AGRICULTURAL STATEGIES IN THE POST PREFERENTIAL MARKET ACCESS ERA

1. Ranjit H. Singh Andrew Jacque Department of Agricultural Economics, University of the West Indies, St Augustine Ministry of Agriculture Trinidad and Tobago AGRICULTURAL STATEGIES IN THE POST PREFERENTIAL MARKET ACCESS ERA

2. DISCUSSION POINTS • Background Issues • Preferences • Trade Issues • Features of the Regional Agrifood Sector • Reflecting on Development Paradigms over the Past 40 – 50 years • The Post Preference Era - A Shift in Paradigm • The Broad Strategies • Key Drivers for the Development of the CARICOM Agrifood Sector

3. PREFERENCES Relevance to CARICOM

4. Contribution of Preferences • Preferences have benefited the CARICOM agriculture, economies and people • Foreign exchange earnings; • employment, • rural development, • higher incomes; • Multiplier effects -- supported the input supply, transportation and other industries; • provision of social services; • contribution to the environment • Food security • Contribution to Government revenue

5. Preferences Cont’d • Preferences have also had some negative effects: • Failed to provide incentives for developing competitive production; • stymied efforts at diversification; • led to a concentration on primary as opposed to processed products (raw versus refined sugar; cocoa beans versus chocolates)

6. Examples of the Importance of Preferences • Trinidad and Tobago in 2002 – • Sugar cane cultivated on 31% of the agric land • sugar and distilleries employed 10,100 persons (5.1% of national labour force; 37.7% of Agric labour force); • Wages in sugar 50% higher than in other agriculture • raw sugar export earnings --0.7% of total export earnings and 1.76% of non-oil export earning • 0.54% of national GDP; 41.81% of agricultural GDP • Rent transfers from the EU of US$16 million • High cost producer of sugar – cost was more than 2x preferential price

7. Examples of the Importance of Preferences • Guyana Sugar – • 50% of agriculture • 17% of national GDP • 25% of forex • 8% of internal Government revenues • 17.5 US c per lb -- Second lowest producer in CARICOM behind Belize • GNP per worker in sugar 2.7x national average

8. Preferences --Implications • Loss of preferences is not only about loss of foreign exchange but involves loss of much more – at the same time that it demands change and realignment • Strategy for the post-preferential era must take account of • External challenges • Internal weaknesses

9. Trade Issues

10. food imports by PTA: 57% from NAFTA, 15% CARICOM; 13%EU15 Food imports by countries: 51.8% from USA; 7.57% from T&T; 4.98% from UK; 4.73% Canada. Food exports: 45.4% to EU; 27.9% CARICOM; 19.8% NAFTA Trade Dependence Trade is concentrated with a few regions and within those regions with a few countries

11. CARICOM --Net food importers, except Guyana and Belize Food imports exceed food exports by 52% (T&T) to 7,422% (Antigua and Barbuda) with most countries< 200% Montserrat= 117,805%; Antigua and Barbuda=7,423%

12. Intra-regional food trade • low shares for: • Suriname (0.38%); • Belize (3.57%); • Haiti (0.11%); • Bahamas (0.53%) • Top 3: • Trinidad & Tobago-48.75%; • Guyana 14.65%; • Barbados 9.39%;

13. Highlights – Some recent Changes in the Caribbean Agrifood Sector

14. Highlights • The Primary Production Component of the value chain earns only a small % of the final Consumer Expenditure – as low as 25% for fresh produce • As low as 10 % for manufactured foods • Consumers are spending and increasing share of their food budget on FOOD AWAY FROM HOME

15. Highlights (cont’d) • The Food Industry / Food Service Industry in the Region is one of the Fastest growing • An increase in post farm services in value added for more ready to cook and prepared foods • Earnings at the farm gate as a % of final product value is expected to continue to decline as the Remainder of the Value Chain expands

16. AGRICULTURAL DEVELOPMENT PARADIGMS:Regional Experiences

17. Features Import Substitution Self Sufficiency Industrialization via Substitution Highly protected domestic market Regional Production Allocation Eg Corn & Soy Project Direct state trading and involvement in production Price Controls and trade control Failure On Account of various structural Factors Domestic market Limited in Size Consequences Frequent shortages High Prices - Consumers taxed Quality issues Domestic market limited in Size/ Absorption capacity Restricted Competition – the Existence of Monopolies/oligopolies in the Food trade Development Paradigm of the 1960s & 1970s

18. The Issues: Macroeconomic Disequilibria Deficit on the External Account The Bitter Medicine: Structural Adjustment Strategies Focus on Export led growth to Enhance FOREX earnings Agricultural Diversification - Non traditionals for the Export Market Exchange rate adjustments The Experience: Major Deterrents in Accessing Export Markets Significant Non Tariff Barriers Transport logistics: cost, unreliability & availability High marketing transaction cost resulting from low volumes Difficulty in accessing Mainstream Markets High levels of Competition in Commodity markets Absence of market development and promotion activities Development Paradigm of the 1980s & Early 1990s

19. Features Globalization & Liberalization of Markets Erosion of Preferences – Decline of the Traditional Export Sector Market Access now Governed More by SPS and Other Regulatory measures rather than Tariffs; eg HACCP GAP Limited role for National Policy in Trade Result Declining export performance (FOREX) Increasing Levels of Food imports Impact on Employment & Poverty Food Security Concerns The Post WTO Period: 1995 +

20. PARADIGM SHIFT FOR AGRICULTURE

21. Implications for Future Development • Loss of Trade Preferences/Globalisation • imperatives of developing competitive industries Trade profile  • Limits to growth possibilities based solely on primary perishable products • Data highlights the importance of processed products in expanding trade opportunities (intra and extra-regional)

22. Implications Cont’d Trade profile (Cont’d) • Data suggest that there is a lot of scope for expanding the regional food market • Some countries are more integrated (southern Caribbean) into the intra-regional food market than others (Belize, Suriname, Haiti, Bahamas)  scope for building the intra-CARICOM market

23. Implications Cont’d • Changing Structure of Agri-Food Markets • Significant growth in the food retailing and food service industry segments • Declining share of farm-gate receipts as a percent of expenditure on food • Implication • The real economic opportunities lies with the integration of all segments of the value-chain.

24. Implications Cont’d • Development Paradigms  • CSME • Expands the economic space for sectoral development • Most recent paradigm suggests need to shift focus from mainly on primary to integrated industry approach • Need for efficiency in all segments of the value chain • Development must be industry-led but with strong public sector support in the provision of public goods • Mechanisms must be built in to ensure balanced development among countries and equity in the distribution of benefits

25. Broad Strategies in the Post Preference Paradigm 1. Creating/Broadening/integrating the New Economic Space that CSME Offers 2. A Focus on the Agrifood Industry rather than the Farming Component in the Main 3. Integration of markets into a fully functional & efficient CARICOM Market:

26. Broad Strategies (cont’d) 4. Efficient & Cost Effective Provision of Critical Public Goods to the Agrifood Sector - (the Drivers of Competitiveness) 5. Adopting a Strategic Development Approach with a Focus on Priority Industries • Prioritization of Industry for Development (resource constraints requires this) • Focus resources on key industry constraints for enhanced competitiveness

27. Broad Strategies (cont’d) 6. Creating an Enabling Environment for Investment Mobility throughout the Region with a focus on the agrifood sector 7. Developing the Institutional Framework to Facilitate strong Regional Public Sector/ Private Sector Partnership and Stakeholder Linkages

28. Broad Strategies (cont’d) 8. Monitoring & Evaluation of the total Contribution of the Agrifood sector to the Regional Economy • The negative effect of inaccurate economic accounting wrt Resource allocation to the Sector

29. Drivers

30. Creating the CSME Economic Space: Key Impediments • Provision of Timely & Reliable Information: • Markets • Opportunities • Investments options • Transport Infrastructure • Provision of Appropriate Fiscal Incentives, harmonization of Regulatory Measures

31. Market Development The Concept of the Agrifood Industry is one Comprising the entire VALUE CHAIN: • Primary production • Primary value added/ pre-processing post farm • Food / Industrial Product Manufacturing • Wholesaling • Distribution / Brokerage • Food Service (fast foods, convenience foods, restaurants)

32. Markets (cont’d) • A large % of food for retailing or fast foods restaurants & the Tourism Sector are sourced from outside the region • Limited & Weak linkages of the food chains with Domestic Agriculture • Little conscious attempts to development the linkages • A fragmented and underdeveloped regional food market

33. Market Development Cont’d • Opportunities • The attractiveness of Retail Food & Food Service Industry in the region • is evidenced by the number of foreign food chains in both retailing and food service (fast foods and restaurants)

34. Agro- Procssing Wholesaling Food Service Primary Production Retailing Distribution A FRAGMENTED AGRI-FOOD INDUSTRY WITH WEAK LINKAGES

35. A FRAGMENTED AGRI-FOOD INDUSTRY WITH WEAK LINKAGES Agro- Procssing Wholesaling Food Service Primary Production Retailing Distribution EFFECTIVE COORDINATION CREATING STRONG LINKAGES A FULLY INTEGRATED AND FUNCTIONAL AGRI-FOOD INDUSTRY

36. CREATING STRONG LINKAGES EFFECTIVE COORDINATION A FULLY INTEGRATED AND FUNCTIONAL AGRI-FOOD INDUSTRY

37. Critical Public Goods Support: Drivers of Competitiveness Efficient & Cost Effective Provision of Critical Public Goods to the Agrifood Sector– Requires effective multi-sectoral coordinating institutions • Technology Support (Research, Development & Innovation) • Agricultural Health and Food Safety • Drainage & Irrigation • Access Roads • Land Policy & Access to Arable lands • Protection of Water resources to ensure Sustainable Agriculture • Protection and maintenance of Suitable Water Quality to ensure food safety • Risk management

38. Technology Support (Research, Development & Innovation) • A more appropriate institutional framework • effective coordination and mobilisation of the research capability in the region to support the entire value chain • Greater stakeholder involvement in establishing research agenda and priorities • Performance-based funding for research/contract research/Contestable R&D funds • Importance of labour-saving technologies; • Biotechnology (e.g., improvements in productivity, quality and pest resistance)