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Current Health Pandemic Shows the Need to Restructure Old Agricultural Trade Policies

agricultural

Current Health Pandemic Shows the Need to Restructure Old Agricultural Trade Policies

Haiti is still rebuilding following the devastation of the 7.0 earthquake that struck a decade ago. Among an array of social burdens keeping this small Caribbean country in a perpetual cycle of vulnerability, food insecurity has been a persistent threat to its citizens since well before the earthquake. The earthquake exacerbated Haiti’s food crisis, and consequently, about half of the Haitian population remains undernourished.

In the aftermath of the 2010 earthquake, the country of 10 million people faced a dire food shortage. Approximately 25,000 tons of food aid of U.S. origin was distributed in response to the earthquake. Over 80 percent of the total dollar value of funds and metric tons of U.S. food aid allocated for emergency activities throughout Latin America and the Caribbean during the 2010 fiscal year was apportioned to Haiti. During the same year, Haiti imported about US$160 million worth of rice from the United States. Haiti needed to rely on foreign food aid, including rice imports.

Fast forward to 2020, Haiti continues to face severe food insecurity that has been exacerbated by the COVID-19 pandemic. Haiti imported more staple food, for which the prices had decreased, by April 2020 than the previous year. However, the global slowdown on imports and exports, in addition to low domestic production and high production costs, have resulted in elevated prices on locally produced staple food such as rice. Haiti’s dependency on rice imports is puzzling considering that it once produced enough rice for local consumption.

The Result of Disproportionate Liberal Trade Policies in a Time of Crisis

As a supporter of trade liberalization myself, it is important to fully understand this contradiction by going back to the liberalization policies of the 1980s and 1990s, when many Latin American and Caribbean countries implemented open-market trade policies to grow their economies. In 1986, Haiti placed a 50 percent ad valorem tariff on rice imports. By 1995, with the support of U.S. President Bill Clinton, the International Monetary Fund and the World Bank pushed structural adjustment programs in Haiti, which involved Haiti drastically reducing its tariffs on rice imports to three percent.

Rather than leading to economic growth, these policies resulted in an influx of cheaper, subsidized rice imports. Haitian rice imports increased dramatically from 7,000 metric tons in 1985 to 207,000 metric tons a decade later, according to the U.S. Department of Agriculture (USDA) figures. The majority of these imports came from the United States.

On the other hand, rice productivity in Haiti dropped significantly. From 1980 to 1990, Haiti averaged 124,000 tons of rice produced, which dropped down to an average of 114,400 tons by 2005-06.

Most of the U.S. rice imports come from Clinton’s home state of Arkansas. The rice grower in Arkansas has received billions of dollars of subsidies since 1995. Following the earthquake, Clinton stated during a Senate Foreign Relations Committee hearing, “It may have been good for some of my farmers in Arkansas, but it has not worked. I have to live every day with the consequences of the lost capacity to produce a rice crop in Haiti to feed those people, because of what I did.”

The liberalization of Haiti’s rice market has created a cycle of dependency for the country, which becomes more evident during a crisis, such as the 2010 earthquake and today’s global health pandemic. Many Haitian rice growers have found it difficult to sell within their own market because of the inability to compete against the lower cost, subsidized imports from the United States. As a result, and prior to the pandemic, 80 percent of rice consumed in Haiti had been imported.

With the current global health pandemic, the United Nations World Food Programme estimates that the number of people in Haiti alone that face food insecurity will jump from 700,000 to 1.6 million.

In April 2020, the World Bank, which supported trade liberalization in Haiti, provided US$9.5 million to Haiti’s agricultural sector to address the deepened food insecurity resulting from the COVID-19 outbreak, as well its impact on global trade. Ironically, such support may help the local agricultural sector to become self-sufficient again. Time will tell.

Awareness to Action

Haiti’s story is a familiar one in other regions as well, such as Sub-Saharan Africa. However, many remain unaware of the link between trade policies and food insecurity. For instance, in response to my TEDx talk on the subject, people have commented, “I had no idea about how these policies impacted so many lives.”

Similar to Haiti, the East African country of Tanzania is a net importer of rice, a least-developed-country, and implemented liberal trade policies by the 1990s. Local measures have been taken to reduce the effects of trade liberalization on Tanzania’s local farmers and food production thus, offering insight into three approaches to mitigate the negative impact of structural adjustment policies–acknowledge disproportionate trade policies, implement policies that support local producers, and build the capacity for local producers to compete internationally.

Consider the trade policies that restrict market access to local producers and create an unfair competitive advantage for foreign producers. Being aware of the role of disproportionate trade policies in the loss of food in developing countries and creating a reliance on imported food aid is the first step to developing effective policies and practices to promote higher levels of food security.

Tanzania allows for duty-free agricultural imports from other East African Community (EAC) members—Burundi, Kenya, Rwanda, South Sudan, and Uganda. However, it places a 75 percent tariff or $345 per ton, whichever is higher, on rice imports from non-EAC countries. This high tariff rate limits the influx of foreign rice imports. In 2018, Tanzania imported a total of 236 tons of rice from international suppliers. The majority of rice—180 tons–came from Pakistan. The United States only accounted for 16 tons.

Tanzania has since placed a ban on rice imports for the 2020/21 marketing year in an effort to boost local production. The US Department of Agricultural estimates a nine percent decrease in rice imports into Tanzania during this period.

The second solution is to develop policies that complement local production, rather than displace it. It becomes a win-win outcome when exported goods are not already abundantly available in a market for which there may be a growing demand. However, the export of staple crops already being produced in a lower-income country should add to the supply and be sold at market value to allow for fair competition.

At the same time, Tanzania has experienced increased imports as rising demand exceeds local production. For instance, in the late 1990s, food imports jumped almost three-fold only because of a decline in domestic production, rather than trade liberalization. Rice imported from the United States are mainly for food aid programs. The rice imports supplement, rather than compete directly with, local production.

Finally, trade facilitation and capacity building (TFCB) programs present a third solution. Such programs emphasize enhancing the skills of local farmers to compete in today’s global economy. TFCB programs can produce success stories, given that they are implemented under truly reciprocal trade policies and practices.

The EAC countries, including Tanzania, have implemented TFCB programs with technical assistance from organizations such as the United Nation Conference on Trade and Development (UNCTAD). EAC countries have adopted an electronic cargo tracking system and invested in transport infrastructure (ports, roads, railways, airports) to improve their trade competitiveness. In Tanzania alone, the transportation and storage industries have grown 16.6 percent by 2017. Improving infrastructure becomes important as Tanzania’s rice production is expected to increase slightly by 2020, per USDA estimates. Furthermore, Tanzania has expanded its market access by exporting rice to its neighboring East African countries, making it a major supplier of rice throughout the region. Tanzania’s rice producers can provide for domestic and international markets. Tanzania’s response to trade liberalization has resulted in it being the fastest growing East African economy at 7.1 percent in 2017.

In sum, trade liberalization policies create structural incentives that shift supply and demand in favor of foreign producers to the detriment of local subsistence farmers. As the COVID-19 pandemic is showing, the cycle of food insecurity only worsens when imports are restricted, local production remains low, and food prices go up. However, designing trade liberalization policies and capacity-building programs that support local producers over the long-term may help address food insecurity in developing countries.

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Sarita D. Jackson, Ph.D. is the President and CEO of the Global Research Institute of International Trade, a Californian think-tank and consulting firm. Dr. Jackson has previously worked on overseas projects funded by the U.S. Agency for International Development (USAID) and the Fulbright Scholar/Lecture Award. She is also a published author, TEDx speaker, and business school instructor. She conducts her work in English and Spanish. Dr. Jackson earned a Bachelor’s degree in journalism and Spanish at the University of Southern California and a Master’s and Doctorate in political science at Brown University. 

climate change

Businesses Must Adjust To Climate Change; 5 Ways Toward Sustainability

As climate change causes worldwide concern and prompts calls for governmental action, consumers are putting the onus on businesses to step up their sustainability standards and practices.

A Nielsen survey, for example, showed that 81 percent of global consumers feel companies should help improve the environment. And with governments across the globe struggling to reach an international consensus on climate change, close observers of business and the environment, along with a high number of CEOs, agree: Private industry should take the lead in driving sustainability.

“Some forward-looking companies are seeing it’s an issue they can no longer ignore, morally and economically, and that you can go green and succeed in business,” says Hitendra Chaturvedi (www.hitendrachaturvedi.com), a professor at the Supply Chain Department of W.P. Carey School of Business at Arizona State University and expert on global supply chain sustainability and strategy.

“Business strategies must include sustainability in their core beliefs and practices. Part of the problem is that they are missing the simple, sensible ways that can drive sustainability and bring a return on investment at the same time.”

Chaturvedi suggests the following ways businesses can exercise sustainability practices to help fight climate change and connect with consumers:

Find the facts. “When a package gets delivered to you by an online commerce company, most people see the packaging as mainly contributing to the pollution, but that is not the case,” Chaturvedi says. “The packaging contributes less than 5%, but the main culprit is the returned/defective item which accounts for close to 50% of the pollution because it is not properly disposed of. I call it sensible sustainability. Identify and focus on low-hanging fruits.”

Seek education. “Finding the facts brings an important issue – education of consumers,” Chaturvedi says. “I see too many data points floating around that are put forth to create hysteria and are flat-out wrong, causing well-intentioned people to be waylaid in unproductive directions. Too many times this causes even a well-wisher of the environment to lose interest. We need a proper way to educate consumers about what is real and what is fake news.”

Implement business model changes. “Look at your business model holistically,” Chaturvedi says. “I propose a 5R model that simply, sensibly, and holistically integrates forward and reverses supply chain within any organization to ensure reduction in waste – and without sacrificing profits or competitiveness.”

Embrace technology. “It will lead to quick solutions to many vexing sustainability problems,” Chaturvedi says. “For example, advancement in technology has given us economically viable micro-factories to processing plastic waste, something that was not possible a few years ago. Now we can package it into a business model and scale it. Technologies like blockchain and dendrites will have far-reaching effects on sustainability as they will drive tracking and accountability.”

Find sensible solutions. “Sustainability needs sensible solutions, not a panacea, not motherhood and apple pie solutions,” Chaturvedi says. “We need solutions that are practical and profitable. We see many solutions that promise to solve the world’s pollution problem but are either one-off, or do not make money or both. We need businesses to step in and partner with scientists, universities, and government so a practical/viable perspective can be applied to sustainability solutions. A business will bring that perspective along with what can scale and what can not.”

“Businesses can see significant benefits, both economically and socially, from incorporating sustainable practices,” Chaturvedi says. “Some of the steps you incorporate can seem small at first, but day by day those efforts will produce great results.”

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Hitendra Chaturvedi spent over 30 years in progressive technology leadership positions with Microsoft, Newgistics, E&Y e-Business and A.T. Kearney. Chaturvedi also built a $100 million software company in India, GreenDust, where he implemented proprietary reverse logistics software at Amazon, Flipkart (Walmart), Samsung, Panasonic and Whirlpool. A computer engineer with a master’s degree from Louisiana State University and an MBA from Southern Methodist University, Chaturvedi has been widely covered in the media and is a subject matter expert on global supply chain strategy, sustainability in supply chain, reverse logistics, ecommerce, artificial intelligence and machine learning. Now a professor at Arizona State University, Chaturvedi has been a visiting professor at Southern Methodist University, University of Texas-Dallas, Penn State and Purdue.