Pilot Assessment of PCD at the Country Level

Transcription

1 Pilot Assessment of PCD at the Country Level The Case of Food Security in Tanzania Dr. Fabien Tondel, ECDPM Didier Alia, ECDPM Solomon Baregu, ESRF Abel Songole, ESRF Festo Maro, COSTECH The Second Annual Agricultural Policy Conference Serena Hotel, Dar es Salaam 24 th February 2016

2 Content Summary of findings How the pilot assessment was carried out Reflections on the pilot assessment Page 2

3 Rationale for country-level PCD assessments Non-development cooperation policies of OECD countries (sectorial, trade, investment policies, etc.) can have negative/positive spill-over effects in developing countries (e.g., food security) Many assessments of spill-over effects of OECD countries policies looking at agricultural development and food security: Specific agricultural sub-sectors (e.g., cereals) Specific policy areas (e.g., trade/market access) At the level of int l or domestic markets For groupings of developing countries Need for more sound and systematic evidence about the coherence/incoherence of OECD countries policies Need for mechanisms to feed evidence and outcomes of multistakeholder dialogues back into policy processes Page 3

4 Summary of findings (TBC) 1 Farm policies in OECD countries are less distortive now than in the past, in particular in the EU Page 4

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6 Summary of findings (TBC) 2But they may still cause trade distortions in some sectors and Tanzania may be affected 3In particular where decoupled producer support benefits exported commodities, notably cereals (wheat, barley), dairy products, meat products and sugar (while there may also be lagged effects of past distortions) Page 6

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8 Summary of findings (TBC) 4Emerging economies farm policies have been increasingly distortive Page 8

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10 Transfers to specific commodities in OECD and EEs, EU Brazil Source: OECD, 2011

11 Transfers to specific commodities in OECD and EEs, China South Africa Source: OECD, 2011

12 Changes in producer support, by country, Per cent of gross farm receipts: potentially most distorting support versus other support Page 12

13 Changes in producer support, by country, Per cent of gross farm receipts: potentially most distorting support versus other support Page 13

14 Summary of findings (TBC) 5OECD countries sugar sector policies have depressed international prices and Tanzania s sugar sector has had difficulty competing with low-price imports Removal of production quotas in the EU in Tanzania s dairy sector has been very exposed to competition from low-price milk powder imports Removal of production quotas in the EU in OECD countries farm policies may have had negative effects on Tanzania s grain sector (maize, wheat, barley) 8Tanzania s rice sector may have been negatively affected by Asian exporters farm policies Page 14

15 Summary of findings (TBC) 9OECD countries biofuel policies have had mixed effects on developing countries like Tanzania Rise in energy crop prices (good for producers, bad for consumers in the short run), increased price volatility, investments in biofuel production in Tanzania (realised and planned) Page 15

16 Summary of findings (TBC) 10The EU s preferential trade arrangements/agreements with developing countries have led to increased agro-food trade flows, particularly with ACP countries Tanzania most likely has benefitted from EU-ACP/LDC preferential trade regimes 11In the horticultural sector, non-tariff measures (product market regulations and private standards) have created challenges for developing countries and Tanzanian exporters to access OECD markets, and for smallholder farmers to participate in those value chains 12Development assistance has been provided to address those market access issues (e.g., ACP-EU programmes) Page 16

17 Summary of findings (TBC) 13 Increased interest from OECD-based investors Promotion of PSD by DPs Many plans, little implementation 14 Increased development assistance from OECD DPs Rural infrastructure, capacity building, R&D, innovation, value chain development, trade facilitation/market access Page 17

18 Summary of findings (TBC) 15 Need to better support the policy environment, to address gaps that CAADP failed to address Better land use governance and land tenure system (zoning, delivery of certificates of occupancy) Agricultural credit Lower taxation of farm inputs and products Better regulation of seeds and agro-chemicals Extension services Trade policy (export bans) Nutrition 16 Involvement of private sector actors and CSOs in policy processes (mutual accountability) Page 18

19 Summary of findings (TBC) 17Increasingly competitive global markets for agricultural commodities (traditional OECD exporters, newer EE exporters) 18Increasing price and quality competition in OECD markets for tropical export products 19And rising competitiveness and quality requirements in regional markets 20Poor domestic policy environment 21Need to address all these challenges Page 19

20 Methodology 5 modules M1: Setting up the project M2: Country food security profile M3: Causal linkages between OECD countries policies and food security conditions in the developing country M4: Empirical analysis, testing of hypotheses M5: Communication and outreach Page 20

21 Linkages between Tanzania economy with OECD and non-oecd countries Development cooperation : Tanzania is largely regarded as one of donors darling receiving up to US$3,430 million of ODA in 2013; top donors are multilateral agencies (WB, IMF, EU, UN) and bilateral partners (US, UK, Japan, Norway, Denmark, Finland, Switzerland, Netherlands) Export: Tanzania has recorded a strong increase in exports over the past two decades. Most of Tanzania s exports go to OECD member states (Switzerland, UK, JPN, NL, Germany) but also increasingly to South Africa, Kenya (and other in the region), China, India and Arab countries Import: Tanzania is a net importing country but imports mostly capital goods, technology, energy, and processed foods (sugar, milk, edible oil, etc.); main suppliers are still OECD countries but also China, India, and South Africa Investment : Important flow of FDI and increasing in agriculture including land acquisition from both OECD and non-oecd countries; increasing mobilization of domestic private investors Page 21

22 Which OECD policies have potential effects on Tanzania and in which sectors? Identification of relevant OECD countries policies and selection of key agricultural sector in Tanzania Identification of agricultural products or subsectors that are (1) important for food security in different ways (food supply and rural household income) and (2) plausibly affected by OECD policies through trade and investments, whereby OECD policies may have economically and socially significant impacts in Tanzania. - The criteria are : sub-sector in agricultural gross domestic product, consumption measured in kilocalories per capita and per day employment (along the value chain) Focus on market and trade impacts of OECD countries policies and formulate their causal linkage to food security at household and individual levels ECDPM Page 22

23 Main OECD countries policies identified OECD policies Agricultural policies in OECD countries and their spillover effects through international, regional and local markets on the performance of Tanzanian agricultural sector Trade policies and product regulations in OECD countries and Private Voluntary Standards, and their implications for market access for Tanzania export Tax policies, investment policies and economic diplomacy in OECD countries and their implication for Foreign Direct Investment flow to Tanzania and large-scale land acquisition. Tanzanian sectors Grains and rice, sugar, dairy, horticulture, (and to some extent fisheries, cotton and tobacco) ECDPM Page 23

24 Where are the food insecure in Tanzania Food insecurity map of Tanzania Food insecurity is intrinsically linked to poverty and more than 28.2% of Tanzanians live below the poverty line; Agriculture play a major role in household livelihoods. As consequence, smallholder farming households in rural areas, especially those female-headed, are the most affected by food insecurity but are also substantial pockets of food insecurity in urban areas Because rainfed agriculture, hunger is a largely seasonal and climate-dependent Page 24

25 Lessons Learned and Reflections Towards a refined methodology Step 1: Identifying potential linkages between OECD countries and the developing country (trade, investment, migration, knowledge) Step 2: Sub-sector/cross-sectorial policy-area case studies (market and institutional impacts) Step 3: Local-level case study(ies) (economic, social and environmental impacts) Page 25

26 End of Part 1 Page 26

27 Part II OECD countries policies causal Linkages to Tanzania Page 27

28 International Sugar Markets 2/3 of world sugar production from Brazil, Australia, Cuba and Thailand Other big producers: India, EU, and South Africa Net exporting regions: Americas, Oceania Net importing regions: Asia, Europe, Africa Largest exporters: Brazil, EU, Australia, Cuba and Thailand Largest importers: Russia, EU, and Japan Concentrated sector; e.g., EU imports done by a few multi-national companies About ⅓ of world sugar production is trade internationally Most of international trade in sugar is done under trade agreements; residual trade thru spot markets; as a result (in addition to the fact that sugar cane is a perennial crop), this market is very volatile Page 28

29 Sugar in OECD countries : EU and US Decline in international prices in the 1990s (rise of Brazil as an exporter), rise in prices in the 2000s; EU and US became net exporters after having been net importers (e.g., in the 1970s) Sugar trade regimes EU s preferential tariff and quota trade regimes: EU Special Preferential Sugar (SPS) arrangements, bilateral agreements with ACP countries, annual TRQ for raw cane sugar Sugar protocol of the EU-ACP Cotonou Partnership Agreement, TRQ with guaranteed prices US preferential tariff and quota regime (Puerto Rico, Philippines and other countries with whom the US has special trade relations) Commonwealth Sugar Agreement: TRQ for exports to UK until Lomé Agreement Sugar Protocol Other international agreements for sugar, incl. bilateral agreements (e.g., Cuba-Russia Sugar Agreement) WTO MFN regime (residual spot market)

30 Support to the Sugar Sector in OECD Group SCT OECD (value LA) SCT EU (value LA) SCT US (value LA) SCT OECD (% RA) SCT EU (% RA) SCT US (% RA)

31 Reform in EU Sugar Policy Major reform of the sugar sector started in 2006 Cut in subsidies to farmers; cut in the target price of white sugar; farmers compensated by decoupled payment for a 4-year period, additional to the single farm payment; abolition of the intervention price Closure of obsolete sugar mills Losses for countries with preferential access to EU market Full liberalization of imports from LDCs in 2009 (duty-free access to EU sugar market for 48 LDCs in 2009 under the EBA agreement signed in 2001) Elimination of production quotas after 2015; production will increase, prices will go down

32 Impact of support to Sugar on international prices SCT (%) Price ($/ton) SCT EU (% RA) SCT US (% RA) SCT OECD (% RA) EU price ($/ton LA) US price ($/ton LA) World price ($/ton LA)

33 Impacts of OECD countries policies on sugar sector in Tanzania Sugar in Tanzania Sugar is a major agro-food and Tanzania is a net importer of sugar Four large sugar factories, some new projects underway Low sugar cane yields relatively to Southern African producers and other Eastern African producers (lack of irrigation, lowperformance varieties, low fertilizer use and other production and marketing factors) Privatization and efforts to rehabilitate the sector in the 1990s led to productivity enhancement and production increase Page 33

34 EU Sugar Policy Quantities in tonnes

35 Impacts of OECD countries policies on sugar sector in Tanzania Regional market protection in the EAC customs union; tariff protection; sensitive industry However for a long period until now Sugar factories have experience difficulty competing with cheap sugar imports, notably sugar from Latin America, Southern Africa, and some Asian exporters Most of the import are illegal reflecting weak legal and institutional capacity of the GoT to protect the sector EU reforms have raised the price but international price is still lower than domestic price in Tanzania Are the reforms favorable to Tanzania? With the removable of quota there will be a risk of import surge to Tanzania because Southern African producers are more cost-competitive than Tanzania and traditionally exported to the EU under the Sugar Protocol Page 35

36 Sugar Production and Trade in Tanzania 3,500, ,000 3,000, ,000 2,500, ,000 2,000, ,000 1,500, ,000 1,000, , ,000 50, Tanzania sugar cane prod. Tanzania sugar prod. (raw) Tanzania sugar imp. (raw) Tanzania sugar imp. (refined) Tanzania sugar exp. (raw) Tanzania sugar exp. (refined) - Left axis, sugar cane production in tonnes; right axis, sugar production and trade in tonnes

37 EU Development Assistance for the Sugar Sector Sugar Protocol Accompanying Measures introduced as part of the 2006 reform; assistance package for ACP countries; 40m euros ACP Sugar Research and Innovation Programme, to fund research to enhance sugar productivity, diversify uses of sugar cane (biofuels, bio-fertilisers, bio-polymers, etc.) and generally ensure that the sugar industry remains viable; about 20m US$, mostly from EU, also from Australia, US and ACP countries

38 Food security situation in Tanzania Despite impressive economic growth, FS major economic and social problem in Tanzania : in % or a total of 15.7 million of Tanzania are food insecure and the situation is not improving much Nutrition indicators for children also recorded no sizeable improvement Page 38

39 Impacts of OECD countries policies on cereals sector in Tanzania OECD countries are major actors of cereals markets World (million of t ) EU US Tanzania Maize Production % 39.64% 0.48% Import % 0.49% 0.09% Export % 57.94% 0.04% Wheat Production % 10% 0.01% Import % 2% 0.22% Export % 24% 0.03% Rice Production % 1% 0.16% Import % 2% 0.46% Export % 14% 0.02% Other major players are china and brazil (maize), china, India Russia, Australia and Canada (wheat) and China, India, Indonesia and Japan (rice) Page 39

40 Impacts on the Maize sector in Tanzania Historically high agricultural support for cereals (maize, wheat barley, rice, etc.) in OECD countries. Support to Maize in OECD countries (mainly the US) depressed world price. Reduction in support has led to price increase Single COmmodtiy Transfer (%) Price OECD maize SCT percentage US maize SCT percentage EU maize SCT percentage World maize Price Page 40

41 Impacts on the Maize sector in Tanzania Maize and rice are the basic staple food in Tanzania and the most important food security crops In overall OECD domestic support policies have little-to-no effect on the maize sector in Tanzania because : supports have been phased out the country sector have become more or less self-sufficient. The maize market in Tanzania is not well integrated to world market Domestic factors and policies have played far more important role in the slow development of Tanzanian maize sector But historically high support in the US with the results surplus exported to the EAC/SADC region or distributed as food aid may compete with Tanzanian maize in regional markets, thus restraining its market opportunities in the region The recent food crisis and the rush for land, the increasing use of maize for feedstuffs, biofuel mandate etc. are factor that could be opportunities for the maize sector but also threats to the m Page 41

42 The case of Wheat Support to Wheat producers in OECD countries (mainly the EU countries and US) depressed world price. Other major players are China, India, Russia, Australia and Canada Single COmmodtiy Transfer (%) OECD wheat SCT percentage US wheat SCT percentage ECDPM Page EU wheat SCT percentage World wheat Price But wheat in Tanzania is a small sector mainly for the agro-processing industry. So the EU policies may have actually benefit consumers because of cheap import even though wheat growers loose Price

43 The case of Rice Single COmmodtiy Transfer (%) OECD rice SCT percentage EU rice SCT percentage Price US rice SCT percentage JPN rice SCT percentage World rice Price ECDPM Rice is an important food security crops but is less internationally traded than maize and wheat Among OECD countries, Japan plays far more important role in trade and domestic supports but the international market is dominated by Thailand, Vietnam, India and Pakistan Page 43

44 Impacts of OECD countries policies on the horticulture sector in Tanzania Horticulture is a sector where non tariff measures and standards play an increasing important role. The key drivers of such trends are : Consumer preferences and market demand for quality products, high food safety, social and environmental standards Policy objectives for food safety, environmental concerns that can create market failure The profit-maximizing decisions of firms to reduce transaction costs along the supply chains by imposing private standards As global tariff have declined and Tanzania is granted preferential access to OECD markets, the rise of NTMs and standards can be incoherent with development if they act as barriers to access competitively those markets Page 44

45 Large numbers and complex norms and standards to regulate Figure 2: Cumulative number of SPS notifications to the WTO EU (28) US Other OECD BRICS Other Countries 2014 More than 400 private standard covering all aspects of agricultural production, transformation, transportation and marketing, etc. Page 45

46 Horticulture in Tanzania Tanzanian horticultural sector is booming in term of production and is also transforming rapidly toward an export-oriented sector Currently, the country exports a wide range of flowers, vegetable (green bean, baby corn, etc.), spices and fruits to EU markets and increasingly to Asia and the US. The domestic and regional market is also huge and the demand in developed countries and Asia in increasing. This offer lot of opportunities for the development of the sector The sector has lot of potential for expansion but face numerous challenge : poor infrastructure, low productivity, under-developed marketing system, high transportation and also importantly standards (public and private) which are mandatory to access EU markets Page 46

47 Examples of requirements of EU standards Private standards require certifications :GlobalGap, British Retail Consortium, etc. Page 47

48 Opportunities and challenges of standards to Tanzanian s horticultural sector Standards facilitate access to OECD market, facilitate trade and bring about a price premium and net benefits But compliance with the requirements of standards is too costly, especially for smallhoder farmers increasingly growing horticultural products for export markets Requirements and good agricultural practices are complex and farmers need training before being able to implement them Obtaining a certification for private standards required a high up-front investment farmer often lack. Certification can cost up to 130 euro for GlobalGap Weak regulatory and institutional capaicty in Tanzania to fully comply with the SPS and TBT agreements Page 48

49 Impact of Tanzanian's horticultural sector Trade effect of standards In aggregate standards can enhance trade Or restrict trade Lowers export standards act as compared to what it barrier to entry could be in absence block market of standards expansion standards can also provide opportunities to expand export Increase in quality Increase in prices But over effect depends on costpush and willingness Page ECDPM 49 to pay

50 Impact of Tanzania's horticultural sector 14 90% % 12 80% Export to OECD (LA) Export to US (LA) Share to EU (RA) Export to EU (LA) Share to OECD (RA) Share to US (RA) Flowers : Less affected by standards All companies exporting are foreign owned and have the capacity to comply with the requirements of the sector Share (%) 30% 4 20% Export to OECD (LA) Export to US (LA) Share to EU (RA) % % % % % % % % 60% % % Share (%) 25 Exports ($US million) 120% Exports ($US million) 35 Export to EU (LA) Share to OECD (RA) Share to US (RA) Vegetable: Most affected by standards Firms works with outgrowers which they help with the support of donors to obtain certification Other farmers willing to participate in the schemes are more or less blocked out until they got the support to obtain a certificationpage 50

51 Report Link: ESRF-Report-Assesing-Policy-Coherence- Development-2015.pdf Ahsanteni Sana! Page 51