Refining trade regulation to support and stabilise local agricultural production in Africa

For African countries, developing local agricultural production in order to be less reliant on imports is a necessity. Their food sovereignty is at stake – as recent agricultural price spikes have illustrated. Moreover, developing this sector would provide a large number of jobs across the industry's various sub-sectors. Rice and sugar are the key products exemplifying these challenges in West Africa. These socially and politically sensitive products face numerous challenges: production of sufficient quantity and quality, market availability, competitiveness, price, etc. Trade regulation is one of the key elements within a wider policy of supporting these agricultural sectors. The direction it should take and the instruments to be used have yet to be determined. A very open trade environment, resulting in low levels of customs duties, brings the danger of exposing local industries to excessive import competition, impeding their growth. Conversely, inflexible import restrictions entail risks of a diffe-rent kind when local industries are incapable of meeting the population's needs. Analysis of the specific cases of rice and sugar in West Africa argues for trade regulation that is more differentiated and flexible.

The challenges of local production

Rice is a basic foodstuff in West Africa, consumed in the coastal states in particular, where consumption levels (more than 60kg per person per year) are close to South Asian levels. Demand for rice is growing fast, too, driven by population growth and urbanisation.

The potential for growth in this sector is regarded as very substantial. Rice is cultivated almost everywhere in West Africa (Bricas et al, 2009) but most particularly in Nigeria (which accounts for 2.4 million of the 5.5 million hectares cultivated in the region), Guinea (nearly 1 million hectares), Sierra Leone and Mali (0.5 million hectares apiece). This potential is largely under-utilised and local production remains insufficient to meet consumption requirements (Figures 1 and 2). Production uses various cultivation systems and is characterised by highly variable yields, ranging from 1.02 tonnes per hectare (t/ha) for rainfed lowland rice to 4.19 t/ha for irrigated rice. Overall, however, the region's yields are low: West Africa's 1.9 t/ha compares with 2.6 t/ha for the African continent as a whole (FAO, 2009). Yields in Senegal and Mali can occasionally reach the levels achieved in Thailand (3 t/ha) but only over very limited areas. Growth in the rice sector is also impeded by quality problems (impurity levels) and high processing costs.

As a result rice imports have increased substantially in West Africa: today the region imports 5.2 million tonnes of rice, compared with 1.7 million tonnes in the early 1990s; it meets only 60% of its own needs (Sahel and West Africa Club – SWAC/Club du Sahel et de l'Afrique de l'Ouest – CSAO, 2011). Moreover the imported rice, sourced mainly from Thailand and Vietnam, is increasingly rice of inferior quality: broken rice represents 40% of imports. Consumption of sugar is steadily increasing in West Africa (12.5 million tonnes in 2005), even though it remains a relatively expensive product. Consumption mainly comprises table sugar, yet there is strong growth potential in terms of industrial demand (especially for beverages) and for biofuel. Half of consumption is imported and only 10% of these imports are derived from intra-African trade. Production of cane sugar has advanced little in the last 25 years, rising from 4 million tonnes to 4.7 million tonnes across ECOWAS from 1980 to the mid 2000s. Three countries account for the bulk of production: Côte d'Ivoire (40%), Senegal (32%) and – to a lesser extent – Burkina Faso at 15% (Faivre Dupaigre et al, 2006).

Ineffective trade regulation

hanges to trade regulations in West Africa have resulted in a simplification and reduction of customs duties (Box 1). For the rice sector, the Common External Tariff (CET) implemented in the UEMOA zone1 in 2000 is especially ineffective in protection terms, standing at 10%. When it was introduced the priority was to ensure that poor urban popu-lations had access to rice; this was achieved at the expense of boosting local production. Effectively the CET contradicted the stated goals of developing local production and intra-regional trade.

Nonetheless putting strong protectionist measures in place does not guarantee the growth of local production. UEMOA's weak CET certainly played a part in the growth of rice imports in the region, but there is no evidence that a more protectionist tariff alone would have increased production. Other factors must be taken into account: consumer preferences,2 supply constraints, infrastructure, etc. The case of Nigeria, where import bans were enforced between 1985 and 1995 in order to stimulate local production, provides further evidence here: production did increase significantly (from 1.4 million tonnes in 1985 to 2.9 million tonnes in 1995), but there were no lasting effects in terms of controlling imports, which rose again as soon as the measures were lifted. The lack of adequate support for production meant that these measures were ineffective overall – especially in terms of problems relating to the quality of the local rice (Lançon and Benz, 2007). More protectionist measures were put in place for sugar. Raw cane or beet sugar from external markets is taxed at 20% under UEMOA's CET. Reference prices have been set, based on market prices in the European Union and the United States and the global price. Moreover companies in this sector frequently enjoy a monopoly of production, operating within integrated sectors. In Senegal until recently only the Compagnie Sénégalaise du Sucre (CSS) could import sugar – and liberalisation was partly offset by an equalisation system, ensuring that no imported sugar costs less than CSS sugar. It should also be noted that in Côte d'Ivoire the go-vernment decided to suspend sugar imports from 2004 to 2006 to counter a sudden surge in imports (Food and Agriculture Organisation of the United Nations – FAO, 2007). Recent global price spikes have brought with them a kind of “protection” for the rice and sugar sectors and a strong response in terms of local production has been evident. In the rice sector, most countries have proposed ambitious targets for increasing production and have launched programmes to boost the sector: Mali's Rice Initiative, Senegal's Grand Agricultural Offensive for Food Security (GOANA – Grande Offensive Agricole pour la Nourriture et l'Abondance), Benin's Emergency Support Programme for Food Security (PUASA – Programme d'Urgence d'Appui à la Sécurité Alimentaire), etc. The impacts on annual production growth are clearly apparent: average annual growth of the area cultivated has risen to 3.8% compared with 2.2% before 2008, while production growth has increased from 3.7% before 2008 to 5.4% today (SWAC/CSAO, 2011). In Senegal for example, a second rice crop (off-season rice) has been introduced – which had not previously been considered possible. In the sugar sector investments are pouring in and plantations are expanding, with the twin aim of making up the domestic market deficit and developing exports. Investments planned in Mali and Senegal, for example, have set sugar production targets far in excess of the current production deficits. However, the high volatility of global agricultural prices could rapidly undermine the “protection” high prices have afforded local production industries and therefore make it necessary to review trade regulations in West Africa.

The value of more differentiated trade regulation

Within the UEMOA area, trade regulation reflects the very liberal approach and highly simplified model of the CET: four tariff cate-gories, tariffs based on value only, plus an import tax (the TCI, or Taxe Conjoncturelle à l'Importation) of 10% applying to particular products. At the same time, the free movement of goods and people within UEMOA (as within ECOWAS3) is barely materialising. As a result, trade between the countries of West Africa remains very limited, around 10 to 15% (although informal flows should be added to this). Comparison with other regional integration areas shows that common trade regulations are often more sophisticated for sensitive agricultural products. In the Mercosur4 region, the introduction of a CET led to a reduction in the highest tariffs, which today do not exceed 20% for agricultural pro-ducts – but states within the region can apply higher or lower tariffs, overriding the CET. In Europe, the customs tariff is based on a wide range of instruments, permitting highly specific, differentiated protection according to the sensitivity of each tariff line (Box 2). It is striking, too, to note that intra-regional trade is much higher in these regions than it is in West Africa: accounting for 35% of trade in the Mercosur region and 70% in Europe.

The latest developments in West African trade regulation are tending towards differentiated protection. Instead of adopting UEMOA's CET, ECOWAS has introduced a fifth tariff band at 35%. However, the difficulty of finalising the CET, and also of implementing the free movement of goods and people, shows how difficult it is to harness regional integration in order to stimulate regional agricultural production and compete with imports. Rice and sugar exemplify these challenges perfectly. In the case of rice, discussions on the CET have stalled, caught between the choice of supporting production given the region's potential (Ghana favours a 20% tariff), and the choice of accessibility for everyone. Sugar is a focal point for tensions, too. Two member states, Nigeria and Ghana, have proposed that refined sugar should be taxed at 20% and raw sugar at 10%. Yet the majority of member states consider that raw sugars are finished products and can be substituted for refined sugar. Applying different rates could simply encourage changes in designation, switching from one tariff category to another. Despite the challenges the process involves, regional integration in West Africa can help to support and stabilise local production industries like rice and sugar as they strive to compete with imports. This will mean reviewing common trade regulation: there is no doubt that the trend towards simplification and openness has gone too far. Without proposing a complexity that would over-burden administrative capabilities and open the door to fraud, the key issue here is to broaden the range of instruments used so as to provide more sophisticated protection reflecting the specific needs of the sectors involved. In the short term at least, the conformity of trade regulations with WTO rules is a se-condary issue. At a time when negotiations have ground to a halt and exceptions to the general rules of liberalisation are increasingly common, the idea of allowing Africa to be an exception is entirely defensible. Without granting them full exemption from WTO regulations, the idea would be to at least allow these countries to review commitments undertaken at a time when they were not yet independent. The key challenge is to construct a regulatory system which – combined with measures to support production – can help to develop intra-African trade.

1 UEMOA (Union économique et monétaire ouest-africaine – West African Economic and Monetary Union) was established to promote economic integration among its member states (Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo), by improving economic competitiveness in the context of an open and competitive marketplace and a rationalised and harmonised legal environment.

2 In Senegal, consumers prefer imported broken rice to whole local rice. Yet the crisis of 2008 showed that when the price differential was reversed they quickly reverted to local rice. 

3 ECOWAS, the Economic Community of West African States (in French, CEDEAO – Communauté économique des États de l'Afrique de l'Ouest), an intergovernmental organisation created in 1975, is the main organisation responsible for coordinating initiatives undertaken by the countries of this region.

4 Mercosur, established on 26 March 1991, is an economic community comprising various South American countries (permanent member states: Argentina, Brazil, Paraguay, Uruguay and Venezuela; associate member states: Bolivia, Chile, Peru, Colombia, Ecuador).

References

Alpha, A., Beaujeu, R., Rolland, J-P., Coste, J., Diagne, D., Ogunkola, O., Baris, P., Broutin, C., 2008. Étude prospective sur les mesures de protection nécessaires pour le développement du secteur agricole en Afrique de l'Ouest, Gret, October. // Bricas, N., Thirion, M-C., Zoungrana, B., 2009. Bassins de production et de consommation des cultures vivrières en Afrique de l'Ouest et du Centre, AFD, CILSS, CIRAD, IFAD, November. // Club du Sahel et de l'Afrique de l'Ouest (CSAO/OCDE), 2011. Crise rizicole de 2008 : chocs et nouveaux enjeux, Enjeux ouest-africains n°2, june. //  Faivre Dupaigre, B., Baris, P., Liagre, L., 2006. Étude sur la compétitivité des filières agricoles dans l'espace UEMOA., Iram, mars. // FAO, 2007. Insights on rice, poultry and sugar imports into Côte d'Ivoire, FAO Brief on Import Surges, n°12, février.// Lançon, F. et Benz, H. D., 2007. Rice imports in West Africa: trade regimes and food policy formulation, Poster prepared for presentation at the 106th seminar of the EAAE, 25-27 October.