanently requires measures thatfacilitate faster out-migration fromagriculture, such as more effectiveinvestments in rural education andinfrastructure.

• Raising domestic food prices imposes aregressive tax, undermining the foodsecurity of urban and rural consumers.The cost of protectionism to poorconsumers is higher for food than formany other products, since the poorspend disproportionately on food.

• By discouraging export production, itreduces foreign exchange earningcapacity of the country andundermines its structural capacity toimport food and other products.

• When pursued by many developingcountries, it results in high barriers toSouth – South trade. Developingcountries have tariff structures inagriculture and food products that are,on average, higher and more escalatedthan those of developed countries,although for primary products theindustrial countries provide much moreprotection through indirect subsidiesand non-tariff measures (mainly tariff-rate quotas).

• It encourages farmers to continue toplant low-value food crops instead ofdiversifying into high-value non-traditional exports, which is a betterroad to escape from poverty.

• Protection via trade policy is oftenviewed by policy makers as a substitutefor methods of support for agriculturethat have been proven to be muchmore productive, such as increasedspending on rural education,infrastructure, or research andextension, and from investments indomestic food distribution systems toimprove their ability to quickly andefficiently respond to food needs intimes of emergency.

• In the Doha negotiations, it divertsattention from the question of howprovisions in the global trading systemcould be used to (1) make allconsumers more food secure bydisciplining the practice of exporttaxation or controls by food- exportingcountries in periods of high worldprices and (2) discipline abuse of foodaid, which has, at times, madedeveloping countries dumping groundsfor surplus production of rich countriesin periods of global gluts, therebyundermining food production andmarketing channels.”

The World Bank concludes that it wouldbe useful to focus more attention onopening up world agricultural trade, thusimproving long-term food security indeveloping countries.


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5. Responsesto the Criticismof SSMThe World Bank voice is not new.These are the same argumentsthat the World Bank used to pushdeveloping countries into thestructural adjustment paradigm.The fact that these are old voicesdoes not necessarily make thearguments invalid, though; whatmakes the World Bank positionweak is the “one size fits all”scenario.

Many developing countries, includingZambia, implemented the famous WorldBank/ IMF Structural AdjustmentProgrammes. Zambia, like many otherdeveloping countries, is yet to recoverfrom the economic and social problems,such as unemployment and poverty, theycontributed to.

In more specific terms, Zambia has noserious problem with landlessness 7. Foodinsecurity and low agriculturalproductivity in Zambia is a result of a)high dependence on rainfall, b) use ofunproductive technology such as thehand-held hoe, c) market failure in termsof agricultural inputs supply, d) highproduction costs such as fuel,communications and e) inconsistencies ingovernment policy on its role inagriculture8.

The government sees the future of theagricultural industry as lying, at least

partly, in the reintroduction of someprotection for local producers and anexpansion of its own role in agriculturalmarketing. The World Bank has opposedthe reintroduction of protectionism and astronger government hand in theindustry.

“The World Bank is willing to assist inthe development of thecompetitiveness of Zambianagriculture, we are not aware that thegovernment plans to reintroduceprotectionism or play a greater role inmarketing, but the Bank would opposeboth”

World Bank deputy representative Mehrnaz

Teymourian9

Former Agriculture Minister MisheckChiindi launched a study on Zambia’sagricultural competitiveness with a callfor “legitimate defence measures” tocounter alleged unfair trade practices bysome Common Market for Eastern andSouthern Africa (COMESA) producers10.

Increasing agricultural exports togenerate foreign exchange to buy food,as the World Bank proposes, is notwithout problems for a number ofreasons. Firstly, the food consumers arenot the same as the agriculturalexporters. There are a growing number ofagricultural firms producing export cropssuch as cut flowers in Zambia. Workers inthese mostly foreign owned firms are notadequately remunerated to ensure theirfood security. Secondly, many agriculturalexport crops, such as cotton, are sufferingfrom long-term price declines - due in nosmall part to producer subsidies from thedeveloped countries such as the USA.Thirdly, the urban poor are left out of thisequation.

The World Bank also states that importsurges do not affect small-scale farmerssince they operate “outside” the casheconomy. But even small-scale farmershave educational and health needs forwhich they need to pay – thanks, again,to World Bank-promoted reforms thatencourage “cost sharing” in social

7 For details on Zambia’s land situation see Muyakwa S. L. andCCJDP (2003): Impacts of the Land Act 1995 on the Livelihoods ofthe poor and peasants in Zambia, Lusaka, Zambia.

8 The newly adopted Agricultural Policy has made strides inaddressing the problems of policy inconsistencies.

9 For details see IRIN Africa English Service [[email protected]]. When the Government finally came upwith the National Agricultural Policy in 2004, the handcraft of theWorld Bank was visible in the document as very little room was leftfor the government.

10 Ibid


14

services. Small-scale farmers can only“cost- share” if they sell some of theiragricultural produce. Low prices causedby import surges can thus limit small-scalefarmers’ access to social services.

The World Bank proposes thatgovernment should invest in roads andother infrastructure. This sounds goodbut has limitations. Good roads alone donot lead to increased agriculturalproduction by small-scale farmers. Thereare a host of other prerequisites, such asavailability of “affordable” loans,extension services and other incentivesthat can stimulate agriculturalproduction11.

11 A case in point is the World Bank sponsored Zambia SocialInvestment Fund (ZAMSIF). The project rehabilitated schools andhospitals in many areas. Some schools and hospitals were notregistering increased school enrolment or health attendancebecause the people had no money to “cost share”.


15

6. The GenevaJuly Packageand SSM

6.1 Market AccessDeveloped countries succeeded in havingan “appropriate number” of their heavilyprotected farm goods categorised as“sensitive products”12 that would enjoyspecial treatment in relation to thestandard tariff-cutting formula. Thus,developed countries are given somesignificant protection for their high-tariffproducts.

There is concern that the “sensitiveproducts” concept would continue toprevent or limit access of developing-country agricultural exports and potentialexports to developed-country markets.

In contrast, developing countries have beenpushing for a decision that farm productson which their food security, farmers’livelihoods or rural development dependshould be exempt from further tariffreduction. The July 2004 Framework nowstates that developing countries will havethe flexibility to designate an appropriatenumber of products as “special products”,based on criteria of food security,livelihood security and rural developmentneeds, and that these products are eligiblefor “more flexible treatment.” The criteriaand treatment will be specified during thenegotiations.

In discussions before the adoption of thedecision, Indonesia (coordinator of theG33 group of developing countries) had ahard time insisting on removing thewords “under conditions to be agreed inthe negotiations” which had been placedafter “flexibility to designate” (productsas special products). This was opposedespecially by the US, but Indonesia finallysucceeded.

Although these “special products” havereceived slightly better recognition afterthe adoption of the 2004 Framework, theexemption from tariff reduction that theG33 demanded is still not provided.Moreover, in a major step backwards, thestatement in the first Geneva draft of 16July that “there will be no requirement toexpand tariff rate quotas on SP products”has been removed, implying that SPs willalso be subjected to tariff rate quotaexpansion.

The July 2004 Framework also states thata special safeguard mechanism will beestablished for use by developingcountries. A good development is thatthe qualifying phrase “under conditionsto be agreed” in the 16 July text has beenremoved.

6.2 Product Coverage It has been mentioned earlier that the US,the EC and others have raised objectionsto the proposals contained in the G-33paper and wish to limit the coverage ofany special safeguard mechanism to aselected number of agricultural products,so that measures can apply only to staplefood products or products necessary forfood security. They also want the SSM toapply to products that already have lowtariffs “in order to facilitate the overallliberalisation process”.

But such a situation would not addressthe needs of many African countries. Therule of thumb should be that all productsmust be covered as long as they are likelyto significantly affect the principles offood security, export revenues anddevelopment aspects.

The production of agricultural products inmany African countries showsdependency among various segments ofthe population on one agriculturalactivity/product or another. Furthermore,most African countries, Zambia included,have already liberalised via structuraladjustment programmes and theapplication of the AoA to the maximumextent possible.12 The “sensitive products” category can be used by all members

and thus by developing countries as well. It is, however, understoodthat this category was devised for the developed countries, whichare unable to make use of the “special products” category thatfalls under special and differential treatment for developingcountries.


It should also be remembered that thereis a fundamental difference in the rolesthat agriculture plays in developed andAfrican countries. For most Africans,agriculture is a way of life, not a chosenoccupation. Support to and protection ofagricultural production is vital to ensuringfood security and poverty alleviation. Keycrops that people depend on should notbe left to the vagaries of open markets.

6.3 Geographical Coverageof an SSM

Zambia has entered into many regionaltrading arrangements. It is important thatthe process of regional integration isaddressed in terms of an agreed strategyon building competitive regionalproduction capacities before consideringopening up markets to increasedcompetition from within as well asoutside the region. Any crop that iscrucial for livelihoods and food securityshould be eligible for treatment underSSM, regardless of its origin.

6.4 Design of the SSM As noted in the G-33 paper, developingcountries have problems in followingrigorous safeguard procedures,particularly with regard to demonstratinga causal link between imports and injurywhere small farmers are involved.Externally imposed reforms have alsoinflicted considerable damage on theAfrican agricultural sector.

Furthermore, because of the extremedependency of many LDCs on a fewagricultural products and the factorssurrounding their production, nolimitations should be placed on theapplication of the SSM, so that countriescan address import surges and pricefluctuations as the situation warrants.

The G33 proposal has particular merit forLDCs such as Zambia in calling for specialsafeguard measures that would:

• Be automatically triggered;

• Be available for all agriculturalproducts;

• Be triggered by both price and volumefactors;

• Allow both additional duties andquantitative restrictions to be applied;

• Be simple, effective and easy toimplement.

Simplicity is vital to the design of theSSM, given the difference between themain objectives of current safeguardprovisions and those of the proposedmechanism for developing countries(trade versus development and foodsecurity).

The automatic trigger for the proposedmechanism could be designed to allow agovernment impose measuresimmediately where an influx of a productappears likely to lead to a fall in prices; orwhere the total available quantity in thedomestic market appears likely to surpassthe normal (average) consumption,leading to a glut; or where an influx isoffered at prices far below domesticprices, likely to affect domestic pricesdownwards; or both.

16


17

7. The Case forSSM in ZambiaZambia is among countries thathave supported the proposal toestablish an SSM that would allowdeveloping country membersimplement measures to counterany sudden influx of agriculturalcommodities or fall in agriculturalmarket prices.

About 4.2 million, or 58%, of the 7.5million hectares of Zambia is suitable foragriculture. Some 33% of the land, or 2.5million hectares, is suitable for cropproduction. However, the currentutilisation is between 1.1 to 1.5 millionhectares, or between 15% and 20% ofthe land. This means that Zambia has justbegun the task of developing itsagriculture.

Table 1 shows that most of the farmers inZambia are not business oriented. Theyare still affected by import surges thatlower producer prices, because small-scalefarmers have to sell some of theirproduce to meet health and educationneeds. Their production focus, though, isfor meeting subsistence needs. An SSMmodel that ensures that their producedoes not sell at too low a price would bea welcome development.

Agriculture has accounted for no more

than 30% of Zambian GDP between 1991and 2004. The rural economy is, however,home to 60% of the Zambian populationof 9.9 million. To increase production andreduce poverty, a SSM is needed tostimulate the sector.

Crops of particular importance to Zambiainclude: maize, cassava, millet,groundnuts, sunflowers, sunflower seeds,rice paddy, sugar cane, cotton seed,wheat, soya beans, tobacco, sorghum,vegetables (including fresh tomatoes andonions). Although maize is by far themost widely grown crop, sugar caneaccounted for a large proportion ofproduction between 1990 and 2001 asshown in Table 2.

Two issues stand out in considering Table2. Firstly, the volumes produced in Zambiaare very low by international standards.This means that even small importvolumes can disrupt the agriculturalsector. Secondly, there are huge variationsin the production volumes of most crops.This is mainly due to almost total relianceon rainfall, the patterns of which havebecome increasingly erratic. Imports arethus an essential element to smoothenthe availability of food. This makes theneed to control import surges veryimportant.

Other crops grown in Zambia includehorticultural and floricultural products,coffee, tea, and high-value crops such aspaprika and marigold.

Zambia’s trade regime was biasedtowards export of metals. However, thepolicy reorientation in the late 1980s and

Table 1: Characteristics of Zambian Agriculture

Characteristics Small-scale Emergent Medium-scale Large-scale

No. of farmers 459,000 119,200 25,230 Less than 40

Area per holding (hectares) 0.5-9.0 10-20 20-60 Over 60

Crops grown Food crops Food/ cash crops Food/ cash crops Cash crops

Production focus Subsistence Commercial/ Commercial/ subsistence subsistence Commercial

Source: The IDL Group, page 12


18

liberal policy measures adopted in the1990s have had a positive impact onZambia’s export trade. The contributionof agriculture to overall exports hasgrown. The main export crops are maize,sugar, tobacco, cotton, floricultural andhorticultural products, marigold andgroundnuts.

In terms of the orientation of Zambia’sexternal trade, the main exportdestination is the EU. Imports are mainlyfrom the Southern African DevelopmentCommunity (SADC) region, especially

Zimbabwe and South Africa. Table 3highlights the main trading partners forZambia. It is worth noting from the tablehow imports from Zambia’s southernneighbours have overtaken the COMESAregion over the years.

The implication for the SSM for Zambia isthat the regional coverage should includeall sources of imports. Tables 1A and 1B aswell as graphs 2A and 2B in theappendices show that there can be verylarge fluctuations in imports in both valueand weight terms. This can be due to

Table 2. Production of selected crops (‘000) Metric tonnes

Sugar SeedYear Maize Cassava Millet G/nuts Sunflower Rice cane cotton Wheat Soybeans Tobacco Sorghum

1990 1093 640 32 25 20 9 1127 31 55 27 4 20

1991 1096 682 26 28 11 15 1150 49 65 28 5 21

1992 483 682 48 21 1 9 1300 26 58 7 2 13

1993 1598 744 37 42 21 14 1220 58 71 28 7 35

1994 1021 744 63 35 10 6 1311 26 43 24 4 35

1995 738 744 54 36 21 12 1310 50 50 21 2 26

1996 1409 744 55 35 27 13 1400 37 58 40 4 36

1997 960 702 61 46 8 12 1500 64 71 29 3 31

1998 638 817 62 57 6 6 1550 59 64 12 3 25

1999 856 971 70 51 7 15 1650 67 90 27 4 25

2000 885 815 43 55 7 9 1600 62 75 30 4 27

2001 900 950 55 55 7 10 1800 62 75 30 4 27Source: IDL group December 2002

Table 3. Value Shares of Zambia’s Trade with Key Partners

Imports % Exports %

Destination 1999 2000 2001 2002 1999 2000 2001 2002

COMESA 12 11 10 11 9 12 9 9

SADC (excluding S.A) 13 13 11 11 12 11 8 16

South Africa 44 56 53 51 17 18 24 23

European Union 22 14 12 13 49 53 57 49

Other Markets 9 6 14 14 13 6 2 3

Total 100 100 100 100 100 100 100 100Source: EU- Zambia Joint Annual Report (2003) - Annual Report on the implementation of the ACP-EU Conventions and otherCooperation Agreements, Lusaka.


19

drought as is the case for maize imports,or lack of competitive capacity as is thecase in terms of oranges and wheatimports.

This situation means that Zambia needs asimple, flexible and robust SSM toprevent damaging import surges.

From 2002 to 2004, Zambia experiencedbumper cereal harvests, especially ofmaize, as a result of exceptionally goodrains. Zambia was thus not only able tofeed herself but exported maize toMalawi, DRC and Angola13.

7.1 Zambian Agriculture andRegional Competition

The 20-member COMESA was initiallyestablished in 1981 as the PreferentialTrade Area (PTA) to boost trade amongEastern and Southern African countries,and to stimulate economic growth on thecontinent14. The organisation transformedinto a common market in 1994. Itestablished a free trade area, offeringduty free market access among members,in 200015.

Zambia ratified the protocol establishingthe COMESA free trade area in October2000 but is already having secondthoughts about its position. Localproducers believe that “dishonesty”among some COMESA member states hascreated an uneven playing field in intra-regional trade. They now want to see theZambian government introducing tradebarriers to curb what they allege isproduce dumping.

“It is a fact that we all went intoCOMESA blindly. Already, we havestarted seeing the adverse effects thathave been experienced. We have seena surge in cheaper imports of theseproducts coming in duty-free, most ofthem with suspicious origins, certainlybeyond COMESA”

Former ZNFU president Ajay Vashee

Economic observers see neighbouringZimbabwe as the main culprit. They pointout that 85 percent of Zambia’sagricultural imports from the COMESAfree trade area come from Zimbabwe, butthat that country allows only limitedagricultural imports from Zambia. In fact,Zambian farmers have unrestricted accessto markets in only three COMESAmember states: the Democratic Republicof Congo (DRC), Malawi and Mauritius.

“Millers continue to prefer cheaperwheat from abroad. The importedgrain is cheaper because inputs areconsiderably cheaper”

Former ZNFU economist Alfred Mwila

Similarly, the soybean crop requirementto meet the country’s edible oil needs isestimated at 150,000mt, but annualdomestic production is under 50,000mt.At the same time, the country’s fresh milkproducers are under threat from “cheapand highly subsidised” powdered milkimports from New Zealand and from“unfair competition due to tradebarriers” within COMESA, Mwila said.

While adverse weather has pushed downmaize production in recent years, industryinsiders blame the country’s failure tofeed itself largely on the effects of adonor-backed economic reformprogramme under which agriculturalmarketing was transferred fromgovernment to private hands. They claimthat agricultural reforms have madecredit and input delivery available tohighly productive producers to theneglect of remote and often inaccessiblerural areas which profit-mindedmarketing agents consider risky andunprofitable.

13 There are fears of reduced rains and hence reduced productionin the 2004 to 2005 season. This has prompted government tocancel all exports of maize. The government is still hopeful that theexisting stocks will see the country through the season. Onerespondent to this study warned that Zambia may become a targetof retaliatory trade sanctions as the country supports some small-scale maize farmers through the fertiliser support programme.

14 COMESA member states are: Angola, Burundi, Comoros,Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia,Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda,Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.

15 Most of the discussion and quotations in this section draw on thework of IRIN Africa English Service [[email protected]]on behalf of IRIN [[email protected]] July 23, 2001 Zambia: IRINFocus on agricultural reforms


20

At the same time, the country’s macro-economic environment puts localproducers at a disadvantage with otherCOMESA producers. Farmers considerthat the country’s commercial interestrates, at an average 25 to 40 percent, arehigher than those of most of itsneighbours, as are its electricity tariffs.This means that its produce prices areinevitably higher.

“Having moved quickly from agovernment controlled environment toa free marketing system during thelast decade, Zambia needs now toreconsider its policy for the agriculturalsector, the liberalised system ofproduction and marketing has had anadverse impact on small-scale andsubsistence farming, separating as ithas, the previous linkage between thefinancial arrangements obtaining inthe supply of inputs and the disposalof outputs”

Former ZNFU President Ajay Vashee

But while economic observers areconcerned about the effects of producedumping on Zambian agriculture, manyconsumers are smiling. “Zambianproducers had a tendency ofovercharging their customers in the past,but cheaper South African imports areforcing them to push their prices down, aLusaka resident commented.

Liberalisation of the economy over thepast decade saw a number of SouthAfrican supermarket chains setting upnetworks in Lusaka and in the Copperbeltprovince, the country’s industrial hub.Virtually all products in the shops,including fruits and vegetables, areimported from South Africa16.

State regulation of agriculture in the1980s proved ruinously expensive, withthe government unable to afford the

subsidies that kept food prices low forurban consumers. It also insisted on fixedprices for increasingly disenchantedgrowers. But some independent observersargue that Zambia’s agricultural industrycan only be turned around if the countrydrops some key aspects of the donor-backed adjustment programme.

“Structural adjustment has destroyedZambian agriculture. It can only berescued if we return to the pre-adjustment days when farmers wereprotected from unfair competition, thegovernment deliberately includedsmaller, rural producers in the marketand credit was extended to needyfarmers”17

Institute of Policy Studies (IPS) Director,

Gilbert Mudenda

In the course of research for this paper,some respondents urged caution in theintroduction of SSM. They felt that it isvery easy to protect inefficient farmersusing such a mechanism and that specialcare must be taken to ensure: a) that anySSM is protecting a worthy cause and, b)that measures are simultaneously takento ensure that farmers become morecompetitive.

Women in Agriculture stated that itsconcern was not how farmers couldcompete against imports, but how toincrease its members’ capacity to growenough food to feed their families. “Wecannot supply these big shops withproduce. We are poor. Our hope is togrow enough food to feed ourselves andhopefully a small surplus to sell at thelocal market,” the organisation’sspokesperson, Ms Makota, stated.

7.2 Zambia’s Experience withImport Surges

The overall import policy in Zambia isliberal. Import licensing requirementswere abolished in 199218. Since then, animporter is supposed to get an importlicence automatically, although thissystem does not always function

16 In response to this, some Zambian potato producers haveorganised themselves into groups, approached some South Africanstores and agreed on quality and quantity requirements. Theseproducers are now reported to have penetrated this market outlet.

17 In response to these concerns, the new Government elected in2001 has reintroduced limited support to farmers through theFertiliser Support Programme that targets about 150,000 small scale farmers with a 50% price subsidy on fertiliser.

18 For details see Ndulo (no date) Trade policy reform and barriersto business expansion in Zambia, 1994-1998


21

smoothly19. There is a completeprohibition for imports of ivory andradioactive materials and a few importsare regulated for health and securityreason, but otherwise there are very fewquantitative restrictions on imports.

There is a general consensus in thegovernment and private sector on theneed to move from a regime ofquantitative restrictions to tariffs.Therefore, the most important factordetermining imports are tariffs. Thegeneral increase indicated in Appendix 1,(tables 5.1 to 5.9) and Appendix 2 (Table1A and Graph 2A) and Appendix 3 (Table1B and Graph 2B) bear witness to theever-increasing levels of imports as aresult of relaxation on import controls.

The government has been generallyconsistent in relaxing import controls,despite the enormous pressure that theprivate sector has sometimes exerted tocontrol certain imports. The case of wheatflour is given below to highlight theproblems of import surges and tradeliberalisation in Zambia.

7.2.1 A Wheat Flour Import Surge inZambia

The case of the importation of wheatflour demonstrates the political pressuresthat come with tariff reform. Thereduction of tariffs in the 1996 budgetbrought about a surge in imported flourinto the country, a lot of it smuggled.Most of the flour came from South Africa.There are several flour milling plants inZambia. The largest is National Milling(NM). The private sector, led by NM,complained that South Africa wasdumping imported wheat products on

the Zambian market. It was argued thatthere was a deliberate policy in SouthAfrica to subsidise wheat products.Consequently, the cost of wheat productsin Zambia was lower than for the localproducts and lower than it was in SouthAfrica.

The private sector lobbied the Zambiangovernment for the imposition of a quotaor countervailing duties on wheatproducts. During 1996 and early 1997there was a lot of pressure on thegovernment, especially from NM. Thesmall milling companies did not considerthe issue as serious. NM was asked toprove the case of dumping and failed.However, because of the intenselobbying, the government succumbed tothe pressure in September 1997 andbanned the importation of wheatproducts.

The milling companies failed to meet thedemand for flour. Furthermore,companies started to ask for exemptionsfrom the ban. Exemptions were given andwere approved by the Minister ofCommerce, Trade and Industry. Thisintroduced arbitrariness and discretion inapproving exemptions. Finally, thegovernment decided to remove the banon the importation of wheat products in1998, bringing consistency to that part ofthe reform program20.

19 The Ministry of Agriculture and Cooperatives has a committeethat issues import permits. The Ministry of Commerce Trade andIndustry has declared this committee “illegal”. Those denied importpermits by this committee have appealed to “higher authorities”.In some cases they have granted the import permits withoutreferring the matter back to the committee.

20 The Government is currently considering a case involvingimported cooking oil from Kenya. The private sector feels thecooking oil imported into Kenya from the Far East and should notenjoy the COMESA FTA provisions. The research team for this studycould not get enough data from the Ministry of Commerce Tradeand Industry on this as it was considered “sensitive”. Oranges areanother case in point. Government at some point is reported tohave banned the importation of some fruits including oranges. Thefarmers failed to meet the quality and quantities demanded byconsumers. The government eventually dropped the import ban.


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8. EssentialElements of an SSM for ZambiaIt is critical to bear in mind thatthe SSM is a special anddifferential treatment measure.The SSM must represent animprovement on the existingsafeguard provisions in terms ofestablishing a mechanism that isresponsive to the needs of LDCs.The special nature and theparticular circumstances of theiragricultural sectors have to beconstantly kept in mind.

The SSM must, therefore, build on theflexibilities embedded in the existingsafeguard provisions rather thanextracting from them. This would be theadequate approach to follow in devisingthe modalities for the new specialsafeguard mechanism.

Arising from the above the followinggeneral parameters should guide thenegotiation of modalities on SSM:

i) The safeguard measure should beautomatically triggered;

ii) The safeguard measure should beavailable to all agricultural products asthe production of all agriculturalproducts in Zambia is still in itsinfancy;

iii) The safeguard measures should beavailable to address situations ofimport surges and swings ininternational prices. Therefore, priceand volume-triggered safeguardsshould be contemplated. This isbecause the purpose of the SSM is toprotect food security as well as

incomes and foreign exchangeearnings.

iv) Both additional duties andquantitative restrictions should beenvisaged as measures to providerelief from import surges and declinein prices;

v) The mechanism should respond to theinstitutional capabilities and resourcesof developing countries. Therefore, itshould be simple, effective and easy toimplement.

The call for SSM to apply to allagricultural products in Zambia may causea degree of controversy. The main reasonfor the proposal is that the agriculturalsector in Zambia is very underdevelopedand changes may occur suddenly.

A case in point is the growing ofsorghum. This crop has traditionally beengrown in remote and drought-proneareas of the country. Recently, ZambiaBreweries, Zambia’s only lager beerproducer, has decided to invest in theproduction of sorghum to replace maizein the beer production. Zambia Brewerieshas encouraged the formation of farmers’groups (cooperatives) and provided inputsand extension services. The result hasbeen that a large number of farmers havetaken to the production of sorghum inview of the assured market and theavailability of inputs. Sorghum has nowmoved from being an obscure to alucrative product.

If products based on selective SP criteriafor an SSM had been designated a fewyears earlier, then sorghum would mostprobably not have been included on thelist. The same applies to cassava (tubersand stems) being promoted by someNGOs to mitigate the impact of droughtin areas that do not grow cassava.Similarly dramatic changes could alsohappen in fish farming if sufficientresources were invested in that sector.

Table 4 offers an outline of the SSM thatwould be suitable for the Zambiansituation.


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Table 4: Template of an SSM suitable for Zambia

Article 5 Agriculture Proposed elementsItem/ parameter Article XIX GATT 1994 Agreement for Zambia

1. Product coverage All products Selected special products All agricultural products

2. Trigger Import surges a) Import surges a) Import surgesb) Drop in prices b) Drop in prices

3. Conditions for Prove through an a) No need to prove a) No need to proveapplying safeguard investigation based on injury or threat thereof injury or threat thereofmeasures objective evidence, injury to local production. to local production.

or threat thereof to b) Automatically b) Automaticallydomestic industry caused triggered triggeredby increased imports

4. Geographic coverage Non discriminatory Non discriminatory Non discriminatory

5. Remedy measures a) Additional duties Additional duties for a) Additional dutiesand both, volume and price- andb) Quantitative triggered safeguard. b) Quantitativerestrictions. restrictions.

6. Restrictions to the a) No specific restrictions a) Volume trigger: the a) No specific restrictions level of compensation as to the level of the additional duty shall not as to the level of the

additional duties to be not exceed approximately additional duties to beimposed. 30% of the applied rate in imposed.b) If quantitative effect the year the b) If quantitativerestrictions were measure is triggered. restrictions were imposed, imposed, such a measure b) Price trigger. The such a measure shall not shall not reduce the additional duty can only reduce the quantity of quantity of imports below compensate for a fraction imports below the level of the level of a recent period of the difference between a recent period

the nominal price of the shipment concerned in domestic currency and the reference price fixed at the average value of the product over the period1986-1988.

7. Administration Requires sophisticated Requires fairly a) Needs to have veryresearch and monitoring sophisticated research and limited technical capacitycapacity monitoring capacity requirements

b) Need for notification.

8. Time scale Temporary Temporary Temporary up to 36 months, permit repeated use after a reasonable break for longer time scales

9. Other rules The rules are complicated The rules are complicated a) Requires simple rules.for Zambia for Zambia b) Zambia may need to

establish a special research and monitoring unit in the MCTI composed of staff fromCSO, ZRA and MACO.c) Government to be compelled to show measures being undertaken and timeframe to redress the situation.


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9. ConclusionsandRecommendations

9.1 ConclusionsThe study findings lead to the followingconclusions:

Zambia, like some other Africancountries, is a net food importer becausethe quantity of food produced is notsufficient to meet local consumptionneeds. The priority in government is toincrease food production. This prioritydoes not, however, preclude the need toprotect the Zambian small-scale farmerfrom import surges.

Different developing countries haveexperienced negative impacts in theimplementation of the various WTOagreements generally and the AoA, inparticular. The main negative impact hasbeen in the form of agricultural goods“dumped” on them by developedcountries and other developing countriesas a result of trade liberalisation.

The idea of special products and specialsafeguard measures, as proposed bydeveloping countries within the AoAnegotiations, are an essential step in thefood security and rural developmentinterests of developing countries, andespecially LDCs.

Many developed and some developingcountries members of the WTO, whoexport food, are opposed to the idea ofintroducing special products and SSM, ortheir broad implementation bydeveloping countries.

Developing countries have so farmanaged to keep the concept of specialproducts and SSM on the negotiatingtable. The G33 proposals on specialsafeguard measures constitute a viableand implementable formula forimplementing such a mechanism indeveloping countries.

The need now is to outline how theseconcepts should be operationalised, andnegotiate for that to happen in the AoAtalks.

9.2 RecommendationsThe conclusions outlined above lead tothe following recommendations:

Zambia needs support from cooperatingpartners to enable her increase foodproduction, especially in the small-scalefarmer sector.

In relation to Special Products:Developing countries, including Zambia,should continue to fight for the inclusionof the special products concept in theAoA negotiations and final agreement.

• Special products should be exemptfrom tariff reductions and they shouldnot be subject to restricting conditions.

• Developing countries should have theflexibility to self-declare specialproducts with respect to food security,livelihood concerns and ruraldevelopment objectives.

• The criteria for selection of specialproducts should include their

♦ Contribution to trade;

♦ Contribution to agriculturalproduction;

♦ Link to livelihood, in relation, forexample, to the number of peopleemployed in making theproduct/products predominantlyproduced by low-income, small-scalefarmers;

♦ Link to food security, for example,in their contribution to calorieintake.

In relation to the Special Safeguard Mechanism:• Developing countries, including

Zambia, should continue to fight forthe inclusion of the SSM concept in theAoA negotiations and final agreement.


25

• The SSM for Zambia and other LDCsshould not be subject to restrictingconditions or limited to a number ofpredetermined products.

• SSM should be a simple and effectivemechanism,

• Developed countries should providecapacity to put in place a monitoringsystem to capture import data andadvise on the implementation of SSM.

• The SSM should allow developingcountries adopt trade remedies in theform of higher tariffs or quantitativerestrictions.

• The SSM should be triggered by anincrease in import volume and/or adecrease in import prices.


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Appendix 1Tables 5.1 to 5.9: Import and Export Trends of Selected Products (Compiled by MCTI Staff from the FAO Year Book, Trade and Commerce Vol 55, 2001)

Table 5.1: Total Merchandise Trade (US $ 100,000)

1996 1997 1998 1999 2000 2001

Imports 11,945 8,200 6,500 6,500 6,500 6,500

Exports 12,527 9,410 7,800 9.290 9,780 12.530

Table 5.2: Agricultural Products (US $ 10,000)

1996 1997 1998 1999 2000 2001

Imports 808 1,026 2,041 860 788 1,051

Exports 517 811 815 1,529 - -

Table 5.3: Bovine Animals (US $ 1,000)

1997 1998 1999 2000 2001 2002

Imports 8,200 7.500 6,700 7,500 9,600 10,900

Exports 9,410 7,800 9,290 9,790 12,530 13,000

Table 5.4: Cereal Imports for the period 2000 to 2002

Cereal Imports (100 metric tonnes) Cereal Imports (US $ 10,000)

2000 2001 2002 2000 2001 2002

694 1,059 3,675 1,579 2,660 8.429

Table 5.5: Wheat Flour Imports

Wheat Flour Imports (100 metric tonnes) Wheat flour imports (US $ 10,000)

2000 2001 2002 2000 2001 2002

572 816 740 1,158 1,934 1,748

Table 5.6: Rice Imports and Exports

Rice (100 metric tonnes) Rice (US $ 1,000)

2000 2001 2002 2000 2001 2002

Imports 656 1,363 2,071 2,226 4,410 6,571

Exports 5 13 18 20 47 60

Table 5.7: Maize Imports and Exports

Maize (100 metric tonnes) Maize (US $ 10,000)

2000 2001 2002 2000 2001 2002

Imports 55 103 2,691 186 265 5,942

Exports 142 117 49 338 204 223


27

Table 5.8: Potato Imports

Potatoes Imports (100 metric tonnes) Potatoes Imports (US $ 10,000)

2000 2001 2002 2000 2001 2002

1,175 4,829 5,634 283 1,273 2,784

Table 5.9: Onion Imports

Onions Imports (metric tonnes) Onions Imports (US $ 1,000)

2000 2001 2002 2000 2001 2002

395 1,236 1,354 112 209 339


Appendix 2Table 1A: Imports of selected agricultural products 1996 - 2004 (Zambian Kwacha - millions)

Product/ Year 1996 1997 1998 1999 2000 2001 2002 2003 2004

Poultry 481 772 866 57 382 544 1,886 1,794 2,198

Potatoes 553 566 1,336 2,258 3,008 6,700 12,536 11,233 14,323

Bananas 594 326 619 813 705 2,985 9,188 5,274 861

Oranges 38 143 325 1,077 1,250 3,088 27,821 5,188 33,195

Wheat 17,299 16,728 22,981 17,517 31,335 44,004 91,586 115,973 73,699

Maize 25,820 14,239 104,021 12,757 3,922 20,229 144,114 175,082 5,965

Rice 1,959 5,048 5,862 2,878 3,922 9,002 29,850 26 41,294Source: Own computations from Central Statistical Office data sets

Graph 2A: Imports by selected agricultural products for the period 1996-2004

28

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

PoultryPotatoesBananasOrangesWheatMaizeRice

1996 1997 1998 1999 2000 2001 2002 2003 2004

Years

VA

L(M

’Kw

ach

a)


29

Appendix 3Table 1B: Imports of selected Agricultural products 1997- 2004. (Kg ‘000)

Product/ Year 1997 1998 1999 2000 2001 2002 2003 2004

Poultry 28 9 2 12 26 29 9 7

Potatoes 1,128 2,300 2,839 1,474 5,337 6,157 5,006 4,803

Bananas 752 1,332 2,019 1,489 4,390 3,842 4,346 1,710

Oranges 581 576 2,088 2,372 6,686 6,664 5,663 105,713

Wheat 30,010 40,332 36,981 49,108 46,910 69,460 84,444 60,178

Maize 52,584 153,856 19,003 6,786 18,298 165,418 130,871 861,491

Rice 6,945 7,923 2,466 3,412 7,090 16,752 26,215 21,543

Source: Own computations from Central Statistical Office data sets

Graph 2B: Imports by selected agricultural products and weight in metrictonnes 1996-2004

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

YEARS

MET

RIC

TO

NN

ES

1996 1997 1998 1999 2000 2001 2002 2003 2004

PoultryPotatoesBananasOrangesWheatMaizeRice


30

Appendix 4List of Interviewees

Name Institution Position

1. Ms Lillian Bwalya Ministry of Commerce Trade Senior Economistand Industry

2. Ambassador B Bowa Independent Trade Consultant

3. Ms Makota Women in Agriculture Chairperson

4. Mr David Mundia Ministry of Agriculture and Principal Planner (AgriculturalCooperatives Trade)

5. Ms Ellah A Chembe Zambia National Farmers Union Economist

6. Ms Chansa Mushinge FEWSNet Country Representative

7. Mr Alfred Mwila FEWSNet Deputy Country Representative

8. Mr Emmanuel Mali Catholic Commission for Justice Programme Officer- EconomicDevelopment and Peace (CCJDP) Justice Programme

9. Ms Namukolo Liywali Catholic Commission for Justice Assistant Programme Officer-Development and Peace (CCJDP) Economic Justice Programme

10. Ms Dorothy Tembo Ministry of Commerce Trade Director- Foreign Tradeand Industry

11. Dr Anthony Agricultural Consultative Forum CoordinatorMwanaumo

12. Mr Mwale Zambia Trade and Investment Enhancement (ZAMTIE)


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