Water for life and livelihoods Water usage decisions in Bangladesh’s shrimp industry

1. Water for life and livelihoodsWater usage decisions in Bangladesh’s shrimp industry Nazia Mintz-Habib, PhD University of Cambridge, UK Harvard University, USA nsh29@cam.ac.uk

2. Outline • Introduction • Concepts review • Evidence from Bangladesh • Proposals • Conclusion

3. Parallel for right or for price aquaticecosystems health habitat body functions waterfunctions waterfunctions erosion, Pollutant, transport carrier socio-economic production livelihoods energy(hydropower, cooling) agriculturalproduction food, timber, biofuels M.Falkenmark March (2009)

4. Core Questions? • To what extent are local water depletion and pollution understood within the context of global trade? • Can international trade increase global water-use efficiency? • And finally, what type of international trade rules would promote a more wise use of water worldwide?

5. WTO and agriculture (WTO-AA) • International trade in agriculture in three main areas: • tariff reductions (market access), • restraints in the use of direct and indirect subsidies (domestic support), • the rationalization and reduction in export subsidies. • Two other WTO provisions on agriculture : • Agreements on Sanitary and Phytosanitary Measures (SPS) • Technical Barriers to Trade (TBT) • Special and differential treatment (S&DT) accord • Preferential market access for developing countries Non-tariff barriers

6. WTO and Water (GATS) • General Agreement on Trade in Services(GTS) • Water seen as a commodity and a service • Pricing model open to interpretation • Push for privatization of water • Unrestricted trade provision on water Living below ecological means

7. Water footprint and Virtual water trade Map: Virtual water trade of cotton to EU Source: Chapagain et al. (2006).

8. Institutional Feasibility Study Source: Mintz-Habib (2010)

9. Key messages • ‘Free trade’ is not ‘green trade’. • Incomplete WTO-AA • Water pricing problem • Government failure • Human capability and water rights uninsitutionalized

10. Case in point- Bangladesh • Bangladesh is: • Highly populated • Developing • Low-lying, tropical, river basin • Vulnerable to: • Growing poverty, and insecurity • Growing coastal and riverine flooding • Greater complex interrelationship among biophysical, social, economic and technological aspects

11. Bangladesh in nature’s way Source: Geography 2010

12. Bangladesh in climate’s way Map Legend: Sea water intrusion Cyclone path Flood path Shrimp zone

13. Bangladesh in ocean’s way Source: SRDI, 1998

14. Global Market for Fish Source: FAO 2006

15. Shrimp industry summary • PRE 1996 • Avg unit price $35.6/Mt • 124 factories • 10% growth rate • POST 1997 • Avg unit price $19.5/Mt • 30 factories • 3% growth rate 2000 flood 1998 flood 2001 (40%) price drop Source: FAO data

16. EU ban basis WTO SPS policy • SPS requirements • Constant fresh water availability • Constant water flow on factory • Cold room areas sanitation • Walls free from projections and rounded junctions • Inwards sloping windowsills and etc • SPS inconsistent • acceptance levels set by importing countries – not standardized. • Ethylene Oxide (ETO) approved by EU but not by the US and Japan • Traceability and labeling required, but no direction on how to achieve • Inconsistent direction on SPS audit by test labs

17. National support structure • Kash (gov free land) land distribution = 88% subsidies • 100 acres to processing factories for shrimp production • 99 years lease with nominal payment • Preferential interest rate • Exporters=Processing factories avg 7-9% • Other commercial loans 15% to 18% • Preferential tax holidays • Export processing factory 5 years • Large hatcheries 5 to 7 years • Industrialization policy • 0% import tariff on seed, feed and capital machinery • Under performing national main testing labs • Gov welcomes donor projects with overlapping initiatives

18. The shrimp industry’s value chain Formal Economy Gray Zone Informal Economy Habib-Mintz(2009)

19. Top tier: Matter of cost Cost born by factory owners Problems: • Growing regulatory and market pressures trickle down through socio-political power embedded in the value chain • Raw shrimp crisis - only 30% factory capacity used • Low quality shrimp • Steep price fluctuation Ways to internalize: • Channel pressure upsteam • (BFFEA and the gov) • Downstream (rest of the supply chain • Acquire more physical capital • Of course absorber some cost • Engage in price fixing • Imperfect competition

20. Bottom Tier: Question of livelihoods Income Sharing in each factory floor Problems: • Intense market pressure crushing down from the top exacerbates client relationships upstream and downstream • No structural support (credit, tech or legal). Bare min earning $3/4 to $7/8/day • Outsiders intervening in the local market (power sharing) Ways they internalize • Absorb HACCP by upgrading (Only 25% comply with HACCP) • Hide and seek with the authority • A progressive bribing system “profit sharing” • Economic collusion and physical action • Channel demand pressure downstream †Avg agents supply shrimp 3 times/day/season

21. Summary: Water, life and livelihoods stuck in a loop

22. Policy proposals: Domestic • National fresh water rights and law • Promote Efficient water usage • Increase capacity to negotiate on water right • Improve trade policy • Countercyclical income policy for price ceiling for poor • Low-tech water reserve intensive for farmers • Streamline local and tacit farming knowledge

23. Policy Proposals: International • Reform WTO provision in water • Water sector inclusion in WTO-AA and not in GATS • Transparency in production input • Direct and indirect water use • Climate data to correct market failure • Risk pricing • Input pricing • Data sharing on climate and virtual water trade provision • A water label mechanism • An International Water Pricing Protocol • An International Water-Footprint Permit System • Climate change fund investment in water

24. Thank you!