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Foreword 3
FOREWORD
The OECD Global Forum on Agriculture is a regular event, bringing together OECD
countries and non-member economies to share experiences on how policies can more
effectively achieve stated government objectives. Recent themes for the Global Forum on
Agriculture have revolved around the linkages between domestic policy reform, trade
liberalisation, economic growth and poverty reduction but the focus has been on
agricultural policy. The focus was broadened for this years Forum to include
development aid under the theme Policy Coherence for Development and provided a
good opportunity for policy dialogue between the agricultural and development
communities, government and the private sector; and developed and developing
countries.
These proceedings bring together papers and presentations from the 30 November
1 December 2005 OECD Global Forum on Agriculture, introduced by a brief summary of
the main issues and policy messages. Participation in the Forum was widespread in terms
of geographical coverage and diversity of stakeholders. In addition to the OECD
countries, there was representation from 17 non-member economies, some
15 intergovernmental organisations and international NGOs and from multinational
agribusiness and academia.
The main objective of this forum was to arrive at a better understanding of the kinds
of policy reforms required in both developed and developing countries to enhance global
agricultural trade and to reduce poverty and alleviate hunger. This focus on trade and
poverty/hunger goals is particularly appropriate as both OECD and developing countries
struggle to achieve the stated commitments of the Doha development round of multi-
lateral trade negotiations (DDA) and the Millennium Development Goals (MDGs). As the
DDA negotiations continue to unfold post Hong Kong, the onus will be on the negotiators
to come through in realising the promises of a truly development agenda. Agriculture
continues to be the focal point of worldwide expectations a kind of litmus test of
credibility.
Policy coherence for development features prominently as a central goal of
international millennium undertakings at the highest level. Contributing to development is
a key objective of the OECD. As an intergovernmental agency bringing together nearly
all areas of policy-making, the OECD is ideally placed to provide analysis and promote
dialogue that can motivate governments to align policies in support of the development
objectives to which they have all agreed.
Recognising this, the OECD Ministerial Council of 2002 mandated the Organisation
specifically to enhance the understanding of the development dimensions of member
country policies and their impacts on developing countries. The Council stipulated that
Analysis should consider trade-offs and potential synergies across such areas as trade,
investment, agriculture, health, education, the environment and development goals.
In taking on this mandate, the OECD has gone beyond the basic notion of do no
harm in terms of avoiding counterproductive or contradictory policies. It has adopted, in
addition, the broader definition of policy coherence used by the Development Assistance
Committee, known as the DAC. The DAC definition of coherence calls for the systematic
promotion of mutually supportive policies across government to help achieve mutually
TRADE, AGRICULTURE AND DEVELOPMENT: POLICIES WORKING TOGETHER ISBN-92-64-02200-7 OECD 2006
4 Foreword
agreed international goals. This has been the point of departure for OECD policy
coherence work, using a four-pronged approach: institutional, sectoral, regional/country
case studies and assessing progress.
Bringing together policy makers from various government policy-making sectors to
focus on coherence issues at the OECD implies that they will also do so at the national
and regional levels. In this respect, it was particularly encouraging to see the decision
taken by the European Council in November 2005 on policy coherence at the level of the
European Union in many different areas - a decision closely followed by concrete action
in the sensitive and difficult area of sugar policy. A number of OECD countries are
providing examples of what can be achieved with adequate political will backed by
analytical capacity. The work at OECD will continue to contribute to examples of action
on policy coherence while the policy dialogue at Forums such as this can bring forward
concrete recommendations to reform government policies in a constructive manner to
achieve internationally agreed development objectives.
Avant-Propos 5
AVANT-PROPOS
Organis rgulirement par lOCDE, le Forum mondial sur lagriculture fournit aux
pays membres de lOrganisation et des conomies non membres loccasion dchanger
des informations sur les expriences quils mnent dans loptique datteindre plus
efficacement leurs objectifs. Les thmes abords rcemment dans ce cadre tournaient
autour des liens entre la rforme des politiques internes, la libralisation des changes, la
croissance conomique et la rduction de la pauvret, mais la politique agricole est
toujours au centre des dbats. Pour ldition de cette anne, la thmatique a t tendue
laide au dveloppement, comme en tmoigne lintitul cohrence des politiques au
service du dveloppement , et a permis de faire dialoguer des reprsentants des
agriculteurs, des acteurs du dveloppement, du secteur public, du secteur priv, des pays
dvelopps et des pays en dveloppement.
Ces actes rassemblent les articles et communications prsents au Forum mondial sur
lagriculture des 30 novembre et 1er dcembre 2005, prcds dune brve synthse des
principaux thmes abords et des enseignements retenir. Venus dhorizons
gographiques trs divers, les participants reprsentaient des intrts varis. Outre les
pays de lOCDE, taient reprsents 17 conomies non membres, une quinzaine
dorganisations intergouvernementales et dONG internationales, ainsi que des
multinationales de lagroalimentaire et le monde universitaire.
Le principal objectif de ce forum tait de mieux cerner les rformes ncessaires, aussi
bien dans les pays dvelopps que dans les pays en dveloppement, pour stimuler les
changes agricoles mondiaux et rduire la pauvret et la faim. La thmatique des
changes et de la pauvret/faim se justifie en particulier par le fait que les membres de
lOCDE et les pays en dveloppement sefforcent de respecter les engagements pris dans
le cadre du cycle de ngociations commerciales multilatrales de Doha (Programme de
Doha pour le dveloppement), ainsi que les Objectifs du millnaire pour le
dveloppement (OMD). Les ngociations sur le Programme de Doha se poursuivront
aprs le sommet de Hong Kong et ce sera aux ngociateurs quil incombera de faire le
ncessaire pour que soient tenues les promesses dun vritable programme de
dveloppement. Lagriculture reste au centre des attentes dans le monde entier une sorte
de test de crdibilit dcisif.
La cohrence des politiques au service du dveloppement figure au premier plan des
initiatives internationales prises au plus haut niveau dans le cadre des objectifs du
millnaire. Contribuer au dveloppement est lun des buts essentiels de lOCDE. Celle-ci,
en tant quorganisation intergouvernementale sintressant presque tous les domaines de
laction publique, est idalement place pour procder des analyses et stimuler un
dialogue susceptibles dencourager les gouvernements adhrer des politiques
favorables la ralisation des objectifs de dveloppement auxquels ils ont tous souscrits.
Cest pourquoi le Conseil de lOCDE au niveau des ministres de 2002 a charg
lOrganisation de mieux mettre en vidence la dimension dveloppement des politiques
des pays Membres, et leurs retombes pour les pays en dveloppement . Il stipulait en
outre : Il conviendrait danalyser les arbitrages oprer et les synergies possibles entre
des domaines tels que les changes, linvestissement, lagriculture, la sant, lducation,
lenvironnement et les objectifs de dveloppement .
6 Avant-Propos
Dans les travaux quelle a engags ce sujet, lOCDE ne sest pas contente dtudier
les actions qui ne nuisent pas , autrement dit les mesures contreproductives ou
contradictoires : elle a fond sa rflexion sur une dfinition plus large, employe par le
Comit daide au dveloppement (CAD), selon laquelle la cohrence des politiques
consiste promouvoir systmatiquement ladoption, par tous les services et instances de
ladministration, de politiques dont les effets se renforcent mutuellement au service de la
ralisation de nos objectifs internationaux. Tel a t le point de dpart des activits de
lOCDE sur la cohrence des politiques, qui comprennent quatre volets : tudes de cas
institutionnelles, sectorielles et rgionales/nationales, et valuation des progrs.
Runir les responsables de diffrents domaines de laction publique pour voquer les
questions de cohrence lOCDE suppose quils fassent de mme aux niveaux national et
rgional. A cet gard, il a t particulirement encourageant dapprendre la dcision prise
par le Conseil europen de novembre 2005 concernant la cohrence des politiques au
niveau de lUnion europenne dans de nombreux domaines diffrents (dcision
rapidement suivie dune action concrte dans le domaine sensible et dlicat de la politique
sucrire). Plusieurs pays membres de lOCDE fournissent des illustrations de ce quil est
possible de faire moyennant une volont politique approprie, assortie dune capacit
danalyse adquate. Les travaux conduits lOCDE continueront de donner des exemples
daction en faveur de la cohrence des politiques, tandis que le dialogue, dans le cadre de
forums comme celui-ci, peut aboutir des recommandations concrtes sur des rformes
constructives de laction publique, dans la perspective datteindre les objectifs de
dveloppement dfinis lchelon international.
Acknowledgements 7
ACKNOWLEDGEMENTS
This OECD Global Forum on Agriculture, held 30 November 1 December 2005 in

Paris, was organised by Wayne Jones with the assistance of Darryl Jones in the initial
stages of preparation. This Forum benefited from financial support of the World Bank
which is greatly appreciated. Thanks are extended to all those who provided papers and
contributed to the animated discussions, to Neil Fraser for his very able Chairmanship
and to Anita Lari, Stefanie Milowski and Florence Mauclert for meeting logistics and
management. These proceedings were edited by Uma Dixit. Anita Lari assembled and
formatted the final publication with assistance from Michle Patterson.
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Table of Contents 9
Table of contents
Executive Summary........................................................................................................................ 11
Rsum............................................................................................................................................. 15
Part I. Setting the Scene ................................................................................................................. 21
Chapter 1. Policy Coherence for Development: Distilling Lessons from OECD Work
Alexandra Trzeciak-Duval................................................................................................................ 23
Chapter 2. Policy Coherence for Development: Issues in Agriculture

Alan Matthews and Thomas Giblin .................................................................................................. 39
Chapter 3. Policy Coherence for Development: Making it Work

Pertti Majanen .................................................................................................................................. 55
Chapter 4. Policy Coherence for Development: What it Means for Farmers

Raul Q. Montemayor ........................................................................................................................ 69
Chapter 5. Policy Coherence for Development: What it Means to the Poor

Ibrahim Assane Mayaki .................................................................................................................... 81
Part II. Enhancing Global Agricultural Trade Through a Fair and

Market Orientated Trading System.............................................................................................. 89
Chapter 6. Enhancing Global Agricultural Trade: A Status Report
Carmel Cahill ................................................................................................................................... 91
Chapter 7. How can Policy Coherence Enhance Global Agricultural Trade?

Joachim von Braun and Tewodaj Mengistu.................................................................................... 105
Chapter 8. Policy Coherence for Development: Issues for Brazil

Fabio R. Chaddad and Marcos S. Jank .......................................................................................... 129
Chapter 9. Policy Coherence for Development: Issues for China

Xiaoshan Zhang .............................................................................................................................. 149
10 Table of Contents
Part III. Contributing to the Millennium Development Goal of

Eradicating Extreme Poverty and Hunger................................................................................. 165
Chapter 10. Eradicating Extreme Poverty and Hunger: Towards a Coherent Policy Agenda
Prabhu Pingali, Kostas Stamoulis and Randy Stringer.................................................................. 167
Chapter 11. How can Policy Coherence in Agriculture Contribute to the

Eradication of Extreme Poverty and Hunger?
Tom Arnold ..................................................................................................................................... 183
Chapter 12. Food Grain Surpluses, Yields and Prices in India

Raghav Gaiha and Vani S. Kulkarni .............................................................................................. 201
Chapter 13. Coherence of International Trade Liberalisation Policy with the Objectives of
Rural Poverty Reduction: Listening to the Views of the Rural People in Sub-Saharan Africa
Mohamed Beavogui ........................................................................................................................ 221
Annex. Agenda and List of Participants..................................................................................... 241
Agenda............................................................................................................................................ 243
Liste des Participants / List of Participants..................................................................................... 248
Executive Summary 11
EXECUTIVE SUMMARY
The OECD Global Forum on Agriculture, held on 30 November 1 December 2005,

covered a wide range of issues under the theme of Policy Coherence for Development.
This summary attempts to highlight some of the main points of the discussion, including
those addressed during a final wrap-up panel discussion. A more comprehensive and
representative overview of the issues covered during the two-day Forum can be obtained
by reviewing the short abstracts provided for all presented papers. The slide presentations
delivered at the Forum are available at: www.oecd.org/ccnm/agriculture.
In his closing remarks as Chair of the Global Forum, Neil Fraser emphasised the
message that policy coherence for development means much more than do no harm in
terms of policy approaches; it means doing the right things with the right people in the
right sequence. He stressed that trade liberalism was a key factor in agricultural
development; in particular the removal of developed country trade distortions, but that it
was not a silver bullet. There was a strong consensus that freer trade in agriculture
alone cannot solve problems of poverty and hunger and may, in some cases, have to be
accompanied by adjustment assistance to help overcome any negative immediate
implications.
Pro-poor agricultural growth strategies need a broader role in development aid
combined with greater national level responsibility for such basics as macroeconomic
stability, dialogue with civil society, research and development, infrastructure, etc.
Several OECD countries (e.g. Finland, Ireland, The Netherlands, Sweden) have adopted
this whole-of-government approach to policy coherence for development. It was clear
from the many experiences discussed that solutions need to be context and country
specific; that no one size fits all in terms of policy approach. The Finnish government, for
example, is working closely with trade partners like Uganda and Zambia to develop a
better understanding of the markets and trade environments in these countries.
In terms of policy coherence for agricultural trade enhancement, the point was made
that developing countries, in general, are not major players in world agricultural trade. In
fact as a group, developing countries are net agriculture and food importers and this trend
is increasing. However, agriculture is still very important to their economies, involves a
high proportion of the labour force and accounts for most of the poverty. Equally
important, agriculture is generally a sector where developing countries can cultivate a
comparative advantage, particularly in labour intensive production. Clearly, a lack of
market access to developed country markets is one problem, due to such OECD country
agricultural policies as domestic price support, border protection and tariff escalation.
These issues are the major focus of the current round of multilateral trade negotiations
and there is an international commitment to reduce these distortions. But participants
strongly emphasised that market access is not the only issue. For most developing
countries, supply capacity is an even more serious constraint. Trade facilitation needs to
be a major component of any development strategy. The constantly changing and
increasingly complex food safety regulations, growing demands of private standards and
evolving multinational food chains, and the inadequate infrastructure and institutional
organisations were just some of the factors limiting the ability of developing countries to
benefit from emerging market opportunities.
12 Executive Summary
Turning to the goals of poverty reduction and hunger alleviation, it was pointed out
that there are an estimated 850 million undernourished an increase of 18 million over
the last 5 years. Sub-Saharan Africa in particular is unlikely to achieve the Millennium
Development Goals (MDGs) for 2015 related to poverty reduction and hunger alleviation.
While it was noted that trade can help reduce poverty and hunger, it was stressed that
increased investment is critical if agriculture is to play a greater role. Aid to agriculture
has been falling in real terms since the mid 1980s with the worlds poorest Sub-Saharan
Africa and South and Central Asia bearing the brunt of the decline (OECD official
development aid statistics).
Conflict has interrupted the programmes to some countries while governance
concerns prompted reductions in aid to others. Domestic policies that effectively tax
agriculture are often more distorting than those of the international community.
Development aid will not be effective if the domestic environment is not appropriate.
Cotton production, involving some 16 million people in West Africa, was given as one
example where aid was withdrawn or withheld because expected policy reforms in
developed countries, that would open markets, failed to materialise. OECD area
agricultural policies clearly limit growth opportunities and provide both good and bad
examples of policy practice for developing countries.
Major donors argue that a lack of predictability and profitability in agriculture has
caused investors to turn elsewhere, but that if conditions improve funds would once again
flow to agriculture. Many national governments have also reduced support for agriculture
for the same reasons and the sectors performance has declined accordingly. However,
there is some room for optimism. Current donor targets, if achieved, would see an
increase in ODA from USD 80 to USD 130 billion, the largest increase in history.
Similarly, African governments through NEPAD have committed to increase the share of
domestic budgets allocated to agriculture.
The wrap-up panel at the end of the Forum essentially confirmed the messages in the
earlier sessions by providing personal experiences and country specific examples. Pinit
Korsieporn (Deputy Secretary-General, Ministry of Agriculture and Cooperatives,
Thailand) stressed that policy coherence for development was an issue for both
developing and developed countries which required strong leadership to minimise
conflicts among stakeholders. The multisectoral approach initiated in Thailand was
offered as a good example of policy coherence aimed at poverty reduction while
developed country agricultural policies, including market access, export subsidies,
domestic support, food aid and preferential treatment, were all noted as factors limiting
development.
Jeremy Hobbs (Executive Director, Oxfam) argued that trade liberalism is not a
panacea; that it must be linked to ODA, debt relief (a third of ODA goes for debt
repayment) and effective domestic policies to formulate a coherent strategy for
development. Citing the success of poverty reduction in East Asia, effective domestic
policies, good governance, sequencing of reforms and the role of private sector were all
seen as key factors. More country case study analysis was recommended to better
understand the interplay and relative importance of these factors, as was greater mutual
accountability between recipients, donors and international organisations.
Kevin Cleaver (Director, Agriculture and Rural Development, World Bank)
underlined the importance of good infrastructure and institutions in order to attract
necessary foreign direct investment (FDI) and attract donor funds as well as to better
integrate poorer countries into regional and international markets. OECD countries
Executive Summary 13
account for over 90% of global official development assistance (ODA) and 80% of FDI.
Agriculture needs to be profitable to attract both private and public sector investment but
in many cases this is not the case. Many developed country agricultural policies seriously
compromise the profitability of farmers in developing countries (again cotton is an
example). Low income countries will need help adjusting to take advantage of more open
markets, in particular investment in infrastructure and rural development.
Mohammed Karaan (Chair, National Agricultural Marketing Council, South Africa)
agreed that institutional reform must precede trade integration while noting that FDI is
also often constrained by political economy issues. Increased market access was
identified as the main trade issue with more analysis required of winners and losers and
the distributions of the benefits of trade liberalism. The importance of improving access
to comprehensive social services in rural and marginal areas with the aim of improving
the quality of life, coupled with the need to put in place food-based safety nets was
highlighted as an integral part of a policy coherent domestic agricultural programme.
Coming back to the question of sequencing, land reform and land tenure (markets) were
noted as fundamental policy coherence issues in South Africa. It would be useful to share
the experiences of other developing countries such as China, Brazil and India in this
regard.
Richard Manning (Chair, OECD Development Assistance Committee) echoed the
message that the benefits of trade liberalisation should not be over sold; that there is a
need for coherent aid policies to achieve development goals. A whole of government
approach to PCD is needed macroeconomic stability, land and labour market reforms,
infrastructure improvements, good governance systems, active stakeholder groups. Food
aid, for example, is often more expensive than commercial food imports, in some cases
could be purchased locally and can negatively impact on domestic food production and
local nutritional habits. Market reforms undertaken by many Sub-Saharan African
countries during the 1980s to reduce government intervention and to promote the private
sector did not have the desired effects because of institutional deficiencies. A forthcoming
DAC policy document on enabling pro-poor growth through agriculture is intended to
provide a framework for donors and domestic governments alike. The importance of
enhancing co-operation between multilateral and bilateral donors was underlined as was
the need for greater accountability and co-ordination between donor-countries, recipient
countries, and international organisations. In this regard, as part of OECDs evolving
partnership with Africa, the Mutual Review of Development Effectiveness which studies
a range of themes of mutual accountability between African and OECD countries
including policy coherence was highlighted.
Jack Wilkinson (President, International Federation of Agricultural Producers)
stressed the need for increasing international assistance and questioned the current decline
in aid for agriculture. Key issues are the on-going structural changes around the
reorganisation of supply chains, increasing downstream concentration, new scientific
breakthroughs, etc., and how smaller farms will be able to cope. He supported a business
approach to agriculture based more closely on actual farmers needs, with direct farmer
input in developing sector business plans and programme design. In most cases, the
farming community was not adequately represented in the decision-making process. He
also encouraged more impact analysis of current policies on both intended beneficiaries
and third parties, for example, the actual benefit for West African farmers of lifting
subsidies on cotton. Tariff escalation, and its dehabilitating impact on the development of
a value-added sector in developing countries, was of particular concern.
14 Executive Summary
Willem-Jan Laan (Unilever and Vice Chair, Sub-committee on Food and Agriculture,
Business and Industry Advisory Committee to OECD) added that the creation of agri-
business opportunities had a follow-on effect of creating further economic stimuli for
local rural communities. Trade and value-added processing can foster such opportunities
in developing countries but development aid is also required. Micro-credit and other
forms of financing are often absent from development strategies and a major limitation to
poverty reduction. Capacity building is essential to help the poor help themselves and the
private sector has a stake and important role in ensuring the resulting economic growth is
sustainable. Once trade reforms have taken effect, some developing countries may need
additional help to integrate into global markets. One area where assistance is already
required is in adjusting to the higher costs and greater complexity associated with
international Sanitary and Phyto-Sanitary (SPS) Standards.
Stefan Tangermann (Director, Agriculture, Food and Fisheries Directorate, OECD)
agreed with the need for rigorous impact analysis of agricultural and trade policies,
including the identification of winners and losers from reform at the national, regional
and household level. The OECD has developed a very strong set of instruments for the
evaluation of subsidies and monitors, on an annual basis, policy developments and levels
of support for all OECD countries and a growing number of non-member economies.
More emphasis needs to be placed on the implications of OECD agricultural policies for
developing countries, with a suggestion that perhaps the annual monitoring exercise
should explicitly evaluate the policy coherence for development aspect of all new
OECD agricultural policy developments. He pointed out that mechanisms should be put
in place to deal with any negative effects of trade liberalisation, for example possible
losses resulting from preference erosion. Also, more guidance should be made available
to developing countries in the tailoring of their agricultural and trade policies to better
achieve domestic policy objectives. In this context, research and development, extension
services, education and training, creation of effective institutions and infrastructure,
adjustment assistance are clearly more effective and efficient than traditional price
support and input subsidies but there must first be the political will to reform.
Rsum 15
RSUM
Le Forum mondial sur lagriculture, qui sest tenu les 30 novembre et

1er dcembre 2005, a abord toute une srie de questions axes autour du thme de la
cohrence des politiques au service du dveloppement . Ce rsum a pour but de
mettre en vidence quelques-uns des principaux points dbattus, notamment lors de la
sance-bilan qui a clos la rencontre. On trouvera un expos plus complet et reprsentatif
des problmatiques traites pendant ces deux journes de runion du Forum dans les
rsums succincts tablis pour chacun des documents prsents. Les communications
prsentes sous forme de transparents peuvent tre consults ladresse :
www.oecd.org/ccnm/agriculture.
Dans ses remarques de clture, Neil Fraser, Prsident du Forum mondial, a rappel
que la cohrence des politiques au service du dveloppement tait loin de se limiter des
stratgies ne nuisant pas , mais quelle consistait prendre les bonnes dcisions
impliquant les bonnes personnes au bon moment . Si la libralisation des changes, en
particulier la suppression des distorsions gnres par les pays dvelopps, est un facteur
essentiel au dveloppement de lagriculture, elle ne constitue en aucun cas la solution
miracle. Les participants se sont trs largement accords penser que la libralisation des
changes agricoles ne saurait elle seule rsoudre les problmes de la pauvret et de la
faim et quelle devrait dans certains cas saccompagner dune aide lajustement pour en
pallier les rpercussions ngatives immdiates.
Les stratgies de croissance agricole favorables aux pauvres mritent de jouer un rle
plus grand dans laide au dveloppement en les combinant avec un accroissement des
comptences nationales dans des domaines essentiels comme la stabilit
macroconomique, le dialogue avec la socit civile, la recherche-dveloppement, les
infrastructures, etc. Plusieurs pays de lOCDE (Finlande, Irlande, Pays-Bas, Sude, entre
autres) ont adopt cette approche globale de la cohrence des politiques au service du
dveloppement. Il est clairement ressorti des nombreuses expriences voques que les
solutions sont ncessairement fonction du contexte et du pays et quil nexiste pas de
stratgie passe-partout. En Finlande, par exemple, les pouvoirs publics travaillent en
troite relation avec des partenaires commerciaux tels que lOuganda et la Zambie, afin
de mieux apprhender la situation des marchs et lenvironnement commercial de ces
pays.
En ce qui concerne les changes agricoles, il est noter que les pays en
dveloppement ne sont gnralement pas des acteurs majeurs du commerce international.
En fait, ce groupe de pays est importateur net de produits agricoles et alimentaires, et
cette tendance va en saccentuant. Lagriculture demeure nanmoins un secteur
primordial pour ces conomies ; elle emploie une grande part de la main-duvre et
concentre lessentiel de la pauvret. Autre aspect tout aussi important : lagriculture est en
gnral un secteur dans lequel les pays en dveloppement peuvent cultiver un avantage
comparatif, en particulier dans les secteurs productifs forte intensit de main-duvre. Il
est vident que ces pays sont notamment pnaliss par un accs insuffisant aux marchs
des pays dvelopps, qui est imputable des politiques agricoles des pays de lOCDE
comme le soutien des prix intrieurs, la protection aux frontires et la progressivit des
droits de douane.
16 Rsum
Toutes ces questions sont au cur du cycle de ngociations commerciales

multilatrales en cours, et la communaut internationale sest engage rduire les
distorsions engendres. Toutefois, les participants au Forum ont insist sur le fait que si
laccs aux marchs constitue effectivement un obstacle lever, la capacit de production
est, pour la plupart des pays en dveloppement, un handicap beaucoup plus lourd encore.
Toute stratgie de dveloppement doit absolument comprendre un volet facilitation des
changes . Au nombre des facteurs limitant la capacit des pays en dveloppement
tirer parti des nouveaux dbouchs commerciaux figurent lvolution permanente et la
complexit croissante des rglementations relatives la scurit des aliments,
laugmentation de la demande de normes prives et lvolution des chanes alimentaires
multinationales, ainsi que linadquation des infrastructures et des organisations
institutionnelles.
En ce qui concerne les objectifs de rduction de la pauvret et de lutte contre la faim,
il est rappel quon estime 850 millions les personnes souffrant de sous-nutrition soit
une augmentation de 18 millions au cours des cinq dernires annes. LAfrique
subsaharienne, en particulier, nest pas en mesure datteindre les Objectifs du Millnaire
pour le dveloppement (OMD) dici 2015 en ce qui concerne la rduction de la pauvret
et la lutte contre la faim. Certes, le commerce peut contribuer rduire la pauvret et la
faim, mais il nen demeure pas moins que si lon veut accrotre le rle jou par
lagriculture, il est impratif daugmenter les investissements dans ce secteur. Laide
lagriculture a chut en termes rels depuis le milieu des annes 80, et tout
particulirement dans les rgions du monde les plus pauvres, en loccurrence lAfrique
subsaharienne, lAsie du Sud et lAsie centrale (statistiques de lOCDE sur laide
publique au dveloppement).
Les programmes ont t interrompus dans le cas de plusieurs pays en raison de
conflits, tandis que des problmes de gouvernance ont amen rduire laide destine
dautres pays. Les politiques internes taxant de facto lagriculture ont souvent des effets
de distorsions plus importants que celles adoptes par la communaut internationale.
Laide au dveloppement ne saurait tre efficace si le contexte national ne sy prte pas.
La production cotonnire, qui occupe quelque 16 millions de personnes en Afrique de
lOuest, est cite comme exemple de retrait ou de suspension de laide faute de
concrtisation des rformes attendues dans les pays dvelopps, qui auraient conduit
une ouverture des marchs. Les politiques agricoles des pays de la zone de lOCDE
limitent manifestement les possibilits de croissance des pays en dveloppement et sont
pour ces derniers la fois des exemples positifs et ngatifs de pratiques daction .
Les grands donneurs estiment que la raison pour laquelle les investisseurs se sont
dtourns de lagriculture est son manque de prvisibilit et de rentabilit, mais que, les
flux de capitaux vers ce secteur reprendraient si la situation venait samliorer. De
nombreux gouvernements nationaux ont par ailleurs rduit le soutien accord
lagriculture pour ces mmes raisons, entranant paralllement une baisse des
performances du secteur. Cependant, loptimisme est encore de mise. Sils taient
atteints, les objectifs actuels des donneurs feraient passer lAPD de 80 milliards dUSD
130 milliards dUSD, ce qui constituerait une hausse record. De mme, les
gouvernements des pays africains se sont engags, dans le cadre du NEPAD, accrotre
la part des budgets nationaux alloue lagriculture.
La sance-bilan qui a clos le Forum a pour lessentiel confirm les conclusions des
sessions prcdentes et apport des exemples dexpriences individuelles et nationales.
Pinit Korsieporn, Secrtaire gnral adjoint, ministre de lAgriculture et des
Rsum 17
Coopratives de la Thalande) a fait observer que la cohrence des politiques constitue,

tant pour les pays en dveloppement que pour les pays dvelopps, une impulsion
politique forte destine limiter le plus possible les conflits entre parties prenantes. Cest
ainsi que lapproche multisectorielle adopte par la Thalande est un bon exemple dune
cohrence des politiques axe sur la lutte contre la pauvret, tandis que les politiques
agricoles des pays dvelopps, notamment concernant laccs aux marchs, les
subventions lexportation, le soutien interne, laide alimentaire et le traitement
prfrentiel, sont toutes considres comme limitant le dveloppement du pays.
Jeremy Hobbs (Directeur excutif, Oxfam) indique pour sa part que la libralisation
des changes nest pas une panace et que, si lon veut une stratgie en faveur du
dveloppement vritablement cohrente, la libralisation doit tre conjugue des
mesures relatives lAPD, la restructuration de la dette (un tiers de lAPD servant au
remboursement de la dette) et des politiques internes efficaces. voquant les succs
remports en Asie de lEst en matire de lutte contre la pauvret, il prcise que
lefficacit des politiques internes passe principalement par une bonne gouvernance, une
mise en uvre squentielle des rformes et le rle jou par le secteur priv. Il
recommande de faire davantage appel aux tudes de cas par pays, afin de mieux
apprhender les interactions et limportance relative de ces diffrents facteurs, mais aussi
de renforcer les principes de responsabilit mutuelle des bnficiaires, des donneurs et
des organisations internationales.
Kevin Cleaver (Directeur, Agriculture et Dveloppement rural, Banque mondiale)
souligne combien il est important de disposer dinfrastructures et dinstitutions adquates
pour attirer linvestissement direct tranger ncessaire (IDE) et les ressources des
bailleurs de fonds et, par ailleurs, de mieux intgrer les pays pauvres aux marchs
rgionaux et internationaux. Les pays de lOCDE versent plus de 90 % de laide publique
au dveloppement (APD) et 80 % de lIDE. Pour attirer les investissements, quils soient
publics ou privs, lagriculture doit tre rentable, ce qui nest que rarement le cas.
Nombre des politiques agricoles adoptes par les pays dvelopps compromettent
gravement la rentabilit des exploitations agricoles des pays en dveloppement (le coton
est l encore un bon exemple). Pour pouvoir tirer parti dune plus grande ouverture des
marchs, en particulier des investissements dans les infrastructures et le dveloppement
rural, les pays bas revenu devront donc bnficier dune aide lajustement.
Mohammed Karaan (Prsident, National Agricultural Marketing Council, Afrique du
Sud) est daccord pour dire que la rforme des institutions doit prcder lintgration
commerciale, mais il fait observer que lconomie politique a souvent une incidence
ngative sur lIDE. Selon lui, lamlioration de laccs aux marchs est au cur de la
problmatique commerciale, et il faudrait multiplier les analyses relatives aux gagnants et
perdants de la libralisation des changes, ainsi qu la rpartition des avantages quelle
procure. Si lon veut quun programme agricole national soit cohrent avec les autres
politiques, il faut imprativement accrotre laccs des services sociaux complets dans
les zones rurales et marginales, lobjectif tant damliorer la qualit de vie des
populations et, simultanment, de mettre en place des filets de scurit bass sur laccs
la nourriture. Revenant la question de la mise en uvre squentielle des rformes, il
note quen Afrique du Sud, la rforme agraire et les marchs fonciers font partie des
enjeux majeurs de la cohrence des politiques. A cet gard, il serait utile de confronter les
donnes acquises aux expriences dautres pays en dveloppement tels que le Brsil, la
Chine et lInde.
18 Rsum
Richard Manning (Prsident, Comit daide au dveloppement, OCDE) est lui aussi
davis quil ne faut pas surestimer les avantages de la libralisation des changes et que
pour tre cohrentes, les politiques daide doivent remplir des objectifs de
dveloppement. Il faut imprativement dfinir une stratgie gouvernementale globale de
la cohrence des politiques au service du dveloppement stabilit macroconomique,
rformes du march foncier et du march du travail, amlioration des infrastructures,
systmes de bonne gouvernance et groupes dacteurs actifs. A titre dexemple, laide
alimentaire est souvent plus coteuse que les importations commerciales de produits
alimentaires, elle pourrait dans certains cas tre achete sur les marchs locaux, et elle
peut avoir un impact ngatif sur la production alimentaire nationale et les habitudes
nutritionnelles de la population. Les rformes engages par de nombreux pays dAfrique
subsaharienne au cours des annes 80, qui avaient pour objectif de rduire lintervention
publique et dencourager le secteur priv, nont pas abouti en raison de carences
institutionnelles. Un document du CAD paratre, qui portera sur les perspectives de
croissance favorable aux pauvres grce lagriculture, devrait fournir un cadre pour les
donneurs et les gouvernements nationaux. Richard Manning souligne limportance de
renforcer la coopration entre donneurs multilatraux et bilatraux, de mme que la
ncessit de dvelopper la responsabilit et la coordination entre pays donneurs, pays
bnficiaires et organisations internationales. Il rappelle cet gard que dans le cadre du
partenariat qui se met en place entre lOCDE et lAfrique, lExamen mutuel de
lefficacit du dveloppement explore toute une srie de thmes concernant la
responsabilit mutuelle entre pays dAfrique et pays de lOCDE, et notamment la
cohrence des politiques.
Jack Wilkinson (Prsident, Fdration internationale des producteurs agricoles)
souligne la ncessit daccrotre laide internationale et sinterroge sur la baisse actuelle
de laide dans le domaine de lagriculture. Les principaux dfis relever sont : lvolution
structurelle en cours autour de la rorganisation des filires dapprovisionnement, la
concentration croissante des secteurs daval, les nouvelles avances scientifiques, etc. et
les moyens dont disposent les petites exploitations pour y faire face. Jack Wilkinson est
favorable une approche conomique de lagriculture reposant plus concrtement sur les
besoins rels de lagriculteur, ce dernier participant directement la dfinition des plans
commerciaux sectoriels et des programmes. La plupart du temps, le monde agricole
ntait pas suffisamment reprsent dans le processus dcisionnel. Jack Wilkinson
recommande par ailleurs de raliser davantage danalyses de limpact des politiques en
vigueur, tant sur les bnficiaires viss que sur les tierces parties, par exemple en ce qui
concerne lavantage rel, pour les agriculteurs de lAfrique de lOuest, dune suppression
des subventions au coton. La progressivit des droits de douane est particulirement
proccupante, notamment cause du frein quelle impose au dveloppement dun secteur
valeur ajoute dans les pays en dveloppement.
Willem-Jan Laan (Unilever et Vice-Prsident, Sous-comit sur lalimentation et
lagriculture, Comit consultatif conomique et industriel auprs de lOCDE) ajoute que
la cration de dbouchs agroalimentaires a eu pour consquence dapporter de nouvelles
incitations conomiques aux communauts rurales locales. Si les changes et le secteur de
la transformation peuvent effectivement encourager ces dbouchs dans les pays en
dveloppement, il nen demeure pas moins que laide au dveloppement est
indispensable. Le microcrdit et dautres formes de financement sont souvent absents des
stratgies de dveloppement, ce qui restreint considrablement la lutte contre la pauvret.
Le dveloppement des capacits est essentiel si lon veut aider les pauvres sen sortir, et
cet gard, faire en sorte que la croissance conomique enclenche soit durable constitue
Rsum 19
pour le secteur priv un vritable enjeu dans lequel il a un rle important jouer. Une fois
les rformes commerciales en place, certains pays en dveloppement risquent davoir
besoin dune aide supplmentaire pour sintgrer aux marchs mondiaux. Il est cependant
dores et dj indispensable dapporter une aide dans un domaine particulier, savoir
aider les pays en dveloppement sadapter laugmentation des cots et la complexit
croissante quimposent les normes sanitaires et phytosanitaires internationales.
Stefan Tangermann (Directeur, Direction de lalimentation, de lagriculture et des
pcheries, OCDE) pense lui aussi quil est ncessaire de procder une analyse
rigoureuse de limpact des politiques agricoles et commerciales, et plus particulirement
de dterminer les gagnants et perdants de la rforme lchelle nationale et rgionale,
ainsi quau niveau des mnages. LOCDE a mis au point un ensemble trs robuste
dinstruments dvaluation des subventions et assure un suivi annuel de lvolution des
politiques et du niveau du soutien pour lensemble des pays de lOCDE, ainsi que pour un
nombre croissant dconomies non membres. Il apparat important daccorder davantage
de place aux consquences des politiques agricoles des pays de lOCDE pour les pays en
dveloppement, peut-tre en intgrant dans lexercice annuel de suivi une valuation
explicite de la prise en compte de la cohrence des politiques au service du
dveloppement dans lvolution des politiques agricoles de la zone de lOCDE. Stefan
Tangermann souligne quil conviendrait de mettre en place des mcanismes permettant de
faire face aux effets ngatifs de la libralisation des changes, par exemple aux pertes
quest susceptible dentraner lrosion des prfrences. En outre, il serait judicieux de
fournir davantage dorientations aux pays en dveloppement afin de les aider dfinir des
politiques agricoles et commerciales leur permettant datteindre les objectifs quils se sont
fixs au plan interne. Dans ce contexte, la recherche-dveloppement, les services de
vulgarisation, lducation et la formation, la cration dinstitutions et dinfrastructures
efficaces, et laide lajustement sont lvidence plus efficaces et efficients que les
traditionnels soutien des prix et subventions aux intrants, mais il faut avant tout quil
existe une volont politique de rforme.
Part I. Setting the Scene 21
PART I. SETTING THE SCENE
Chapter 1.
POLICY COHERENCE FOR DEVELOPMENT:
DISTILLING LESSONS FROM OECD WORK1
Alexandra Trzeciak-Duval
Policy Co-ordination Division, Development Co-operation Directorate, OECD and
Horizontal Project on Policy Coherence for Development
Abstract
This paper introduces the rationale, definition and approach for work on policy
coherence in support of development at the OECD. The paper is organised according to
the four main avenues through which coherence issues have been examined, i.e. through
institutional, sectoral, regional and country based approaches. The main parts of the
paper sketch the key policy-relevant issues and lessons that can be gleaned from an
examination of these approaches. It discusses the need for more systematic monitoring
and evaluation of progress on policy coherence for development, suggests future areas of
work, and highlights the challenges which need to be addressed moving forward. . The
forthcoming WTO ministerial meeting in Hong Kong provides the next headline
opportunity for OECD countries to show that policy coherence for development (PCD) is
more than a rhetorical formulation.
Mandate, meaning and method
Why the OECD? Contributing to development is a key objective of the OECD. As an

intergovernmental agency tying together nearly all areas of policy-making, what better
forum to provide the analysis and promote the dialogue to motivate governments to
coordinate policies in order to support development? With policy coherence for
development (PCD) featuring prominently as a goal of international millennium
undertakings at the highest level (Box 1), the OECD Ministerial Council of 2002
mandated the OECD specifically to enhance the understanding of the development
dimensions of member country policies and their impacts on developing countries.
Analysis should consider trade-offs and potential synergies across areas such as trade,
investment, agriculture, health, education, the environment and development co-
operation, to encourage greater policy coherence in support of internationally agreed
development goals (OECD, 2002).
An operational definition: Achieving policy coherence for development means
ensuring that the objectives and results of an OECD member governments development
are not undermined by other policies of the same government that impact on developing
countries. At a minimum, this implies the Hippocratic commitment to do no harm. The
OECDs Development Assistance Committee (DAC) has adopted a more ambitious,
synergistic interpretation: policy coherence for development calls for the systematic
1. This paper serves a background for the introductory comments of Deputy Secretary-General Kiyo
Akasaka who will present an overview of OECDs work on policy coherence for development to
introduce the Global Forum on Agriculture.
24 Part I. Setting the Scene
promotion of mutually supportive policies across government to help achieve mutually

agreed international goals (OECD, 2001).
Box 1. International commitments to PCD
Millennium Declaration (September 2000)
Millennium Development Goal 8: Develop a Global Partnership for Development
Doha Development Round (2001)
Monterrey Consensus (March 2002)
Addressing systemic issues: enhancing the coherence and consistency of the international monetary,
financing and trading systems in support of development
OECD Ministerial Meeting (May 2002)
OECD Action for a Shared Development Agenda
UN Summit: 2005 accountability checkpoint
EU Treaty and EU Council decision of 22 November 2005
Due to the wide range and the complexity of policy areas which need to be
considered, the experience of OECD countries suggests a need to define the different
systemic levels at which governments and institutions can seek greater policy coherence.
A useful PCD typology that breaks down the notion of coherence into four types,
illustrated by examples of harmful policies, is presented in Box 2.
Box 2. PCD typology and illustrative examples of incoherent policies
Type 1. Internal coherence: the consistency between goals and objectives, modalities and protocols of a
governments development policy (e.g between state-to-state bilateral aid, bilateral aid channelled through NGOs
or the private sector, and multilateral aid).
Examples of internal incoherence:
Reduced value of aid through tying = USD 2-7 billion in 2002
Tied in kind food aid carries substantial efficiency costs, estimated at least at 30% over less restrictive
procurement methods.
Type 2. Intra-country coherence: the consistency among aid and non-aid policies of an OECD government in
terms of their contribution to development.
Examples of intra-country incoherence:
Total support to agriculture = circa 5 x aid
Military expenditure = circa 20 x aid and rising
Fishing subsidies USD 15-20 billion per year
More Malawian doctors in one of Europes cities than in all of AIDS-ravaged Malawi
National or regional regulatory standards more stringent than the international standards of Codex
Type 3. Inter-donor coherence: the consistency of aid and non-aid policies across OECD countries in terms of
their contribution to development.
Examples of inter-donor incoherence:
Of 200 average yearly missions to 14 survey countries in 2003, fewer than 10% were joint
Low or no representation of countries with 85% of world population in international financial bodies
Type 4. Donor-recipient coherence: the consistency of policies adopted by rich and poor countries to achieve
shared development objectives.
Example of donor-recipient incoherence:
Aid is rarely aligned with recipient countries budget cycles
Source: Picciotto, 2005a; OECD, 2003; OECD, 2005a; OECD, forthcoming a.
How to approach PCD? The OECDs horizontal programme is guided by the DAC
definition and takes a four-pronged approach. This overview paper is structured along the
same lines.
Institutional approach: No single analytical approach can address all aspects of the
complex process of government policy-making that seeks to meet multiple and often
competing objectives. For this reason, it was essential to address the institutional
aspects of PCD. This has been done by analysing and drawing lessons from the good
practices of OECD members, which have been distilled into a framework that is
consistently applied to DAC peer reviews and could be used more widely.
Sectoral approaches: In parallel, different parts of the OECD Secretariat have
addressed inter-linkages between development and a range of sectoral policies,
including agricultural, trade, migration, health, fisheries, environmental,
macroeconomic and security policies. The relevant OECD Committees or their
subsidiary bodies have been associated with this work to varying degrees from taking
note of the issues, to full endorsement and active participation. The Global Forum on
Agriculture is a major opportunity to take the sectoral approach forward in examining
the linkages between OECD country agricultural policy impacts and the development
commitments they have taken.
Regional and country-based approaches: In order to test the analytical validity of the
sectoral work and make it more context specific, the OECD has also applied regional
(East Asia, Sub-Saharan Africa) and country-specific case study approaches. They
examine the impacts of OECD country policies and pairs of policies on individual or
groups of countries. A special effort to understand and improve policy coherence for
development in fragile states is part of that approach.
Assessing progress: A fourth dimension of OECD work on PCD seeks to increase the
monitoring of OECD country efforts to take developmental impacts into account in
their policy making through peer review and mutual review. Some quantification of
policy impacts is being attempted and a few proxy indicators to support PCD work
exist already. More needs to be done to assess progress and measure results.
Institutional approaches to PCD
The political economy of PCD: Given the general acceptance of PCD as a critical
factor in attaining internationally agreed development objectives, why is it so hard to
achieve? The OECD has initiated some reflection on the reasons. The analysis has found
relatively strong support for the hypothesis that those countries tending to give more
foreign assistance as a share of GNI and to demonstrate a relatively strong commitment to
promoting PCD are countries with high levels of income distribution. It also unearthed
some inconsistencies between professed support for the PCD agenda and actual behaviour
on aid and trade (Kapstein, 2005). The work has highlighted the need better to understand
and take into account special interest groups that interfere in domestic political-economic
policy making in order to preserve rent-seeking benefits that are a cost to the society at
large. In the case of agriculture, particularly, even though most agricultural policies fail to
meet their stated objectives efficiently, reform has been modest. There must therefore, be
a gap between officially articulated policy objectives and implicit ones (OECD, 2005a).
The political economy approach highlights the central role of politics, politicians and
special interests, which may have received too little attention to date in efforts to
understand and change policies that impact developing countries negatively.
Lessons of good practice: Joining up policies across government is a complex
process, but there is a useful body of recent institutional experience which can be drawn
upon. Much of this experience has been reviewed as part of the DAC peer reviews and
brought together for discussion at a series of workshops in 2003 and 2004 (OECD,
2005b). It shows the value of carefully prepared policy frameworks based on wide-
ranging consultative processes and careful dissemination strategies. The list of countries
adopting such public policy statements on PCD is growing. DAC member experience
offers a variety of instruments which can ensure political commitment and accountability.
Cabinet rank for the development portfolio manager and engagement with national
legislatures appear to be of the highest importance. Sweden is the first country in the
world whose Parliament has ratified a Government Bill on a coherent, whole-of
government development policy, while The Netherlands have used joint ministerial
protocols addressed to their Parliament. What works in one national context is not
necessarily transferable to others, but certain basic elements related to politics, capacity,
institutional structures, and results assessment are indispensable, as captured in
shorthand in Box 3.
Box 3. Indispensable institutional Cs of coherence
Clout: Political will to adopt coherent policies that are supportive of development.
Capacity & Co-ordination: Good analytic capacity and co-ordinated policy-making to ensure coherent
policies.
Concreteness: Specific, concrete actions for quick results in key areas, especially trade and agriculture.
Coequality: Better balance in the global governance architecture
An analytical framework: Based on specific examples and the evolving body of good
practice, the OECD has developed a detailed analytical framework for institutional
approaches to policy coherence for development, which helps assess the progress of DAC
members, while offering recommendations for improvement (Box 4. summarises the
framework). Some OECD member countries have already embraced strategic actions for
institutional change by adopting this analytical framework for assessing political will and
institutional capacity; by drawing lessons from recent analytical work and experiences
with institutional reform, by tackling issues in specific action areas according to a firm
schedule, and by monitoring results on a regular basis. The recommendation to apply the
framework systematically to DAC peer reviews is already being implemented.
Subsequent monitoring and possible application to other peer review processes are also
recommended.
Box 4. Analytical framework: institutional mechanisms to

promote policy coherence for development
(1) Managing the politics and policy
Political context: Does the structure, form and system of government, the interaction of its different parts and
the designation of responsibilities facilitate or hinder achievement of policy coherence?
Political commitment and leadership: What priority is given to development and coherence issues and raising
public awareness of these issues on an ongoing basis at the highest level of government?
Policy frameworks: Does the government have clear, integrated policy or legal frameworks to set out and
ensure implementation of commitments to development, poverty reduction and policy coherence?
(2) Building capacity in the policy-making process
Stakeholder consultation: Is the government able and willing to identify, consult and balance the interests of all
possible stakeholders in a policy decision or change?
Analytical capacity: What is the capacity of the government to define the development issues at stake, gather
data to fill information gaps, analyse it effectively and feed results into policy processes on time?
Policy co-ordination mechanisms: How effective are cross-institutional co-ordination mechanisms to consult
on policy options, negotiate policy, anticipate and resolve policy conflicts or inconsistencies?
Informal working practices: Does the administrative culture promote cross-sectoral co-operation and
systematic information exchange between different policy communities in day-to-day working?
Negotiation skills: What is the ability of the development ministry/agency to build strategic alliances, persuade
and engage others and create ownership of the policy coherence for development agenda?
Building capacities in developing countries: What efforts were there to build the institutional capacities of
developing country actors in analysis, consultation, policy making, co-ordination and negotiation and their
institutional and productive capacities in specific policy areas?
(3) Overcoming institutional challenges in different policy areas
Context: What are the major national and international forums for discussion? Do these adequately represent
development perspectives?
Efforts: What studies, consultation and negotiation took place during the policy process?
Actions: What were the policy changes or coherence initiatives in specific areas?
(4) Assessing the results of policy coherence efforts
Monitoring and evaluation mechanisms: Are there policy monitoring mechanisms or specific studies in
different policy areas that analyse impacts on development? How are coherence efforts evaluated?
Results: How did the policy changes affect developing countries?
Source: OECD, 2005b.
Sectoral approaches to examining PCD
Given the numerous forms of assistance to partner countries, the diverse government
ministries responsible for various aspects of development assistance, the sheer number of
actors at the supra-national level and the multiplicity of decision-making forums, the need
for co-ordination and coherence in policy making is easily recognised - but still difficult
to implement. The 2001 DAC Guidelines on Poverty Reduction introduced overall
coherence between the different policies of OECD governments as a key factor
influencing the effectiveness of development co-operation policies on poverty reduction,
with a specific checklist against which to gauge performance. The checklist illustrates the
significant number of policy areas that affect development. Thus, to help policy makers
achieve PCD, a better understanding of sectoral issues and the development of analytical
frameworks are needed to complement the institutional mechanisms.
This paper touches upon a number of sectoral work-streams at various stages of

completion within the OECD, including the agricultural sectoral work that is the focus of
the Global Forum discussions. It is meant to illustrate key issues, as well as summarise
the state of play as of November 2005.
Tied aid: The tying status of aid has long been considered a key test of donors
commitment to coherent policies and effective aid delivery (type 1. internal coherence).
Partners have consistently identified tying as one of the principal procedures that
undermine aid effectiveness. It raises the cost of many goods, services and projects by 15
to 30% on average and 40% or more for food aid (see below). Even by conservative
estimates that ignore indirect costs, tied aid reduced the value of total bilateral aid by
USD 5 billion to USD 7 billion in 2002. Tied aid often results in higher transaction costs
for recipients and is a serious barrier to harmonising donor procedures (OECD, 2005c).
Many donors have increased the share of untied aid in their bilateral programmes. A
few have untied all or large parts of their programmes, to improve aid effectiveness and
strengthen local ownership of the development process. The share of untied aid in total
bilateral aid increased from 40% in 1984 to 55% in 1994 with some intermittent
fluctuations, but since 1997 it has stabilised at around 40 to 45%.
The DAC continues to keep this issue on its agenda and to seek progress in untying.
Building on its 2001 Recommendation to untie aid to the least developed countries, the
DAC, meeting at senior level in December 2005, will consider removing the size
thresholds below which aid did not have to be untied. If agreed, this will add an
additional USD 300 million in untied aid. It will also seek to strengthen efforts to support
local and regional procurement of aid funded activities, to the benefit of developing
country suppliers. Beyond that, the DAC has agreed to explore further possibilities to
untie more aid, including untying to a wider range of countries and activities than are
presently covered by the Recommendation.
Tied food aid: A recent OECD study has helped to quantify the costs of tied food aid.
The study shows that, in most circumstances, financial aid is the preferable option. Food
aid in-kind is overwhelmingly tied. This makes it at least 30% more expensive than
financing commercial imports and, on average, 50% more expensive than local food
purchases. The relative efficiency of local and third country purchasing also suggests that
untying food aid and opening it up to much broader sourcing would clearly benefit
agricultural development in many low-income developing countries (OECD,
forthcoming c).
Aid effectiveness: The DAC is actively engaging the international community of
donors and partners on several additional fronts related to both inter-donor (type 3.) and
donor-recipient (type 4.) coherence. Commitments were taken in Rome (2003),
Marrakech (2004) and Paris (2005) to align development assistance with partner-country
strategies, to harmonise donor policies and procedures, to implement principles of good
practice in development co-operation, and to track progress and assess outcomes by
relying on partner countries' monitoring and evaluation systems. Progress has been made
on both harmonisation (e.g. simplified procedures and practices, joint analytical work,
delegated co-operation, common procurement and financial management procedures, and
common arrangements for sector wide approaches and budget support) and alignment
behind country strategies and more joint support of these strategies. The Paris
Declaration on Aid Effectiveness, a landmark agreement signed by nearly 100 countries
in March 2005, featured prominently in the conclusions of the UN Summit of
September 2005.
Agriculture: The work of the OECDs Directorate for Food, Agriculture and Fisheries
has been groundbreaking in terms of quantifying member country and, increasingly, non-
OECD country agricultural support. This public good has been effectively and creatively
mined to argue against OECD member country agricultural support policies and their
trade-distorting effects. Yet, this compelling information has not dissuaded policy makers
from continuing to provide high levels of support. The political economy reasons for this
have already been evoked.
In order to take the work a step further, as part of its horizontal PCD programme, the
OECD commissioned an analysis by Professor Alan Matthews (OECD, 2005a). The
study has been discussed by the Committee on Agriculture and in various seminars and
workshops, including those held at ministerial levels. This 2005 Global Forum on
Agriculture, meeting back-to-back with the OECD Committee on Agriculture and with
policy coherence for development as its central theme, is a timely opportunity to discuss
analytical findings and subsequent work.
It is important here to underscore the useful contribution of this work to the PCD
agenda in several respects. Its starting point is the achievement of the Millennium
Development Goals (especially the elimination of extreme poverty and hunger), to which
all OECD members have subscribed. It provides an analytical tool to enable the policy
maker to approach each type of agricultural policy and policy instrument with a
development perspective. This perspective has not been offered before in a systematic
way to agricultural policy makers. The study also recalls the gains, as quantified by a
number of analysts, from removing agricultural protection. The timeliness of the study
and the Global Forum discussions of the issues it raises as the WTO Ministerial
meeting approaches, should be highlighted.
Box 5. The impact of OECD agricultural policies on poverty reduction in East Asia
The case of Vietnam
East Asia has been studied as a special regional case in OECD work on policy coherence for development. This
regional case study is discussed in Section III of this paper. Given that East Asia, over the past two decades, holds
the best record of all regions in reducing poverty, it is of special interest to examine the impacts of OECD
agricultural policies on poverty alleviation there.
The study recalls that OECD country domestic support, export subsidy or inhibited market access policies have
the most distorting effects if the developing exporting country has world market power in a given commodity, if the
policy or policy combination will shift aggregate excess demand or excess supply and affect world market prices
and if the developing countrys agricultural sector is linked to those world market prices.
On this basis, the study finds that Vietnam is likely to be affected, as it has commodity overlaps with OECD
countries mainly in rice and sugar. Thus, world price effects on Vietnams domestic prices are likely. The effects of
these prices on rural wage rates are likely to be pronounced in Vietnam due to the low degree of integration
between industrial and agricultural labour markets. Based on this observation, OECD country policies in rice and
sugar are likely to have negative effects on Vietnamese poverty reduction, including poverty of the lowest income
rural poor.
Source: Barichello, 2005.
Trade: OECD work has been focusing on the gains from tariff liberalisation,
liberalising non-tariff measures, trade facilitation, and liberalising trade in services. It
underscores the importance of developing country access to developed-country markets,
recalling that one of the many benefits of market access is the anticipated positive impact
on domestic and foreign investment. Under a number of scenarios for multilateral tariff
cuts, the findings uniformly point to the fact that half or more of the potential welfare
gains originate from increased developing-country exports to the OECD area (OECD,
2005c).
OECD estimates of global annual welfare gains from tariff liberalisation range
between USD 117 billion under a proportional tariff reduction of 50% to USD 174 billion
under a scenario with full tariff removal. Close to half of these gains accrue to developing
countries. Most of them arise from liberalisation of market access in manufacturing.
Developing countries as a whole reap welfare gains of around USD 50 billion from tariff
reductions on manufactures and USD 19 billion from agricultural tariff reductions. This
suggests that tariff reductions for both manufactures and agricultural products can
contribute to enhancing welfare in developing countries.
Developing countries benefit when the liberalisation focuses primarily on the
developed countries, but they benefit even more when they cut their own tariffs too.
Roughly two-thirds of these gains come from the removal of tariff-related distortions in
just three sectors, namely motor vehicles and parts, textiles and clothing, and processed
agricultural products. In South-North trade, studies suggest that customs and
administrative procedures and behind-the-border sanitary and phytosanitary (SPS) and
technical barriers to trade (TBTs) particularly concern developing countries. In South-
South trade, cumbersome or otherwise difficult customs and administrative procedures,
including problems with import licensing, also rank very high among the market-access
concerns reported by developing countries. They may be more pervasive than in South-
North trade. There are also many complaints about fees and charges on imports and other
para-tariff measures, which appear to have become more frequent as countries have
lowered their import tariffs.
A combination of examples, case studies and empirical studies indicate that
developing countries often have special difficulties and higher costs in showing
compliance with technical regulation and these can adversely affect firms propensities to
export in developing countries. Lengthy inspection and testing procedures especially have
been shown to reduce developing-country export shares by four per cent and nine per cent
respectively. Efforts to rationalise these non-tariff policies further and to help exporting
countries build up the infrastructure and capacity needed to show compliance with
foreign regulatory requirements could significantly enhance developing country exports
and welfare.
Studies further suggest that the transaction costs generated by inefficient procedures
at the border may range from one to fifteen per cent of the traded goods value, depending
on the countries, types of goods and types of traders. The same studies note that a mere
1.5% uniform reduction in these costs could result in global welfare gains of
USD 72 billion. The OECD has estimated that 65% of these worldwide income gains
would accrue to non-OECD countries, whatever the assumption on the extent of trade
facilitation. To illustrate, the welfare gains as a percentage of GDP in Sub-Saharan Africa
are more than twelve times the OECD average in relative terms. These benefits would
accrue primarily to countries that actively engage in trade facilitation, while those who do
not would lose out through trade diversion. The OECDs work in estimating the welfare
effects of services trade liberalisation suggest that under certain assumptions, projected
gains from unilateral services trade reform can significantly exceed those from unilateral
reform in agriculture or manufacturing.
Aid for trade: Much of OECDs coherence work has focussed on sectors outside of
development co-operation. Yet, the results have put the spotlight back on the two-way
street aspect of coherence, namely that development co-operation policies need to
integrate issues, lessons and techniques that arise through linkages with other government
policy sectors. One of the policy areas brought out in the sectoral PCD work on
agriculture, as well as in several other sectors, revolves around the coherence of
development co-operation policies in relation to the specific sector under review. For this
reason, in the trade area, the priority of using aid for trade is rising in international
discussions. Enabling partners to benefit from open markets goes beyond market access
itself and beyond building expertise in trade negotiating techniques. It encompasses help
to secure a wide range of capacities and infrastructure needs, including reliable roads and
energy supply, technical improvements, training for managerial and technical skills.
Migration: Many coherence issues arise in relation to migration, notably in relation to
OECD policies that target skilled workers to leave their countries to come and fill gaps in
critical sectors, especially in the health area. This contributes to brain drain, but under the
right policy environments possibly to brain circulation and brain gain. As for unskilled
workers, it is the restrictions on their entry into OECD countries that raise issues of policy
coherence for development.
A central theme linking most issues of migration is related to the growing transfers of
resources through remittances and the links between migrants, remittances and the
economic development of sending countries. The OECD has a long experience of
migration issues, including the role that remittances have played in the development of
sending countries, such as Italy, Portugal, Greece, Spain and more recently Turkey and
Mexico. It has analysed the current magnitude of remittances, the characteristics of the
migrants in question and the transmission channels used to send their savings back to
their countries of origin. Due to the substantial impacts of remittances in supporting
living standards and economic development in the countries of origin, OECD work has
focused on measures that help reduce transaction costs associated with transfers and
enhance transparency. There are numerous examples of how greater competition between
banking and other money-transfer-saving intermediaries, combined with the use of
information and communication technologies (ICT), have contributed to reducing formal
fees and to quickening the process of remittance. This is less apparent with respect to
transparency, as it is often unclear which exchange rates are used for the transactions. It is
important to continue to share OECD member country experiences with non-member
economies, to optimise the use of money transferred by emigrants, to explore ways of
increasing the use of new technologies in order to reduce further costs of transfers and
help to modernise the formal fund transfer system (OECD, 2005d).
Health: The MDGs explicitly include providing access to affordable essential drugs
and making available the benefits of new technologies. Rapid advances in science and
technology open new opportunities for fighting poverty. Greater synergies between
development policies and science and technology for sustainable development, access to
medicines, and eradication of neglected diseases are critical to efforts to reduce
poverty.
The issue of availability, accessibility and affordability of medicines for emerging
and neglected diseases (including but not limited to HIV/AIDS) is a thorny topic that is a
source of friction between the developed and developing world. Disease burden is
undeniably a major stumbling block to economic and social progress in many developing
countries, notably in Africa. The OECD is seeking to address in a more concerted fashion
how member countries might encourage innovation that meets the health needs of
developing countries. This will include availability, affordability and access to medicines
as well as the need to address more explicitly the threat posed by emerging and neglected
diseases. The latter is a serious economic issue. Several developing countries have seen
decades of slow, painstaking improvement in standards of living wiped out in just a few
years by the ravages of disease.
Fisheries: Policy coherence for development in the fisheries sector has implications
for the livelihoods and poverty status, economic performance, social conditions, and food
supply and nutrition of millions of people throughout the world. An analytical study on
fisheries coherence issues concludes that policy coherence work in general, including the
work on fisheries, has tended to focus on qualitative and descriptive aspects and needs to
be deepened through analysis of political, economic and social issues. In the fisheries
sector, issues of coherence arise in relation to five major domains: environment,
technology, economic, social and governance. These are developed into a typology for
policy analysts and decision makers and illustrated by a series of case studies (OECD,
forthcoming c).
This analytical study has been discussed several times by the OECD Committee for
Fisheries with significant elements integrated into the Committees future work. A
meeting planned between development and fisheries experts in April 2006 will take up
issues such as access agreements, trade, income effects and development co-operation
policies in the fisheries sector.
Environment: An OECD project, begun in 2002, has been examining ways of
mainstreaming climate change policy objectives into the development assistance efforts
of OECD donors, as well as into the national planning activities of developing countries.
National level case studies in six developing countries (Bangladesh, Egypt, Fiji, Nepal,
Tanzania and Uruguay) have been completed. The main emphasis is on delivering cost-
effective adaptation to climate change in developing countries, using sectoral and aid
policies as vectors for doing so. Policy guidance to aid agencies is currently in
preparation (OECD, forthcoming d); the work is also examining ways of mainstreaming
climate policy objectives into specific development instruments, such as the Poverty
Reduction Strategy Papers (PRSPs). The work has contributed significantly to the World
Bank-led Multi-agency Report on Poverty and Climate Change (2003), endorsed by the
heads of participating development agencies, including the OECD.
The current phase of this work focuses on intensive preparations for the first ever
Ministerial level meeting of the Development Assistance and Environment Committees
of the OECD. It is expected that these two policy communities will adopt a common plan
of action that envisages joint work to help developing countries.
Security: The OECD DAC Guidance on Security System Reform (SSR) and
Governance (OECD, 2005e) has been influential as a catalyst for policy discussions
within aid agencies on the role of security and SSR in creating the necessary environment
for sustainable development to take place. A December 2005 SSR practitioners workshop
is a major initiative that brings together relevant actors from both partner and OECD
member countries. It is a whole-of-government event, with practitioners from the
military, intelligence, police, customs, immigration, justice and prison sectors
represented. This broad-ranging participation will help ensure a cross-cutting approach to
OECDs SSR work. Most of the practitioners have worked or are working on SSR within
field missions and bring to the table SSR experience from Latin America, Asia, the
Balkans, Central Asia and Africa.
The workshop aims to bring together SSR practitioners to: (i) examine and identify
concrete examples of sector-specific (e.g. police, judiciary, military) approaches by
practitioners and experts; and (ii) begin the process of developing a system-wide
implementation framework based upon shared knowledge, hands-on experience,
emerging best practices and lessons learned. The goal of this work is to develop an
Implementation Framework on Security System Reform (IF-SSR) to help guide,
co-ordinate, align, monitor and evaluate SSR activities in the field. This will in turn help
strengthen the coherence of donor government and multilateral organisation practice by
facilitating the formulation of a joined-up plan for their own individual engagement.
Regional and country case-based approaches
A regional case study of East Asias development examined a range of OECD policy
vectors - trade, investment, migration, aid and others - and their impacts on Asian
economies. The central findings of this study show that policy coherence in OECD
countries can bear fruit only when partner economies have the capacity to respond:
coherent policies are necessary, but not sufficient.
As previously discussed, the regional and country-specific work is important not only
in its own right but also to test the validity of findings under the sectoral approaches of
the PCD work. The East Asia regional case has indeed confirmed the validity of the
sectoral priorities that have been singled out for OECD work and the findings of the
sectoral work. The study suggested policy lessons in a number of areas, but the central,
generalised challenges highlighted for OECD countries are considered to be:
To ensure the fundamental enabling conditions of security and political stability.
To pay greater attention to the impacts of macroeconomic policies on developing
country growth.
To increase both market access and capacity building for developing economies.
To assure government structures that help maintain financial stability.
To improve aid effectiveness and its complementarity with host country strategies and
policies (Fukasaku et al., 2005).
A series of regional studies of coherence are underway to focus on the impacts of

OECD policies on Sub-Saharan Africa, Latin America and Asia and are being informed
by country-specific cases. As part of the OECDs evolving partnership with Africa, the
Mutual Review of Development Effectiveness takes up a range of themes of mutual
accountability between African and OECD countries, including policy coherence (ECA,
OECD, 2005).
Box 6. The impacts of OECD cotton support policies on West Africa and Central Asia
The horizontal PCD programme has stimulated a work-stream on cotton in the Sahel and West Africa
Club (SWAC) of the OECD. Up to 3 million families in the region are estimated to produce cotton in West Africa
and up to 16 million people are involved in some way in cotton production, processing and trade. The SWAC
proceeded with an analysis of cotton production in the context of dynamic change in West African agriculture
supplemented by extensive consultations with the economic agents involved. The results focus on the strategic
importance of this sector in production and trade in West Africa and to the role of cotton in livelihoods and access
to services. Despite the numerous consultations and international meetings since 2004 to help resolve the
distortions created by high export and production subsidies to producers in OECD countries, the issue remains
unresolved in the run-up to the WTO Hong Kong Ministerial.
Consultations with a range of West African actors from producers, NGOs, governments, private sector
representatives, and regional organisations showed strong consensus around the need for greater public awareness
in wealthier nations of the importance of policy coherence in order to support development and poverty reduction
efforts. They suggested that targeted protection and support may be needed for strategic commodities or sub-sectors
such as cotton in order to support the development of West African agriculture and identify areas of comparative
advantage in increasingly competitive markets. The use of WTO provisions for special and differential treatment
may need to be applied in this situation. The development of regional markets and processing capacities is
considered an important way forward (Sahel and West Africa Club Secretariat, 2005).
In reviewing the impact and coherence of OECD country policies on Asian developing countries and the
lessons for central Asia in particular, cotton stands out as the main channel through which OECD country policies
have an economic impact on that region. The analysis finds OECD textile trade and farm support policies extremely
harmful and considers that they significantly outweigh any developmental benefits from aid or other channels
(Pomfret, 2005).
Monitoring and evaluation
Through DAC peer reviews and the Mutual Review of Aid Effectiveness in the context
of NEPAD, monitoring elements are in place for policy coherence. However, a more
systematic monitoring system across countries, as well as an evaluation of efforts to date
to improve PCD are warranted. A framework for such evaluation already exists
(Picciotto, 2005b) and should be put into operation. In addition, the development of
indicators and other quantitative tools would also be important and could raise the profile
and impact of the work.
Concluding remarks: future challenges
Much information is coming out of PCD work in the OECD and elsewhere. This
initial analytical phase of work has been necessary and is already the basis for joint
meetings of several policy communities. The policy lessons need to be synthesised from
various streams of work and presented to policy makers in a concise, digestible fashion.
This step will have the added advantage of helping think through the priorities for the
next stages of work.
Policy coherence in OECD countries can bear fruit only when developing countries
have the capacity to respond. Regional and sectoral work-streams have repeatedly
brought out this issue. Therefore, the scaling up of aid over the coming decade provides
an opportunity to include capacity development as a central focus of coherence. The case
for supporting aid for trade is being made in a forceful way and is likely to feature
prominently at the WTO Ministerial meeting in Hong Kong. This is only one, albeit a
most critical, area that needs long-term consistent focus on capacity development.
Coherence is most effective when it is practiced by both developing and developed

countries in tandem. This has been brought out on numerous occasions by the developing
country partners themselves. Any and all support from OECD countries and the OECD
itself to achieve that will be a sound investment.
As for new areas of work, the pressure must remain on trade and agriculture reforms
by OECD member countries. Much remains to be done with respect to policy coherence
issues related to several dimensions of migration. In the realm of anti-corruption, there
are OECD country supply-side issues on which greater attention should be focused. With
globalisation, there will continue to be increasing linkages and inter-linkages that will
keep the coherence of policies between the wealthier and poorer countries in the
spotlight.
REFERENCES
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of OECD Country Policies, in Fukasaku K., M. Kawai, M. G. Plummer and A. Trzeciak-
Duval (eds.) (2005), Policy Coherence Towards East Asia: Development Challenges for
OECD Countries, Development Centre Studies, OECD Development Centre, Paris.
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Mutual Accountability in Practice, A joint report by the ECA and the OECD at the request of
the NEPAD Heads of State and Government Implementation Committee, Addis Ababa.
Fukasaku, K., M. Kawai, M. G. Plummer and A. Trzeciak-Duval (2005), Policy Coherence
Towards East Asia: Development Challenges for OECD Countries, Policy Brief No. 26,
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Development Dimension series, OECD, Paris.
OECD (2005c), Making Poverty Reduction Work: OECDs Role in Development Partnership,
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Chapter 2.
ISSUES IN AGRICULTURE
Alan Matthews and Thomas Giblin
Institute for International Integration Studies, Trinity College Dublin
Abstract
This paper discusses issues raised for OECD agricultural and agriculture-related
policies by the policy coherence for development perspective. These issues are organised
in a five-fold typology covering OECD domestic agricultural policy, agricultural trade
policy, regulatory policies, development co-operation policy as well as the coherence of
developing country policies. Changes in OECD agricultural policy have varying impacts
on different groups of developing countries, and on different groups within developing
countries. The message for policy coherence for development analysis is that specifics
count, and that impacts need to be assessed on a country-specific basis. Bringing a policy
coherence perspective to the debates on OECD agricultural policy reform requires a
careful classification of the various channels whereby developing countries are impacted
by this reform, not least so as to identify ways in which development assistance can be
used in order to maximise the opportunities it creates but also to help to mitigate adverse
impacts where they occur. The paper concludes with a checklist of actions which might be
taken by the development policy community to improve the coherence of agricultural and
development policy with development objectives.
Introduction
Policy coherence for development is a process whereby a government, in pursuing its

domestic policy objectives, makes an effort to design policies that, at a minimum, avoid
negative spillovers which could adversely affect the development prospects of poor
countries and, more positively, seek to maximise synergies. This paper takes stock of the
extent to which agriculture and agriculture-related policies of OECD countries are
incoherent with their stated development objectives.
Policy coherence is of particular importance in the case of agriculture, given the first
Millennium Development Goal target of eradicating extreme poverty and hunger, and
also in light of the fact that three quarters of the worlds poor live in rural areas. OECD
agricultural policies have a significant impact on the trade and development opportunities
available to developing countries, and it is important to bring a development perspective
to the debates on OECD agricultural policy reform. This impact is a nuanced one.
Changes in OECD agricultural policy have varying impacts on different groups of
developing countries, and on different groups within developing countries. Bringing a
policy coherence perspective to the debates on OECD agricultural policy reform requires
a careful classification of the various channels through which developing countries are
impacted by such reform, not only to identify ways in which development assistance can
be used so as to maximise the opportunities it creates by agricultural policy reform but
also to help mitigate adverse impacts where they occur.
This paper builds on an earlier overview paper prepared for the OECD Horizontal
Project on Policy Coherence, Policy Coherence for Development: Issues in Agriculture
(OECD, 2005). We first review the typology used in that paper to discuss agriculture-
related issues and policy coherence. We then draw some lessons based on empirical and
other work in the literature concerning the relationship between OECD agricultural
policies and development. Based on recent work we are conducting with partners in two
African least developed countries, Tanzania and Uganda, we conclude with a checklist
for development agencies wishing to pursue a policy coherence agenda with respect to
agricultural policy.1
What we are discussing
Table 1 presents a typology of agriculture and agricultural-related policies relevant to

the policy coherence debate. Five policy domains are identified. Domestic agricultural
policy objectives in OECD countries include those concerned with equity or
distributional issues, such as support for the incomes of farm households, and those
designed to correct market failures (OECD, 2003). Support for domestic agricultural
production is also justified as a way of achieving social objectives such as the protection
of family farming, the maintenance of a dispersed rural population or support for
preserving the cultural heritage of farming areas. Many argue that these non-food outputs
reflect the multifunctional nature of agricultural production. Social and income objectives
of the agricultural sector in OECD countries have been addressed largely through market
price support and, to a lesser extent, through income transfers. Market price support
policies require that the domestic market is insulated from the world market. A country
which seeks to maintain a domestic market price above the world market price will find it
necessary to impose a trade barrier, as otherwise cheaper imports would undermine the
domestic policy. Thus both trade and domestic policies designed to support agricultural
output and incomes in OECD countries are jointly considered under the first policy
domain.
Table 1. Policy coherence between agriculture and development policies a framework
Policy actor Policy domain Examples of policy instruments affecting agricultural

development in developing countries
OECD countries Domestic agricultural policy Market price support, direct payments, export subsidies, income
support, risk management measures, investment and structural
adjustment assistance
OECD countries Agricultural trade policy Regional trade agreements, trade preferences, tariff escalation,
attitudes to developing country demands in international trade
negotiations, international commodity agreements
OECD countries Regulatory policies affecting Non-tariff measures addressing food safety, food quality,
agricultural production and environmental protection and conservation, intellectual property
trade protection, geographical indications
OECD countries Development co-operation Development aid to the agricultural sector, food aid, trade capacity-
policy building, trade compensation measures
Developing countries Developing country policies Agricultural trade policies, institutional reform, exchange rate
concerning trade and policies, investment and infrastructure policies
agriculture
Source: OECD, 2005.
1. This project, the Policy Coherence project being carried out at the Institute for International Integration
Studies at Trinity College Dublin, is supported by the Advisory Board for Development Cooperation
Ireland. Further details at www.tcd.ie/iiis/policycoherence.
Agricultural trade policy is the second policy domain where policy coherence issues
arise. This recognises that agricultural trade policy is not only designed to play a
supporting role to domestic agricultural policy, but may also be used to pursue other
objectives. Trade policy may be used to promote regional integration objectives, as a
development instrument through the award of trade preferences, or to protect the
domestic food processing sector through tariff escalation. Trade policy is also concerned
with the international architecture of trade rules. Policy coherence questions arise in
examining the stance which OECD countries take in international trade negotiations on
agricultural trade issues of relevance to developing countries, or with respect to problems
in international commodity markets and the difficulties these cause for commodity-
dependent developing countries. This is the foreign policy aspect of agricultural trade
policy, as distinct from its use as an adjunct to domestic agricultural policy which is
discussed in the first domain.
A characteristic of OECD country food systems is the growing importance of
regulatory interventions aimed at ensuring food safety, consumer protection,
environmental protection and intellectual property protection. The requirement to meet
specific regulatory standards before a product can be sold on the domestic market is not
usually aimed specifically at imported products. Nonetheless, even where this is not the
case, standards have an indirect influence on agricultural output and trade. Policy
coherence analysis must take account of the growing importance of these non-tariff
measures in OECD countries and their implications for development.
The fourth relevant OECD policy domain is development co-operation policy and
the extent to which it is used to help minimise conflicts and maximise synergies between
agricultural policy reform and development objectives. To what extent does development
co-operation policy provide support for the agricultural sectors of developing countries in
helping them integrate with global markets? PCD issues here include the magnitude of
aid flows to promote agriculture in developing countries, aid co-ordination and the role of
specific types of aid flows such as food aid and trade capacity-building. Another relevant
issue in this context is potential compensation measures to address problems of
preference erosion arising from agricultural policy reform.
Finally, policy coherence also places an obligation on developing countries to pursue
policies which take advantage of the opportunities that arise as OECD countries improve
the developmental coherence of their own policies. The need to ensure adequate
incentives for farm production, to provide adequate budgetary support for growth-
promoting agricultural policies and rural infrastructure, to pursue consistent agricultural
and agricultural trade policies, and to support institutional development and involving the
private sector and civil society in decision-making are relevant issues to consider in this
context.
Channels of impact
Policy coherence analysis in agriculture requires an understanding of the ways in

which OECD agricultural policy impacts developing countries. The primary mechanism
is through the world market impacts of the policy, particularly through the level and
stability of world prices. World price changes influence the terms of trade of developing
countries, and will have an initial positive or negative impact depending on whether these
countries are net exporters or importers of the product in question. Further indirect effects
will occur as these changes in border prices are translated through national trade policies
and the domestic marketing system into changes in domestic market prices for producers
and consumers. In turn, through consequential changes in factor market conditions
resulting from the impact of the reforms, and by decisions made by the government on
how it responds to changes in its revenue base. Households will be affected by these
domestic price changes depending on whether they are net producers or net consumers of
these commodities. These channels are summarised in Figure 1 and provide the
framework for the analysis which follows.
Figure 1. Analysing the impact of OECD agricultural policy reform on developing countries
Source: Adapted from Brooks, 2003.
The status of agricultural policy
Any discussion of policy coherence for development and agricultural policy must
begin from an analysis of OECD agricultural policy and how it is changing over time.
OECD has developed the PSE/CSE methodology to provide a summary indicator of the
magnitude of policy interventions in agriculture. Transfers to farmers since the mid-1980s
have changed relatively little in absolute terms but have declined when expressed as a
proportion of the value of agricultural output.
Table 2. OECD indicators of support to agriculture
Indicator 1986-88 1993-95 2002-04

PSE
Billion USD 243 269 254
Percentage PSE 37 33 30
CSE
Percentage CSE -32 -26 -21
NPC (producer) 1.57 1.40 1.29
NAC (producer) 1.60 1.50 1.44
TSE
Billion USD 306 364 346
Percentage TSE in GDP 2.3 1.7 1.2
Source: OECD PSE/CSE database, Paris, 2005.
Looking only at the magnitude of PSE transfers is not necessarily a good measure of
their trade-distorting effect. Transfers are generated by a wide variety of policies, some of
which impact trade opportunities more than others. This is recognised in the WTO
Agreement on Agriculture in the distinction between amber, blue and green box policies.
Market price support is generally recognised as the most trade-distorting element in the
PSE. OECD countries have been gradually changing their policies in a less trade-
distorting direction. Nonetheless, market price support still constitutes 60% of the total
support provided to OECD farmers (Figure 2).
Figure 2. Changing composition of OECD producer support
Source: OECD, PSE/CSE database, Paris, 2005.
Developing country impacts of OECD agricultural country policies
It is then an empirical question to determine the impact which these domestic OECD
transfers have on developing countries. There is now a wealth of empirical studies
available which have tried to analyse these effects (see Charlton and Stiglitz, 2004 for
studies up to 2003, and Ackerman, 2005 for a review of more recent GTAP and World
Bank results) All studies agree that the removal of trade-distorting agricultural policies
would generate global welfare gains, but two conclusions can be highlighted here. First,
differences in model methodologies, assumptions, parameter estimates and policy
simulations mean that there is considerable variation in the estimates obtained. One
exercise undertaken by the World Bank modelling team illustrates the fragility of these
estimates and the difficulty which policy makers have in interpreting them. Five scenarios
were run using the same database but with varying model assumptions. The initial
scenario, the 2015 base case, compares the results in 2015 from a base run using the
Banks dynamic computable general equilibrium (CGE) LINKAGE model with a
scenario in which all support to agricultural production is eliminated. Because the global
economy in 2015 will be approximately one-third bigger than in 2001, scaling back these
effects to the impact such a scenario would have in 2001 reduces these estimates.
Removing the dynamic element of the model eliminates the cumulative reinvestment
from a larger economy each year and further reduces the estimated impact. Replacing the
behavioural and trade elasticities used in the base case by those recommended for use in
the GTAP model, a widely-used CGE model for trade policy analysis, results in a further
reduction. Finally, making the assumption that all factors including land are fixed and
using the GTAP elasticities produces the lowest estimate of global welfare gains, and the
estimated impacts on Sub-Saharan Africa turn negative.
Table 3. Effect of varying model assumptions on welfare gains from global

merchandise trade liberalisation
USD billion 2015 Base 2001 Scaled 2001 GTAP GTAP

case dynamics Comparative elasticities elasticities +
static fixed land
World 287.3 156.4 127.4 88.5 77.8
Dev countries 85.7 43.9 23.7 10.6 2.0
Sub-Saharan Africa 4.8 2.8 0.7 0.2 -0.1
South Africa 1.3 0.8 0.7 0.5 0.4
Selected SSA countries 1.0 0.6 0.3 0.4 0.3
Rest of SSA 2.5 1.4 -0.2 -0.6 -0.8
Source: Anderson, Martin and Van der Mensbrugge, 2005.
Second, more recent estimates of global gains tend to be more modest than earlier
ones. For example, early World Bank numbers based on dynamic as well as static gains
suggested overall gains from agricultural trade liberalisation of USD 280-630 billion of
which USD 110-250 billion would accrue to developing countries (World Bank, 2003).
This compares to more recent World Bank estimates of USD 182 billion of which
USD 56 billion would accrue to developing countries (Anderson et al., 2005) and lower
estimates from the GTAP model of USD 56 billion of which just USD 12 billion would
accrue to developing countries (Hertel and Keeney, 2006). The lower estimates come
about because some liberalisation occurred following the Uruguay Round Agreement on
Agriculture; because studies now use applied tariff rates which are often much lower than
bound tariffs; and because studies now take better account of agricultural trade under
preferences.
Furthermore, we should be careful to avoid the fallacy of identifying the potential
gains of developing countries from agricultural trade liberalisation with the damage
caused by OECD agricultural policies. All studies agree that the main beneficiaries from
agricultural policy reform are the countries which undertake the reform. Developing
countries provide high levels of nominal support to their agricultural sectors, and much of
the estimated gain from reform comes from their own liberalisation. The direct impact of
OECD agricultural policy reform on these countries is more modest. In the more recent
World Bank study, developing countries gain USD 26 billion from OECD agricultural
policy reform alone, just half of the overall gain they would get from global agricultural
trade liberalisation (Anderson et al., 2005). Hertel and Keeney (2006) using the GTAP
model without dynamics find a figure of USD 9.5 billion as the damage to developing
countries caused by the all OECD agricultural policies.2 These figures compare to net
ODA flows of around USD 60 billion, and aid to agriculture in 2003 of USD 3.9 billion
(OECD, 2005).
Figure 1 highlighted that the primary way in which OECD country agricultural
policies affect developing countries is through their impact on the level and stability of
world agricultural prices. If developing countries with a comparative advantage in
producing those products protected in OECD countries are to gain substantially, then
OECD agricultural policy reform should lead to a significant increase in world market
prices for agricultural products. Very few studies report directly the impact of OECD
country agricultural policy reform on world prices. Examining the predicted impact of
global agricultural policy reform (that is, including liberalisation by developing countries
themselves) reveals large variation in projected world price changes (see Table A1-D in
Morrissey et al., 2005). The results of the study by Bouet et al. (2005), albeit reporting
only a partial liberalisation, suggest that the changes may not be that significant for most
commodities. This is not to argue that agricultural policy reform is not worth pursuing,
but it does suggest that, for developing countries in aggregate, unrealistic expectations
have built up regarding the likely benefits of more open OECD agricultural markets.
Gainers and losers
These aggregate results reported for developing countries as a whole conceal the fact
that the impact of OECD agricultural policy reform will be felt very unevenly among
these countries. The main gainers will be competitive agricultural exporters (such as
Brazil, Argentina, Thailand, China) while least developed countries are likely to lose out
and may be made worse off as a result of reform, for two reasons they are largely net
importers of commodities protected by OECD agricultural policy, and those countries
which are exporters often benefit from preferential access to OECD country markets, the
value of which will be eroded by further trade liberalisation (see Panagariya, 2005 for a
trenchant critique of the argument that OECD country agricultural protectionism hurts the
poorest countries most and that it is the principal barrier to the latters development).
The importance of preferences is demonstrated in Table 4 which shows average
applied bilateral tariffs between different country groups. Applied tariffs on imports from
Sub-Saharan Africa (and, in the case of the EU, for imports from Mediterranean
countries) are less than half those applied to imports from other countries. Preferences are
often criticised as being of little use to developing countries. However, agricultural
preferences are well used, and confer benefits of two kinds. One kind is a competitive
advantage in OECD markets vis--vis other suppliers. The other and more important
kind is the possibility of obtaining rents. This is the most important effect of quota-
constrained access where there is no possibility of additional trade creation. These rents
are, in effect, a form of trade-tied aid. However, while it is wrong to overlook the gains
some developing countries derive from preferences, they cannot be an alternative to a
2. This estimate is very consistent with those from previous studies quoted in Matthews, 2005a.
multilateral reduction in trade barriers. They are fundamentally a short-term solution,

often benefit an arbitrary group of countries and, by locking countries into uncompetitive
lines of production, may have detrimental impacts on them in the long run.
Preference erosion is not the only reason why some developing countries may lose
from further agricultural trade liberalisation. Net food-importing countries are also
vulnerable and there is a need to address their concerns. Putting teeth into the Marrakesh
Decision is one possible route. Making a commitment to the worlds poorest countries
that their food import needs would be met and that their import bills are kept under
control would remove one real source of concern that developing countries have about
embarking on further trade liberalisation.
Table 4. Average applied bilateral tariffs, agricultural sector, per cent, 2001
Tariffs applied by EU25 US Asia developed Cairns developed

Applied to
EU25 - 5.8 22.2 15.7
US 16.2 - 28.9 5.1
Asia developed 12.5 3.7 - 6.2
Cairns developed 25.9 3.4 24.9 -
Mediterranean 7.3 4.0 14.1 3.7
Sub-Saharan Africa 6.7 3.0 12.0 0.7
Cairns developing 18.3 3.8 24.0 5.9
China 13.5 5.1 21.7 8.7
South Asia 14.4 1.8 33.7 1.8
Rest of World 15.1 2.1 17.4 2.6
Average 16.7 4.7 22.5 10.8
Source: Bouet et al., 2005.
These concerns can be illustrated by examining the likely impact of OECD country
liberalisation on some Sub-Saharan African countries. Six countries which are
programme countries for Development Co-operation Ireland (DCI) are selected: Ethiopia,
Uganda, Tanzania, Zambia, Mozambique and Lesotho (referred to as DCI programme
countries in the Figures below). Figures 3 and 4 illustrate the composition of their food
trade with the EU-15, which is their major market although it does not represent all their
trade. Fully three-quarters of their food exports comprise tropical beverages and fish, both
of which are exported free of duty to the EU with the aid of a preferential margin against
third country exporters. Almost half of their imports are cereals or cereal products, whose
price is projected to increase following OECD agricultural policy reform.
Figure 3. EU-15 imports from the DCI programme countries by value, 1995-2003 average
Source: Chaplin and Matthews, 2006, based on Eurostat.
Figure 4. Distribution EU-15 exports to DCI countries by product for the period 1995-2003
RESIDUES AND WASTE
TOBACCO ETC EDIBLE ANIMAL
1% LIVE ANIMALS
MISCELLANEOUS 4% PRODUCTS
1% 5%
BLE PREPARATIONS COTTON
9% 1%
BEVERAGES EDIBLE VEGETABLES
13% 1%
CEREALS
31%
PREPARATIONS OF MILLING INDUSTRY

VEGETABLES PRODUCTS
3% OIL SEEDS ETC
2% 14%
PREPARATIONS OF
CEREALS
5%
ANIMAL OR VEGETABLE
SUGARS AND FATS AND OILS
CONFECTIONERY 6%
2%
Source: Chaplin and Matthews, 2006, based on Eurostat.
It is thus not hard to understand that these countries have little to gain and indeed
much to lose from OECD agricultural trade liberalisation. Table 5 presents the results of a
specific simulation of the Harbinson proposals using the ATPSM model.3 This exempted
least developed countries such as Tanzania and Uganda from making tariff reductions and
thus the results represent the impact of OECD plus developing country liberalisation on
these two countries. The figures suggest that, overall, partial agricultural liberalisation
will have little overall impact one way or the other on these countries. Indeed, as the
ATPSM model cannot take account of preferences, the outcome in practice is more likely
3. ATPSM, the Agricultural Trade Policy Simulation Model, was jointly developed by UNCTAD and FAO.
Details can be found on the UNCTAD ATPSM website http://192.91.247.38/tab/ATPSMabout.asp.
to be negative than positive. For the rest of Sub-Saharan Africa, the simulations are even
more definite that this is the more likely outcome.
Table 5. Welfare effects of the Harbinson proposal, USD million
EU US Tanzania Uganda Rest of SSA

Producer surplus -41 258 -2 293 +47 +42 +656
Consumer surplus +27 834 +106 -53 -42 -992
Government revenue +20 462 +2 050 0.8 0.2 -9
Total welfare +7 038 -136 -6 0 -345
Source: Giblin and Matthews, 2005.
Poverty impacts
Just examining the aggregate welfare impacts on developing countries may

underestimate the impact which OECD agricultural policy reform might have on poverty
in these countries. As is clear from Table 5, aggregate impacts net out the gains to
producers and losses to consumers from higher farm prices. These distributional effects of
trade liberalisation are usually far greater than the aggregate impacts, whether in OECD
countries or in the developing world. Where poverty is concentrated among rural food
producers, as in much of Africa, it might be expected that OECD agricultural trade
liberalisation will have a pro-poor effect. However, this may not be the case, if there is
also preference erosion which hurts rural producers. As importers of supported products,
these producers also have the option of using tariff protection to capture the benefits of
cheaper food imports (to increase government revenue) while protecting the incomes of
the rural poor. Also, in many least developed countries, poor market infrastructure means
that border price changes never get transmitted to the rural poor in the first place.
The immediate poverty impacts in middle-income countries are also ambiguous
may of the poor are urban food consumers who also may pay a higher price for their food.
Agricultural structures in middle-income countries are also more differentiated, with a
greater concentration of production on larger holdings. Thus, a large part of the benefits
of higher world prices may go to larger landowners. The longer-term impacts will
depend, in part, on how once the economy has become more buoyant, the government
distributes additional resources.
Empirical attempts to quantify the poverty effects of trade liberalisation are still
relatively recent (see Hertel and Winters, 2005 for a comprehensive discussion and series
of case studies, and Ackerman, 2005 for a critique of one of these studies). Hertel and
Winters find mixed outcomes for their near term analyses, with poverty rising in some
cases and falling in others. The largest poverty reductions, in both absolute and relative
terms, are in countries with agricultural export potential to the markets which liberalise
most (i.e. East Asia and Europe). On the other hand, they find that poverty tends to
increase in countries which are net importers of agricultural products and which may
presently benefit from preferential market access. The message for policy coherence
analysis is that specifics count, and that impacts need to be assessed on a country-by-
country basis.
Sequencing of reform
Given the potentially conflicting nature of OECD agricultural policy reform for
developing countries, it is worth asking whether it is possible to identify particular policy
measures or particular commodities where the development pay-off is highest and to seek
to accelerate these reforms. It is striking, for example, how virtually all developing
countries condemn export subsidies even where, based on narrow economic analysis,
subsidised exports would appear to benefit net-importing countries. On a commodity
basis, it would be useful to rank commodities according to the absolute levels of damage
caused by OECD agricultural policies although few studies report their results in this
way. The scope for influencing the sequencing of reforms in multilateral trade
negotiations where the modalities are based on formula reductions may be limited, but
there are exceptions. For example, the WTO July 2004 Framework Agreement reiterates
the call for full implementation of the long-standing commitment to achieve the fullest
liberalisation of trade in tropical agricultural products and for products of particular
importance to the diversification of production from the growing of illicit narcotic crops.
Another important example is the Cotton Initiative. This follows the proposal made by
four West African cotton producing countries to the WTO in May 2003 seeking a system
for the reduction with a view to the elimination of cotton subsidies and compensation for
LDC cotton producers while the subsidies remain in place. Among the proposals under
consideration are an earlier elimination of export subsidies and reduction of domestic
support in the particular case of cotton as opposed to a reduction on support for other
agricultural products under the terms of any Doha Round agreement. The negotiations on
this issue are being guided by the July 2004 Framework Agreement commitment that
Cotton will be addressed ambitiously, expeditiously, and specifically, within the
agriculture negotiations.
Regulatory barriers
As traditional trade barriers are reduced, regulatory barriers are on the increase and
may now be more important obstacles to increased food exports from developing
countries. Consumers are demanding higher food safety standards and importing
countries impose detailed sanitary and phytosanitary (SPS) protection measures in order
to secure human, animal and plant health. Developing countries will be expected to meet
these standards like other exporters. The WTOs Agreement on Sanitary and
Phytosanitary Standards (SPS) is designed to reduce the trade-distorting effects of SPS
measures, but many developing countries have concerns about the way in which the
agreement has been implemented to date. Particular concerns are that developed countries
take insufficient account of the needs of developing countries when setting SPS
requirements, that insufficient time is allowed between the notification and
implementation of SPS requirements, and that insufficient technical assistance is given to
developing countries (Henson et al., 2002). Regulatory authorities should be made aware
of developing country perspectives in the design of food safety, environmental protection,
consumer protection and intellectual property protection measures. For example, the
sheer complexity of regulations may itself be an important factor, and it may be possible
to guarantee the same outcomes for human, animal and plant health with more transparent
legislation. While it will be important to monitor the use or abuse of regulations for
protectionist purposes, the longer term objective must be to assist developing countries in
reaching a position where they can meet the requirements of ever more demanding
consumers.
Increasingly, food standards are set by private agents (supermarket buyers) rather
than by governments. Preferred and exclusive partnerships (based on trust and audits)
between supply chain partners are increasing. Chain transparency, including tracking and
tracing systems, is increasingly required both to safeguard consumer health and safety of
food, as well as to use as a marketing tool to maintain consumer trust and confidence in a
brand name. For developing countries, meeting these standards requires investment in
education, infrastructure, and hardware. The additional costs of audit and certification can
be substantial, especially if they have to be carried out by foreign experts. The move to
preferred suppliers may favour those developing countries with more advanced
infrastructure, making it even more difficult for new entrants and less advantaged
developing countries.
Development co-operation policy
Examination of trade statistics often reveals that developing countries do not appear
to be taking advantage of market access opportunities which are open to them.
Developing countries with preferential access to an OECD country export market often
appear to lose market share to their less preferred competitors. Thus, even where poorer
countries gain market access opportunities, turning these opportunities into additional
trade flows will require support. Furthermore, where countries or population groups
within countries may be potential losers, for example, from the unravelling of preferential
access arrangements, there is a need to find ways to compensate them or to assist them to
diversify.
Awareness of these issues has led to a growing interest in trade-related development
assistance (TRA). TRA covers four categories of actions: assistance for trade policy
formulation and participation in negotiations, assistance for trade development including
actions aiming at relieving supply side constraints which prevent developing countries
from exploiting their international trading potential, assistance for trade adjustment,
including measures to mitigate the adjustment costs of trade liberalisation, and assistance
to support trade-related infrastructure. The WTO July 2004 Framework Agreement
reiterated the need to further increase TRA. OECD countries have indicated their support
for this objective at various opportunities, including at the G8 Summit in Gleneagles in
July 2005 and at the Development Committee meeting of the IMF and World Bank in
September 2005. The WTO Hong Kong Ministerial Declaration in December 2005
invited the Director-General to create a task force that shall provide recommendations on
how to operationalise Aid for Trade (WTO WT/MIN(05)/W/3/Rev.2).
Despite these positive signs, questions remain about the extent of the coherence
between aid and trade in agriculture. The global volume of assistance to agriculture in
2002 (expressed in 2002 prices) was at its lowest level for the past thirty years even if it
recovered somewhat to EUR 2.9 billion (in 2002 prices) in 2003 (Matthews, 2005).
Greater priority for assistance to global public goods important for the livelihoods of poor
people is warranted, such as generating productive new technologies for the sustainable
management of land and water, forest and marine resources; controlling trans-boundary
pests and diseases; conserving agro-biodiversity and rehabilitating degraded lands. New
and more innovative ways of providing aid to agricultural sector development need to be
created, including through involving the private sector and voluntary groups. Under the
SPS Agreement, developed countries are to provide technical assistance to developing
countries, to help them meet SPS requirements, but there is some evidence that this aid is
poorly focused (Wiig and Kolstad, 2005).
Assistance for trade adjustment, especially where this is due to preference erosion, is
also contentious. One issue in this debate is whether the provision of compensation for
preference erosion is a bilateral or multilateral responsibility. Because the most important

preferences originate in unilateral trade policy decisions by OECD countries, it is argued
that it is up to those countries responsible for preference erosion to bear the burden of
offsetting it. On the other hand, because trade liberalisation is a global public good,
proposals have also been put forward for a multilateral preference erosion compensation
fund. These issues have a particular resonance in the policy coherence and agriculture
debate because the existence of tariff peaks makes preferences in this sector particularly
valuable.
Developing country policy coherence
Developing countries too have a responsibility to ensure that their domestic policies
are consistent with the Millennium Development Goal objectives and to facilitate
adequate supply responses. Specifically, in the case of agriculture, this requires
developing countries to follow consistent and credible economic policies which
encourage private investment, to adopt trade policies that are not biased against primary
production and exports, and to make the public investment in infrastructure, technical
development, and credit which is necessary for modernising production and improving
competitiveness. Much progress has been made in reducing the negative bias against
agriculture in macroeconomic and trade policies, but it still does not get the attention it
deserves as the main source of livelihoods for poor people, particularly in the worlds
poorest countries. Government investment in agriculture as a percentage of GDP remains
very low in many developing countries.
Policy coherence analysis for agriculture
Based on ongoing research to investigate the impact of EU and OECD agricultural

policy reform on the six partner countries of Irelands aid programme in Sub-Saharan
Africa, the following checklist of actions is suggested to the development policy
community seeking to bring about greater policy coherence between domestic
agricultural policy and development objectives.
1. Create institutional mechanisms to ensure that the development perspective is taken
into account when agricultural policy or policy reform is being formulated. As the
discussion in this paper makes clear, this means more than links with agricultural
Ministries, but also requires links with trade ministries and agencies concerned with
setting and monitoring food safety standards, intellectual property rights issues, and
environmental protection.
2. Undertake empirical study of the impacts of higher world food prices for the
developing country partners of your development assistance programme. While the
more sophisticated studies now use general equilibrium modelling for this purpose, for
policy purposes it may often be sufficient to adopt a more direct and transparent
approach using partial equilibrium modelling or even impact analysis applying price
changes derived from published studies.
3. Trace through the likely impact of border price changes on the distribution of rents
among developing country partners. Our research in Tanzania and Uganda shows that
there is very limited price transmission of border prices to domestic farm gate and
consumer prices within these countries, suggesting that changes in world prices are
absorbed in the marketing chain. Thus the initial impacts on producer and consumer
surplus, as shown in Table 5, would need to be modified to take into account the way in
which changes in border prices are dissipated along the marketing chain.
4. Examine the feasibility of potential export increases in the light of known SPS barriers.
For example, projected livestock or meat export increases to high-value markets may
not be feasible if the countrys disease status does not allow it. This may suggest
measures to relax these constraints, for example, by assisting in disease eradication, or
by helping to upgrade slaughtering capacity to meet OECD country standards.
5. Undertake a poverty profile using household budget survey data to identify the
households and producers likely to be affected by the modified agricultural price
changes. Commodity price changes from published studies will provide some of the
required data to estimate the impacts on consumption bundles, but poverty researchers
stress in addition the importance of factor market changes and changes in government
revenue which will usually require output from general equilibrium models. The
purpose of the poverty profile is to identify households which are specialised in
producing particular crop combinations or in consuming food products likely to be
affected either positively or negatively by agricultural policy reform.
6. Trade-proofing of development assistance activities in relation to the impacts of
agricultural policy reform. What investments need to be supported if the recipient
country is to be helped to take advantage of new trade opportunities? Is there a need to
strengthen social safety nets to prevent an increase in the number of households living
in poverty? How is policy dialogue with recipient countries being used to encourage
aid recipients to develop policies more coherent with the new trading environment?
REFERENCES
Ackerman, F (2005), The Shrinking Gains from Trade: A Critical Assessment of Doha Round
Projections, Global Development and Environment Institute Working Paper No. 05-01, Tufts
University.
Anderson, K., W. Martin and D. Van der Mensbrugge (2005), Would Multilateral Trade Reform
Benefit Sub-Saharan Africans?, CEPR Discussion Paper No. 5049, London.
Bout, A., J.C. Bureau, Y. Decreux and S. Jean (2004), Multilateral Agricultural Trade
Liberalization: The Contrasting Fortunes of Developing Countries in the Doha Round, CEPII
Working Paper No. 2004-18, Paris.
Brooks, J. (2003), Overview Paper: Agricultural Trade Reform, Adjustment and Poverty:
Mapping the Linkages, in OECD, Agricultural Trade and Poverty: Making Policy Analysis
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Bureau, J.C., S. Jean and A. Matthews (2005), The Consequences of Agricultural Trade
Liberalization for Developing Countries: Distinguishing Between Genuine Benefits and False
Hopes, CEPII Working Paper, No. 2005-13, forthcoming in World Trade Review.
Chaplin, H. and A. Matthews (2006), Food Trade with Irelands Development Assistance Priority
Countries, IIIS Discussion Paper, Trinity College Dublin.
Charlton, A. and J. Stiglitz (2004), A Development-Friendly Prioritization of Doha Round
Proposals, Working Paper, Initiative for Policy Dialogue, New York and Oxford.
Giblin, T. and A. Matthews (2005), Global and EU Agricultural Trade Reform: What is in it for
Tanzania, Uganda and Sub-Saharan Africa?, IIIS Discussion Paper No. 74, Trinity College
Dublin.
Henson, S.J., R.J. Loader, A. Swinbank, M. Bredahl and N. Lux (2002), Impact of Sanitary and
Phytosanitary Measures on Developing Countries, Centre for Food Economics Research,
University of Reading, UK.
Hertel, T. and A. Winters (2005), Poverty Impacts of a WTO Agreement, World Bank,
Washington, DC.
Hertel, T. and R. Keeney (2006), What Is at Stake: The Relative Importance of Import Barriers,
Export Subsidies, and Domestic Support, in Anderson, K. and W. Martin, eds., Agricultural
Trade Reform and the Doha Development Agenda, Palgrave Macmillan, New York and the
World Bank, Washington, DC.
Matthews, A. (2005), Development Assistance to Agriculture: Can the Decline be Reversed?,
Eurochoices, 4, 1, pp. 24-25.
Morrissey, O., D. Willem te Velde, I. Gillson and S. Wiggins (2005), Sustainability Impact
Assessment of Proposed WTO Negotiations, Mid-Term Report for the Agriculture Sector Study,
London, Overseas Development Institute in association with the International Institute for
Environment and Development and the Institute for Development Policy and Management,
University of Manchester.
OECD (2003), Agricultural Policies in OECD Countries: A Positive Reform Agenda, OECD,
Paris.
OECD (2005), Policy Coherence for Development: Issues in Agriculture: An Overview, OECD,
Paris.
Panagariya, A. (2005), Agricultural Liberalisation and the Least Developed Countries: Six
Fallacies, The World Economy, pp. 1277-1299.
Wiig, A. and I. Kolstad (2005), Lowering Barriers to Agricultural Exports Through Technical
Assistance, Food Policy, 30, pp. 185204.
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Chapter 3.
POLICY COHERENCE FOR DEVELOPMENT: MAKING IT WORK
Pertti Majanen
Finnish Ambassador to the OECD
Abstract
In todays world, people and states depend upon each other and influence each
others well-being in many different ways. As a responsible member of the international
community, Finland promotes development and a more equitable division of the benefits
of globalisation. Developing countries themselves bear primary responsibility for their
own development. However, developed countries have an important role to play in this
regard as well. Joint commitment to poverty reduction means that that the policies of
industrialised countries will have to be considered in a more comprehensive manner.
The main goal of Finlands development policy is to contribute to the eradication of
extreme poverty worldwide. These activities address policy coherence in the areas of
development and trade policies, development and environmental policies and
development and agricultural policies. Activities that help to achieve these goals also
include the promotion of equality, human rights, democracy and good governance as well
as increasing worldwide security and economic interaction, which originally became part
of Finlands policy in development co-operation during the 1990s. Part of Finlands
development policy is also to strengthen the multilateral system, to increase the
operational capabilities and to improve the opportunities of developing countries to have
an impact.
To achieve these goals, work will be required in Finland, in the partner countries and
within the EU, the UN and other international forums. The Finnish Ministry for Foreign
Affairs has overall responsibility for implementing the policy and for the co-ordination
this necessitates. Other key parties are also involved, including various other ministries,
government agencies and institutions as well as the private sector and NGOs. Continuous
and comprehensive monitoring and evaluation are needed to implement the policy.
The development policy of Finland - focus on coherence
Common goals for the common good

In todays world, people and states depend on each other and influence each others
well-being in many different ways. As a responsible member of the international
community, Finland promotes development and a more equitable division of the benefits
of globalisation. This is our responsibility, but in this way we also construct the security,
economic growth and the fundamental well-being of our own society.
Since the beginning of the 1990s, the international community has been shaping a
common understanding of development problems and of the means to solve them. This
process culminated in the UN Millennium Summit and the resulting Millennium
Declaration. The WTOs Doha ministerial meeting, the Monterrey International
Conference on Financing for Development and the Johannesburg World Summit on
Sustainable Development as well as New York World Summit 2005 further specified
common goals and means and promoted the implementation of the Millennium
Declaration.
Developing countries themselves bear primary responsibility for their own
development. The Monterrey Conference examined financing for development in a more
comprehensive perspective than before. Development financing includes developing
countries domestic financing, private sector investment, trade, the question of debt, and
conventional development co-operation funding. At Monterrey, the developing countries
committed themselves to economic and political reforms, and the industrialised countries,
on their part, to improving access to markets for developing countries products, to
resolving the debt problem and to increasing development aid.
Joint commitment to the reduction of poverty means that the policies of the
industrialised countries will have to be considered in a more comprehensive manner. New
types of international indicators are being developed in order to compare different
countries. This comparison is based on factors such as the level of development aid and
the harmonisation of procedures, trade with developing countries, investments in
developing countries, protection of the environment, immigration policy and
contributions to the promotion of peace and security.
New concept of development policy

Development policy refers to coherent activity in all sectors of international co-
operation and national policy that have an impact on the status of developing countries,
including security, human rights, trade, environment, agriculture and forestry, education,
health and social, immigration, and information society policies.
Development co-operation is a key instrument of development policy. It can be used
to promote the strengthening of an environment conducive to development in the poorest
countries in order to improve the premises for investments and trade and to achieve
economic growth.
The following are the main principles of the new development policy:
Commitment to the values and goals of the UN Millennium Declaration.
Broad national commitment and coherence in all policy areas.
Commitment to a rights based approach. This means that the realisation of the rights of
the individual as defined by international human rights agreements is taken as the
starting point in Finlands development policy.
The principle of sustainable development.
The concept of comprehensive financing for development.
Partnerships for development. Partnerships based on participation by the public and
private sectors and civil society, both at the national level and internationally, are a sine
qua non for development.
Respect for the integrity and responsibility of the developing countries and their
people. States themselves bear responsibility for their own development. Finlands
contributions are directed towards supporting each countrys own efforts.
Long-term commitment and transparency. Finland adopts predictable long-term

solutions, and communicates all activities and plans in a transparent manner. This
applies both to the financing and the contents of policy.
Finland uses the instruments of development co-operation, trade and security policy,
as well as other national policies in a coherent manner. The activities of the public sector
alone are not sufficient; there is also a need for co-operation and partnerships with the
private sector, civil society, expert organisations and interest groups. Finnish people give
their strong support to improving the circumstances of people in developing countries.
The best way to ensure this support also in the future is to continue to improve the
quality, efficiency and effectiveness of Finnish development policy.
The foremost threats to security today are armed conflicts, crises and instability with
all the eventual repercussions; terrorism, the spread of weapons of mass destruction, cross
border crime, drugs, HIV/AIDS, environmental destruction and uncontrolled migration.
Development policy instruments can be used to help avert these threats.
In line with the Government Programme, Finland seeks to take the interests of
developing countries better into consideration in the WTOs Doha round of trade
negotiations, while also seeking to promote the position of developing countries with the
instruments of trade policy. Trade is important for economic growth in developing
countries, and thereby for the reduction of poverty. In bilateral and multilateral co-
operation Finland stresses that improving the necessary conditions for trade should be one
of the main components of poverty reduction strategies. All this is also in Finlands own
long-term trade interests.
Finlands responsibility and goals

The main goal of Finlands development policy is to contribute to the eradication of
extreme poverty from the world. Activities that help to achieve this goal include
prevention of environmental threats; promotion of equality, human rights, democracy and
good governance as well as increasing worldwide security and economic interaction,
which originally became part of Finlands policy in development co-operation in the
1990s. Finland is committed to a rights based approach and to the principles of
sustainable development in its development policy. Finland bears its own share of the
responsibility for creating the global partnership called for by the Millennium
Declaration, in which developing countries are committed to the reduction of poverty and
in which they themselves bear the main responsibility for developing their own societies,
while industrialised countries are committed to supporting this process by means such as
development aid, trade and private sector investment.
Thus, in practice, the Government of Finland will:

Increase funds for development co-operation in accordance with its programme so that
based on the present estimation of national income growth, they will be at the level of
about 0.44% of GNI in 2007.
Develop the content, quality and administrative framework of development co-
operation so that it will be possible to achieve a level of 0.7% of GNI by 2010.
Increase the efficiency, effectiveness and impact of development co-operation by
concentrating activities and working for the harmonisation of donor procedures.
Encourage people in Finland to support the values and goals of the Millennium
Declaration and the fulfilment of Finlands obligations.
Promote economic growth in developing countries together with an equitable
distribution of income.
Support endeavours to help the poorest developing countries gain influence in
international forums, particularly emphasising co-operation with African countries.
Work to strengthen the multilateral system and to increase the effectiveness of the UN.
In accordance with the Government Programme, give more consideration to the
interests of the developing countries in WTO trade negotiations and help to enhance the
developing countries bargaining position by improving their trading capacity and
promoting the inclusion of trade issues in their own poverty reduction strategies.
Support the effective implementation of debt management programmes for developing
countries, with special interest in ensuring the sustainability of debt and aid received by
Improve co-operation between public institutions in Finland to increase the coherence
and effectiveness of Finlands development policy.
Urge Finnish companies to participate in achieving the Millennium Development
Goals, and encourage them to direct their interests and activities towards the poorest
developing countries, and, with a view to this, promote co-operation and partnerships
between the public and private sectors.
Promote the access of developing countries to new technologies including information
technologies, and identify, together with the private sector, solutions in information and
communications technologies which are appropriate for the poorest developing
countries.
Finlands strengths and the focus of activities

Our own experience of the development of Finnish society in five decades from a
poor country with small production capacity, and recovering from two wars, into one of
the worlds most competitive welfare and information societies, also provides a firm
foundation for involvement in international development policies. Finns have learned that
security and stability, both inside the country and in the surrounding regions, are
prerequisites for development. Respect for human rights, democracy and good
governance create a social environment that enables well-balanced development. Equal
participation of women and men in the functions of society are important contributors to
our own success, as is care for the environment.
Responsible economic growth led by the private sector in conjunction with an
equitable distribution of income provides society and its members with resources for
economic development. Sustained long-term investment in education, health, social
services and the wellbeing of children and young people has borne fruit in our country.
With regard to its own participation, Finland must consider the value that it can
contribute to international development. On the one hand, this value added arises from
Finlands own cultural history and experiences as outlined above, as well as the values
rooted in them, and, on the other hand, from the special strengths and skills that Finland
has acquired in certain sectors.
The cross-cutting themes in the implementation of the Finnish development policy

are:
Promotion of the rights and the status of women and girls, and promotion of gender and
social equality.
Promotion of the rights of groups that are easily marginalised, particularly those of
children, the disabled, indigenous peoples and ethnic minorities, and promotion of
equal participation opportunities for them.
Consideration of environmental issues.
Finlands support for developing countries in implementing the Millennium

Declaration in individual countries is guided by the poverty reduction strategies of the
partner countries. Hence, Finland ensures that its inputs are channelled into development
work that the partner countries manage themselves, and which is based on a deep
understanding of each countrys situation. Implementing the goals set requires creating an
environment conducive to development.
Primarily, it is the developing countries themselves that are accountable to their own
citizens for the socio-economic development programmes aiming at economic growth
and reduction of poverty. Private-sector-driven economic growth and equality-promoting
income distribution are fundamental to the reduction of poverty. Success requires true
political will to create an operating environment that makes development possible.
Respect for human rights, promotion of gender equality, social equality and democracy,
good governance and sound economic management are essential cornerstones of
development. Peace and security are prerequisites for achieving sustainable results.
Eradication of poverty calls for an environment in which public resources can be put
to work together with the skills and resources of the private sector and civil society. It is
becoming increasingly clear that development in individual countries depends on global
and regional environments.
Finland contributes at all levels and in all sectors to create an environment that is
favourable to development and to private sector operations. Finland particularly directs its
support to strengthening democratic institutions and the civil societies in developing
countries, to developing local government, and to helping combat corruption. Finland
promotes co-operation between government bodies, employers and labour organisations
in creating jobs and improving labour market regulations. By participating in conflict
prevention, peacekeeping and civilian crisis management we take part in creating the
basic necessities for the reduction of poverty.
Implementing, monitoring and evaluating development policy

The goals set in this development policy are ambitious. To achieve them will require
work in Finland, in the partner countries and within the EU, the UN and other
international forums. The Ministry for Foreign Affairs has overall responsibility for
implementing the policy and for the co-ordination this necessitates, but other key parties
are also involved, including various other ministries, government agencies and
institutions as well as the private sector and NGOs. Continuous and comprehensive
monitoring and evaluation are needed to implement the policy.
Development policy is a part of Finlands foreign policy. The goals and
implementation of the development policy are part of the strategy and operational plan of
the Ministry for Foreign Affairs, in which the main tasks of the Ministry are seen as the
promotion of the security and well-being of Finnish people, the creation of a common
international sense of responsibility and the reinforcement of peace, together with the
responsibility for preparing and implementing Finnish foreign policy, including co-
ordination of shaping the national principles of action. The implementation of the
development policy is monitored as part of the Ministrys overall goals using the
Ministrys internal monitoring systems.
Co-operation within the Ministry for Foreign Affairs and among the authorities will
be further improved to promote coherence in the development and monitoring of the
policy. The Ministrys internal systems for implementing and monitoring development
policy will be consolidated. A separate action plan has been prepared, specifying the
targets and areas of responsibility. The Department for Development Policy monitors the
implementation of the plan to ensure that the development policy is directly linked with
framework and results budgeting and appropriation decisions.
The need for new strategies connected to certain sectors, themes or procedures has
been considered when the implementation plan was prepared. The implementation is
guided by the approved Strategy and Action Plan for Promoting Gender Equality 2003-
2007 and the Strategy for Rural Development.
In planning co-operation, more systematic use will be made of the results of
independent evaluations. Exceptionally comprehensive and varied independent evaluation
material that was produced by the Ministrys own evaluation and research services and by
international bodies was available for the preparation of the present resolution. Review
and evaluation will be developed so that up-to-date information is always available to
support policy and implementation.
The Development Policy Committee assesses the implementation of the policy. Its
work is directed particularly to the achievement of policy coherence. The Committee
reports annually to the Government on the implementation of Finlands development
policy and the factors affecting it. The Committees proposals are taken into account in
the annual planning of the implementation of the policy. To help it in its tasks, the
Committee calls on representatives from different ministries to serve as permanent
experts.
The UN reviewed the implementation of the Millennium Declaration in
September 2005 and Finland made its first interim review of work for the achievement of
the goals. At the end of its present term of office in 2007, the Government will arrange
for an independent assessment of the realisation of the aims of its development policy. In
international co-operation, Finland takes an active part in developing the contents, quality
and effectiveness of the development policy especially within the framework of the
OECD Development Assistance Committee (DAC). Finlands next OECD/DAC review
of development co-operation is expected to take place in late 2007.
Achieving the goals of development policy by increasing coherence
The development policy perspective affects many areas of policy

Achieving the aims of development policy requires improved policy coherence in
national policies, multilateral co-operation and EU policies. Coherence in practical
implementation also needs to be increased through better co-operation among authorities.
The development policy perspective needs to be included in all the programmes and
reports in which Finlands policies in issues affecting development are defined.
Together with the drafting of this policy, work was started in the Ministry for Foreign
Affairs, amongst various public sector institutions, and with other stakeholders, to deal
with the challenges posed by the need for coherence. This work shall be continued.
Government officials are well acquainted with the Millennium Declaration, and its goals
are considered important. This common commitment should lead to a systematic analysis
of the challenges of coherence. The policy changes required in each area of activity are to
be mapped out and specified with the aim of:
Finding mutual interests of Finland and the developing countries and adopting effective
ways to promote them, and
Identifying potential conflicts. Awareness of the existing contradictions in the national
policy will create opportunities to deal with them and to draw up new operational
guidelines.
Exchange of information, co-operation and interactive mechanisms among officials

must be strengthened further. There are already regular theme-based groups in which
officials from different ministries work together. More and more of such arrangements
will now be made to deal with development policy issues which are inter-ministerial in
nature. The Ministry for Foreign Affairs shall also investigate how the overall
harmonisation of development policy amongst official bodies can be achieved effectively
without unnecessarily increasing the administrative burden.
Finland supports the multilateral system

Part of Finlands development policy is to strengthen the multilateral system, to
increase its operational capabilities and to improve the opportunities of developing
countries to have an impact. Through the multilateral system, norms and guidelines are
created for international co-operation, environments conducive to development are
strengthened at global and regional levels, and support is given to the efforts made by
developing countries themselves. The multilateral system secures the position of small
countries and improves their prospects for exerting an influence.
The multilateral system provides the best forum for dealing with international
development issues in a comprehensive, cross-sectoral and pluralistic way. The
multilateral system has become increasingly significant through globalisation. There is a
strong international consensus about the Millennium Declaration and the Millennium
Development Goals. This consensus was further reinforced at the Doha ministerial
conference as well as at Monterrey, Johannesburg and New York summits.
Finland considers that the resources of the multilateral system should now be
concentrated on activities to implement the jointly agreed goals. The credibility of the UN
and of the multilateral system depends on the ability to fulfil joint commitments in
practise. Naturally, responsibility for implementing decisions also lies with national
actors.
Finland strives to strengthen the operational capability of the multilateral system and
supports the reforms set in motion by the Secretary General of the United Nations. The
international financial institutions that work alongside the UN, and particularly the World
Bank, also play an important part in carrying out the commitments of the Millennium
Declaration. The Asian economic crisis showed how instability in the international
economic system can plunge millions of people into poverty. Thus, the International
Monetary Fund has considerable direct responsibility for the reduction of poverty through
the maintenance of stability in the international economic system and the prevention of
crises. Finland finds it essential that the UN, the international financial institutions and
the WTO work even more closely together.
The chairmanship of the UN Economic and Social Council (ECOSOC) in 2004
offered Finland an excellent opportunity to address development issues in a coherent
manner and to promote co-operation. Finland will also intensify its work in the OECD
and its Development Assistance Committee. As a comprehensive organisation for
economic co-operation and development, the OECD provides exceptional opportunities
for dealing with cross-sectoral issues that promote coherence in development policy.
The Helsinki Process

In todays world, there is a clear need to facilitate and complement inter-
governmental negotiations with open and equal dialogue between all stakeholders in
seeking out new joint methods for managing globalisation.
The Government of Finland wants to improve the conditions for managing
globalisation, to extend the benefits of globalisation more equally to all, and to mitigate
its negative impacts. Finland continues to co-operate with Tanzania in the Helsinki
Process, promoting broad based international discussion about a more equitable
management of globalisation. The Helsinki Process is a forum that brings together
governments from the South and the North, international organisations, the private sector
and civil society, and offers opportunities for open, unprejudiced and pluralistic dialogue.
The aim is to develop concrete proposals and strategies for promoting the implementation
of the UN Millennium Declaration and the results of the Doha, Monterrey and
Johannesburg conferences. Finland is prepared to utilise the results of the Process in
bilateral and international connections, including the EU. In the long-term, the process is
to achieve a more balanced, democratic and rule-based management of globalisation
within inter-governmental multilateral co-operation, particularly in international
organisations.
Based on the results of the second Helsinki conference organised in Finland in
September 2005 the process will be carried further in the form of specific round tables
supported by Finland, Tanzania and other governments. At the same time a number of
governments are committed to the further implementation of some of the Helsinki
Process recommendations.
The ILO World Commission on the Social Dimension of Globalisation

The development perspective is one of the main features of the World Commission on
the Social Dimension of Globalisation set up by the International Labour Organisation.
The Commission was co-chaired by Finlands President Halonen and Tanzanias
President Mkapa.
The Commissions point of departure is that globalisation is a process that should
benefit people all over the world. The benefits and the disadvantages of globalisation
should be evaluated expressly in terms of how they affect peoples daily lives.
Globalisation is a process that can be controlled and can be guided by national, regional
and international measures.
The measures proposed by the Commission in its report require monitoring. The
Government of Finland is prepared to promote in its activities the monitoring of the
World Commissions recommendations on the social dimension of globalisation in fora
appropriate for each issue. Multilateral development work is a particularly important
sector of activity in this respect. The Government will assess which measures to use to
bring to the fore internationally, the themes raised by the report, and to promote the
implementation of the Commissions recommendations.
Finland promotes policy coherence in the European Union

Many of the decisions that determine Finlands policy in development-related issues
are made within the EU. Finland emphasises the coherence of different policy sectors in
the national preparation of EU decision-making. Comprehensive preparation in Finland
creates a good basis for achieving Finlands goal of influencing and increasing the
coherence among the different areas of EU policies, and especially in its external
relations and development co-operation.
The European Union has vastly increased the extent of Finlands contact with the
countries of the world. As a member of the EU, Finland is involved in multi-sectoral
dialogue with almost all countries, including developing countries. The EU is the major
development co-operation partner of the developing countries as well as a significant
trade partner. The EU also has a significant role globally. Finland works increasingly
through the EU, and the EU has a direct impact on our national policies. EU membership
has increased Finlands potential to influence global development; it has also increased
our visibility in the international arena and has enabled us to contribute to the quality of
the relations between the EU and developing countries.
Within the EU, attention has been devoted to policy coherence ever since the 1960s
but it still remains a greatly challenging issue. Finland promotes increased coherence in
EUs external relations, in relations with developing countries, and among different
policy sectors. This requires increasingly close co-operation at the national level in order
to find areas of convergence on the issues dealt within the EU, and in order to be able to
include the development policy perspective in Finlands positions on decisions affecting
global development. Since Finland joined the EU, domestic preparation in EU sub-
committees has served to shape a coherent national strategy.
Coherence in EU activities, effectiveness of aid and improved quality are prominent
features in the three-year programme for the EU presidencies, which Finland will
implement during its presidency in the second half of 2006.
Along with the opportunities it offers, membership of the EU also guides Finlands
scope for making independent policy decisions for the benefit of developing countries.
Trade policy and agricultural policy, for example, mostly fall within the EUs
competence. This means that Finlands influence on various matters is through the EU
and that Finland respects the fact that EU positions are defined on the basis of
negotiations among all the EU member countries. Finland contributes and is committed to
the compromises sought between the national interests of the member countries and that
of global development.
Coherence between development and trade policies

Finland will increasingly take into account the interests of developing countries in the
WTOs Doha round of trade negotiations. Strengthening the multilateral trading system
requires the full participation of the developing countries. From the point of view of the
poorest developing countries, it is important that issues such as better access to markets
for developing countries products, impartial rules that also observe the special needs of
the poorest developing countries, and the promised technical aid to strengthen their
trading capacity, will also be carried out. Finland targets its support towards creating an
operating environment favourable to trade and to resolving supply-side problems in
developing countries. Finland will extend the range of instruments in its bilateral trade
and economic relations, including the promotion of import from developing countries.
The globalisation and liberalisation of markets poses great challenges for developing
countries, particularly for those that are least developed. On the one hand, globalisation
opens international markets, enabling a rise in the standards of living and a decrease in
poverty. On the other hand, the possibilities for the poorest developing countries to keep
up with international competition may deteriorate considerably unless they are able to
change the basic structures and institutional capabilities of their economies and societies
and develop internationally competitive products and production capacity. Integrating
developing countries into the international trading system can only take place if that
system supports their own development goals. Finland respects the right of developing
countries to resolve trade policy issues in their own interests.
In the light of its own experience, Finland considers that well-managed integration
into international economy, of which foreign trade is essential and promotes economic
and social development in poor countries. Finland is prepared to support, by means of
trade policy and development co-operation, the opportunities of developing countries to
benefit from international trade. A universal, rule-based and open multilateral trading
system which takes the interests of all parties into account equally, will create the
framework and conditions necessary for freeing trade and enabling all countries to benefit
from its favourable impact on economic growth, employment and development. The issue
of integration into the international trading system should be taken up in the national
development programmes or poverty reduction strategies of the developing countries so
that the integration takes place in a controlled way and its impact on the reduction of
poverty is ensured.
To complete successfully, the WTO Doha round of trade negotiations, which started
in 2001, is one of the main goals of Finlands trade and development policy during this
Governments term of office, particularly in terms of the consideration given to the
poorest developing countries. The strengthening of the multilateral trading system also
requires the wholehearted participation of the developing countries. It is essential for
developing countries that, as acknowledged in the Doha Declaration, access of their
products to international markets is improved, balanced rules are implemented and that
technical assistance is assured as well as exploited effectively.
Agricultural issues are among the most important topics of the WTO Doha round of
negotiations. According to the Doha Declaration, the negotiations aim at obtaining
considerable improvements in ensuring access for agricultural products to international
markets, a gradual reduction of export subsidies with a view to phasing them out in all
their forms, and a substantial reduction in trade-distorting domestic support. The
preferential treatment of developing countries is an integral part of the negotiations. Both
agricultural and so called non-commercial concerns will be taken into account.
In the framework of the multilateral trading system, Finland works for improved
consideration of the special needs of developing countries by promoting special benefits
that support their integration into the trade policy system. Finland supports and finances
initiatives that further implementation of the obligation to increase trade-related technical
assistance and facilities. Finland supports the work of the WTO on technology transfer
which aims to increase the production capacity and export product range of developing
countries. Finland works on improving the effectiveness of interactive dialogue with the
developing countries about trade policy issues bilaterally, through the EU, and in
multilateral contexts. Finland seeks to consider the special circumstances of developing
countries in the implementation of the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS).
Over the past few years, the EU has improved the access of developing countries to
its markets. Products originating from the least developed countries are allowed entry into
the EU area duty-free, and many other developing countries also benefit from tariff
preferences. For example, over 80% of Africas agricultural exports come to the EU. In
2004 and 2005 the EUs Generalised System of Preferences (GSP) for developing
countries has been revised. Finland is in favour of developing the system so that its
benefits accrue better to the least developed countries, and is presently investigating how
benefits of the type that have been granted to countries under the Cotonou agreement
could be applied to all the least developed countries. Finland is looking for ways to
promote its own imports from developing countries. Finland will also make use of the
opportunities offered by the unit established in the EU to facilitate imports into the EU
from developing countries.
While supporting development of the multilateral trading system, Finland uses
development co-operation instruments to support the efforts of the developing countries
to create an operating environment that promotes trade and investments. Trade that brings
about an increase in sustainable economic growth, employment and productivity requires,
among other things, stable and functioning basic social structures, infrastructure, a
functioning financial sector and the possibility to develop production technology, product
quality and marketing. These form a key field of operations for development co-
operation, in which the interests of trade and development converge and development co-
operation acts as a catalyst for trade.
In order to increase imports and trade, Finnish business and industry are kept
informed about the markets of the developing countries, production structures and rules
affecting trade. Efforts are made to encourage the channelling of investment to
developing countries by developing a climate and an environment favourable to
investment, and, particularly through bilateral agreements, promoting and protecting
foreign investment.
Coherence between development and environmental policies

The prevention of international environmental threats is one of the main goals of
Finlands development policy. Finland advocates change in production and consumption
patterns and supports the reduction of poverty in developing countries in such ways that
help avert the most serious environmental damage caused by economic growth. By
promoting the implementation of multilateral environmental agreements, Finland seeks to
safeguard the state of the environment. Finland includes consideration for the
environment as a cross-cutting theme in all its development co-operation. Finland
supports the inclusion of the principles of environmentally sustainable development in the
poverty reduction strategies of its partner countries. Finland also supports specific
environmental programmes and projects.
The challenges of development and of environmental sustainability are closely linked
at both national and global levels. The future of Finlands own environment will also be
decisively affected by the ways in which other countries in the world, including the
developing countries, take care of the environment. By implementing multilateral
environmental agreements, the state of the environment can be controlled in Finland and
in developing countries. The environment is a global public good and its protection is in
everybodys interests.
It is impossible to achieve sustainable well-being and reduction of poverty unless the
environment is taken care of. For this reason, environmental issues are a cross-cutting
theme in Finlands development policy. Environmental issues are connected today with
such issues as security, trade and finance. Co-operation among various sectors of
administration is essential. Finland considers multilateral environmental agreements and
the enhancement of international environmental governance a good means of ensuring
that both industrialised and developing countries accept joint responsibility for the
environment. Finland is party to more than a hundred multilateral environmental
agreements, the aims of which include the prevention of climate change, the protection of
biodiversity, combating desertification and the control of international trade in chemicals
and control of transboundary movements of hazardous waste. The agreements include
obligations binding on the developing countries and obligations to support the developing
countries. The detrimental consequences of global climate change have the worst effects
on the poorest countries and hinder their efforts to reducing poverty. The developing
countries will therefore play an important part in the implementation and monitoring of
the Kyoto Protocol.
Finland supports the developing countries in their capacity building to enable them to
implement multilateral environmental agreements. Through international and
development co-operation, Finland makes available to developing countries the benefit of
its own expertise in managing global environmental problems and in promoting
sustainable development. Factors related to the environment are decisive in achieving
many development goals, such as food safety, access to clean drinking water and progress
in health care.
Access to affordable energy and sustainable energy solutions are of great importance
in improving the standards of living and health conditions of the poor, in creating
employment opportunities, but also in regard to the sustainable exploitation of natural
resources and, for example, climate change. The Johannesburg Action Plan requires all
countries to draw up a strategy for sustainable development by 2005. In its development
co-operation, Finland emphasises that environmental issues, and the fulfilment of the
obligations set out in environmental agreements, are an integral part of poverty reduction
strategies.
Coherence between development and agricultural policies

In its development co-operation, Finland emphasises the importance of promoting
rural development and increasing the productivity of rural livelihoods. Finland supports
the possibilities of the poorest developing countries to benefit from opportunities offered
by international trade in agricultural products and recognises the special needs of the most
vulnerable countries to protect and assist their farmers so that they will have sufficient
time to adapt to a market-led production system.
Rural living conditions in developing countries will have a crucial impact on whether
the Millennium Declaration Goals are achieved, since about two thirds of the people who
live in extreme poverty live in rural areas. Finland emphasises the significance of the role
played by agriculture in rural areas and in society. Not only is agriculture a means of
livelihood and a source of income, but it is also an essential factor in, for example, food
security, regional politics and environmental issues. For almost all countries of the world
agriculture is a sector of national importance, the future of which they seek to secure.
The exports of many developing countries are primarily agricultural products. Hence,
the entry of developing countries agricultural products into industrialised countries
markets, and the subsidies of industrialised countries to agricultural production and
exports, have caused disputes and disagreements between developing and industrialised
countries. In this connection, the great differences among developing countries in their
production and marketing capacities in agriculture and agricultural trade must also be
taken into account. As a member of the EU, Finland promotes such trade policy solutions
that improve the prospects of the poorest developing countries to benefit from agricultural
exports and develop the competitiveness of their agriculture. The goal of greater
coherence will also necessitate consideration of national perspectives on agriculture.
The EU, including Finland, has long made unilateral concessions in its trade policy
which have eased access for specific groups of developing countries. Finland is in favour
of developing these systems further. They include, for example, the Generalised System
of Preferences (GSP) and the Lom and Cotonou agreements with the countries of Africa,
the Caribbean and the Pacific. The Everything but Arms (EBA) initiative applied since
2001 has made it possible to remove duties on imports originating from almost all of the
least developed countries. Duties on sugar, rice and bananas will be phased out by 2009.
Since the GATT Uruguay Round, the EU has also made cuts in domestic agricultural and
export subsidies; these are expected to increase the competitiveness of developing
countries agricultural trade.
Both in the EU and bilaterally, Finland promotes measures that improve the status of
poor producers in the poorest countries. The prospect of poor producers to benefit from
world trade can be enhanced by adjusting the rules governing international agricultural
trade, but this will not resolve the whole problem. In order to improve their living
conditions, Finland will increase its efforts in bilateral and multilateral development co-
operation to improve the political and economic operating environment, to develop
productive and income generating activities in rural areas, and to strengthen poor peoples
livelihoods.
Finland has many years of experience in developing rural livelihoods based on family
farms and smallholdings. Finlands own agricultural sector has also gone through great
structural changes to adjust to international competition. Both in development co-
operation and in other international collaboration, Finland offers to developing countries
the benefit of its own experience and expertise in, for example, establishing organisations
of small producers, co-operative activities and extension services. Agriculture and
forestry are the key sectors in development co-operation. Individual areas of focus
include support for local rural livelihood strategies, the formation of farmer associations
and producer organisations, provision of staple foods, food production and diversification
of income-generating activities.
Chapter 4.
WHAT IT MEANS FOR FARMERS
Raul Q. Montemayor
IFAP Asian Farmers Committee
Abstract
Policy coherence is important not only for developing countries who need to optimise
resource-use in their agricultural sectors, but also for developed countries whose long-
term growth and progress in inextricably linked to the welfare of developing countries
and the world economy as a whole. Governments in developing countries need to
translate words into action by giving priority to sustained and coherent policies and
programmes that provide basic support and services to their large agricultural sectors.
Such policies will reverse the effects of long years of neglect and will give farmers the
confidence to pursue change and to participate in development efforts. These domestic
initiatives should however be complemented by reforms in international trade rules that
will limit, if not eliminate, the distortion effect of domestic supports and export subsidies
on global markets even as developing countries undertake reforms and prepare their
farmers for global competition.
Farmers must be adequately compensated for their efforts if they are to continue
providing safe and healthy food to consumers while simultaneously following
environmentally friendly practices. Otherwise, they may be pressured to take shortcuts
that will prove harmful to consumers and to the environment. In turn, appropriate
policies have to be implemented to ensure that market concentration does not have undue
harmful impacts on farmers, even as trade rules are crafted so that large multinational
firms do not corner the benefits of freer trade to the exclusion of developing countries and
small-scale producers.
Development assistance must be used to complement domestic reforms and not to fix
problems created by incoherent policies. They should focus on addressing agriculture-
related issues because these are often the root causes of problems in urban areas and the
economy as a whole. Likewise, the role of the private sector in the development effort
needs to be defined, acknowledged, and supported. Farmer organisations in particular
both have a right and a responsibility to participate in, and influence the developmental
process and will need to strengthen their ranks and capacities in order to effectively
speak for themselves and to contribute constructively to developmental efforts.
Introduction
I would first like to thank the organisers of this conference and the OECD for giving
farmers an opportunity to present their views on what I consider a very timely and
important theme Policy Coherence for Development. I speak today on behalf of the
International Federation of Agricultural Producers or IFAP, which is one of the largest
international networks of farmer organisations in the world. IFAP presently counts
110 national farmer organisations in 75 countries among its members. It represents
practically all farmers in the industrialised countries, and almost half a billion agricultural
producers in the developing world.
IFAP believes that farmers can best speak for themselves, even though it is not often
that they are asked to do so, and sometimes are even prevented from voicing their point of
view. So, allow me to take advantage of this opportunity to present the major
development issues and concerns that farmers face today as a result of policy incoherence
at the national, regional and global levels. There are of course many types of farmers
living under different conditions and under varying levels of development, and their
positions on certain issues may not always coincide. Today, I would like to focus on the
concerns of farmers in the developing countries, which I think would be of more interest
to policy makers in the OECD and its member-countries. I would also like to contribute
some ideas on how farmers and their organisations can help rectify policy inconsistencies
and ensure that developmental programmes and policies move forward coherently.
The need for policy coherence
Farmers from developing countries may sometimes wonder why more advanced
countries belonging to the OECD have to worry about development in the poorer regions
of the world. One probably could presume that countries, like people, tend to be more
magnanimous when they become more prosperous. Charity could also be a way to
assuage hidden guilt arising from the notion that in order for advanced countries to enrich
themselves, many other countries had to become poor.
I would however like to believe that the concern for development on the part of
developed countries transcends mere altruism or remorse. I think that the rich countries
know that they will never be able to truly enjoy their wealth for as long as the billions of
people living around them in the developing world are hungry, poor, uneducated,
malnourished, and unemployed. For one, they will find it difficult to expand their markets
for their own goods and services. In other words, their own prospects for growth in the
future are inextricably linked to the development and progress of the poorer countries
around them and of the world as a whole. Even in the jungles, before man interfered,
nature saw to it that predators always had agile and healthy prey to eat, the logic being
that predators themselves would not survive if all their prey died from hunger and
malnutrition.
Global poverty and hunger also lead to many problems that people in developed
countries are uncomfortable with and often dread illegal immigration, HIV/Aids,
pandemics, wars, and of course, terrorism. As we have seen, these problems spread
quickly in an increasingly globalised environment, and it is impossible even for people in
developed countries to insulate themselves from these emerging threats. In the end,
helping poor countries develop and to lift their poor populations out of extreme poverty is
the only effective and permanent recipe for global health, peace and progress.
With all the problems besetting countries and the world as a whole, both developed
and developing countries dont have the time to waste efforts and resources on policies
and programmes that end up nullifying each other. Because development itself is a multi-
faceted challenge, it naturally requires a comprehensive response, the components of
which must be both individually effective and collectively complementary to each other.
Policy coherence therefore is not merely an embellishment. It is an urgent and critical
requirement for any developmental effort to succeed.
It goes without saying that policy coherence for development is as important, even if
not more critical, for the poor developing countries themselves. To a large extent, their
underdevelopment, arising from years of neglect of their agricultural and other critical
sectors, corruption, weak governance, and policy inconsistencies, is of their own doing.
They too have to set things right in their own backyard and carry out necessary reforms in
a coherent and sustained manner if they hope to escape from chronic underdevelopment
and to lift their masses out of poverty and hunger. Developed countries can augment their
initiatives but will never be successful if the developing countries themselves do not
assume the responsibility and accept the challenge for reform and change.
Coherence in domestic agricultural policies
Perhaps the most obvious and chronic form of incoherence in domestic agricultural
policy, especially in developing countries, is the disconnect between what politicians and
government functionaries say in public and what they actually do in practice. Farmers
have somehow grown accustomed to politicians promising them the moon and the stars
during elections, and then disappearing after they have won or lost, only to reappear in
the next elections, promising more moons and stars. I remember a story (probably true)
where a local politician in my country was campaigning to get elected and ended up
promising farmers in a village that he would build a bridge to help them transport their
products to the market. When he was told that there was no need for a bridge because
there was no river to cross in the village, he promised to build a river as well!
In many developing countries, widespread hunger, unemployment and poverty is
directly traceable to the absence of even the most basic infrastructure that farmers in
developed countries often take for granted roads, bridges, electricity, communication,
ports, etc. These deficiencies eat into the already meagre incomes of many farmers in the
countryside by making it expensive for them to buy the inputs they need and to market
their goods. They also make it difficult if not impossible for farmers to react promptly to
market signals and take advantage of emerging market opportunities. Opportunities for
securing a higher price or a better market for their products in the city or even in another
country are useless if farmers cannot even move their produce out of their village because
of an impassable road or a broken bridge. I remember another story (probably also true)
of farmers in a village complaining to a local trader why his buying price was so low
compared to the price announced over the radio station. The trader, knowing that the
farmers had nowhere else to go, merely shrugged his shoulders and challenged them to
sell their products to the radio station!
Compounding the situation are government policies that prioritise the supply of cheap
food to urban consumers (and voters), whether through price controls, government market
intervention, or trade and tariff policy favouring cheaper imports. In cases where
governments use tariffs and import restrictions to protect farmers, the agricultural sector
is also tacitly neglected. As a result, inherent problems remain entrenched, are aggravated
over time, and are exposed only when governments are forced to open up their markets to
foreign competition. This is what is happening as a result of the recent multilateral and
regional trade agreements.
Although it is clear that governments in developing countries often lack the resources
to address all their problems, it is equally evident that the priority politicians (especially
at election time) promise to give to agriculture and to the rural sector almost always
disappears, when the time comes to allocate the limited budgets of government to priority
programmes. Typically, debt service and defence get the largest chunks of the limited
government pie, while large populations in the rural areas end up with a
disproportionately small share for basic services and programmes from the government.
This is despite commonly accepted conclusions that investments in agriculture,
particularly in agricultural research and basic infrastructure, have the largest economic
multiplier effects on the economy, benefit the largest sectors, have the most significant
impact on poverty incidence, and are keys to overall economic development.
The long years of recurrent neglect of, and bias against, the agricultural sector in
many developing countries has made the resultant problems larger, more complex, and
much harder to solve. In many cases, addressing one problem such as the access to rural
credit by providing microfinance services to farmers ends up a failure because other
constraints are not addressed at the same time. For example, the absence of a proper
transportation network forces farmers to sell their products at very low prices, and
eventually prevents them from generating enough income to pay their loans. In turn,
improved technology that is expected to increase yields and enhance the efficiency of
farmers is often left unapplied because farmers have no money to buy modern seed
varieties or appropriate fertilisers. In other instances, they are afraid to invest their money
and time because of the fear or risk that typhoons or pests might suddenly come and wipe
away their investments, or that the government might unexpectedly allow cheap imports
to come in and depress local prices.
Perhaps the most deep-rooted effect of decades of neglect and policy incoherence is
the pervasive apathy, lack of motivation, and a sense of hopelessness on the part of
farmers in many areas of the developing world. Many have grown to be suspicious of
promises that things will get better, are wary of change, and are resigned to a life of
poverty and desperation. When they earn some money, they rarely invest in their farms
and instead use the money to send their brightest child to school, with the hope that he or
she will someday earn a well-paying job in the city and will rescue them from their sordid
fates on the farms. To a large extent, farmers themselves have become the largest and
most difficult obstacle to change and progress and it will need a serious and sustained
effort to get back their confidence and generate their support for any developmental
effort. Realigning policies and programmes into a coherent strategy will be a necessary
step in this direction.
Coherence in agricultural trade policy
In many developing countries, the problems in the agricultural sector are often
aggravated by external factors. The worldwide push towards trade liberalisation and
globalisation for example has caught many developing countries unprepared if not
flatfooted, even as it has forced them to abruptly expose their small-scale farmers to
competition from well-equipped producers from the developed world. One may say that
trade liberalisation is sometimes unfairly being blamed for a countrys agricultural woes,
when in fact the core problem arises from biased and incoherent domestic agricultural
policies that make local farmers uncompetitive and unprepared for competition. Still,
experience has shown that adjustment measures have to be carefully planned out and
implemented while trade liberalisation takes place.
At the same time, trade reforms, especially in developed countries are important.
Even as they are already well ahead in the development race, developed countries cannot
continue insisting on having their cake and eating it too. One may understand their need
to protect and subsidise some of their agricultural producers, but to do so at the expense
of large masses of poor and underprivileged farmers in many developing countries is
simply unfair and self-serving. Nor does it make sense for developing countries to give in
to demands to open up their markets even as the developed countries manipulate trade
rules so that they can continue equipping their own producers with a huge arsenal of
domestic supports and export subsidies which they can then use to ward off competition
while penetrating foreign markets.
It does not matter when, where and on whom these trade-distorting practices will
have an impact. The point is that these price supports, export subsidies and other artificial
benefits that many developed countries give to their farmers can and often do create
surpluses that result in worldwide market distortions, affecting the livelihood and survival
of farmers in other countries who do not have any access even to the most basic
infrastructure like roads, much less to subsidies. They also allow less efficient farmers in
the developed world, well-off as they already are, to displace other more efficient and
self-reliant producers from less developed parts of the world. Many of these small-scale
producers in developing countries have no government support or assistance programmes
to fall back on when these trade distorting practices wreak havoc on their domestic and
export markets.
One cannot allow a person holding a bag of explosives to go scot free just because he
has not detonated the bomb, or because there is no guarantee that the bomb will explode
or hurt people, or because of a promise that he will make the bomb less and less
destructive over time. And yet this is not so different from what the GATT rules have
allowed developed countries to do in agricultural trade by effectively legalising the use of
distorting subsidies, albeit at decreasing levels, while at the same time requiring other
countries, most of which do not use such subsidies, to increasingly open up their markets
to these subsidised foreign products.
Somewhere, large masses of farmers are becoming hungry, unemployed, sickly, and
desperate because a few rich countries want to protect their agriculture so that their
farmers can maintain comfortable lifestyles and their citizens can continue to enjoy
beautiful landscapes. Such subsidies literally and indiscriminately maim and kill innocent
people, displace them from their farms, and shatter lives and livelihoods, much like the
so-called weapons of mass destruction that rich countries spend billions of dollars to
unearth and destroy.
Clearly, there is a need to rationalise the negotiating positions of many developed
countries in trade fora like the WTO with their publicly avowed commitments to help
developing countries benefit from trade. Trade rules are supposed to remove distortions,
level the playing field, and provide each country, big or small, rich or poor, a decent
chance to compete and reap benefits from an enlarged and freer global market. They are
not supposed to perpetuate inequities and unfair trading practices, especially those that
work against the interests of developing countries.
In this respect, it is unfortunate, to say that at the very least, developed countries have
again used special and differential treatment or SDT as a bargaining chip or quid pro quo
in the Doha Development Round negotiations to secure concessions that will allow them
to retain many of their trade-distorting subsidies in the foreseeable future. Other
developed countries in turn have insisted on reducing their subsidies only if developing
countries open up their markets further and aggressively reduce their tariffs. Subsidies
that distort are normally banned in international trade and reducing or removing them
should not be treated as a concession that would require some form of compensation from
countries that are harmed by such subsidies. Clearly, a thief cannot demand that his/her
erstwhile victims unlock and open their doors and windows wider at night in exchange
for a promise that less and less will be stolen from their homes.
This is not to downplay the political and economic risks that developed countries
have to confront when they undertake reforms and attempt to phase out the distortive
support and protection that they have traditionally extended to their well-organised
farming sector. One also cannot deny the right even of developed countries to preserve
and promote their own agricultural sectors and to ensure their own food security. Nor can
one question the important cultural, historical, environmental and other contributions that
agriculture provides in addition to producing food for their societies. However, it is
equally important to remember that these rights and prerogatives are not absolute or
exclusive. The larger number of developing countries have as much right and need to
protect and promote their own agricultural sectors, and the problems and risks they face
in undertaking their own set of reforms are as daunting, if not more serious, than those
faced by developed countries. There is therefore simply no moral justification for
developed countries to insist on one-sided rules in trade negotiations.
Many studies have also shown that developed countries themselves will be the
biggest gainers, at least in the short to the medium term, from a less distorted global
marketplace. Clearly, it does not make any economic sense for them to subsidise
producers, encourage surpluses, prop up falling prices that arise from the surpluses
through additional subsidies, and then provide even more subsidies for exports to
alleviate the resultant domestic glut, and finally, to top it all, end up hurting producers in
poorer parts of the world elsewhere.
Of course, developing countries should also do their share in making the global
marketplace a fairer, freer and more progressive arena for trade. They cannot hide forever
under the cloak of underdevelopment, unpreparedness and uncompetitiveness and use
these as pretexts for again delaying necessary reforms in their agricultural and other
domestic sectors. Protectionism breeds inefficiency and dependency, and eventually
penalises consumers and farmers alike. Nor is it wise for farmers to perpetually place
their future in the hands of politicians and government functionaries whose priorities and
whims may change at any time. The most coherent approach to trade liberalisation is to
make farmers competitive, efficient and profitable, so that they can supply food to the
domestic market on an equal footing with imported products, and at the same time
compete squarely in the export markets. This is a case where the best defence is a good
offence.
Coherence in other trade-related policies
Aside from the need to craft coherent, fair and responsive rules in international trade,
clear and equitable policies and directions also have to be established by governments,
the public at large, and the commercial private sector on various issues which are relevant
to how farmers produce, process and sell their products in both domestic and export
markets. In particular, coherence is needed in how issues on food safety and nutrition,
market concentration, sustainability and environmental protection are addressed.
Concerns over food safety, health and nutrition have become more pronounced as a
result of the rise in food-borne diseases and illnesses and pronounced levels of both
obesity and malnutrition in various parts of the world. To some degree, these have had
trade-related effects on farmers. Many developing countries, for example, have
complained against the increasing use of food safety and related sanitary and
phytosanitary regulations to act as disguised trade barriers and block legitimate imports.
Clearly, it does not provide any benefit to a developing country to be given duty free
access by a developed country on the one hand, and then to have its exports blocked on
the other hand because these have not passed overly stringent chemical residue
thresholds, have not undergone costly laboratory analyses, or do not carry the proper
labels and health certifications. The poor country ends up not only with lost export sales
but with boatloads of rejected cargoes in foreign ports. It is unfortunate that the Doha
Development Agenda bypassed reforms in the SPS regulations despite clear indications
that the Uruguay Round rules did not satisfactorily achieve the objective of harmonising
global quarantine regulations to protect humans, plants and animals.
On a much larger scale, the emerging food safety concerns have led to more rigid
quarantine, food safety, labelling, and traceability regulations on food products which in
turn have made it more expensive for farmers both in developed and developing countries
to sell their products locally and in foreign markets. In many cases, these regulations have
forced farmers to shift to new and more costly methods of production that influence the
types of fertilisers or pesticides they use for crops, or hormones and antibiotics they apply
to animals, and the equipment they utilise for producing and handling food products.
Although it is important to ensure that food products are safe to consume,
governments and the public at large should at the same time ensure that farmers are
adequately compensated for their efforts. Pressuring farmers to produce better and
healthier food and to supply this food at a lower price, may backfire on the health and
welfare of consumers. Mad cow disease, for example, resulted from the attempts of cattle
producers to reduce costs and sell their meat products more cheaply in response to
consumer demands and stiff market competition. These led some livestock raisers to use
offal and waste material from other dead animals as feed ingredients, without the
knowledge that such ingredients would result in the spread of BSE years later.
Governments and consumers must therefore be willing and ready to pay the price for
safe, healthy and nutritious food. The current situation where the share of the farmer out
of every dollar that a consumer spends has fallen to as low as five cents even as global
prices for raw and semi-processed agricultural commodities have continued to decrease,
is clearly unsustainable. Farmers are not miracle workers, and they will stop producing
food if society does not give them the necessary financial and other rewards and
incentives for their efforts. Otherwise, they will turn in desperation to production short-
cuts that could be harmful to consumers in the end.
The precarious situation of farmers is exacerbated by market concentration, or the
emergence of large corporate entities that exert monopoly or excessive control over
agricultural technology, inputs and markets. This is an established phenomenon in both
developed and developing countries. While corporate size and breadth is arguably
necessary for the huge investments in some agricultural ventures, there is the danger that
farmers will eventually end up with little or no choice when it comes to where to buy
their seeds and inputs and sell their products. In some cases, they may become virtual
employees of these large corporations. In such a situation, farmers will not only lose their
leverage in determining the prices of their products, they will also be powerless if the
large firms on which they depend for most of their sustenance and livelihood simply
decide to pass on to them most or all of the cost and burden of food safety, environmental
protection, and other regulations that consumers are unwilling to absorb. Even worse,
they will have little recourse if these firms abruptly decide to shift to other more pliant
suppliers or move their production and processing operations altogether to a more

business friendly country or region.
It appears however that governments and international institutions have no clear
policies with regard to the increasing influence of these large multinational firms on both
domestic and global markets. Although current international trade rules for example
define the terms of engagement among countries, they have practically nothing to say
about the potentially distorting or manipulative practices of large trans-national firms on
trade in agricultural products, services and intellectual property. Some of these
corporations may in fact be even larger and more influential than some large countries
and economies. Hence, the push of some developed countries for the incorporation of
competition policy in WTO rules has ironically been construed by other developing
countries as a mere ploy to dilute the market leverage of local firms over their domestic
markets and thus to make it easier for these large multinational companies, most of whom
are based in rich countries, to penetrate their markets.
The issue of market concentration brings to the fore the question as to who actually
benefits from trade liberalisation. Clearly, freer and more open trade can be empirically
shown to foster overall economic growth within countries and on a global scale.
However, the benefits are not spread equally, and there will always be losers in the
process. Concerns have been raised that trade liberalisation is being pursued for its own
sake, without consideration for what countries and sectors need to, or should, benefit
most from it, and without adequate concern for those who lose out in the process.
Many developing countries for example will not be able to export more just because
the global market has opened up and expanded. In fact, the very factors that make these
countries uncompetitive in export markets lack of roads, high power, input and
financing charges, low yields, etc. will make them vulnerable to cheaper imports.
Hence, while more advanced and resourceful countries may benefit from trade
liberalisation and improved market access, a vast majority of less developed countries
will suffer or receive a disproportionately small share of the benefits if proper safeguards
are not put in place and they are not given the time and space to undertake the necessary
adjustment measures. In turn, one would wonder if it is to the immediate interest of the
developed and advanced countries to wait for the less developed countries to catch up,
considering that their market advantage to a large extent derives from the inability of
these underdeveloped countries to produce as efficiently and competitively as they can.
Nor can we expect large profit-driven multinational companies to concern themselves
with how trade benefits are allocated. Their main concern is to be able to buy the raw
materials from the cheapest producers and to sell their products to the most lucrative
markets. One can therefore raise the question as to whether a trading environment that is
arguably freer and more open, but which benefits only a few large companies while
marginalising large masses of small producers is worth aiming for. In addition, some
farmers from both developed and developing countries have raised the issue as to why
international trade rules are being given so much importance over domestic agricultural
policies, often to the disadvantage of small-scale producers, despite the fact that less than
10% of total global agricultural output is actually being traded internationally.
Even within countries that have somehow been able to expand exports and achieve
economic growth due to trade liberalisation, there are indications that the benefits have
gone mostly to traders, processors, exporters, large farmers and corporate farms, and to a
much lesser extent (if at all) to small-scale primary producers. In turn, small-scale farmers
invariably bear most of the burden when cheap imports come into their domestic markets.
Unless these farmers are consciously allowed to benefit from free trade, trade
liberalisation may ironically end up aggravating rural poverty.
Concerns have also been raised as to the fate of small-scale producers in a trading
environment that rewards economies of scale and places excessive emphasis on
production efficiency and cost competitiveness. While large-scale producers may be able
to produce food and other agricultural products more efficiently and at least cost to
customers, it may in fact be more prudent to spread out production capacity to a larger
base of producers than bank on a few suppliers who may suddenly decide to close or
move their operations.
Many policies of developed countries also run counter to publicly avowed
commitments to promote sustainable development and environmental protection, issues
which are critical to the long-term survival and prosperity of farmers in the developing
world. While developed countries for example have pushed strongly for strict controls
over gas emissions, land and air pollution, and water depletion, their trade policies often
push poor farmers in other countries to adopt environmentally destructive practices like
slash and burn farming and soil, water and air contamination. In several cases, these
developed countries have merely exported their destructive processes and equipment to
third-world countries, thereby relegating the poor countries to dumping grounds for toxic
waste and pollution.
As in the case with food safety regulations, farmers worldwide are also being
pressured to adopt more environmentally friendly farming practices but are not being
given the appropriate financial incentives to offset additional costs. Clearly, farmers can
only go so far when prices are stagnant or are decreasing while costs are rising.
Government should encourage and provide farmers with incentives to adopt good farming
practices, instead of focusing on punitive approaches that are based on the premise that
farmers abuse the environment and should therefore be controlled and disciplined.
Coherence in development aid policy
Clearly, governments in developed countries first need to sort out their priorities and
strategies before they start preaching and promoting development to developing
countries. It would be pointless to spend time and money on development assistance only
to see the gains more than offset by trade policies which have distortive impacts.
Development aid must be used to promote development, and not to fix problems that
result from anti-development policies and programmes. In turn, countries that receive
development assistance must capitalise on such assistance to directly address their
problems and deficiencies, and not use them as another pretext to retain policies biased
against agriculture, scrimp on support to farmers, or postpone necessary investments and
reforms in the agricultural sector.
In any case, development agencies as a whole need to confront the fact that
international assistance for agricultural development has consistently declined over time.
Although it can be argued that it is the governments of developing countries themselves
that have prioritised non-agriculture projects in requesting international aid or funding,
aid agencies are also partly to blame for not clearly delineating and pursuing their
programme and funding priorities. One can wonder why they often impose numerous
conditions in exchange for such loans or assistance, but cannot pressure governments to
give more attention to their agricultural sectors. The perception that many agricultural
development projects fail or give lower returns is also not a valid excuse, given that such
deficiencies are usually traceable to poor project design and implementation.
To a large extent, development aid in urban areas and other sectors aside from
agriculture often falls short because it does not address the root of the problem. For
example, many problems like squatting, traffic congestion, sanitation, and crime arise
from sordid living conditions in the countryside which force rural residents to migrate to
cities. Housing projects, expanded road networks, improved water supply, and other
amenities in the cities will encourage even more migration and will aggravate the
problem in the urban areas for as long as income and employment opportunities remain
scarce in the rural areas. Channelling development assistance to rural areas is therefore, a
more logical and sustainable approach to solving urban problems and promoting
economic progress as a whole.
Finally, development assistance agencies must increasingly recognise the important
role played by the private sector. Whereas traditional ODA has been channelled through
the government bureaucracy and has focussed on supporting government-initiated
programmes, relatively limited effort and initiative have been allotted to building up
institutions and programmes run by the private sector, including farmer organisations that
can be more results-oriented, less politically vulnerable, and more attuned to the real
needs of small farmers and target beneficiaries. Such private initiatives are particularly
important since many rural development assistance loans and programmes often come
with conditions that require governments to phase out or privatise functions that
traditionally have provided marketing, credit and other basic services to farmers. While
deregulation and privatisation may have their merits, they are often pursued without
putting in place alternative or substitute institutions and programmes that can provide
safeguards and necessary assistance to affected farmers. As a result, farmers often end up
worse off than they were before.
Role of producer organisations
Because farmers are often the victims of the incoherent policies of their own
governments and of the governments of other countries, they have as much right as
responsibility to participate in programmes that impact their welfare. However, in order
to constructively and effectively influence decisions, they have to establish credible,
independent and solid farmer organisations. Only as a unified force in their countries and
in the international community will they have the clout to be heard and seriously listened
to.
Strong farmer organisations at the domestic and international levels have become
more important than ever with the advent of globalisation and the need to consolidate
forces not only in the formulation of trade rules but also in conducting trade. Even in
developed countries, farmer co-operatives and similar business enterprises that grew
rapidly in the past when food commodities were in short supply and markets were
generally supply driven are now experiencing major adjustment problems. In many cases,
they face stiff competition from both large multinational firms and niche players who
have assumed larger control over the processing and marketing sectors of the value chain
so as to cater to the requirements of an increasingly demand-driven and consumer-
oriented market. In most developing countries, rarely have large masses of unorganised
small farmers been able to exert market power over emerging hypermarkets and
integrated agribusiness firms. This implies that they will need to act swiftly and
effectively to establish an effective counterforce to industrial concentration.
It is towards this objective that the International Federation of Agricultural Producers
of IFAP has spent the last sixty or so years helping strengthen national farmer
organisations and linking them together into a dynamic international farmers network.
This has enabled national organisations to participate in local decision-making bodies,
implement programmes for their members, and participate in the design and monitoring
of developmental programmes funded by local sources and/or by development aid. Some
farmer organisations have established large and profitable co-operative business
operations that provide important economic services to their members and allow them to
directly and more profitably participate in the domestic and global markets.
At the same time, IFAP has developed close links with international agencies like the
Food and Agriculture Organization (FAO), the World Bank, the International Fund for
Agricultural Development (IFAD), the World Trade Organization (WTO), the
Consultative Group on International Agricultural Research (CGIAR), and similar
institutions to advocate in the international arena.
IFAP maintains a keen and natural interest in development issues because its
members, particularly the large masses of farmers in the developing world, will be the
main beneficiaries of any developmental effort. Through their local and national
networks, the farmer organisations under IFAP can play a constructive role in helping to
design such development programmes, pinpointing inconsistencies based on the
experience and feedback they gather from the field, assisting in the implementation of
such programmes, and participating in monitoring exercises that will measure the success
of such programmes against intended objectives.
A case in point is IFAPs recent collaboration with the Global Forum on Agricultural
Research or GFAR and the FAO. Farmer organisations under IFAP are involved in the
determination of agricultural research and development priorities in different parts of the
world, are also involved in bodies that allocate budgets and set priorities for research
activities and their role in technology dissemination and monitoring programmes.
Similar linkages could easily be developed between IFAP and its member
organisations and OECD countries which seek to implement development projects in
selected areas. IFAP members in fact can provide such donor countries with independent
feedback and proposals which could help in refining the design of development
programmes and ensuring that such programmes complement other initiatives.
There is therefore a clear case of allowing farmers to speak for themselves, making
them active participants in the development process, and ensuring that development
efforts are coherent, effective and responsive to the needs of farmers and the rural poor in
general. As the IFAP stressed during a recent OECD proceeding: Whether or not most of
the millennium development goals are met depends on more effective and pro-poor
producer organisations being engaged in all areas from determining what should be
done, to doing it, to monitoring progress.
Chapter 5.
WHAT IT MEANS TO THE POOR1
Ibrahim Assane Mayaki
Platform (Hub) on Rural Development and Food Security for West and Central Africa
Abstract
It is a well-established fact that improved income-generating capacity and economic

growth are necessary for poverty reduction. Development policies which are incoherent
reduce both growth and income prospects for Third World countries. Yet, poor countries
as well as developed countries continue to implement policies which are not coherent
with their objectives and with the Millennium Development Goals.
As regards the poor at large, policy coherence for development means that national
and global governance policies should not contradict the Millennium Declaration and its
Development Goals. For instance, it is policy incoherent when developed countries
increase foreign development assistance while adopting domestic and trade policies that
create market distortions against strategic and important commodities vital to the
development of Third World countries. A case in point that is well documented is African
cotton.
Policy coherence for development in favour of the poor will therefore mean that all
government and bilateral and multilateral donors should work towards initiating,
implementing and adjusting, at both national and global levels, policies that are not only
complementary but also mutually supportive policies that reinforce poverty reduction,
hunger alleviation and food security goals. In other words, to the poor, policy coherence
for development means supporting, creating and nurturing synergies for the achievement
of pro-poor goals, including economic growth, even if it is not clear that economic
growth can be seen as automatically contributing towards improving the lot of the poor.
In view of the difficulties encountered by West and Central African States in
establishing coherent development policies, a new form of power balance is emerging
with a well-structured civil society poised to defend the interests of the poor. The new
trend is an integral part of a dynamic democratisation process.
Introduction
The fight against poverty has been at the centre of human activities ever since man
appeared on earth. Whereas human beings have been making efforts to reduce poverty
over the years, the gap between the poor and the rich continues to widen, leading to social
and political unrest and even wars. The situation led the international community to
commit itself, at the United Nations Millennium Summit in 2000, to a series of specific
development goals and to dedicate itself to achieving them through a new global
1. The terms poor and developing countries, as used in this paper, refer mainly to the countries and
peoples of West and Central Africa.
partnership. In this regard, developing countries have resolved to establish sound policies,
while the developed countries opted to provide additional aid and ensure that their
policies worked toward supporting the development goals. These decisions were taken at
the International Conference on Financing for Development held in 2002 in Monterrey,
NL, Mexico. The developing countries commitment and the developed countries
decision showed that the international community came to realise that policy coherence
for development is a necessity, contrary to what prevailed until then. After the Monterrey
meeting, the international community decided to set an agenda to promote, via policy
coherence, positive changes in the conditions affecting poor countries and poor peoples in
the world.
With regard to the poor, policy coherence for development means that the national as
well as global governance policies should not contradict the Millennium Declaration and
its development goals. Policy coherence for development also implies, on the one hand,
that development policies elaborated and implemented by developed countries, do not
impede developing countries efforts to achieve the goal of reducing poverty, alleviating
hunger and attaining food security. On the other hand, it means that developing countries
and the poorest countries should make sure that (1) their domestic policies are consistent
with the Millennium Development Goals, (2) the international aid they receive does not
have a negative impact on their ability to produce domestically; (3) and the agreements
they sign are not in contradiction with their own policies and strategies aimed at
developing their economies and creating an enabling environment to improve living
standards for their populations. That being the case, the question that arises is: what then
does policy coherence for development mean or what does it entail for the poor, i.e. poor
countries, especially those of West and Central Africa and their populations?
This paper will attempt to answer the question above by discussing the extent to
which both developed and developing countries policies are coherent with, and can help
them achieve the Millennium Development Goals, with particular regard to reducing
poverty, alleviating hunger and attaining food security, the main concerns of the poor at
large. The paper will focus on the implication of coherent development policies from the
perspective of developed and developing countries and with particular regard to the cases
of West and Central African countries. It will discuss the implication of the lack of
coherence in governing instruments such as domestic macroeconomic policy instruments,
domestic agricultural support, trade-related policy measures, non-tariff regulations,
development co-operation and developing countries domestic policies, and their impact
on the achievement of development goals aimed at accelerating growth and alleviating
poverty.
Policy coherence for development: the case of the Least Developed Countries
In a dynamic and globalised world, most developing countries have been striving to
improve their economies through policies that are not always coherent with their
domestic objectives and those of the Millennium Development Goals. This criticism is
widely shared by the civil society in the Least Developed Countries (LDCs), especially
by farmer organisations and professionals of the agricultural sector whose voices are
being heard in international forums across the globe.
The foundations, such as healthy and well-trained people, communication
infrastructures and investments that would foster steady economic growth and yield
wealth to combat poverty, are lacking in most of these countries. Yet their
macroeconomic policies often do not seem to address these problems. For instance, in
West and Central Africa where most of the countries economies are desperately in need
of capital investments, the French-speaking countries have decided - in a deal with
France - to deposit up to 60% of their export earnings in an account abroad, thereby
depriving their economies of these important resources. Besides, developing countries
have not laid adequate emphasis on education and training as well as investment in
communication and transport infrastructures whereas their economies need qualified
manpower, in order to be more productive and to participate effectively in regional and
world trade.
Given that their economies are usually dependent on their agricultural sectors, the
West and Central African countries should:
Promote public investment in agricultural infrastructures and ensure that credit needed
to modernise production and improve the competitiveness of agricultural products are
available and accessible mainly to producers.
Follow consistent policies to encourage private investment in order to diversify and
intensify production.
Adopt fair trade policies when it comes to agricultural activities and agricultural
exports. In this regard, developing countries should strive to increase the share of
agriculture in their public expenditures so as to promote and create an environment
conducive to agricultural and rural development. Unfortunately, the majority of these
countries have failed to adopt and implement these policy measures. Some of them
have tried but they have failed to do so consistently. The lack of such policy measures
has a negative impact on growth in the agricultural sector and therefore on farm
income, which is essential to increasing demand for basic non-farm products and
services in the rural areas. In turn, this has the potential to create employment and
therefore to contribute to poverty alleviation.
Secondly, these countries economies often rely heavily on foreign markets and aid
although empirical evidence shows that development should first depend on internal
market and local resources in order to be sustainable. Besides, most of the countries are
exporters of primary materials and commodities, which implies that their economies are
dependent on the prices of goods which also happen to be the lowest and the most volatile
in the world markets. As these countries do not process their products before exporting
and selling them, they deprive their economies of the added value that could be gained if
the processing was done in the producing countries. The added value is often several
times greater than the prices of the raw material being exported. Furthermore, in
exporting raw products, Third World countries lose all the jobs that could have been
created if these goods were also processed at home. The loss of such added value,
coupled with job losses, could prevent economies in developing countries from growing
as fast as the economies in developed countries which enjoy the benefits of added value
from processing goods at home. Thus, economic growth of developing economies could
continue to lag farther behind, thereby widening the gap between these economies and
those of developed countries.
Thirdly, while most developing countries are signatories to Regional Trade
Agreements (RTA) within the framework of regional economic integration and Economic
Partnership Accords (EPA), they are also engaged in the World Trade
Organisation (WTO) negotiations. They have also signed bilateral and multilateral
accords which impact their development policies. However, these agreements seem
limited in their usefulness. It is not always obvious that these countries will gain from the
accords they have signed or that they will derive tangible benefits from the outcomes of
the WTO negotiations. While it is possible that the countries would benefit from a boost
in trade through an integration process that could also expand the market, the fact remains
that regional trade agreements implemented among LDCs during the last four decades
have not lived up to expectations. In Africa, the economies of several countries involved
in these trade agreements have stagnated or declined. This is a clear indication that the
overall impact of the regional trade agreements and the integration processes in which
these developing countries are involved are not always coherent with their development
policies and strategies.
During the 1980s, when African economies hit a recession, they were advised to sign
a drastic Structural Adjustment Programmes (SPA) with the Bretton Woods institutions
(IMF and the World Bank). As these programmes very often increased debts for
developing and poor countries, most of the programmes have not yielded the expected
returns. The conditions imposed by these programmes are generally incoherent with the
main objectives of increasing agricultural production, generating more income in rural
areas and reducing poverty. Cutting extension services and resources for research on the
one hand, and taking measures which lead to an increase in the prices of inputs, on the
other hand, have reduced the resources available for making improved technology
packages available to farmers in countries that signed SAPs. Therefore, most agreements
and accords are not coherent with the objectives of developing countries. This means that
if developing countries continue to pursue their policy objectives within the framework of
these accords and agreements, then they are more likely to experience relatively small or
even declining growth and may therefore remain underdeveloped. The solution lies in
poor countries reviewing their domestic policies as well as the agreements and accords to
which they are party with bilateral and multilateral partners in order to make them
coherent with their own development policies and strategic objectives. To that end, better
and coherent domestic development policies should be formulated and implemented and
countries should show the initiative to adjust these policies to social, natural and
economic changes as they occur. This calls for good governance so that the countries can
take the right decisions, set priorities, ensure better resource allocation and management,
and make sure that they are on the right course to development.
Coherence of developed countries development policies
Although in general policies followed by developed countries affect the economies of

Third World countries in one way or another, agricultural policies in particular have the
most significant impacts on the welfare of poor countries. In general, agricultural policies
pursued by developed countries can be grouped into four categories. First, they provide
domestic income and price support to their farmers, thereby providing their farmers with
opportunities to manage their resources better and be more competitive. Secondly, they
usually adopt regulatory measures for food safety, environmental protection, consumer
safety and protection, as well as intellectual property rights that affect trade in agricultural
products. Thirdly, these domestic market interventions are usually supported by trade
policy measures such as border tariffs and/or export and even domestic subsidies. Finally,
at the international level, they often pursue development co-operation policies, including
agricultural assistance and food aid programmes, trade preference to LDCs, duty-free and
quota-free access to markets and trade liberalisation. A fundamental question in this
context could be: If the developed countries policies have the potential to influence
progress in the Third World countries, then in pursuing their policy objectives, are
developed countries concerned about the coherence of their policies for the development
of the poor countries?
In this section of the paper, we will try to answer the above question and to determine
the impact of coherence in developed countries policies or the impact of their
inconsistencies on the development of poor countries. In that context, we will also assess
the African countries chances of attaining the Millennium Development Goals.
Furthermore, we will examine the coherence of agricultural policy measures (category-
wise) adopted by developed countries vis--vis the developing countries objectives and
the impact of these policies on both poor countries and on their rural populations in
particular.
Income and price support measures

These two domestic policy measures often adopted by developed countries to increase
incomes for their producers are usually coupled with trade-distorting border tariffs and/or
export subsidies that lower world prices and reduce both exports and welfare in
developing countries. According to Mathews2, the loss in welfare incurred by developing
countries is estimated between five and ten billion dollars annually. Empirical studies
have shown that developing countries have the most to gain from the withdrawal of tariff
barriers and that subsidies are trade-distorting, with export subsidies being the most
disruptive instruments for particular commodities and in particular markets. The adverse
impact of subsidies on developing countries cotton is a topical issue. Despite such well-
documented evidence, developed countries committed to helping the poor countries attain
the Millennium Development Goals have not given up, and are not willing to abandon, at
least for the time being, those policies that are not coherent with the objective of helping
poor countries in their endeavours to foster living better conditions for their people.
Consequently, developing countries need to negotiate with developed countries so that
they progressively phase out such policy measures that are incoherent with their
development objectives.
Regulatory measures
Although commodity standards in general and food standards in particular are
necessary and good for international trade, especially for developing countries, more and
more developed countries are setting stringent standards for food and other agricultural
commodities. In fact, to address their populations growing concern about food safety,
food quality and environmental protection, developed countries, sometimes unilaterally,
set new standards and adopted more regulations which the poor countries found difficult
to meet. These measures have effects on the level of trade between developed and
developing countries. They reduced exports and export opportunities in some cases and
diverted trade from developing countries that had difficulties in meeting the required
standards. In the absence of adequate infrastructures, and with their low level of
resources, most developing countries find it difficult to comply with the new regulations
and consequently their market shares for exports in developed countries are declining.
2. Matthews, A. (2005), Policy Coherence for Development: Issues in Agriculture, An Overview Paper
prepared for the OECD Global Forum on Agriculture: Policy Coherence for Development.
For example, when the European Union adopted its new regulation on Maximum
Residue Limits in fruits and vegetables, two African countries, Cameroon and Cte
dIvoire, suffered a sharp decline in their export earnings from these commodities. It took
the two countries a few years to recover partially from these losses, which had a negative
impact on their finances and on the welfare of their producers. Sanitary and Phyto-
Sanitary (SPS) regulations are made to protect consumers so they are important in trade.
However, SPS regulations have been and are being used by developed countries to
discriminate against and limit trade in some commodities, especially from Third World
countries. In those cases, the process of adopting SPS regulations becomes an incoherent
policy that negatively impacts on the development objectives of Third World countries in
particular.
Development co-operation policies

Development co-operation policies, including agricultural assistance and food aid
programmes, trade preference to LDCs, duty-free and quota-free access markets and trade
liberalisation have been among the policies and strategies used by developed countries in
the framework of development co-operation to assist developing countries in their efforts
to the Millennium Development Goals. Although these policy measures are useful for
both developing and developed countries, it is however important to note that they have
not always helped the Third World countries attain the expected level of development.
Development assistance is consistent with developed countries commitment to help
developing countries pull out poverty by improving their economic growth and income
generating capacity. But there is no coherence for development if developed countries
increase their foreign assistance to developing countries while creating trade distortions
against some of the most important commodities like cotton that could foster economic
growth in the poor countries. Furthermore, developed countries have not always provided
sufficient assistance, either in terms of quantity or quality, on a timely basis. Therefore,
foreign assistance in most cases becomes ineffective since it does not allow developing
countries to rationally invest and get positive returns on their investments.
In the trade sector, developed countries have offered non-reciprocal trade preferences
to developing countries so as to boost their exports and contribute to their development.
They have also used duty-free and quota-free measures to provide additional assistance as
a means of integrating the vulnerable economies of poor countries into the global
economy. Yet, in the framework of Economic Partnership they are negotiating
multilateral liberalisation that will reduce the value of the preferential marginal gains
enjoyed by developing countries through non-reciprocal preferences. This will reduce
income prospects for developing countries and will eventually impede their development.
With food aid, developed countries have provided direct help, enhanced the
availability of food in markets by lowering prices and have improved sustainability of
balance of payments for poor countries facing foreign exchange shortages. Empirical
evidence shows, however, that direct food aid creates distortions in developing countries
and regional markets, a situation that leads to dependence on food aid, negative impacts
domestic food production and changes in local nutritional habits which cannot be
sustained. Several studies have demonstrated that food aid for development is more
expensive than commercial food imports. Therefore, providing funds to developing
countries for purchasing food on commercial terms is better than direct food aid.
Nevertheless, most developed countries continue to use direct food aid as a way of
helping developing countries cope with their food security problems. In some sense, this
strategy helps developed countries to rid themselves of their surplus even though it is not
coherent with the development objectives of their partners.
Conclusion
It is a well-established fact that improved income-generating capacity and economic

growth are necessary for poverty reduction. Policy incoherence in development leads to
actions that reduce both growth and income prospects for Third World countries. Yet,
poor countries as well as developed countries continue to implement policies which are
not coherent with their objectives and with the Millennium Development Goals.
With respect to the poor at large, policy coherence for development means that
national and global governance policies should not contradict the Millennium Declaration
and its Development Goals. For instance, it is policy incoherent when developed
countries increase foreign development assistance while adopting domestic and trade
policies that create market distortions against strategic and important commodities vital to
the development of Third World countries. A case in point is African cotton.
Policy coherence for development in favour of the poor will therefore mean that all
government and bilateral and multilateral donors should work towards initiating,
implementing and adjusting, at both national and global levels, policies that are not only
complementary but also mutually supportive policies that reinforce poverty reduction,
hunger alleviation and food security goals. In other words, where poverty allevation is
concerned, policy coherence for development means supporting, creating and nurturing
synergies to achieve pro-poor goals.
In view of the difficulties encountered by West and Central African States in
establishing coherent development policies, a new form of power balance is emerging
with a well-structured civil society poised to defend the interests of the poor. The new
trend is an integral part of a dynamic democratisation process.
REFERENCES
Anderson, K. (2004), Agricultural Trade Reform and Poverty Reduction in Developing
Countries, World Bank Policy Research Working Paper 3396, Washington, DC, World Bank.
OECD (2003), Policy Coherence: Vital for Global Development, Policy Brief, OECD,
July 2003.
OECD (2004a), Policy Coherence: Vital for Global Development, Policy Brief, OECD,
January 2004.
OECD (2004b), Agriculture and Key Issues for Policy Coherence for Development, OECD,
January 2004.
OECD (2004c), The Impact of Coherence of OECD Country Policies on Asian Developing
Economies, OECD, May 2004.
OECD (2005), Making Poverty Reduction Work: OECDs Role in Developing Partnership,
OECD, September 2005.
Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System 89
PART II. ENHANCING GLOBAL AGRICULTURAL TRADE

THROUGH A FAIR AND MARKET ORIENTATED
TRADING SYSTEM
Chapter 6.
ENHANCING GLOBAL AGRICULTURAL TRADE: A STATUS REPORT
Carmel Cahill
Directorate for Food, Agriculture and Fisheries, OECD
Abstract
This paper looks at recent trends in trade in agricultural and food products, focussing
on some key changes in the direction of trade flows between developed and developing
countries. It reviews the current situation with respect to levels of support and protection
in the OECD region and in some key non-OECD countries that are major players in
agriculture and in agricultural trade. Market access and export competition issues are
also reviewed. Some preliminary results are given from a recent OECD study that
examines the impact of across the board reform of domestic support and protection at
global, national and household levels.
Broad trends in world trade in agricultural and food products
Understanding the changing structure of trade flows in agriculture and food products
is important in understanding the trade policy stance of different countries and groupings
as reflected in the on-going Doha Development Round. It is also important in
understanding the scale and incidence of the trade liberalisation impacts projected in trade
modelling exercises and how and why they differ across regions, countries and
commodities.
An indication of market share of the OECD, the Least Developed Countries (LDCs)
and the rest of the world is given in Table 1. Agricultural trade is still dominated by the
countries that constitute the OECD area. These countries account for over 70% of world
exports of agricultural products and about 75% of world imports. Although these shares
are slightly lower in recent years than prior to the Uruguay Round Agreement on
Agriculture, the change has been small, and does not challenge OECDs dominance.
Least Developed Countries on the other hand account for a tiny share of world
agricultural trade. That share has been growing much faster for imports than for exports,
but remains small. Other countries have maintained their share of world exports in the
post URAA period, but their share of imports has increased.
Table 1. Shares by regions of agricultural trade
Share of exports Share of imports

1990-1994 2001-2004 1990-1994 2001-2004
OECD 71.4 71.0 77.1 75.0
LDCs 0.4 0.8 0.4 1.1
All Others 28.2 28.1 22.5 23.8
Source: UN Comtrade, 2005.
92 Part II. Enhancing Global Agricultural Trade Through a Fair and Market Orientated Trading System
These broad indications mask some significant changes in the composition and
direction of trade flows. Trade in processed products has been growing faster than trade
in commodities and trade among developing countries has been growing faster than trade
between developed and developing countries [FAO (2004) The State of Agricultural
Commodity Markets]. However, as seen in Table 2, with the exception of south-south
trade (developing country to developing country) growth in agricultural trade flows
slowed following the URAA.
Table 2. Growth by region in agricultural exports*
1990-1994 1994-2004
Developed to developed 3.1 4.3
Developed to developing 8.6 5.3
Developing to developed 8.0 2.0
Developing to developing 16.3 7.5
*Average annual growth rates.

Source: UN Comtrade database, September 2005.
A feature of agricultural trade developments in recent decades has been the switch in
the trade status of developing countries, who as a group have become net importers. This
is illustrated in Figure 1. Since the mid 1980s LDCs have consistently reported net
imports of agricultural and food products, in contrast to the 1960s and 1970s when they
were net exporters. Similarly for all developing countries although for this much bigger
grouping, the net trade status has fluctuated between net importer and net exporter status
in recent years. For this group also the contrast with the earlier period is clear. With the
exception of a short period at the beginning of the 1980s, developing countries were
consistently net exporters of food and agricultural products up until the early 1990s.
How important are agricultural trade flows in overall economic terms for the different
regions or groupings? The answer to this question helps in understanding the concerns
that underpin negotiating positions. For OECD countries generally, despite overall
dominance of global trade flows, agricultural imports and exports account for less than
2% of GDP. Nonetheless, agricultural exports are relatively more important for countries
like Australia and New Zealand (3 and 12% of GDP respectively). In contrast agricultural
trade relative to GDP is much higher for LDCs over 4% for imports and almost 3% for
exports. For remaining countries (those not belonging to OECD or to the LDCs) the share
of both imports and exports is in the region of 2.5%. Among the non-OECD countries
agricultural exports are particularly important in the economies of countries such as
Brazil, Argentina and Chile. Table 3 summarises these indicators for the main OECD and
non-OECD country groupings.
Figure 1. DCs and LDCs Importers
20
15
10
5 Developing countries,
Agricultural Products
Developing countries,
0 Food and Animals
LDCs Agr Products
-5
LDCs Food and
Animals
-10
-15
61
63
65
67
69
71
73
75
77
79
81
83
85
87
89
91
93
95
97
99
01
03
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
Source: FAOSTAT.
Table 3. Significance of trade and agricultural trade
All exports as a All imports as a Agricultural Agricultural

share of GDP share of GDP imports as a exports as a
share of GDP share of GDP
OECD 17.4 18.9 1.5 1.7
LDCs 12.6 20.0 4.3 2.7
All others 29.2 26.9 2.4 2.6
Source: UN Comtrade, 2005; World Bank.
No attempt is made here to analyse or explain these changing trade flows. However,
the underlying economic drivers and their interpretation are likely to be very diverse. A
switch to net-import status could be the reflection of an agriculture sector unable to
supply adequate food for a growing population or unable to compete with subsidised
exports from developed countries. But, it could also reflect a more positive evolution
towards specialisation in a growing economy that is switching resources into production
of non-agricultural goods and services and increasingly able to import food to meet the
needs of a larger and better-off population.
How a country fares as a result of trade liberalisation depends, inter alia, on the
importance of the liberalising sectors in its economy, its net trade status for different
products and on the changes in the terms of trade that result from the process. These
issues will be explored further in the section presenting the results of OECD work on the
impacts of agricultural and trade policy reform.
Support and protection in OECD agriculture
OECD estimates levels of support in agriculture for each of its member countries and
for selected major non member economies, in the form of the Producer Support Estimate.
The trend in this indicator for OECD as a whole and an illustrative selection of countries
is shown in Figure 2. Although declining, the percentage PSE for the OECD area as a
whole has remained stubbornly high, currently in the region of 30%. The variation across
countries is wide, with Japan Korea, Norway and Switzerland all reporting %PSEs in
excess of 50, while the reported levels for Australia and New Zealand have been below
5% for a long period. Although it fell significantly in the decade to the mid 1990s,
support to agriculture in the US has been relatively high in historical terms in most recent
years. The EU supports its farmers to a greater degree than the OECD average, although
the overall level has been falling slowly. Major non-OECD players in world agricultural
production and trade for whom the PSE has been estimated tend to fall systematically into
the lower range of support levels, as evidenced by PSEs for China of 6% (2000-2003) and
Brazil for 3% (2002-2004).
There are many ways in which governments can deliver support to farmers.
Traditionally they have chosen to support prices above market clearing levels with the
help of border measures such as tariffs and quotas. More than 90% of support to
agriculture was delivered in this way or through input subsidies at the time the Uruguay
Round was launched. These measures have been shown to be the most distorting in terms
of generating production and trade surpluses. It is also increasingly acknowledged that
such measures are seriously flawed as vehicles to deliver income support to agriculture
because of leakages to unintended beneficiaries outside the sector. They also have
perverse distribution impacts which result in the bulk of the support going to those who
already produce the most. In recognition of these flaws, and under increasing pressure
resulting from the Uruguay Round and the current DDA negotiations, some OECD
governments have been making significant changes in the way they deliver support to
their farmers. Most noticeable has been a shift away from price supports to direct
payments that are, over time, increasingly linked to historical or other fixed parameters
and which as a result as likely to be less distorting in terms of production and trade. As
can be seen in Figure 3 the share of this type of measure in the overall composition of
support to producers in the OECD has increased significantly. It should nonetheless be
noted that the most distorting measures still dominate the overall picture.
Figure 2. How levels of support have evolved
50
40
30
EU
OECD
20 USA
China
South Africa
10 Australia
Brazil
New Zealand
0
-10
-20
p
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
20 3
0
04
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
Source: OECD PSE/CSE databases.
Figure 3. Composition of support
1986-88 2002-04 Price support
Payments based on
area planted/animal
numbers
Payments based on
historical entitlements
Payments based on
input use
Payments based on
input constraints
Miscelaneous
Source: OECD PSE/CSE databases.
Governments are not able to raise farm prices above those prevailing on world
markets unless border measures are in place. Since the Uruguay Round Agreement on
Agriculture, only tariffs and tariff-rate-quotas have been permitted. Despite the reductions
in tariffs agreed and since implemented, bound tariffs in agriculture remain high. Figure 4
shows their distribution for the OECD Quad countries, comprising the US, the EU,
Canada and Japan. Although shown in highly aggregated form, it is clear that a
significant share of tariff lines carry tariffs that are in excess of 20%, and that the
incidence of bound tariffs in excess of 100% is quite significant. Although not revealed in
this graph, these high tariffs often apply to sectors of agricultural production that are
important and extremely sensitive in the countries concerned rice in Japan, dairy
products in Canada, beef and dairy products in the EU, sugar and dairy in the US.
In order to ensure that some degree of market opening occurred as a result of the
URAA, despite the persistence of very high tariffs in many sectors, a system of tariff rate
quotas was instituted as part of the agreement. Under these arrangements opportunities
were to be allowed for the importation of specified shares of domestic consumption of
particular products again mainly those subject to the highest tariffs. These imports were
to occur at tariffs significantly lower than the bound tariffs described in Figure 4. Again,
the results of this market opening device were relatively modest. Many tariff-rate quotas
have not been completely filled throughout the period since URAA implementation
began, and overall, utilisation of these export opportunities has tended to decline from
initial levels. Whether poor and falling fill rates relate to aspects of the way in which the
TRQs are administered, or are a reflection of underlying market conditions, is difficult to
determine.
Figure 5 provides a snapshot of levels of import protection accorded by OECD and

non-OECD countries to the main product groupings, towards the end of the period of UR
tariff cuts. In contrast to Figure 4, the tariff rates used here are the applied rates (not the
bound or maximum legally allowed rates under the WTO) and also reflect the preferences
that are granted to some countries by others under various bilateral, multilateral,
reciprocal and non-reciprocal arrangements. These aggregates confirm the existence of
much higher rates of protection in both primary and processed agricultural products than
for textiles or manufactures generally. They also confirm that OECD countries tend to
protect their primary agricultural sectors from imports to a significant degree, while both
OECD and non-OECD provide relatively high levels of protection to processed
agricultural goods. An interesting feature that emerges from this figure is that developing
countries generally accord much higher protection against textiles and manufacturing
goods than they face themselves in trying to access OECD markets, thus potentially
restricting growth in trade among non-OECD countries, across the whole range of
agricultural and manufactured goods.
Figure 4. MFN Bound tariff distribution-QUAD
60
50
40
US
EU
30
CANADA
JAPAN
20
10
0
0 <5 5 <10 10 <20 20 < 50 50 <100 100+
Source: OECD/AMAD.
Figure 5. Average applied import tariffs by sector and region (2001)
20
15
OECD levied
10
%
non-OECD levied
0
Primary Agriculture Processed Textiles, clothing Manufacturing
Agriculture
Source: OECD (2006), Global National and Household Level Effects Trade and Agricultural Policy Reforms.
Export subsidies were disciplined in the URAA, as a result of which resort to them
has declined significantly. Countries for which the export subsidy disciplines were
constraining, principally the European Union, have been able to scale back their use as a
result of domestic policy changes that resulted in sharp reductions in administered or
policy-determined prices, accompanied by shifts to direct payments based on criteria
other than output, such as area. Nonetheless, the EU, which still accounts for more than
90% of notified export subsidies under the URAA, has continued to subsidise its exports
of some products up to close to the permitted limits for a number of important
commodities, among them cheese and other dairy products. Overall, however, both the
volume subsidised and associated expenditures have fallen dramatically [WTO(2002),
Export Subsidies, Background Paper by the Secretariat, TN/AG/S/8].
Under the current Doha Development Agenda negotiations, complete elimination of
all export subsidies is under discussion, conditional on satisfactory ways also being found
to discipline the use of export credits, the trade distorting impacts of food aid, and the
distorting effects of the activities of state trading enterprises that have monopoly control
over exports of some commodities. Work undertaken by the OECD with respect to export
credits has shown that they are associated with a relatively small share of agricultural
trade in general 4.4% and that the share of the largest user the US is also small at
around 5.2%. The subsidy element in these arrangements has also been found to be small
no more than 4% for the OECD as a whole and 6.6% for the US (OECD (2004),
Agriculture and trade liberalisation: extending the Uruguay Round Agreement).
Significant progress has already been made in defining and agreeing ways in which the
subsidy element of export credits can be disciplined, but discussions on food aid and state
trading have not yet been concluded. Irrespective of whether these export issues are mere
irritants, or significant determinants of international trade in food and agricultural
products, agreement to effectively discipline them in the context of the DDA will be
important in locking in the progress that has already been made. It will also provide
reassurance to countries that are reluctant to open up access to their markets that they will
not be flooded with large quantities of subsidised exports, should they do so.
Global, national and household effects of trade and agricultural policy reform
OECD has been involved in a major study designed to improve understanding of the
nature and magnitude of market and welfare effects of reducing trade protection and
trade-distorting domestic supports globally and in those countries implementing the
reforms [for a more complete description of the models used GTAPEM and several
household models the scenarios undertaken and the detailed results see OECD (2006
forthcoming) Global, National and Household Level Effects of Trade and Agricultural
Policy Reform]. The specific policy scenario evaluates the changes that would accompany
a halving of all merchandise tariffs and agricultural export subsidies worldwide and of
agricultural domestic support in OECD countries. National and sectoral impacts were
analyzed using a global general equilibrium model. Household level policy effects
associated with these national level impacts, were evaluated using a variety of different
micro-level models in five country case studies: Brazil, Italy, Malawi, Mexico, and the
United States.
Economic welfare changes as a result of reform

The changes in economic welfare that result from the reform scenario already
described are summarised in Table 4, in a way that allows the effects to be decomposed
according to the policy category and country grouping which is the source of the change,
and according to the effect on specific countries and regions, both in absolute terms and
as a percentage of GDP.
Table 4. Decomposition of welfare effects by broad policy category,

region and country implementing the reforms, EV million USD
Total % of OECD non-OECD OECD non-OECD

Welfare GDP Agriculture Agriculture non-Agriculture non-Agriculture
World 44 268 0.1 23 361 3 124 6 694 11 357

OECD 33 459 0.1 21 407 1 871 -248 10 680
Non-OECD 10 809 0.2 1 954 1 253 6 943 677
OECD
Australia/New Zealand 1 006 0.2 885 97 50 8
Canada 269 0.0 747 29 -376 -130
European Union 15 10 791 0.1 7 005 702 -1 521 4 775
Japan 10 007 0.2 5 746 -21 2 091 2 195
Mexico 452 0.1 38 -30 463 -15
Turkey 631 0.4 158 92 48 334
United States 2 995 0.0 3 071 714 -2 218 1 457
rest of OECD 7 308 0.6 3 758 288 1 214 2 054
Non-OECD
Brazil 1 730 0.3 1 178 94 367 96
China 3 739 0.3 -73 -199 3 373 635
India 1 723 0.4 72 544 378 735
Indonesia 484 0.3 -35 80 308 128
Malawi 24 1.4 19 -1 1 6
Russia 8 0.0 -133 166 55 -83
Thailand 1 204 1.0 190 225 237 551
South Africa 253 0.2 69 25 23 137
rest of SS. Africa -240 -0.1 61 65 -136 -220
rest of World 1 884 0.1 607 253 2 335 -1 309
Agriculture includes primary and processed food.
Source: GTAPEM simulation results.
Welfare gains overall are significant USD 44 billion although they are in the
lower range of estimates currently reported in the literature from similar studies. This is
partly because the analysis is based on more recent data but also because other studies
factor in benefits from policy reform that might come through other channels such as
induced improvements in productivity or complementary reductions in transactions costs.
The policy changes implemented by OECD countries would contribute the lions share of
the global gain reported here and agricultural policy reforms account for most of that. It is
notable also that OECD itself captures the bulk of the benefits. This reflects several
factors, mainly that the OECD dominates in terms of the overall support and protection
accorded to agriculture and is therefore itself the most likely to gain from the removal of
the resulting distortions and inefficiencies. Another element in the explanation relates to
the continuing dominance by OECD of agricultural trade in the base period for the study.
It should be noted also, however, that the reductions of import tariffs by non-OECD
countries also yield a significant contribution to the reported OECD gains.
Synthesis of Main Numerical Results
67% of the benefits come from OECD reforms.
78% of the benefit of OECD reforms comes from agriculture.
90% of the benefits of OECD agriculture reforms go to OECD countries.
70% of the gains to non-OECD countries comes from liberalisation of tariffs on textiles and
industrial goods.
Non-OECD countries as a group also gain overall from the hypothetical halving of
OECD farm support and protection but not nearly so much as OECD countries
themselves gain from such reform. Likewise, although not shown here, agricultural value
added for the non-OECD region increases. These gains are concentrated in a
comparatively small number of middle-income agricultural exporting countries, and
Brazil is dominant in this group. LDCs as a group are virtually unaffected by the
agricultural policy reforms. Some report overall welfare losses, but their overall
magnitude is insignificant as are the gains for some other LDCs. These findings reflect
the minor role that these countries play in agricultural trade and the relatively minor role
of agricultural trade in their economies in the base period. In fact, findings show much
larger potential gains for the non-OECD region from reduction in the trade protection that
OECD countries afford their producers of textiles and other industrial products than from
reduction in OECD agricultural support.
The scenario reported here involved a simultaneous global reduction in import tariffs
applying to both agriculture and goods trade, and a reduction in domestic support in
OECD countries. The reported welfare gains derive overwhelmingly from the tariff
changes. OECD gains from both agricultural and non-agricultural tariff reduction but the
former dominates. In the case of non-OECD countries, virtually all the gains arise
through market access improvements rather than through the reform of domestic support,
but in this case it is reductions in non-agricultural tariffs that are of greatest significance
for non-OECD countries. The direction and trend of the predicted changes reflect many
complex factors. Among them, the relative importance of agricultural trade compared to
trade in goods, the terms of trade effects that result from the reform process and the
starting levels of protection are all important (Tangermann 2005, Organisation for
Economic Co-operation and Development Area Agricultural Policies and the Interests of
Developing Countries in American Journal of Agricultural Economics, 87, N5).
Table 5. Decomposition of global welfare gains by support category and region

implementing the policy change, million USD
OECD Non-OECD Total

Import tariffs agriculture 17 546 3 128 20 674
Capital payment 3 928 3 928
Land payment 875 875
Export Payment 660 -3 657
Intermediate input payment 181 181
Output payments -97 -97
Subtotal agriculture 23 093 3 124 26 217
Import tariffs non-agriculture 6 694 11 357 18 051
Total 29 787 14 481 44 268
Elements do not equal exactly to the total due to errors in approximation.
Agriculture includes primary and processed food.
Source: GTAPEM simulation results.
Household level impacts

As indicated above, household level policy effects were evaluated using a variety of
different micro-level models in five country case studies: Brazil, Italy, Malawi, Mexico,
and the United States. The case studies differ in their construction, reflecting the different
structures of the economies as well as data availability. But, they each embed micro
(household) level information in a macro (region or economy-wide) behavioural model
and they each contain groups of representative households that collectively represent
the totality of household types in the economy. The key elements in tracing out the
distributional impacts of reform are household responses to policy change, products and
factor market interactions, and economy-wide linkages.
The detailed categorisation of households differs in each study. However, there is a
broad distinction between commercial and non commercial farm households (with one or
more sub categories in each case). The former tend to behave more like firms, consuming
little of their own output and supplying few of their own inputs. The non-commercial
category differs considerably between developing and developed countries. In poorer
countries, this category corresponds to subsistence or semi subsistence households. In
richer countries, the non commercial category typically equates to lifestyle or
retirement farm households, which are characterised by high levels of off farm income.
Two further broad categories of household are agricultural wage earners and urban
(consumer) households. These groups may be particularly important in developing
countries, where there tend to be more landless workers and the urban population spends
a substantial share of its income on food.
In both developed and developing countries, the immediate effects of reforms on
commercial farmers tend to be greater than the incidence on non-commercial farm
households. If a commodity sector stands to gain on aggregate from multilateral reform,
say due to higher export prices, then commercial producers in that sector will reap the
majority of those gains. Similarly, if the sector stands to lose, because lower domestic
protection is not sufficiently offset by higher world prices, then commercial farmers will
incur the majority of those losses. Non-commercial farms tend to have higher off-farm
income, which dampens the effect of price changes on total income, and in developing
countries they also consume a significant share of what they produce, which has a similar
effect. In some cases, non-commercial (subsistence) producers may consume more than
they produce, in which case the incidence of reform is reversed.
The main features of the results for the individual countries that were the subject of
the case studies are as follows:
In Brazil welfare gains are widespread across household types. Poorer categories of both
urban and rural household are better off and the incidence of poverty falls but inequality
among agricultural producer household increases. In addition, agricultural employees
gain more than any other type of agricultural household, as demand for farm labour
increases.
The vast majority of households in Malawi are poor. Commercial producers of the
dominant cash crop, tobacco, who are less poor, gain from higher prices. The resulting
increase in their demand for labour benefits poor non-commercial households who cannot
grow tobacco, but lowers the incomes of poor farm households that hire in labour. On the
other hand, the effects of maize price increases/decreases (the main food staple) are very
context specific, depending on the range over which price increases occur, whether the
household has a net surplus or deficit, and the relationship between maize prices, wages
and fertiliser prices.
In Mexico, the principal scenario implemented involved declining prices for cash crops
and livestock, and lower urban wages. The estimated real incomes of all agricultural
households fall in response, but the declines are greatest for producers with more than
5 ha of land. There are similar, but much smaller impacts for landless households and
smaller producers with less than 5 ha. These average impacts for Mexico could mask
significant regional differences.
In Italy, all categories of farms post losses following global agriculture and trade policy
reforms. Medium to larger family farms lose relatively more than the small, limited
resource and retirement farms due to simulated falls in land rental rates due to support
reductions under the global reform scenario. All categories of urban households gain
from the reduced tax burden that comes with reductions in budgetary payments. Overall
national welfare improves.
In the United States all categories of farms lose payments as a result of the reform and
although the loss is greatest in absolute terms for very large farms, it is residential and
farm occupation farms that lose most relative to value of production. Once the
adjustments triggered by the reform are complete all farm types gain. This occurs because
the loss of subsidies is outweighed by the benefits arising from stronger international
prices, notably higher wages and improved returns to assets. The greatest income gains
accrue to residential and lifestyle farms because of their greater capacity to adjust than
other farm household types.
The case studies reported here are illustrative. The diversity of reported impacts
within any given country will be context specific. Within any given population of farm
and non- farm households there will be winners and losers depending on their output and
factor mix and their off-farm earning possibilities, the importance of food in the
household budget and other factors. Compensation or adjustment policy may be
appropriate for those negatively affected but will need to be designed for specific
households and contexts. The best adapted policy may fall outside the domain of
agricultural policy being more properly within the domain of broader social and
development policy. Measures to improve adjustment capacity include public investments
in area such as education and training, research and extension and health (notably in poor
countries). Such policies need to be targeted regionally, or at the household level. Models
like those used in the case studies can pick up variations in adjustment capacity and thus
in the relative need for adjustment assistance. Providing that assistance could be
important in creating the conditions that favour reform and market opening initiatives,
which would benefit the majority of countries and the majority of households in them.
Summary and conclusion
OECD dominates global trade in agricultural and food products and developments in
recent years have had little impact on that dominance. Additionally, OECD countries on
average continue to provide high levels of protection and support to their agricultural
sectors, despite reform efforts that have been on-going for two decades and recently
completed implementation of URAA commitments. It is therefore not surprising that
when significant reductions in global protection and support are simulated most of the
resulting gains accrue to the OECD countries themselves. Non-OECD countries provide
relatively high levels of protection on imports both of agricultural and manufactured
goods. Reform also benefits these countries. Welfare increases as a result of non-
agricultural reforms carried out by the OECD countries are the main source of their
income gains, but liberalisation of agriculture in both regions is also important. Almost all
individual countries or groupings gain overall although, in many cases, both gains and
losses are rather small. A complex picture of the distribution and incidence of gains and
losses among different types of households within affected countries emerges. This
suggests that carefully planned and targeted adjustment or compensation programmes
could be helpful in getting reform and liberalisation underway so that the significant
benefits simulated to occur overall, as a result of the process, can be realised.
Chapter 7.
HOW CAN POLICY COHERENCE ENHANCE GLOBAL
AGRICULTURAL TRADE?
Joachim von Braun and Tewodaj Mengistu
International Food Policy Research Institute
Abstract
Since trade policy is an instrument for growth and development, this paper focuses on
how to incorporate the Policy Coherence for Development (PCD) agenda into domestic
and international agricultural policies. Progress in coherence in select developing
countries market and trade policy is noted. The role of coherent policy sequencing is
highlighted and exemplified in the cases of China and India. Further, since trade and
investment interact, the central role of such links is elaborated on. The paper concludes
that sound domestic and international trade policy must be an integral part of the PCD
agenda. This has implications for the global trade policy agenda.
Introduction
Aiming for policy coherence is part of aiming for good policy.1 The purpose of this
paper is three fold. Firstly, it examines some of the major policy incoherencies in global
agricultural trade. Secondly, it reviews the linkages between global agricultural trade and
growth and poverty reduction in developing countries while focusing on their
international trade and domestic market policies. Finally, it suggests actions that would
improve policy coherence, which could in turn translate into enhanced global agricultural
trade that would serve development.
In approaching these issues we stress that trade policies are not goals, but instruments.
PCD in relation to agriculture trade has to consider goals, such as growth, poverty
reduction, environmental sustainability and improvements in health. We mostly focus on
these goals and on poverty in particular.
1. An irrelevant alternative which however exists is that of a policy being coherent but bad, as they say in
former planned economies.
We broadly follow Picciottio (2004) coherence taxonomy with some extensions.2 The
focus will mostly be on how developing country policy makers can incorporate the PCD
agenda in their domestic agricultural and trade policies. Because of the dynamic and
complex nature of policy making, the need for a strategic approach for achieving policy
coherence will be highlighted. Moreover, because trade and private investment (including
foreign direct investment) at the national level are mediated through public investments,
the central role of such investments will be elaborated upon as well.
At least two questions need to be considered from a conceptual perspective:
What are the principal driving forces of agricultural trade expansion and what might be
the incremental contribution of policy coherence in facilitating further growth in
agricultural trade? This question should lead us to normative assessments.
What actual policy coherences or incoherencies stand in the way of agriculture trade
expansion, and why? This question will lead us into positive assessments. The why
question in particular requires assessment in the context of initial conditions. Quite
different from an ideal world of all-inclusive policy coherence, the reality of economies
operating on different time-paths with differing initial conditions must be considered.
In the next section, we briefly look at some of the underlying theoretical concepts of
policy coherence and examine their relevance to agricultural trade policies for
development. Then, in a second part, we review the existing incoherencies in global
agricultural trade. In a third part, we review the linkages between enhanced global
agricultural trade, growth, and poverty reduction. Finally, we conclude by suggesting
some actions towards achieving better coherence in agricultural trade policies to reflect
development objectives, as stipulated in the Millennium Development Goals (MDGs).
Some underlying theoretical concepts of PCD
According to the theory of economic policy elaborated by Tinbergen (1952),

economic policy systems are distinguished and subdivided according to the targets that
policy makers have set. Economic policy instruments are then used to attain these targets.
Tinbergen argued that there have to be at least as many instruments as targets in order to
efficiently achieve the set targets, and because of the interdependence and inter-linkages
among targets, these instruments need to be co-ordinated and not used in isolation
towards achieving any one target individually (Tinbergen, 1952).
2. As summarised in Dahlsten (2005) in Key issues for Policy Coherence for Development: Agriculture, the
Picciottio (2004) taxonomy distinguishes the following four different dimensions of policy coherence for
development:
a. Internal coherence: Is there consistency between the goals and objectives, modalities and protocols
of an OECD government development policy (between bilateral and multilateral aid, technical
assistance, and aid channelled through NGOs or private sector)?
b. Intra-country coherence: Is there consistency among aid and non-aid policies in an OECD member
government in terms of its contribution to development?
c. Inter-donor coherence: Is there consistency of aid and non-aid policies across OECD member
countries in terms of their contribution to development?
d. Donor-recipient coherence: Is there consistency of policies adopted by rich and poor countries to
achieved shared development objectives?
In terms of development policy, the Millennium Development Goals (MDGs), which

contain eight different objectives, encompass multiple targets which have gained wide
acceptance. Thus, according to the Tinbergen rule, since the development policy system
is composed of multiple targets, it is first necessary to have as many instruments as
targets in order to effectively achieve these targets, and secondly, to the extent possible,
these instruments need to be co-ordinated. Therefore there has to be some type of
coherence between the different policy instruments implemented (von Braun, 2005b).
In a bid to improve such coherence, the Organisation for Economic Co-operation and
Development (OECD) launched the concept of policy coherence for development (PCD),
which it defines as a process whereby a government makes an effort to design policies
that take into account other policy communities, minimize conflicts and maximize
synergies (OECD, 2005a).
To fully understand the notion of PCD, it is important to firstly recognise the dynamic
framework of policymaking and secondly, the complexity of the PCD agenda. Indeed,
development policy is a dynamic concept with ever changing economic and social
contexts both nationally and internationally. In effect, the PCD agenda is also constantly
evolving, as different policies are implemented to deal with changing contexts. As for the
complexity of the PCD agenda, as well noted by Picciottio (2004), there are several
dimensions that need to be considered. In addition, the policy field involves a variety of
actors at different levels of governance (international, regional, national and local) and
these various actors may be advocating for different and conflicting objectives (Fresco,
2004). Policy makers have to therefore reconcile these objectives through negotiations
and compromise in order to come up with a coherent system of economic policies. This
operates in a market of supply and demand of policies. However, as Rausser and Irwin
(1987) warn, policy makers can be manipulated by powerful interest groups seeking to
enhance their own benefits to the detriment of society as a whole, as government
policies, like markets, are sometimes imperfect and incomplete (Rausser and Irwin,
1987). Rausser (1982) further points out that there are two main forces of political
economy whereby policies are motivated by either political economic seeking
transfers (PESTs),referring to the influence of powerful stakeholders seeking to enhance
their own benefits, or by political economic resource transactions (PERTs), referring to
the legitimate role of policy makers to enhance the benefits of society as a whole. Thus,
since the domain of policy making in both developed and developing countries is
imperfect, the influence of PESTs cannot be entirely removed. As a result, policy
incoherence is endogenous to policymaking. Therefore, the economics of (in)coherence
must not only address costs of lack of coherence in a comparative static sense, but also be
concerned with dynamics. Thus it should also address transactions costs of changing
(increasing or decreasing) (in)coherencies. Out of such considerations of transactions
costs of policy change, may result optimal (non-zero) (in)coherencies.
The PCD agenda is especially important in the context of agricultural trade in that
while most developing countries comparative advantage lies in agriculture it is the most
protected sector in global trade. Reducing incoherencies between agricultural trade
policies and development policies would increase developing countries participation in
global trade, resulting in increased pro-poor growth.
To that regard, the PCD agenda in agricultural trade resonates with the Millennium
Development Goals (MDGs), most directly with MDG 1 of eradicating extreme poverty
and hunger, and MDG 8 of developing a global partnership for development. Indeed,
since most of the poor rely on the agricultural sector for their livelihoods, trade driven
agricultural growth can increase farm incomes through multipliers and linkage effects,
and foster off-farm economic activities, resulting in enhanced job creation both on- and
off-farm. As for MDG 8, its aim is to facilitate the co-ordination of the policies
implemented by both industrialised and developing countries toward achieving
development objectives (von Braun, 2005b; Manning, 2005).
Incoherencies in agricultural trade
In this section we look at the existing incoherencies in agricultural trade policies in

both OECD and developing country policies. Since the PCD issues of OECD country
policies have been comprehensively documented elsewhere (see Matthews, 2005), we
will only very briefly review them here. The focus will be on PCD issues in overall
international trade policy trends and developing countries policies.
In the first sub-section, when dealing with intra-country (in)coherence, we extend the
concept beyond OECD countries domestic and development co-operation policies to
include developing countries domestic policies. And, to illustrate how internal policy
inconsistencies in developing countries can negatively affect trade and growth, we take
the example of agricultural market reforms undertaken in Sub Saharan African countries
in the 1980s.
In a second sub-section, we look at inter-donor and donor-recipient coherence. We
first address PCD issues in the current agricultural trading system by discussing the
current trends of the WTO negotiations, the concurrent bilateral and regional trade
agreements, preferential market access schemes, and the increased use of Sanitary and
Phytosanitary (SPS) measures in global agricultural trade. Second, we address the
potential PCD issues that can arise from the interaction between development co-
operation policies and developing countries domestic policies.
Intra-country incoherencies
PCD issues in OECD countries internal policies

PCD issues can arise from OECD countries aid and other policies. Non-aid policies
include trade and domestic policies which protect and support domestic producers from
competition, while aid policies include provide support to developing countries through
financial flows and technical assistance. In what follows, we briefly examine how some
of these internal policies can conflict with development objectives.
PCD issues in OECD trade and domestic support policies

The objectives of OECD trade and domestic agricultural policies include increasing
agricultural productivity, ensuring distributional equity for domestic producers and
stabilising domestic market prices. OECD countries use a complex set of policies to
achieve these goals. These policies either directly restrict market access to competing
agricultural producers through tariff and non-tariff barriers, or assist farmers through
market price support payments (output and export subsidies). The underlying PCD issue
associated with such instruments is that these instruments are generally in conflict with
development objectives.
In the case of market access restrictions, industrial countries maintain average tariffs
on agricultural products. These tariffs are two to four times higher than tariffs on
manufactured goods (World Bank, 2005). Beyond this relatively high average tariff on
agricultural products, some OECD countries maintain tariff peaks3 on certain agricultural
imports and apply escalated tariffs4 on processed agricultural product imports. This
hinders the diversification of developing country exports towards higher value products
and keeps these countries dependent on primary product exports (IMF, 2002; Aksoy,
2005). Further, in addition to tariff barriers, OECD countries are increasingly adopting
non-tariff measures5 to restrict access to their markets. The PCD issue here, apart from
the restriction in market access, is that developing country exporters face uncertainties
when it comes to whether or not they have access to OECD markets for certain
agricultural products.
Domestic support policies indirectly impact development objectives by encouraging
over-production in OECD countries and subsequently reducing international commodity
prices, resulting in a reduction of farmer incomes in developing countries.
PCD issues in OECD development co-operation policies

OECD development policy objectives include promoting economic and social
development by contributing to the achievement of the MDGs, and facilitating the
integration of developing countries within the world economy. Some of the instruments
used include general aid flows and food aid.
Aid can enhance economic growth in developing countries by expanding domestic
savings, and thus promoting investments. However, there are some potential conflicts
between aid flows and the export competitiveness of the recipient countries. Some of
these potential problems are as follows:
1. Aid flows may cause the appreciation of the exchange rate of recipient-countries,
which would make their exports less competitive on the world market.
2. Recipient-countries may develop an aid induced trade dependency if the aid funds
projects that require the importation of capital goods only produced in donor countries
(Suwa-Eisenmann and Verdier, 2005).
One particularly contentious area of OECD development co-operation is food aid.
While food aid can be effective in alleviating severe hunger and malnutrition, it is often
inadequately designed to meet these objectives. The main deficiency here is that donor
countries use it not only as an instrument of development assistance but as instruments of
domestic agricultural policy, foreign and trade policies. With few exceptions, to the
extent that food aid has been ineffective in increasing producers prices and in stimulating
3. Tariffs of 15% or more.

4. Tariff rates increase along the food processing chain, resulting in higher tariffs for processed goods than
for primary products.
5. Non-tariff barriers can take on various forms including measures that are directly trade related (import
quotas and anti-dumping measures); measures that limit trade through technical measures such as
labelling, packing and sanitary requirements; and measures that arise from general public policy such as
government imposed investment restrictions or the extent of intellectual property rights protection
(UNCTAD, 2005b).
new export markets (Barrett and Maxwell, 2005), it has not had a significant positive
effect on domestic OECD farmers.
PCD issues in developing countries domestic policies
There is a great deal of diversity in the policies adopted by developing countries.

Some countries, mainly in East-Asia and the Pacific and more recently in India and China
(as we will see in the next section), have made important progress in providing incentives
to their agriculture and export sectors to spur trade and private investment through
strategic public investments and appropriate sequencing of policies. Others, mainly Sub-
Saharan African countries, have lagged behind.
Nevertheless, since the mid 1980s, developing countries as a whole have undertaken
significant reforms in their agricultural and export policies moving from import-
substitution favouring the manufacturing sector, toward export-oriented growth while
concentrating on their comparative advantages. Despite these reforms however, some
PCD issues still persist in their domestic policies, especially in regard to public
investment choices and private investment promotion policies.
Towards major reforms
In the past, in pursuing import-substitution ideals, many developing countries taxed

their agricultural sector in favour of manufacturing through a wide range of instruments.
These included export taxes on agricultural products in order to generate revenues,
overvalued exchange rates to get cheaper imported inputs for the manufacturing sector
(which penalised agricultural exports), and price controls that artificially kept food prices
low for urban consumers (Aksoy, 2005).
Since the mid 1980s however, developing countries have made great strides towards
reforming their agricultural and export sectors. For the most part, the reforms eliminated
the bias against their agricultural and export sectors; export taxes and price controls were
removed and exchange rates were devalued (Aksoy 2005). In addition, developing
countries as a whole have substantially decreased their average agricultural tariffs from
30% in 1990 to 18% in 2000 (World Bank, 2005).
Nonetheless, particularly among middle-income countries, many are moving toward
protection, mostly as a reaction to OECD countries protection (Aksoy, 2005). For
example, when looking at total Producer Support Estimates (PSE) in India, Indonesia,
China and Vietnam, Orden et al. (forthcoming) find that most of these countries have
moved toward protection of their agricultural sector. Indeed, while Indonesia has
consistently subsidised its agricultural sector (except during the 1998 financial crisis),
Vietnam and China are moving towards protection and Indias support was counter-
cyclical, i.e. support increased when world commodity prices were low, and decreased
when world prices were high (Figure 1).6
6. Total PSE = Market Price Support + Budgetary payments (BP). The Market Price Support is commodity
specific and the authors may not cover all the commodities (depending on the specific country) so they
have two versions of the Market Price Support; the scaled up version (MPSc) and the non-scaled up
version (MPS). The MPS assumes that the commodities not covered do not receive any support, while
the MPSc assumes that the non-covered commodities receive on average the same type of support as the
covered commodities (i.e., the support for non-covered commodities is extrapolated from the average
Despite this trend, protection of agriculture is much less of a PCD problem for
developing countries than it is for industrialised nations. The main PCD issues in
developing countries have to do with the inefficiencies of their domestic policies with
regards to their investment climates, insufficient public investments in the agricultural
and export sectors and under-investment in productivity enhancing science and
technology.
support given to the covered commodities). Thus, the PSE = MPS + BP and PSEc = MPSc + BP. The
closer the PSE is to the PSEc, the more commodities are covered for the estimates of market price
support.
Figure 1. Total Producer Support Estimates for India, Indonesia, China and Vietnam (% PSE)
India Indonesia
30 80
20 60
40
10
20
Per cent
0
Per cent
0
-10
-20
-20 -40
-30 -60
-40 -80
1985 1987 1989 1991 1993 1995 1997 1999 2001 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
PSEc PSE %PSEc %PSE
China Vietnam
30 80
20 60
40
10
20
0
Per cent
Per cent
0
-10
-20
-20
-40
-30 -60
-40 -80
1995 1996 1997 1998 1999 2000 2001 1985 1987 1989 1991 1993 1995 1997 1999 2001
PSEc PSE %PSEc %PSE
% PSE gives a measure of support relative to domestic farm revenue. Source: Orden et al.
Domestic investment climates and public investments

Developing country governments need to first create the right incentives domestically
for people to invest and to engage in international trade. To that effect, they have to
reduce the incoherence of some of their domestic policies such as macro-economic,
competition, foreign direct investment and regulation policies. Further, when undergoing
economic reform, developing country governments need to pay special attention to the
sequencing of their policies in order to avoid short-run disruptive economic shocks.
Macroeconomic stability is fundamental for the proper functioning of markets and for
attracting long-term investments. This entails that policy makers implement sustainable
macroeconomic policies including adequate foreign exchange policies that will not
penalise the agricultural sector. In addition, in the short-run, governments need to
consider price levels in order to avoid excessive price volatility.
Next, domestic market institutions need to be reformed in order to foster competition.
This entails breaking up monopolies and monopsonies, and also better regulation of
barriers to market entry and market exit. It may also entail privatisation of state-owned
enterprises and reformulation of foreign direct investment policies in order to attract the
desired type of foreign investors. To that effect, governments might want to run targeted
investment promotions and/or implement performance requirements (UNCTAD, 2005a).
Regulation policy is another area that requires reforms in many developing countries.
Regulations can sometimes be excessive and costly, which is an impediment for trade and
investment enhancement. For instance, cumbersome customs procedures can be a
disincentive for traders to engage in import and export activities. Thus, streamlining
procedures in order to remove unnecessary transaction costs should be part of the reform
process (World Bank, 2004).
Further, in many developing countries, especially in the least-developed ones, public
investments to improve the agricultural and export sectors are necessary to spur
agricultural trade. Indeed, investments in rural infrastructure and transportation improve
market access for agricultural producers and also access to new technologies. They also
enable better price transmission to rural areas. In addition, investments in
telecommunications technologies can enhance the market integration of rural populations
by enabling better access to goods and services as well as information, and also by
reducing the cost of communications for producers and small businesses (Torero and von
Braun, 2005).
Example of domestic policy incoherence as an obstacle

Like many developing countries, several Sub-Saharan African countries undertook
market reforms in the 1980s to reduce government intervention in agricultural markets.
The main objective of the reforms was to increase producer prices of tradable agricultural
commodities. With the reforms, it was expected that a vibrant private sector would
intervene to take over the functions previously undertaken by inefficient state-owned
enterprises (SOEs) or state marketing boards. However, in many cases, the private sector
response failed to materialise because of inadequate implementation of reforms, the
persistence of institutional deficiencies and inadequate provision of public services, along
with the high susceptibility of Sub-Saharan African countries to risk factors such as
droughts and floods, conflicts and diseases (Kherallah et al., 2002).
In terms of the inadequate implementation of reforms, the policies of many

governments were inconsistent. In some countries, governments liberalised internal trade
while still maintaining their monopolies on external trade. For example, in Benin, the
government maintained control of cotton exports despite the liberalisation of the internal
trade of cotton. In addition, in some countries reforms were not sustained. There were
instances of policy reversal due to external shocks or changing political circumstances
such as a regime change (Kherallah et al., 2002).
In terms of institutional deficiencies, most Sub-Saharan African countries lacked
basic property rights protection and proper enforcement of contracts before the market
reforms were undertaken. Thus, there was little institutional incentive for private
companies to enter agricultural markets (Kherallah et al., 2002). Further, as pointed out
by Badiane (2000) and Fafchamps (2005), entry to markets in certain countries, is
restricted informally by networks of traders that create barriers to entry.
Finally, in terms of inadequate provision of public services, many countries did not
invest in structural factors such as roads and communication networks, which seriously
hampered market access, the availability of marketing services and the accessibility of
new inputs (Kherallah et al., 2002).
Inter-donor coherence and donor-recipient coherence

Inter-donor and donor-recipient coherence issues arise in two settings: within the
current international trading system, and within the interaction of aid policies and
developing countries domestic policies. In this sub-section, we address the potential PCD
issues within these two contexts.
PCD issues in the current international trading system

Several PCD issues arise from global trade trends. First, there is a lack of consistency
in the positions of developing countries and donor countries in international agricultural
trade negotiations. The World Trade Organization (WTO)s Doha Development Round
of negotiations was launched in 2001. The long-term objective of the talks with regards to
agriculture are to establish a fair and market-oriented trading system through a
programme of fundamental reform encompassing strengthened rules and specific
commitments on support and protection in order to correct and prevent restrictions and
distortions in world agricultural markets (WTO, 2001). However, agriculture has
become an impasse to the advancement of multilateral trade talks with the trading blocks
refusing to make any substantial concessions. The objective for negotiations on
agriculture and non-agriculture market access is to agree on formulas and other details
that will determine the scale of reductions in tariffs on thousands of products and on farm
subsidies (WTO, 2005). However, this agreement is going to be difficult to obtain as the
current proposals still vary widely.
Second, within the international trade system, there is an increasing volume of
regional and bilateral trade agreements.7.Although these agreements provide reduced
barriers to trade for partner countries and sometimes create common regulatory
frameworks, which can translate in enhanced trade and investments (World Bank, 2004),
7. As of January 2005, there were 312 RTAs that have been notified to the GATT/ WTO, of which 170 are
currently in force. Beyond the RTAs notified to the WTO, there are an estimated 65 that are currently in
operation (Crawford and Fiorentino, 2005).
they may be undermining multilateral negotiations. Indeed, bilateral and regional trade
agreements (RTAs) go beyond the agreed multilateral rules and usually supersede them.
Further, agreements often overlap and are increasingly complex. The risks here are as
follows:
1. Multilateral negotiations can be undermined because developing country coalitions sign
onto different bilateral agreements and RTAs.
2. Traders may experience higher costs in meeting rules for the different bilateral
agreements and RTAs.
3. The spaghetti bowl problem may arise with multiple tariffs and increased
inconsistency in trade rules and regulations between the various bilateral agreements
and the RTAs, and between the bilateral agreements/RTAs and multilateral agreements.
4. Regulatory confusions in regional markets may be created and more problems with
regard to implementation may be faced (Bhagwati and Panagariya, 2003; WTO, 2005).
There is clearly a need for a review of the (in)coherent trade policies resulting from
RTAs for global agricultural trade regimes.
Third, many developed countries offer low-income countries preferential access to
their markets. However, these schemes are also accompanied by several PCD issues. In
theory, these schemes can help low-income countries boost their exports to developed
countries. However, in reality, preferential schemes have several shortcomings as
effective instruments for the promotion of developing country participation in
international trade. (1) In their design, the preference schemes offered by OECD
countries differ from each other, which means that there is no uniformity in preferential
access. Further, many of these schemes exclude or restrict major agricultural products
(including processed agricultural products) in which low-income countries have a
comparative advantage (Brenton and Ikezuki 2005). (2) From the perspective of a
developing country exporter, there is sometimes a high cost associated with preference
compliance. For instance, satisfying the rules of origin8 can imply a high cost for the
exporter relative to the expected gain from the preference, especially if the exporter deals
with processed agricultural goods (Brenton and Ikezuki, 2005). In addition, preference
schemes (with the exception of the European Unions Anything But Arms programme)
are uncertain and unpredictable in the long-run in that they are subject to legislative
renewal. This creates a disincentive for the developing country exporter to incur long-run
investments (Badiane, 2005). (3) For recipient-countries, preference schemes may create
a dependence on exports of certain products, which can in turn hamper the diversification
of their exports. Also, because of the current WTO negotiations for tariff reductions, the
long-term viability of preference schemes is in doubt, and as a result, countries benefiting
from preferences face the risk of preference erosion (Brenton and Ikezuki, 2005).
Finally, due to the health and environmental concerns of developed country
consumers, increasingly strict sanitary and phytosanitary (SPS) measures are being
applied in developed countries. Such measures act as barriers to entry for developing
country exports. This trend presents a series of PCD problems. First, although protection
from food borne and agriculture related diseases is a legitimate goal, there is an
8. Rules of origin are used to certify that preferences are granted only to exporters from eligible countries.
For primary products (products produced in a single stage or wholly obtained in one country), origin is
fairly easy to establish. This is not the case for processed products; rules of origin specify how much or
what kind of domestic processing must take place (Brenton and Ikezuki, 2005).
underlying risk that some countries may use such measures for protecting their producers.
Although international standards9 exist, the WTOs SPS agreement allows countries to set
up their own standards (based on scientific evidence), so that there is no uniformity in
standards between countries. Thus, developing country exporters may find complying
with different SPS requirements to be very costly. Furthermore, many developing
countries do not have the financial resources or the technical expertise to participate in
the discussions of international standard setting bodies, so that their needs and concerns
are rarely covered by the resulting agreements (Josling, Roberts and Orden, 2004;
Matthews, 2005; Jensen, 2002).
PCD issues in the interaction between development co-operation policies and

developing countries domestic policies
Development co-operation policies are supposed to support the domestic policies of
developing countries in order to achieve the agreed targets of the MDGs. However, there
are often incoherencies between (1) the different donors objectives and/or (2) between
the objectives of donors and developing country policy makers objectives. The risk
associated with the first one is that the differing objectives could result in contradictory
policies. For example, when Malawi was undergoing agricultural sector reform, one of
the obstacles was conflicting donor conditions. While USAID was pushing for the
elimination of subsidies for fertilisers to small farmers, the World Bank and the European
Union were funding the distribution of free fertilisers and hybrid seeds to poor
smallholders (Kherallah et al., 2002).
The risk with the second type of coherence issue is that developing country policy
makers would not be receptive to the reforms suggested by donors, and would either not
implement them or would implement them partially. We illustrate this point with the
example of Vietnam, becoming one of the worlds leading rice trading nations. In the late
1980s, the government of Vietnam started implementing market reforms in rice by
undergoing macro-economic reforms (establishment of positive real interest rates,
devaluation of the exchange rate and liberalisation of trade), eliminating subsidies and
price controls, cutting export duties, and strengthening property rights. These initial
reforms led to a five percent annual increase of rice production from 1985 to 1995, of
which 57% were derived by yield increases, 38% from cropping intensity and 8% from
the interaction of the two (Ryan, 1999). By 1995, the government of Vietnam had
engaged the country into transition from a planned economy towards a market economy.
However, the country had little experience with institutions of market economies. As a
result, the government was receptive to research on the appropriate policy environments
that would allow the sustained positive impacts of the reforms undertaken in the rice
sector. Supported by other multilateral organisations (mainly the World Bank and the
Asian Development Bank), the International Food Policy Research Institute (IFPRI)
undertook relevant research that helped reduce incoherence in the rice sector by providing
new information, as well as by influencing the timing of the rice policies (Ryan, 1999).
9. The Codex Alimentarius Commission was created in 1963 by FAO and WHO to develop food standards,
guidelines and related texts such as codes of practice. The main purposes of this Programme are
protecting the health of consumers and ensuring fair trade practices in the food trade, and promoting co-
ordination of all food standards work undertaken by international governmental and non-governmental
organizations (FAO/WHO, 2005).
Linkages between enhanced global agricultural trade and growth and poverty
reduction
In theory, enhanced agricultural trade offers opportunities for economic growth and
poverty reduction for two main reasons. Firstly, trade offers consumers a wider variety of
food products at cheaper prices. Since the poor spend a substantial amount of their
incomes on food, the availability of better and cheaper foods is reduces poverty.
Secondly, since most of the poor live in rural areas and partly depend on the agricultural
sector for their livelihoods, trade offers opportunities in terms of market access and
therefore enables poor producers to increase their incomes. This can in turn lead to more
dynamic effects such as increased opportunities for producers to diversify towards high-
value production, and increased non-farm economic activity in rural communities,
offering job opportunities both on-farm and off-farm. Further, the availability of non-farm
job opportunities provides rural populations with an incentive to invest in their education
and skills to take advantage of the new off-farm job opportunities.
However, global agricultural trade and global agricultural growth share a complex,
non-linear relationship. There should not be any doubt about the power of trade for
enhanced allocative efficiency and economic welfare. The last two decades have seen
considerable expansion of agricultural trade with an average growth rate of 4.8% from
1985 to 2003, exceeding those of the value-added of the global agriculture sector (which
grew on average by 1.9% during the same period) (World Bank, 2005; FAO, 2005). Thus,
the two growth rates show no significant correlation and the linkages between trade and
growth may be more indirect through investment linkages, and through political economy
linkages for economic reform.
Even more complex is the relationship between agricultural trade and poverty
reduction at the global scale. Poverty declined only slowly in the past two decades in
terms of head count measures. Significant reductions are noted in Asia, in particular in
China. Domestic market opening and more international trade have played a role. The
stagnation in poverty reduction in Africa is paralleled by slow growth in trade and
declining shares in global agricultural trade. PCD and agricultural trade policy must avoid
any black box approach where strong and direct linkages between trade expansion,
growth and poverty reduction are taken for granted.
In this section we briefly review the current knowledge on trade reform impacts on
the poor before turning our focus to developing countries domestic policies. We
summarise the main drivers of agricultural trade expansion, and consider the role of the
PCD agenda for the expansion of global agricultural trade. In doing this, we highlight the
need for a strategic approach in sequencing policies and the central role agriculture in the
early stages of development. Looking at the progress in India and China as illustrations of
how policy coherence can play a role in promoting trade and lead to increased growth and
poverty reduction. Finally, we provide some insights on how to manage the dynamic risks
and factors affecting global agricultural trade.
Trade reform impacts on the poor

The litmus test for policy coherence in development policy is the short and long term
effect for the poor. The impacts of the macro-level changes induced by agriculture trade
reform on poor households depend primarily on whether they are net consumers or net
producers of food (Orden, Torero and Gulati, 2004). With increased openness, net
consumers of agricultural products benefit from a larger variety of products and reduced
prices with cheaper imports entering domestic markets, while net producers face
increased competition from imported goods, which may lead to lower prices for their
products, depending on their competitiveness. Net producers would also become more
susceptible to higher volatility in agricultural prices.
In addition, the overall impact of trade policy reform will be determined by
households abilities to adjust to these changes through shifts in production and
consumption patterns, such as switching production toward goods whose prices have
risen, switching consumption toward goods whose prices have fallen (McCulloch et al.,
2001), or taking advantage of changed opportunities in labour markets. The ability to
make such shifts will in turn depend on the households access to markets, its physical
assets, individuals skill sets, and its access to credit and insurance markets. Labour
mobility across sectors is an important consideration because labour is the main resource
owned by many poor households. Price transmission to rural markets for inputs and
outputs are also significant as there are many stages between border prices and prices
faced by rural households.
Current knowledge on trade reform impacts at the household level is rather limited.
Top-down approaches use detailed economy-wide data and build on the microeconomic
assumption of a representative agent, while bottom-up approaches use detailed household
expenditure data and emphasise heterogeneity of households (Reimer, 2002). In general,
very little consensus emerges from this literature.
Ivanic (2005) conducts a multi-country analysis of the poverty effects arising from
trade reform on different household groups (Table 1). His analysis differentiates
households by income sources and regions (urban and rural). He uses the GTAP model
along with data from the GTAP database 6 and detailed household surveys from fifteen
countries. The author finds that in some of the countries (Chile, Indonesia, Malawi,
Mozambique, Peru, the Philippines, Thailand, and Vietnam), the extent of trade reform
has a positive impact on poverty levels. However, he finds that this is not always the case
in other countries. For instance, in seven of the countries (Bangladesh, Colombia,
Mexico, the Philippines, Uganda, Venezuela, and Zambia) full trade liberalisation
increases poverty levels in agriculture dependent households.
Table 1. Estimates of full trade liberalisation impacts on households in select developing countries
Household groups
Agriculture Non-agriculture Urban Labour Rural Labour Transfer Urban Diverse Rural Diverse Total
Bangladesh 37 51 10 65 2 35 122 323

Brazil -94 12 40 39 0 -9 -6 -17
Chile -16 0 1 0 1 -4 -2 -20
Columbia 18 30 15 16 3 8 8 98
Indonesia -282 -98 -17 -80 3 -49 -219 -742
Malawi -19 -1 0 -4 -1 -3 -18 -45
Mexico 1 6 12 14 11 14 17 75
Mozambique -1 -2 -2 0 -2 -5 -3 -14
Peru -3 -5 0 -1 -1 -3 -5 -18
Philippines 46 -12 -11 -17 -4 -24 -34 -56
Thailand -7 0 0 -1 2 -2 -39 -49
Uganda 6 3 0 5 0 3 52 69
Venezuela 3 17 28 9 1 15 5 77
Vietnam -29 -277 -8 -110 -8 -227 -1 136 -1 795
Zambia 0 3 3 1 0 4 1 10
Source: Ivanic, 2005.
From the above studies and others on the issue (see for a review von Braun et al.,
2005) we can conclude that the majority of poor households will gain from trade reform
while some will lose. The results vary across countries, and according to these estimates,
the effect of trade openness on poor households income is not large. Thus, policy makers
in each country need to consider complementary actions targeting vulnerable households
in order to avoid potential negative impacts on these populations. The integration of
social policies with trade reform policies is a major challenge for the PCD agenda.
Principal driving forces of agricultural trade expansion and the role of policy
coherence
In order to promote agricultural trade, policies in developing countries have to first
ensure that the macro-economic environment is conducive to trade. This involves
adequate access to investment capital and exchange-rate policies. Further, institutions that
foster economic activity need to be in place. In many countries, this requires significant
institutional reforms, for which good governance fostering public order and political
stability and security is a necessary pre-condition (Birner and Resnick, 2005).
Beyond providing a favourable political environment, policy has to provide the right
economic incentives for agricultural producers to invest in improving their lands and also
to facilitate their access to formal financial markets, not only through reforms of markets
as earlier pointed out, but also through secure property rights and adequate contract
enforcement mechanisms (World Bank, 2004).
In addition, key public investments in agricultural research and technology,
infrastructure and education can enhance agricultural trade and contribute to economic
growth and poverty reduction in developing countries. Investments in agricultural
research and technology enable productivity growth by providing farmers with more
productive seeds and new technologies for more efficient production. Indeed, research
has shown that investment in agricultural research has high returns in terms of promoting
agricultural growth and poverty reduction. For instance, as shown in tables 2 and 3,
investments in agricultural R&D had the second highest and the highest return among
public investments in China and India respectively in terms of poverty reduction.
Table 2. Returns to poverty reduction from public investments in China
Returns to poverty reduction from Number of poor reduced per 10 000 Yuan
investments in expenditure (average from all regions)
Education 8.8
R&D 6.79
Roads 3.22
Electricity 2.27
Telephone 2.21
Irrigation 1.33
Poverty loan 1.13
Source: Fan, Zhang and Zhang, 2002.
Table 3. Returns to poverty reduction from public investments in India
Returns to poverty reduction from investment in Total poor reduced per million INR 1995
Ag. R&D 156.61
Rural roads 152.19
Rural education 48.43
Irrigation 17.01
Rural development 31.37
Soil and water conservation 27.75
Rural health 22.35
Rural electricity 5.24
Source: Fan, 2002.
Investments in rural infrastructure are also crucial in order to facilitate market access
and facilitate price transmission to rural areas. Such investments also enable the reduction
of transportation and communications costs. In China, in terms of reducing poverty,
investments in roads had the third highest return while in India they had the second
highest return. Finally, investment in education can also contribute to enhancing
agricultural growth, by improving rural population mobility between on-farm to off-farm
sectors. In China, investments in rural education had the highest returns in terms of
poverty reduction, while in India they had the third highest return (Tables 2 and 3).
Development assistance can play a key role in terms of supporting the above policies
through financial and technical assistance. In the context of trade liberalisation,
industrialised countries can increase their support to facilitate improvements in the
functioning of markets in developing countries (through for e.g. an aid for trade
programme that would assist countries in making the necessary basic investments in
infrastructure and also in modernising their institutions in order to help them take
advantage of the new opportunities offered by more liberalised trade).
A strategic approach to formulating domestic policies is an integral component of
policy coherence for agricultural trade policies in developing countries. This requires that
reforms be adequately sequenced and implemented in a gradual manner in order to
maximise the benefits of enhanced trade for society as a whole. Indeed, in order to attain
the benefits of a more liberalised agricultural trade system, domestic markets and
institutions need to be developed to take advantage of new opportunities. As we saw
earlier in the example of Sub-Saharan African countries, domestic trade liberalisation
efforts were undertaken prematurely in that the required investments and institutional
reforms were not carried out before embarking on the reforms. The results were that the
reforms did not yield the expected outcomes (Kherallah et al., 2002).
Further, agricultural trade reforms need to consider the potential impacts of
liberalisation on vulnerable populations, otherwise, reforms might lead to increased
poverty. Appropriate risk management strategies that would minimise transitional poverty
and enable vulnerable populations to better take advantage of the new trade opportunities
need to be put in place before undertaking reform.
Policy coherence enhanced trade and development: China and India

China and India have in recent years made important progress in creating the right
incentives in their agricultural and export sectors, albeit through different development
strategies. Over the past two and half decades, both countries implemented significant
economic reforms that have enabled their increased participation in world agricultural
trade. The aggregate effects of these trends have led to high economic growth and
spectacular poverty reduction, especially in China (Figure 2). The underlying lesson from
the experiences of both countries is that strong national initiatives with a strategic
approach are necessary in order to propel a countrys development. Also, trade is part of
the story.
Figure 2. GDP per capita in China and India, 19502003

2000 PPP International
5 000
4 000
Dollars
3 000
2 000
1 000
0
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
China India
Source: von Braun, Fan and Gulati, 2005.
Further, in a comparative study of the two countries development policies, Gulati

et al. (2005) show that the different strategies of development followed by the two
countries explain the differences in their achieved growth and poverty reduction rates.
While China focused on reforms in the agricultural sector at the beginning of its reforms
and then undertook macro-economic and non-agriculture reforms, India followed the
reverse path.
During the agricultural reforms, China first created strong incentive structures and
institutions to enable the increased productivity of agriculture and the proper functioning
of agricultural markets. Then, in a second phase, they liberalised and opened up markets.
Indian policy makers on the other hand, opened up their agricultural markets before
reforming incentives. Nevertheless, reforms were undertaken afterwards which resulted in
export-oriented agricultural growth (Gulati et al., 2005).
In addition, the two countries strategies differed in their pace of reforms. In the
Chinese case, although, policy makers made sure that each new measure that they
implemented was successful before moving forward with another measure, reforms were
implemented relatively faster than in India due to the more pluralistic and bureaucratic
nature of political processes in India (Gulati et al., 2005).
Management of dynamic risks and forces that shape the factors affecting global
agricultural trade
IFPRIs IMPACT model10 provides some insight on how policy actions (or inactions)
can affect, among other things, commodity prices, demand, cereal yields, production and
net trade. A progressive policy scenario outlines several of the most fundamental steps as
reviewed above. In this scenario, national governments and the international community
focus their policies on agricultural growth and rural development; developing countries
increase their expenditure on agriculture and rural development between 2005 and 2015
(including their expenditures on agricultural research and development) and producer
support to farmers in developed countries is substantially reduced. Further, developing
countries progressively increase their investments in education, social services and health
between 2005 and 2020. In the policy failure scenario, the crucial investments in
agriculture and rural development are not undertaken and agricultural protectionism
increases along with greater political discord. In the technology and resource
management failure scenario, agricultural protectionism does not increase but the
technology and natural resource failures are severe.
The simulations, as shown in figure 3, demonstrate that under the ideal conditions
of the progressive scenario, because of rising incomes, world demand in cereals and in
high-value products such as meat and fruits and vegetables increase. Further, net meat
trade increases in developing countries, while net cereal trade decreases (Figure 3; von
Braun, Rosegrant et al., 2005).
10. The International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT) model
was developed by Mark Rosegrant at IFPRI to provide insights into the management of the dynamic
risks and forces that shape the factors affecting peoples access to food and the links with malnutrition
through appropriate policy actions. The IMPACT model enables the exploration of the potential impacts
of different policy alternatives to manage hunger, malnutrition, commodity prices, demand, cereal yields,
production and net trade, by projecting future global food scenarios to 2050 (von Braun, Rosegrant,
Pandya-Lorch, Cohen, Cline, Brown & Bos, 2005).
Figure 3. Some results from the IMPACT model

Projected world cereal demand per capita, Projected world meat demand per capita,
all scenarios all scenarios
Progressive Policy Actions Scenario
Progressive Policy Actions Scenario 60
Policy Failure Scenario
400 Policy Failure Scenario
Technology and Resource Management Failure Scenario 55
380 Technology and Resource
Management Failure Scenario
50
Kilograms per capita

360
Kilograms per capita
340 45
320 40
300
35
280
30
260
25
240
220 20
1997 2015 2030 2050 1997 2015 2030 2050
Projected net cereal trade in developing countries Projected net meat trade in developing countries
Policy Failure
0
Progressive Policy Actions
1997 2015 2030 2050 30 000
Tech and Resource Failure
-50
20 000
Thousand of metric tonnes
Million metric tonnes
-100 10 000
-150 0
1997 2015 2030 2050
-10 000
-200
-20 000
-250 Progressive Policy Actions Scenario
Policy Failure Scenario -30 000
Technology and Resource Management Failure Scenario
Source: von Braun, Rosegrant et al., 2005.
Concluding remarks
New PCD issues have emerged due to changes in the domain of agricultural policy
making, new incoherence issues have also arisen. Many developing countries have made
significant improvements toward decreasing their protection levels in the agricultural
sector. However, in the international arena there have been a number of setbacks in terms
of multilateral progress in agricultural trade liberalisation negotiations. The increased
focus on bilateral agreements may have undermined progress toward multilateral
progress.
Also, some old incoherence issues persist. Since political markets are imperfect and
incomplete, the risk exists that powerful self-serving interest groups will influence the
policy setting and policy implementation in agricultural trade. Fortunately, a large
number of developing countries have established parliamentary systems in recent
decades, thus opening up political markets. The implication of this for coherence in
domestic policies is yet to be seen. Increased transparency, rule of law and dynamic
media could also facilitate a reduction in incoherencies.
Global welfare, development and poverty alleviation will be well served if rules-
based, multilateral liberalisation of agricultural trade can be achieved. This would bring
gains for developing countries not just from new market opportunities created
multilaterally, but from trade-based investment and the technological advances these
opportunities induce. Public investments are an essential complement to trade policy
reforms. To make the Doha Round truly a Development Round requires an innovative
combination of trade policy reforms with enhanced development finance that facilitates
market functioning. This requires closer co-ordination among the WTO and development
finance organisations, such as the World Bank and regional development banks.
Gains for developing countries from strengthening markets will come from
simultaneously enhancing their physical and institutional infrastructures for agriculture,
reducing domestic marketing channel inefficiencies, and eliminating internal barriers to
private investments. To turn the market opportunities created by either multilateral trade
agreements or their own trade policy reforms into concrete gains requires investments
which can make markets work and endow the poor with the assets they need to compete.
While this responsibility lies primarily within the countries themselves, developed
countries and international institutions need to increase their support for these efforts.
Trade policy reform and international assistance to agriculture in poor countries are
complements, not substitutes in creating benefits for the poor people who are primarily
concentrated in the agricultural sector. Progress in reducing agricultural support and
protection among the worlds wealthy countries would be important for the development
and strengthening of the multilateral trade system. Since they have much to gain,
developing countries also need to be actively engaged in the multilateral process of
agricultural trade liberalisation. There are substantial grounds for agreement on
agriculture between advocates of international development and poverty reduction and
those advocating strengthened agricultural trade opportunities.
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Chapter 8.
ISSUES FOR BRAZIL1
Fabio R. Chaddad
Ibmec Business School
and
Marcos S. Jank
Institute for International Trade Negotiations Studies (ICONE)
Abstract
This paper provides a perspective on the issue of policy coherence for

development (PCD) as it relates to agriculture in Brazil. While drawing on Brazils
experience with OECD agricultural-related policies (e.g. tariffs, non-tariff barriers,
export subsidies, and payments to domestic producers) and Brazilian agricultural-related
policies (e.g. rural development, farm support, and trade), the study examines the policy
coherence of these issues, with an emphasis on enhancing global agricultural trade and
the development of the Brazilian agri-food economy.
Introduction
Beginning in the late 1980s, Brazil started to adopt liberal, market oriented policies,
which significantly impacted the performance of its agri-food economy. Brazils
economic reform programme included controlling inflation, ensuring macroeconomic
stability, privatising state-owned companies, deregulating industry, dismantling
agricultural credit and price support programmes, and increasing international integration.
These changes have significantly impacted the competitiveness of the agri-food sector in
Brazil, which has experienced substantial, export-led growth since the mid-1990s.
The agri-food sector is now among the most dynamic in the Brazilian economy.
According to a recent article in The Economist (2005), agriculture is the Cinderella of
Brazils economy. Between 1990 and 2004, agricultural production doubled from 58 to
120 million metric tonnes (MT), while meat production surged from 7.5 to
18.3 million MT. The agri-food economy generated BRL 534 billion (USD 183 billion) in
2004, which is equivalent to 30% of the countrys GDP. In addition, it accounted for
approximately 35% of total employment and 41% of the total exports in 2004.
During the 1990-2004, total agricultural exports increased from USD 12.9 to
USD 39 billion (Ministry of Industry, Development and Foreign Trade, 2005). Exports
accounted for 31% of agricultural production in 2004 compared with shares of 22% in the
United States (US), 41% in Canada and 74% in Australia (OECD, 2005). Spurred by an
annual growth rate of 6.2% in exports since 1990 (Figure 1), Brazil is now the worlds
1. The authors are respectively assistant professor at Ibmec Business School and president of the Institute
for International Trade Negotiations (ICONE), both in Sao Paulo, Brazil. The authors would like to thank
Jos Garcia Gasques for providing the data regarding the Brazilian government expenditures on farm
policy and Sidney Nakahodo and Isabel Oliveira for research support.
third largest agri-food exporter following the European Union (EU) and the US. Brazil
is the worlds largest exporter of sugar, ethanol, coffee, beef, poultry, orange juice and
tobacco, and is the second largest exporter in the soybean complex. In 2004, Brazil
surpassed the US and led the world with an agricultural trade surplus of USD 25 billion.
Figure 1. Top fifteen largest world agri-food exporters, 2003
Source: FAO, 2004. Elaboration: ICONE.
The growing competitiveness of the Brazilian agri-food sector is attributed to a

number of factors, including investments in agricultural research and availability of
agricultural credit, which contributed to significant productivity gains since the 1970s.
The average annual growth rate of total factor productivity in Brazilian agriculture was
estimated at 3.3% for the period 1975-2002 and at 5.7% for 1998-2002, which are above
the growth rate of 1.6% achieved by US agriculture in the 1990s (Gasques et al., 2004).
According to the same study, land productivity was the principal component of total
factor productivity growth. While agricultural output doubled in the last fifteen years,
land used in agricultural production increased 20%, from 38 to 48 million hectares. Other
factors, such as the macroeconomic stability introduced with the Real Plan and significant
reductions in government intervention and trade barriers, also contributed to the
competitiveness and thus to the growth of the agri-food sector in Brazil, (Jank, Nassar
and Tachinardi, 2004).
Despite these favourable developments and the availability of labour and natural
resources such as land and water, the growth of the agri-food sector in Brazil faces
significant internal and external constraints. In the domestic arena, agricultural producers
in Brazil face uncertainties related to the volatility of macroeconomic policies (high
interest rates and over evaluation of the real exchange rate), the lack of clearly defined
property rights where land is concerned, the regulatory framework concerning research
and marketing of genetically modified organisms (GMOs), poor infrastructure causing
logistical bottlenecks, and the decline in government spending in important areas such as
sanitary defence, agricultural research and other traditional agricultural policy
instruments. The recent re-emergence of foot-and-mouth disease, which forced more than
fifty countries (as of 15 November 2005) to close their borders to beef exports from
Brazil, will be used as a case study to analyse some of the policy challenges facing the
Brazilian agri-food economy.
Besides, trade barriers and subsidies to domestic producers and exporters, especially
from OECD countries continue to significantly impact Brazilian agri-food products. The
benefits from agri-food economy development would be substantially increased for the
country if OECD countries reformed their agricultural policies to minimise distortions in
agricultural trade. This is why Brazil adopted a more aggressive position in the
international trade negotiations at the World Trade Organization (WTO), bringing two
high-profile dispute cases against developed countries and taking leadership in the
formation of a coalition of twenty-one developing countries known as the G-20. In the
next section, we discuss the constraints to agri-food development in Brazil emanating
from OECD member countries policies.
Brazilian agricultural trade policy and perspectives in international agricultural

negotiations
According to an OECD report on Key Issues for Policy Coherence for Development
in Agriculture (2004), agriculture is the area on which OECD member countries are
creating most trade distortions by subsidising production and exports and by imposing
tariffs and non-tariff barriers on trade. Figures 2 and 3 show the relatively high average
agricultural tariffs and domestic subsidies currently prevailing in world trade. In a more
recent report which reviews agricultural policies in Brazil, the OECD (2005) observes
that if the US, the EU and other OECD countries were to cut import tariffs and export
subsidies on agricultural products, farmers in Brazil would gain from the resulting rise in
international prices, with the larger commercial producers benefiting most.
Figure 2. Bound and applied average agricultural tariffs in selected countries1
1. Specific and compound tariffs were converted into Ad Valorem Equivalents (AVE) following the methodology
agreed by WTO Members in 2005.
Source: WTO (2005). Elaboration: ICONE.
Given that Brazil has already achieved the status of a global agri-food powerhouse,
why are international trade negotiations including the WTO Doha Round, the Free
Trade Area of the Americas (FTAA) and the EU-Mercosur regional agreement still
essential to the countrys development? The answer resides in the nature of the products
exported: 90% of Brazilian agri-food exports are comprised of agricultural and agro-
industrial commodities. International competitiveness and export growth largely depend
on the outcome of international trade negotiations.
Figure 3. Domestic subsidies measured by the OECD producer support estimate (%PSE)1
58%
60%
50%
40%
34%
30%
30%
22%
21%
20% 17%
8%
10%
5% 4% 3% 2%
0%
Australia
USA
N. Zealand
China
EU
OECD
Japan
Mexico
Russia
Brazil
Canada
1. The %PSE expresses the total producer support as a percentage of gross farm receipts measured by the value
of total production (at farm gate prices) plus budgetary support.
Source: OECD (2005).
Perhaps more importantly, the main agri-food commodities exported by Brazil are
treated as sensitive products by importing countries and, therefore, are highly regulated
and protected. The great majority of Brazilian agri-food commodities face border
restrictions (Table 1). The sugar and ethanol sector is globally protected with tariff peaks,
tariff rate quotas, special safeguards and other mechanisms. Other agri-food commodities
are subject to more specific protection. A case in point are grains and cotton in the US,
which are highly subsidised. The meat sector including beef, poultry and pork faces a
heterogeneous set of protectionist policies. The EU, Iceland, Norway and Switzerland
adopt tariff peaks in all three types of meat, while Japan protects the pork sector, and
Canada and Mexico protect the poultry sector.
In addition to tariff protection, sanitary barriers exist in the meat sector in countries
including those with relatively lower tariffs such as the US (for beef, poultry and pork)
and Canada (for beef and pork). As a result of tariff and non-tariff barriers, trade is
severely constrained. Tariff rate quotas and special safeguards also restrict market access
for most agri-food commodities exported by Brazil. For example, soybeans, tobacco,
coffee and cocoa beans are subject to low tariffs, but the processed products such as
soybean oil, roasted and soluble coffee, cigarettes and chocolates are targets of tariff
escalation. We now discuss how Brazil is acting in the international arena to contribute to
increasing policy coherence in developed economies.
Table 1. Trade barriers to agri-food exports from Brazil
Product EU USA Japan
Raw sugar 161(1,2) 133(1,2) 311(1)

Ethanol 43 (1)
46 (1) 27
Powder milk 64 (1,2)
44(1,2) 155(1,2)
Frozen chicken cuts 94 (1)
12 (1,3) 12
Frozen pork 43(1,2,3) 0(3) 136(1,2,3)
Frozen beef 124(1,2) 26(2,3) 50(3)
Corn 73 (1,2)
1 (1)
87(1)
Tobacco 75 (1) 350 0
Orange juice 15 39(1) 25
1. Specific and compound tariffs. These tariffs were converted into Ad Valorem Equivalents (AVEs) following the methodology
agreed by WTO Members in 2005.
2. Existence of Special Safeguard Measures (SSG).
3. Sanitary restrictions that act as a barrier to trade.
Sources: Bound rates from WTO, APEC, COMTRADE, USITC, and TARIC12. Elaboration: ICONE.
Brazil and the WTO cotton and sugar cases

On 27 September 2002, Brazil filed two dispute cases against US cotton subsidies and
EU sugar export subsidies at the Dispute Settlement Body (DSB) of the WTO. Both cases
marked the first time that a developing country challenged developed countries
agricultural domestic and export subsidies.
In the sugar panel against the EU, Brazil won alongside Australia and Thailand. The
WTO Appellate Body agreed with the argument that the EU provides subsidies above
those stipulated in the GATT agreement on agriculture with respect to the exports of
1.6 million MT of white sugar. The WTO Appellate Body also confirmed the market
distortions caused by sugar C exports, which refer to sugar production above the domestic
market quota (A) and sugar receiving allowed export subsidies (B). As a result of these
findings, the EU will have to exit a market of 3.8 million MT of white sugar, which will
become available to competitive producers such as Australia, Brazil, South Africa and
Thailand. This was an important victory for Brazil because EU sugar subsidies cost
annual losses of USD 400 million to Brazilian producers. In the case of sugar, former
European colonies in Africa, the Caribbean, and the Pacific (ACP) were against Brazil
because they benefit from preferential access to the European market.
In the WTO cotton panel, Brazil claimed that the US violated the peace clause of
the GATT agreement on agriculture as cotton producers received payments during the
1998-2002 marketing years that exceeded the 1992 level of USD 1.9 billion. Brazils
cotton case argued that US cotton subsidies caused serious prejudice to Brazilian cotton
producers because they depressed cotton prices, allowing US producers to gain world
market share to the disadvantage of Brazilian producers (Chaddad, Aguilar and Jank,
2005; Jank, Arajo and Diaz, 2004).
Brazil also won the cotton case, but this time the interests of Brazil converged with
those of West African countries (Benin, Burkina Faso, Chad and Mali). Following the
establishment of the cotton panel in March 2003, the four African nations presented a
proposal to the WTO emphasising that the elimination of cotton subsidies should be
considered a priority. Backed by NGOs and other pressure groups, the cotton case won
global media coverage.
Brazils victory in the sugar and cotton panels will have significant impacts in the
Doha Round. First, the WTO cotton ruling may have far reaching consequences because
the general programmes including direct payments, countercyclical payments,
marketing loans, crop insurance and export credit guarantee programmes constitute the
vast majority of US agricultural support that flow to producers. These programmes are in
effect for several crops besides cotton including corn and soybeans. Second, the sugar
panel challenges a product that has never been reformed by the EU. Brazil now expects to
consolidate these advances in the Doha Round, with a complete elimination of export
subsidies and a significant reduction coupled with discipline in the use of distorting
domestic subsidies.
A pragmatic role in the WTO Doha Round

The WTO Doha Round was launched to reduce the historical imbalance between
strong liberalisation in industrial markets since the early stages of the General Agreement
on Tariffs and Trade (GATT) in 1947 and persistent protectionism in agriculture, a sector
that has been literally left behind in the world trading system. This round is a unique
opportunity to improve conditions for international trade in agricultural products. It is at
the multilateral level that developing countries can find room to address systemic issues
such as domestic support and export competition, which are usually excluded from
regional and bilateral trade agreements (IPC, 2005).
In 2002 the US doubled its agricultural subsidies by approving the most protectionist
Farm Bill in its history. In 2003, the EU eliminated a few subsidies with another reform
of its Common Agricultural Policy (CAP). However, Europes reform excluded important
sectors (i.e. sugar) and did not improve conditions for worldwide access to its large
consumer market. On the eve of the 2003 Cancun Ministerial, the US and the EU released
a joint proposal outlining their respective defensive positions on subsidies and market
access.
Together with China, India and eighteen other developing countries, Brazil formed
the G-20 in an attempt to revive the Doha spirit on agricultural subsidy reduction and
market liberalisation in developed countries2. In the middle of many other coalitions that
are formed in the WTO negotiations, the heterogeneous G-20 has been recognised by
both developing and developed countries as an important and strategic player in the
current multilateral negotiations. Over the past two years the group has changed the
variable geometry of the negotiations by acting in a cohesive and pragmatic manner, with
strong political representation and good technical work shown in the dozens of proposals
presented on each item of the agricultural negotiations agenda. Certainly, the G-20 has
been the most significant result of Brazils current trade policy.
2. G-20 member countries generate 12% of the worlds GDP, 21% of the worlds agricultural GDP, 20% of
the worlds agricultural exports, 57% of the worlds population, and 70% of the worlds rural population.
The group of twenty-one countries has a balanced geographical representation. Five members are in
Africa (Egypt, Nigeria, South Africa, Tanzania and Zimbabwe); six countries are in Asia (China, India,
Indonesia, Pakistan, The Philippines and Thailand); and ten countries are in Latin America (Argentina,
Bolivia, Brazil, Chile, Cuba, Guatemala, Mexico, Paraguay, Uruguay and Venezuela).
In the current phase of the Doha Round, the main issues to be resolved include
domestic agricultural subsidies and agricultural market access in both developed and
developing countries. In particular:
On domestic agricultural subsidies, it is necessary to force the US to accept deeper cuts
and additional disciplines to avoid more escapes and loopholes, as well as demand the
immediate implementation of the final decisions of the WTO Appellate Body on cotton
subsidies. The Doha Round will fail if the US does not reduce its subsidies, which
skyrocketed from USD 7 billion in 1997 to USD 20 billion in 2004. The need to
decouple subsidies, given current production and price levels, is also an absolute must.
The US has been quite skilful when it comes to camouflaging its agricultural
subsidies in the WTO, alleging that they are less trade distorting. The WTO cotton
panel, however, exposed to world public opinion the highly distorting side of US
subsidies as they reached excessively high levels. If Washington is unable to come up
with groundbreaking proposals to lower subsidies in Geneva, not only is it likely that
the Doha Round is doomed to failure but the WTO itself will be forced to deal with an
explosion of new disputes (Jales and Nassar, 2005).
On agricultural market access, the major effort needs to come from Europe. There is
strong resistance, however, to the EU providing greater access to its consumers by
means of reduced agricultural tariffs and expanded import quotas. Unlike the US, the
EU challenge is not to reduce agricultural subsidies, which was partially achieved in
the 2003 Fischler Reform. The greatest challenge facing EU policy-makers and
negotiators is to promote openness to agri-food imports from more competitive
countries. France continues to put pressure on the European Commission not to give up
more, whereas ACP countries do not want to lose preferential access to the European
market and tend to fight with the bloc when it comes to the wider opening of trade
barriers.
The G-20 should also be less defensive when it comes to agricultural market access for
developing countries. As these nations account for 70% of the worlds rural population,
it is expected that some of them will fear reducing their own tariffs on imports. Within
the G20, there are disagreements regarding market access. On one hand, some of its
members including Chile and Mercosur adopt an offensive position and clearly
stand for low agricultural protection. On the other hand, China and India adopt a
defensive position as they seek to protect their domestic markets through high tariffs
and new protection mechanisms such as the concepts of Special Products and Special
Safeguards for developing countries (SSM). An impartial and reasonable reading of the
numbers indicates, however, that there is much room for the G-20 to accept more
ambitious cuts and simpler, more limited rules for sensitive products.
The most important question is whether the Doha Round will affect the current levels
of protection, going beyond the trade and agriculture policies currently in place. The
challenge ahead is to preserve the high level of ambition of the Doha Mandate.
Deadlocks in regional and bilateral negotiations

In addition to multilateral trade negotiations at the WTO, Brazil is also involved in
regional and bilateral trade talks. More specifically, Brazil is involved in negotiations
between the EU and Mercosur since 1999 and with 34 countries in the Western
Hemisphere since 1994.
Losing ambition in the Free Trade Area of the Americas (FTAA)

The Free Trade Area of the Americas (FTAA) initiative was launched in 1994 to
promote a gradual hemispheric integration through the substantial and progressive
elimination of trade, services, and investment barriers. However, since 2003 FTAA
negotiations have become increasingly contentious and moved towards a deadlock
between the US and Brazil (Jank and Arashiro, 2004). Faced by US insistence on
removing subsidies and trade remedy laws from regional talks, Brazil responded by
proposing the transfer of rules in investment, services and intellectual property to the
WTO. As a result, the single undertaking and the most-favoured nation treatments
two core guiding principles of the negotiations have already been broken. Under the
negotiating format set up in the Miami ministerial meeting of November 2003, countries
were left free to pursue agreements bilaterally or multilaterally with only a minimum set
of rules to be commonly applied. For different reasons, it appears that Brazil and the US,
co-chairs of the negotiations, have opted for a more modest approach the so-called
FTAA a la carte considerably less ambitious than what was observed during the early
stage of negotiations.
The FTAA is currently at a dangerous crossroads as it faces the threat of losing
relative importance to other bilateral and sub-regional trade blocs. Such agreements
appear to have become the priority for Chile, Mexico and the US. The growth of bilateral
agreements in the Western Hemisphere not only undermines the FTAA, but also adds
substantial complexity to a future multilateral trade system. In this respect, the FTAA
would be the best alternative relative to the proliferation of bilateral agreements in the
Hemisphere because it would include uniform trading rules for all countries involved. If
the FTAA were negotiated in the original format, a more balanced agreement would have
been achieved in order to foster trade in all directions. Additionally, a hemispheric
agreement would have avoided the negative effects of trade and investment diversions,
and potential conflicts stemming from different rules of origin, technical standards and
trade dispute settlement mechanisms.
Sensitivities in the EU-Mercosur bi-regional agreement

The EU absorbs 35% of Mercosurs total agricultural exports or the equivalent to
48% of total bloc exports to the EU. Export products of particular relevance to Mercosur
include meats (beef, poultry and pork), sugar, ethanol, tobacco, milk powder, corn, wheat,
orange juice and fruits. Although agriculture is central to Mercosurs interests, the sector
continues to suffer from a high protectionist system in the EU based on tariff peaks, tariff
rate quotas, minimum entrance prices, special safeguards and sanitary measures, together
with domestic support and export subsidies (Jank et. al., 2004). The EU maintains an
inflexible position relative to market access for agricultural products and restricts
negotiations in this area to a small expansion of tariff rate quotas for selected products.
Moreover, the concrete results of the EU-Mercosur negotiations are expected to be
influenced by EU enlargements and further CAP reforms for sensitive products, such as
sugar.
In recent years the EU-Mercosur negotiations failed to achieve any meaningful
results. Both sides are to blame. On the one hand, Europe continued to adopt an inflexible
position regarding agricultural market access and did not show interest in concluding the
agreement due to lack of advances from the FTAA. Additionally, the EU agricultural
offer was insufficient and for several products, was lower than what Mercosur already
exports. On the other hand, with an excessively timid proposal in industrial goods,
services and government purchases, Mercosur contributed to the stalemate in the

negotiation process. From the perspective of the agri-food sector, it would be best that the
negotiations resume taking into consideration the informal offers made by both parties in
2004 before the Mercosur proposal.
Finally, South-South co-operation has become an increasingly important topic in
Brazilian foreign policy, albeit with no concrete results up till now. A trade-strengthening
initiative (IBSA initiative) has been launched between India, Brazil and South Africa
while a preferential trade agreement between Mercosur and India was signed in
January 2004. Besides, a preferential trade agreement between Mercosur and the
Southern Africa Customs Union (composed of Botswana, Lesotho, Namibia, South
Africa and Swaziland) is under negotiation, and a free trade agreement between Mercosur
and the Andean Community was signed in October 2004.
(The lack of) coherence in Brazils agricultural policies
As mentioned in the introduction, meat production in Brazil more than doubled from
7.5 to 18.3 million metric tonnes (MT) between 1990 and 2004. This growth has been
fostered primarily by a surge in exports. Total meat (poultry, pork and beef) exports from
Brazil increased from USD 360 million in 1990 to USD 5.2 billion in 2004. In particular,
beef exports during this period grew at an annual average rate of 31% reaching
USD 2 billion in 2004. This surge in beef exports was made possible by government
efforts to eradicate foot-and-mouth disease (FMD) since the 1980s - especially with the
1992 National Programme for the Eradication of FMD and co-ordinated sanitary defence
efforts with neighbouring countries (Lima, Miranda and Galli, 2005). As a result of these
efforts, there has been a substantial decrease in the number of FMD cases in the country
(Figure 4) leading the World Organization for Animal Health (OIE) to recognize several
Brazilian states as FMD-free zones. Despite these advances in controlling FMD, Brazilian
beef still faces sanitary barriers from major importing countries such as the US, Japan,
Mexico South Korea, Canada and China markets that imported USD 7.5 billion worth
of beef products in 2004.
Figure 4. Number of cases of foot-and-mouth disease in Brazil
12,000
10,000
8,000
6,000
4,000
2,000
47 37 0 0 2 24
0
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source: Lima, Miranda and Galli (2005).
On 9 October 2005, a new case of FMD detected in Eldorado, Mato Grosso do Sul
the state with the largest cattle heard in Brazil sparked a new crisis in the Brazilian beef
industry. As more than fifty countries decided to close their borders to Brazilian beef
including the EU, Russia, Egypt and Chile, which are the top four importers from Brazil
fourteen thousand animals were sacrificed, packing houses reduced slaughtering
activities, cattle prices fell and jobs were lost. Beef industry participants were quick to
blame the government for the crisis, while President Lula, more concerned about avian
flu suggested that cattle ranchers were responsible for vaccination. Most experts believe
that it was a matter of time for FMD to re-emerge in the country. This recent crisis in the
beef industry raises the puzzling question of how the government lost sight of an industry
that is so important to the countrys economy. In the analysis that follows we begin to
inform this issue.
Brazilian government expenditures on farm programmes

Over the last three decades, agricultural policy in Brazil underwent significant
changes. The 1970s and early 1980s were characterised by massive government
intervention in agricultural commodity markets primarily by means of agricultural credit
and price support programmes (Figure 5). At that time, agricultural policy had the
objective of promoting food self-sufficiency while compensating the agricultural sector
for the anti-export bias of the import substitution model. The debt crisis of the late 1980s
forced the Brazilian government to decrease support to farmers and to review agricultural
policy goals. Structural reforms introduced in the early 1990s further decreased the
strength of agricultural policy in Brazil with the elimination of export taxes and
commodity price controls, market deregulation, and the introduction of private
instruments for agricultural financing. As a result of these changes, government support
currently represents 3% of farm receipts in Brazil, compared with 2% in New Zealand,
4% in Australia, 17% in the US, and 34% in the EU (OECD, 2005).
Figure 5. The evolution of agricultural policy in Brazil1
50% Massive Debt Crisis and Low Inflation 250

Intervention Liberalization Effects Scenario
45%
40% 200
35%
30% 150
25%
20% 100
15%
10% 50
5%
0% 0
1980
1982
1984
1986
1988
1990
1992
1994
2002
2004
1966
1968
1970
1972
1974
1976
1978
1996
1998
2000
Price Support: % of grain production supported
Preferential Credit Support: US$ per ton of grain production
1. Before 1965, there was price support for coffee, sugar cane, milk, and grains.
Source: Ministry of Agriculture, Livestock and Food Supply (MAPA), 2005.
Figure 6 shows the decreasing levels of government expenditures on agriculture-

related programmes in Brazil since the mid-1980s. The total amount spent in the 1985-89
period reached BRL 101 billion (USD 34.7 billion), which represented 5.6% of total
government expenses. The total amount spent on agricultural programmes decreased to
BRL 50 billion (USD 17.1 billion) in the 2000-04 period, representing one per cent of
total government expenses (Table 2).
Not only have government expenditures on farm programmes decreased by half in
real terms, but they were also pulverised in an increased number of programmes.
According to Gasques (2004), the number of agriculture-related programmes increased
from 30 before the year 2000 to 100 programmes in 2003 (84 under the function
Agriculture and 16 programmes under the function Agrarian Organisation3). Many of
these programmes are hard to evaluate and, in general, expenses are made in intermittent
actions that do not contribute to intended goals. As a result, Gasques (2004) observes that
some programmes are stretched out to the limit and cannot survive with decreased
budgets. Additionally, he argues that some programmes such as sanitary defence have
been neglected despite being essential to agri-food development and export growth.
3. Brazilian government expenditures are organised in functions and programmes. A function represents the
higher level of aggregation of federal government expenses, including health, education, social security
and the two agriculture-related functions (Agriculture and Agrarian Organisation). A programme
comprises a group of government actions aimed at a specific policy goal.
Figure 6. Brazilian government expenditures in farm programmes1
35
11.9%
8.6%
30
25
1.9% 2.6%
7.1% 4.4% 2.2%
20 2.0% 2.2%
1.9% 2.5% 2.2% 1.3% 2.5%
15
1.0% 1.1% 0.9%
1.0% 1.0%
10
3.5%
5
0
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
1. Expenditures are measured in BRL billions corrected for inflation by IGP-DI (base year is 2004). The percentages on
top of the bars represent expenditures in farm programmes relative to total government expenditures.
Source: Ministry of Finance (2005). Elaboration: Gasques (2004) and ICONE.
Table 2. Brazilian government expenditures in farm programmes by function1
Expenditures in
Expenditures in
Total Expenses in Total Expenses in Agriculture /Total
Agrarian Organisation
Years Agricultural Programs Agrarian Organisation Government
1 1 /Total Agriculture
(BRL Billion) (BRL Billion) Expenditures
(%)
(%)
1985 1989 101.52 6.47 5.55 6.37

1990 1994 91.11 5.97 2.39 6.56
1995 1999 88.15 15.01 2.11 17.03
2000 2004 50.06 18.88 1.02 37.78
1985 2004 330.85 46.34 2.25 16.91
1. Expenditures are measured in BRL billions corrected for inflation by IGP-DI (base year is 2004). Family
Farming (PRONAF) was included in Agrarian Organisation Expenses for the period between 2000 and 2004.
Another important trend is the increased emphasis placed on a function known as

agrarian organisation. This function is largely related to land reform in Brazil, which
since 1994 has settled approximately 500 thousand new family farms on expropriated
land (Graziano, 2004). In addition to land reform, the government adopted a set of
policies targeted toward the rural poor in 1995 known as PRONAF including
subsidised credit, training and extension. Interestingly enough the Brazilian government
created a new ministry in 2000 to run programmes targeted toward family farms and land
reform the Ministry of Agrarian Development (MDA). According to Gasques and
Bastos (forthcoming), MDA expenses in personnel and other current expenses cost
Brazilian taxpayers BRL 2.2 billion (around USD 1 billion) between 2001 and 2004.
Reflecting the dualistic nature of Brazilian farming, Brazil is probably the only country in
the world with two agricultural ministries. Out of a total of five million farms in the
country, less than 10% own more than 100 hectares of land (IBGE, 1995). In other words,
a small percentage of farms account for a bulk of output and exports, whereas the rest are
small-scale, mostly inefficient producers.
Table 2 shows that from 1985-89 to 2000-04, federal government expenditures on
Agrarian Organisation programmes-as a proportion of total expenditures on farm
programmes-increased from 6.4% to 38%. In other words, not only did total government
expenditures on agricultural programmes decrease both in relative and absolute terms, but
traditional farm programmes including rural credit, commodity price support,
agricultural research, sanitary and phytosanitary defence and extension services also
suffered increased competition from Agrarian Organisation programmes.
Figures 7, 8 and 9 illustrate the increased priority given to land reform in Brazil as
opposed to traditional farm programmes since the year 2000. Figure 7 shows that
government expenditures on land reform and similar programmes increased from
BRL 1.84 billion (USD 836 million) in 2000 to BRL 2.4 billion (USD 1.1 billion) in
2004. Expenditures on supporting family farming (PRONAF) also increased from
BRL 1.4 billion to BRL 2.8 billion. At the same time expenditures on government
purchases and storage of agricultural commodities decreased from BRL 1.32 billion
(USD 600 million) to BRL 0.53 billion (USD 241 million). Other traditional agricultural
policy programmes such as extension, research and sanitary defence also suffered
resource cuts during the last five years.
Figure 7. Brazilian government expenditures in specific farm programmes1

BRL Billion - Real Values 2004
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2000 2001 2002 2003 2004
Research and Development Sanitary Surveillance
Supply Programmes Rural Extension
Land Reform and Other Programmes PRONAF (Family Farming)
1. Expenditures are measured in BRL billions corrected for inflation by IGP-DI (base year is 2004).
Government expenditures in agricultural research through the Brazilian Agriculture

Research Corporation (Embrapa) have substantially increased between 1975 and 1982
(Figure 8). As a result of the 1980s debt crisis, the government has not been able to
sustain that growth. Consequently, government expenditures in agricultural research have
hovered around the BRL 1 billion (USD 455 million) mark between 1983 and 1995.
Since reaching the BRL 1.35 billion (USD 614 million) peak in 1996, Embrapa has
received decreasing levels of support from the government. Additionally, over 90% of
total Embrapa budget is currently being used for personnel and other current expenses.
Given the central role of Embrapa in tropical agriculture research this trend might
jeopardise future productivity growth in Brazilian agriculture.
Figure 8. Brazilian government expenditures in agricultural research (Embrapa)1
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
Figure 9. Brazilian government supply of agricultural credit1
100
90
80
70
60
50
40
30
20
10
0
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
Another important component of agricultural policy in Brazil has been the supply of
relatively cheap credit by government sources. Figure 9 shows, however, the reduced
level of government intervention in agricultural credit markets since the late 1970s.
Government supply of agricultural credit has decrease from BRL 91 billion

(USD 41 billion) in 1979 to BRL 13 billion (6 billion) in 1996. During this period, non-
traditional sources of credit including private banks, agribusinesses and international
lenders have substituted for government-supplied credit. Since these non-traditional
lenders did not generally reach small family farmers, PRONAF was instituted in 1995.
PRONAF provides working capital and investment credit to small farmers, including the
beneficiaries of agrarian reform, at below-market interest rates. Since the institution of
PRONAF, government supply of agricultural credit rebounded to BRL 38 billion
(USD 17.3 billion) in 2003, which is equivalent to approximately 30% of the total
agricultural credit market.
Summary and conclusions
The agri-food sector in Brazil underwent significant export-led growth in the last
decade. This growth in agricultural production and exports has been attributed to a
number of factors, including the market oriented policies introduced since the late 1980s
and substantial investments in tropical agriculture research and availability of agricultural
credit, which significantly impacted the performance and competitiveness of the
countrys agri-food economy. Total factor productivity in Brazilian agriculture grew at an
average annual rate of 3.3% between 1975 and 2002. In 2004, Brazil surpassed the US as
the country with the largest surplus in agricultural trade with USD 25 billion.
Despite these favourable developments and the availability of labour and natural
resources, the growth of the agri-food sector in Brazil faces significant internal and
external constraints. Where external constraints are concerned, Brazilian agri-food
exports are significantly impacted by OECD trade barriers and subsidies to domestic
producers and exporters. The benefits from agri-food economy development would be
substantially increased in Brazil if OECD member countries reformed their agricultural
policies to minimise distortions in agricultural trade. That is why Brazil adopted a more
aggressive position in international trade negotiations by bringing two high-profile
dispute cases against developed countries at the World Trade Organization (WTO) and by
taking the lead in the formation of a coalition of developing countries (the G-20).
In the domestic arena, agricultural producers in Brazil face uncertainties related to the
lack of clearly defined property rights for land, the regulatory framework concerning
research and marketing of genetically modified organisms (GMOs), poor infrastructure
causing logistical bottlenecks, and the decline in government spending in important areas
such as sanitary defence, agricultural research and other traditional agricultural policy
instruments. This paper has shown that government spending in farm programmes has
significantly decreased in the last couple of decades. Perhaps more importantly, the
number of agriculture-related programmes has tripled since the early 2000s, meaning that
only a limited supply of resources is available to be spent on an increasing number of
programmes. Traditional farm programmes including commodity purchases and
storage, agricultural credit, research and development, and sanitary defence have
suffered from the consequences of significant reductions as the Brazilian government has
shifted priorities to land reform and other Agrarian Organisation programmes.
One of the structural changes of recent agri-food development in Brazil is the growth
of commercial agriculture, including in areas that have traditionally been important to
small-scale farmers such as dairy products and corn (OECD, 2005). This creates
pressures on less competitive, semi-subsistence farmers, for whom the long-term future
mostly lies outside the agricultural sector. As a result of these changes, and significant
political pressure from the landless workers movement (MST) and the Catholic Church,
the Brazilian government has developed programmes targeted to small-scale farmers,
including land reform and PRONAF.
Given the role of agriculture in the Brazilian economy, however, it is important that
policies aimed at poorer farmers do not hold back further improvements in productivity of
more competitive farms. The recent re-emergence of foot-and-mouth disease, which
forced more than fifty countries to close their borders to beef exports from Brazil, clearly
shows some of the policy challenges to the development of the Brazilian agri-food
economy. Brazilian efforts in international trade negotiations will not contribute to agri-
food development if the country continues to neglect important domestic issues such as
sanitary defence. Growth in perishable commodity exports including meats and fruits
depend on the countrys success in guaranteeing product safety and quality. It is,
therefore, important to enhance the network of laboratories for product testing, develop
modern certification and traceability mechanisms, and control FMD and other diseases. If
Brazil does not do its homework, it will suffer the consequences of the visibility curse
as the country increases its market share in global agri-food trade and adopts a pro-active
role in international trade negotiations.
In retrospect, farm policies in Brazil have evolved in the last three decades from a
food security emphasis before 1985, to deregulation and openness to trade between 1985
and 1995 and, since then, to a land reform and family farm focus. Looking ahead,
Brazilian policy makers should develop farm policies to balance competitiveness with
social and environmental sustainability goals. This policy agenda should include social
inclusion goals and programmes targeted toward different types of family farms, but also
programmes that are essential to agri-food competitiveness, including agricultural
research, sanitary defence, food safety, traceability, clearly defined property rights to
land, and infrastructure development.
REFERENCES
Chaddad, F.R., P. Aguilar and M.S. Jank (2005), Agri-food Market Integration: Perspectives
from Developing Countries, Paper presented at the Second Annual North American Agri-food
Market Integration Workshop, San Antonio, TX, May 4-6, 2005, paper available at:
http://naamic.tamu.edu.
Food and Agricultural Organization (FAO) (2004), FAOSTAT Database, available at:
http://faostat.fao.org, April.
Gasques, J.G. (2004), Gasto Pblico para o Desenvolvimento Agrcola e Rural: O Caso do Brasil,
Research report prepared for the FAO, Santiago, Chile.
Gasques, J.G. and E.T. Bastos, Gastos Pblicos na Agricultura: Uma Atualizao, forthcoming.
Gasques, J.G., E.T. Bastos, M.P.R. Bacchi and J.C.P.R. Conceio (2004), Condicionantes da
Produtividade da Agropecuria Brasileira, Revista de Poltica Agrcola 13(3): 73-90, 2004.
Graziano, X. (2004), O Carma da Terra no Brasil, A Girafa Editora, So Paulo.
IBGE (Instituto Brasileiro de Geografia e Estatstica) (1995), Brazilian Census of Agriculture.
IPC (International Food & Agricultural Trade Policy Council) (2005), Building on the July
Framework Agreement: Options for Agriculture, Washington, DC.
Jales, M. and A. Nassar (2005), How to Read the US and EU Proposals on Domestic Support to
Agriculture, Bridges, International Centre for Trade and Sustainable Development (ICTSD),
No. 10, December 2005, p. 5-7, available at: www.ictsd.org.
Jank, M.S. and Z. Arashiro (2004), Free Trade in the Americas, Where Are We? Where Could
We Be Headed?, in Inter-American Dialogue (org), Free Trade in the Americas: Getting
There From Here, Washington, DC: Report of the Inter-American Dialogue.
Jank, M.S., L. Arajo and J. Diaz (2004), The WTO Dispute Settlement Mechanism Perspective:
Challenging Trade-Distorting Agricultural Subsidies, in J. Lacarte and J. Granados (eds),
Inter-Governmental Trade Dispute Settlement: Multilateral and Regional Approaches,
London: Cameron.
Jank, M.S., J.Y. Carfantan, G. Kutas, A.J. Meirelles, A. Nassar and J.H. Cunha Filho (2004),
Scenarios for Untying the Agriculture Knot, in A. Valladao, F. Pea and P. Messerlin (eds.),
Concluding the EU-Mercosur Agreement, Paris: Mercosur Chaire of the Institut dEtudes
Politiques de Paris, Presses de Sciences Po.
Jank, M.S., A.M. Nassar and M.H. Tachinardi (2004), Agronegcio e Comrcio Exterior
Brasileiro, Revista USP 64 (Dezembro), pp. 14-27.
Lima, R.C.A., S.H.G. Miranda and F. Galli (2005), Febre Aftosa: Impacto sobre Exportaes
Brasileiras de Carne e o Contexto Mundial das Barreiras Sanitrias, So Paulo, ICONE.
Ministry of Agriculture, Livestock and Food Supply (MAPA) (2005), Brazilian Agriculture
Policy. Presentation, Washington, DC, 16 June 2005.
Ministry of Finance (2005), Relatrio Resumido de Execuo Oramentria do Governo Federal,
data available at: www.fazenda.org.br.
Ministry of Industry, Development and Foreign Trade (2005), trade data available at:
www.desenvolvimento.gov.br/sitio/secex/negInternacionais/tec/apresentacao.php.
OECD, Key Issues for Policy Coherence for Development in Agriculture (2004), report available
at: www.oecd.org/dataoecd/22/53/25507214.pdf.
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www.oecd.org/document/62/0,2340,en_2649_201185_35584190_1_1_1_1,00.html.
The Economist (2005), The Harnessing of Natures Bounty, pp. 73-75, November 5-11.
World Trade Organization (2005), data and notifications available at: www.wto.org.
Chapter 9.
POLICY COHERENCE FOR DEVELOPMENT: ISSUES FOR CHINA
Xiaoshan Zhang
Institute of Rural Development, Chinese Academy of Social Sciences
Abstract
Chinese rural development policies were secondary to Chinas national development

paradigm, development framework and development strategies.
In the past two decades and a half, Chinas rural and agricultural sectors have grown
significantly. However, problems persist in the areas of labour, land and capital. Cheap
labour, cheap land, domestic and foreign capital, advanced technology, information and
management, good infrastructure, effective policies and market access were important to
Chinas development process. Rural development however suffered.
Chinese authorities have tried to tackle problems relating to social justice and also
those relating to exclusionary issues, both of which they recognise as being important.
However, a comprehensive policy adjustment framework is necessary to approach these
matters in an effective manner.
Chinas agricultural trade policies have been subordinated to the overall trade policy
framework which in turn is an indispensable part of the countrys development
framework. The central policy of speeding up the industrialisation process through open
policies which emphasise attracting FDI enabled China to become a world factory
However, in order to ensure the export of industrial products, agricultural trade was
neglected. The fact that Chinese agricultural trade policies have stayed open seems to
have merely been the inevitable result of the strategies followed by Chinese trade players
and their international counterparts.
Even if Chinas overall development policy is changed, Chinese trade policies will
not have to undergo any significant adjustments. The competitiveness of manufactured
goods will be raised through the up-grading of the industrial structure and the
enhancement of technology and capital. But the policy of adopting an open attitude in
terms of agricultural trade to ensure the export of manufactured goods an approach
that resulted in the expansion of Chinas agricultural trade products-will remain
unchanged. A close relationship existed between the expansion of world grain trade and
the expansion of Chinese grain imports. It is possible that Chinas overall imports of
grain will increase and the import volume of grain (including soybean) will approach
30 million tonnes. Such a situation will inevitably influence Chinas effective and
sustainable grain security mechanism and the livelihoods and incomes of Chinese grain
producers, especially those of soybean producers in the north-eastern areas and of wheat
producers in the central areas. In the long run, it is very possible that there will be a
deficit between domestic grain supply and demand. It is important to manage such a
situation in order to maintain an effective and sustainable grain security mechanism.
Other priorities include deepening internal reform and implementing institutional
changes to reduce corruption and to protect the rights and interests of excluded and
vulnerable social groups. It is also important to implement a top-down organisational

approach combined with bottom-up initiatives.
Chinese agricultural-related policies
Chinese rural development policies are subordinated to the national

development paradigm, development framework and development strategies
The national development paradigm China adopted since reforms were implemented
was urban-oriented, SOE-oriented, and coastal regions-oriented.
The basic ideas driving the paradigm were put forward by Deng Xiaoping who
mentioned on several occasions that certain groups of people should be allowed to
participate and that some regions must take the lead, in both rural and urban China, where
development is concerned. (p. 23, Deng Xiaoping, 1993).
In practice, growth spurts were associated with a relatively narrow range of reforms.
The Chinese called it a gradual change approach which is unlike shock therapy. It was
also thought that such an approach would reduce the resistance from vested interest
groups so that the reform process could proceed smoothly.
During the transformation from a central-planned economy towards a more outward-
oriented, market-oriented economy, assisted by inflows of FDI, new sectors like private
sectors, TVEs (township and village enterprises), joint ventures, and multi-national or
trans-national corporations, sprang up besides the old sectors which were still controlled
by the state. Employment and income sources increased and diversified, the peoples
dependence on the old system decreased, and the gains from the new sectors covered the
costs of the reform (Fan Gang, 1991).
However, the development paradigm is not a remedy for all ills and some problems
remain to be addressed.
Poverty alleviation issue

In the past two decades and a half, significant achievements have been made by the
Chinese government in reducing rural poverty (Table 1). However, much remains to be
done.
In 1993, the central government set up the eight-seven plan, with the aim of lifting
80 million of the rural poor out of poverty by the year of 2000. However, at the end of
1997, 50 million of the rural poor still lived below the poverty line while in 2000, this
number stood at 30 million (Table 1). As per the poverty line criterion set by the World
Bank, a person needs a minimum of one USD per day in terms of purchasing power
parity (PPP). In line with this definition, at the end of 1997, the rural poor numbered
124 million and the poverty rate was 13.5% (Wu Guobao, 2000). In 2003 the number of
poor increased by 800 thousand as per the Chinese definition of poverty (Table 1).
Several Chinese institutions set a minimum requirement of CNY 8821 (2003) for low
income rural populations. This was supposed to be close to the World Bank definition.
1. In this report, Chinas currency is called Yuan which is equal to Yuan renminbi. The currency code
applied is CNY which is in line with ISO classification.
According to this revised criterion, in the year 2003, the number of people in rural areas
living below the poverty line was 85.17 million, and accounted for 9.1% of total rural
population (UNDP; NDRC, PRC; CICETE,PRC; CQOLS, Wuhan University; 2004).
Table 1. The number and percentage of rural population under poverty line
Year Rural population (million) Rural people under Percentage (%)
poverty line (million)
1978 790 250 31.65
1985 808 121 14.98
1990 841 85 10.10
1995 859 65 7.57
1996 851 58 6.82
1997 842 50 5.94
1998 832 42 5.05
2000 808 30 3.71
2002 782 28.2 3.61
2003 29
Rural poverty line: CNY 450 per capita (1994)
CNY 530 per capita (1995)
Sources: China Statistical Yearbook, Analysis and Forecast on Chinas Rural Economy (1999-2000); Green Book of Chinas Rural
Economy, UNDP; NDRC, PRC; CICETE,PRC; CQOLS, Wuhan University; A National Development Framework Converging with
the MDGs to Build Chinas Overall Xiao-Kang (Well-off) Society, December, 2004.
The widening gap between urban and rural areas in terms of income and social
welfare
In 2000, the per capita disposable income in urban areas was CNY 6 280 (Table 2).
The gap between urban and rural incomes widened from 2.65 in 1999 to 2.8 in 2000, and
then to 3.23 in 2003. In 2003, per capita annual net income of rural households was
CNY 2 366 (80% in cash and the rest in kind). Factoring in the prevailing urban bias in
public expenditures, urban hidden income and the residual urban social welfare from the
long-existing dual structure, the gap between urban and rural incomes is even wider.
Table 2. The gap between urban and rural annual per capita income
Year Per capita annual disposable Net income of rural The ratio between urban
income of urban households households (CNY) and rural income
(CNY)
1978 343.4 133.6 2.57:1
1980 477.6 191.3 2.50:1
1985 739.1 397.6 1.86:1
1990 1 510.2 686.3 2.20:1
1991 1 700.6 708.6 2.40:1
1992 2 026.6 784 2.58:1
1993 2 577.4 921.6 2.80:1
1994 3 496.2 1 221 2.86:1
1995 4 283 1 577.7 2.72:1
1996 4 838.9 1 926.1 2.51:1
1997 5 160.3 2 090.1 2.47:1
1998 5 425.1 2 162 2.51:1
1999 5 854 2 210.3 2.65:1
2000 6 280 2 253.4 2.79:1
2001 6 859.6 2 366.4 2.90:1
2002 7 703 2 476 3.11:1
Source: China Statistical Yearbook.
The stagnation of growth rate of Chinese farmers net income

The per capita growth rate of Chinese farmers annual net income decreased for four
consecutive years starting the year 1997 (Table 3). There is an urgent need to increase
farmers income. This can then enhance their purchasing power which in turn will
stimulate domestic rural markets.
Table 3. The change of farmers net income per capita

Year Nominal income Nominal rate of Real income Real increasing rate
(CNY) increase (%) (CNY) (%)
1985 397.60 11.90 383.05 7.80
1986 423.76 6.58 410.32 3.20
1987 462.55 9.15 445.79 5.20
1988 544.94 17.81 491.69 6.30
1989 601.51 10.38 536.22 -1.60
1990 686.31 14.10 667.62 11.00
1991 708.55 3.24 700.04 2.00
1992 783.99 10.65 750.35 5.90
1993 921.62 17.56 809.08 3.20
1994 1 221.00 32.50 967.70 5.00
1995 1 578.00 29.20 1 282.00 5.00
1996 1 926.00 22.00 1 720.02 9.00
1997 2 090.00 8.50 2 014.60 4.60
1998 2 162.00 3.40 2 179.87 4.30
1999 2 210.00 2.20 2 244.16 3.80
2000 2 253.00 1.90 2 256.00 2.10
2001 2 366.40 5.00 2 347.63 4.20
2002 2 476 4.63 2 480 4.80
2003 2 622.00 5.90 2 582 4.30
2004 2 936 11.98 2 800 6.80
Notes: Real income is the net income deflated by the price index. Real increasing rate is calculated as follows: current years
real income divided by previous years nominal income minus 1.00.
Source: China Statistical Yearbook, State Statistical Bureau, PRC.
Within the development paradigm China adopted since the reform, policy priorities
were not in favour of rural areas. Inland areas, agriculture, rural and small-and-medium-
sized enterprises were especially disadvantaged and were the major reasons for the
stagnation of rural and agricultural development.
Discriminating policies for rural workers jeopardised urbanisation process

Data shows 130 million rural labourers working in the TVEs and according to the
recent survey, about 120 million of the rural labour force worked out of their home
counties. These people are considered marginal and belong to the unstable and vulnerable
section of the population. For example, the rural workers in TVE and in urban areas do
not enjoy social security privileges. Such institutional arrangements result in a stagnation
of the urbanisation process.
The rural workers shifting to urban areas or working in TVE have been regarded as
cheap labour. This means that they dont enjoy decent salaries, have to tolerate very poor
working and living conditions, and have no social security privileges. This labour force
was exploited to the utmost, could not afford to put down roots and to settle down in
urban areas. However, according to demographic census, many of these people were
included in the urban population so that the urbanisation rate was calculated at 40.53% in
2003. Because this phenomenon cannot be considered real urbanisation, these numbers
are misleading.
Why is the rural labour force so cheap? The rural labour force brought an abundant
supply of cheap, unskilled labour and any calls for an increase in wages, or improvements
in working or living conditions will meet resistance from employers, given the increase in
costs such changes would entail Moreover, in order to attract FDI, increase fiscal
revenue, and to realise personal promotion, local cadres were inclined to form a coalition
with entrepreneurs in order to control supplies of cheap labour.
The drawbacks of the land tenure system deprived farmers of their property rights
and negatively influenced farmers livelihoods
The Constitution stipulates collective ownership of rural land. But it is difficult to
clarify who could represent the rural collective. Moreover, the ambiguous system of rural
land rights also enables local governments, domestic and foreign industrial and
commercial capital to obtain, through confiscation and together with community leaders,
rural land from rural collectives and then to convert the land -after infrastructural
improvements-into construction land. In some cases, farming land is used to construct
infrastructure, such as high-ways or oil-pipe-lines, and in other cases, the land is used for
the construction of industrial parks or for commercial housing. In this way the local
economy could accumulate capital and most of the added value from land use
conversions would be shared among the local governments, industrial and commercial
capital.
Since the reform, reportedly about CNY 2 000 billion from the added value
associated with the conversion of rural land have been taken from farmers. It is also
reported that according to the programme, from the year of 2000 to 2030, 3.63 million ha
of arable land will be expropriated. If the current compensation criteria are still in force,
the losses to farmers from the transactions will equal more than CNY 3 000 billion.
Besides, the confiscation will also cause about 80 million farmers to be temporarily
unemployed (Zhang, 2004).
Those farmers who lost their land during the urbanisation process through such land
transfers can get only limited compensation, and therefore became both landless and
jobless. It was reported that in the year of 2002, 880 000 farmers lost their land in
Zhejiang Province and got only a lump-sum compensation (Peoples Daily, 17 March
2003). Further, because these people were not included in the urban social security
network, they also became marginal and vulnerable. It was said that various kinds of
development zones expropriated 35 400 square km of arable land, and the landless
farmers numbered 35 million. Fifty per cent of them were both landless and jobless
(Zhang, 2004). The so called three Nos farmers (no farming land, no job and no right to
minimum social security) will create serious problems for society.
In terms of arable farming land, agribusiness started featuring in o agriculture and
signed contracts (leases) with local governments and rural collectives to take land
already-contracted land away from farmers. The entrepreneurs then developed large-scale
plantations to grow cash crops such as fruits and vegetables, and hired dispossessed
farmers as agricultural labourers.
Since the small piece of the contracted land is still the basic means of security for a
vast number of small-scale farmers, any change in the land tenure system will inevitably
impact this populations security. Also, whether or not the people who lost their rights to
land use will be compensated by other stable means of security, like non-farming
employment opportunities and social protection is an important issue. The land tenure
system should be regarded as an important factor when it comes to influencing the
livelihood, income and employment opportunities of rural labourers.
According to the recently issued Rural Land Contract Law, the state should maintain
the long-term stability of the rural land contract arrangements. During a given contract
period, those who issue contracts will not be allowed to renege on the terms of the
contract. But the purpose of this law is to regulate the economic relationship, within the
rural collective, between those who issue contracts (village cadres) and the contractors
(ordinary farmers). This law does not address the key issue of how to protect farmers
interests and property rights during the land confiscation process. Besides, the
implementation of this law will meet resistance from local officials and rural cadres since
they will not be able to easily take the contracted land away from the farmers in the name
of promoting agricultural integration or for developing agricultural, scientific and
technological parks.
Tax-sharing system and fiscal policies were also not in favour of rural
development
After the tax-sharing fiscal reform in 1994, the fiscal situation at both the central
government and provincial government levels has improved to a certain extent. As a
result, most of the fiscal sources were concentrated at central, provincial, or even
prefectual levels and many of the responsibilities and obligations were allocated down to
county and finally to township or town levels. Such an approach caused difficulties for
the rural grassroots organisations (township or town, villages) in carrying out their normal
functions. The unfunded mandate from above also caused the crises in the provisions of
public goods and of basic social welfare amenities at a grassroots level.
Local governments, both in poor and even in relatively rich areas, face severe
imbalances due to the gaps which exist between required and available budgets. For
example, when the cost of a luxury car at the provincial level exceeds the total yearly
budget of a township, it is difficult to provide sufficient public service at the grassroot

levels. Besides, the debt burden on both townships and villages is high as well. It was
reported that the average debt owed per town or township was CNY 4 million and the
average debts owed per village was CNY 200 000 (Zhang et al., 2001).
Rural financial policies couldnt provide farmers with enough capital

After the closing-down of the Rural Co-operative Funds (RCF), the Rural Credit
Co-operatives (RCC) became the monopolistic financial powers in rural areas. There are
problems involved in converting these bodies into real co-operatives. Besides, given the
high transaction costs involved in dealing with small farmers and also fearing financial
difficulties, commercial banks are withdrawing from the countryside. Therefore, farmers,
small rural business men or other working people have fewer chances of getting loans
from the formal financial sectors and have to depend on money-lenders.
In the past two decades and a half, China witnessed significant increases rural and
agricultural growth. But there were problems associated with labour, land and capital.
The development process was fuelled by cheap labour, cheap land, domestic and foreign
capital, advanced technology, information and management, good infrastructure, effective
policies and market access. However, rural development was neglected.
Adjustments of Chinese rural development policies - government priorities for

rural development
Policy makers could still continue with the old development patterns, which include
making GDP growth a priority, concentrating resources on the coastal areas, big cities,
SOEs, stimulating the domestic consumption of certain groups (white collar or golden
collar people) and developing the automobile industry, tertiary industry and commercial
housing. It is thus possible to sustain a 7% per annum growth rate in GDP for at least 10,
perhaps even 20 years.
An alternative approach is to adjust the distribution structure which is currently
distorted and rebuild the national social policy framework so that excluded social groups
can get as much of access to basic public services as their more included counterparts.
Investing in human capital in this manner will yield huge social benefits.
If development is defined as sustainable economic growth based on equitable
distribution, then in the past two decades and a half, China has achieved rapid economic
growth. However, to a certain extent, the country has not realised real development. Thus,
fundamental policy adjustment is not only connected with social justice, but also with
development issues.
During the 16th Congress of Chinese Communist Party which was held in
November 2002, Mr. Jiang Zeming said that Chinas goal for the next twenty years is to
build a society which will benefit its more than a billion Chinese people. He also
mentioned that, so far in China, the urban-rural, dual economic structure has not changed,
the trend toward increasing inequities between regions have not been reversed, and a
large number of number of people continue to live below the poverty line. Therefore,
when it comes to realising Chinas potential for industrialisation and modernisation, there
still remains a long way to go.
In the 3rd plenary session of the 16th Partys congress in 2003, five harmonised
development objectives (regional development both urban and rural, economic and
social development, human development and environmental preservation, domestic

development and openness to the outside world) were put forward. There was also a call
to improve the institutional environment so that the rural surplus labour force could find
employment opportunities in their home villages. Besides, the need to eliminate
restrictive regulations on rural labourers who wanted to pursue urban employment so as
to gradually create more flexible labour markets and to unify the urban and rural labour
pools, while prioritising the needs of agriculture, rural areas and farmers was also
emphasised.
In line with these ideas the Chinese Communist Party in 2004 and 2005 said that the
scientific development outlook should be adopted in order to encourage human-capital-
based sustainable development. The development goal is to finally build a harmonised
society. In the 5th plenary session of the 16th Partys congress in October 2005, the goal
of building new socialist villages was suggested in the context of the eleventh five year
plan.
These perspectives indicate that Chinese authorities have attached great importance to
solving social issues including problems relating to the exclusion of social groups.
However in order to realise these ideas, a comprehensive policy adjustment framework
should be set up. Several policies have now been launched in the area of rural
development. These are as follows
1. In 2004, taxation reform was launched in 30 provinces and the central budget
transferred CNY 51 billion to governments at rural levels in order to help cover
budgetary deficits.
2. Establishing a new rural co-operative medical care system.
3. Promoting rural educational reform: The aim is to increase the percentage of children
who can enjoy nine years of compulsory education to above 85% in the western regions
of the country. It is also the aim to reduce illiteracy rate among adults to below 5%. A
state education report issued recently by the ministry of education promised that by the
year 2010, education would be made compulsory and would also be free everywhere in
rural China.
Chinese trade policies on agricultural products

While Chinese agricultural trade policies are subordinated to trade policies, they are
also an indispensable part of Chinas development framework.
Chinas share in global trade increased from 0.9% in 1980 to 6.2% in 2004. The share
of agricultural products in Chinas trade decreased dramatically from 28.5% in 1980 to
5.8% in 2004 while the share of fuel and mineral turnover decreased from 13% in 1980 to
8.2% in 2004.
Meanwhile the share of manufactured products in total trade increased significantly
from 55% in 1980 to 85.2% in 2004 (Chen, 2005). The figures indicate that in the past
two decades and a half, there have been important changes in Chinas overall trade
structure.
The development strategy of speeding up the industrialisation process using open
policies which emphasise attracting FDI has enabled China to become a world factory.
Agriculture trade was sacrificed to ensure the export of industrial products. As an
inevitable result of Chinas own trade strategies and those used internationally, Chinese
agricultural trade policies remained open. In 2004, tariffs on agricultural products in

China were 15.8%. This was much lower than the world average (46.5%)2. Besides, in
general, Chinas tariff rate was 15% compared to the world average of 62% (Ke, 2005).
As far as imports go, the tariff level of less than 8% was far below the world average of
15.8% (Table 4).
Table 4. Chinas tariff of agricultural products import, 2004

Import value The share of total Tariff rate Tariff amount
(million USD) import (%) (%) (million USD)
Grain 2 210 7.9 1 22.1
Oil 3 890 13.9 9 350.1
Cotton 3 200 11.4 1 32
Sugar 280 1.0 15 .42
Soybean 6 980 24.9 3 209.4
Vegetables 90 0.3 13 11.7
Fruits 590 2.1 12 70.8
Animal Husbandary 4 040 14.4 12 484.8
products
Others 6 750 24.1 14 945
Total/ average 28 030 100.0 7.7 2 167.9
Sources: The data of import value were provided by the Information Centre, Ministry of Agriculture, China. The tariff rates were
synthesised according to the actual custom tariff quoted from Ke et al., (2005).
An overall adjustment in Chinas development policies will not significantly impact

Chinas trade policies. The manufactured goods sector will remain competitive through
the up-grading of the industrial structure, and the enhancement of technology and capital.
However, I personally think that the open policy in agricultural trade (to ensure
maintaining the exports of manufactured goods) will remain unchanged.
Agricultural policies have been adapted to meet the needs of the new situation
The new situation was characterised by:
1. A reduction in grain supply. In 2003, influenced by structural adjustments in the
agricultural sector and by natural disasters, the total grain output fell to 430.67 million
tonnes the lowest it had been since the 1990s. Compared to the highest output levels
achieved for 1998, this marked a decrease by 15.9% and compared to the year of 2002,
a decrease of 5.8%. Such a phenomenon caused an increase in food prices which spilled
over to the related sectors and goods.
2. The stagnation of farmers income.
3. A depressed domestic market.
The Chinese government must target two goals: ensure the security of grain supply
and enhance farmers incomes.
In order to achieve the two goals, government should adopt policies which will give
farmers more incentives to produce grain and will also improve the competitiveness of
2. Chen Yongfus calculation according to the data from Benjamin Buetre, Roneel Nair, Nhu Che and Troy
Podbury (2005).
In 2004, in order to promote rural taxation reform, funds to the tune of

CNY 51 billion, were transferred from the central government. During the reform, the
elimination of agricultural special taxes on all products except tobacco combined with a
reduction in agricultural taxes enabled farmers to reduce their debt burdens significantly.
Besides, the direct subsidies to grain producers in 2004 reached CNY 11.6 billion, while
the subsidies for using good varieties of grain in 13 grain-producing areas totalled
CNY 2.8 billion. The subsidies provided for purchasing agricultural machinery reached
CNY 0.5 billion. However, the total subsidies accounted only for 0.5% of Chinas
agricultural output value (Ke, 2005).According to Chinas WTO commitments relating to
the Amber Box Policies, the percentage of subsidies in the future could reach 8.5%.
All policies adopted by the central government produced positive results. In 2004, the
area allocated to grain increased by 330 million mu (22 million hectares) as compared to
the previous year. Grain output reached 469.47 million tonnes an increase of 9% or
38.77 million tonnes. Grain output per mu (1/15 of hectare) reached 308 kg, an increase
of 6.6% (Table 5). Both the average yield and the absolute yearly increase in grain
production were record-breaking.
Table 5. Changes in grain output and area

Year Grain output Grain sown areas Grain output per capita
(million tonnes) (million mu) (kg/person)
1978 304.77 1 809 318.7
1980 320.56 1 759 326.7
1985 379.11 1 633 360.7
1990 446.24 1 702 393.1
1991 435.29 1 685 378.3
1992 442.66 1 658 380.0
1993 456.49 1 658 387.4
1994 445.10 1 628 373.5
1995 466.62 1 651 378.3
1996 504.54 1 688 414.4
1997 494.17 1 694 401.7
1998 512.30 1 707 412.4
1999 508.39 1 697 405.5
2000 462.18 1 627 366.1
2001 452.64 1 591 355.9
2002 457.06 1 558 357.0
2003 430.67 1 491 333.3
2004 469.47 1 524 361.2
Source: The Main Data of Chinese Rural Economy 1978-2003, Rural Social and Economic Survey Department, National Statistics
Bureau.
In 2004, farmers net income per capita reached CNY 2 936 - an increase of CNY 314
or 12% from the previous year. The real rate of increase was 6.8%. This was the highest
and fastest increase since 1997 (Table 3).
It should be pointed out that the increase in grain prices played a key role in
increasing farmers incomes. In 2004, the price of grain (over a wide range of grains) per
kilo rose by 22.2%. Such an increase in prices enabled farmers per capita net income to
increase by CNY 165 (Zhang, 2005).
In 2005, 27 provinces, autonomous regions and municipalities had already eliminated
agricultural taxes and it was announced that starting the year 2006, China would
eliminate agricultural taxes entirely. Direct subsidies to grain producers in 2005 would be
increased by 10% from CNY 11.6 billion in 2004. Meanwhile the State Council decided
to transfer CNY 5.5 billion to support education, science and technology, and agriculture
in 800 grain-producing counties.
Analysing the agricultural situation of 2004, we will notice that almost all the factors
which enabled the increase of grain output and farmers income had temporary and short-
term features. Factors such as the expansion of acreage under grain, rising grain prices,
favourable climate, exemption of agricultural taxes, etc. had no sustainable function. It is
crucial but difficult to establish an effective and sustainable mechanism which can ensure
grain supplies while increasing farmers income in the long run (Zhang, 2005).
Chinas experience with OECD agricultural-related policies
The expansion of agricultural products trade

Chinese agricultural trade was forced to adopt open policies in order to ensure the
expansion of manufactured goods exports. This also contributed to the expansion of
trade in agricultural products.
According to statistics on agricultural products from the Ministry of Commerce, from
1995 to 2004, Chinese trade in agricultural products first decreased and then increased.
Especially after accession to the WTO, the scale of trade gradually expanded. By the end
of 2004, the total trade in agricultural products expanded from USD 26.5 billion in 1995
to USD 51.2 billion in 2004 an increase of 93% (Table 6). With regard to trade in
agricultural products, China has become one of the top players in the world. If EU was
considered a single entity, the China ranked 4. On the other hand, if the EU is
diasggregated, then China ranked No. 8 (Weng, 2005).
Table 6. The trade balance of China's agricultural products

Unit: million USD
Item 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Total m 12 169 10 827 9 924 8 332 8 216 11 237 11 813 12 411 18 898 28 126
Agricultural products
import
Total x 14 375 14 255 14 928 13 805 13 551 15 617 15 997 18 027 21 251 23 090
export
Trade x-m 2 206 3 428 5 004 5 473 5 335 4 379 4 184 5 616 2 353 -5 036
balance
Total x+m 26 544 25 082 24 853 22 137 21 768 26 854 27 810 30 438 40 149 51 215
amount of
trade
"+" means favourable balance; "-" means unfavourable balance quoted from Chen (2005).
Source: The Ministry of Commerce Statistics.
In terms of trade turnover, the import of agricultural products decreased from

USD 12.2 billion in 1995 to USD 8.2 billion in 1999. It increased for each consecutive
year afterward and reached USD 28.1 billion - 1.3 times more than it was in 1995. The
export of agricultural products was reduced from USD 14.4 billion in 1995 to
USD 13.6 billion in 1999. Again, it increased continuously afterward and reached
USD 23.1 billion - 0.6 times higher compared to 1995.
In terms of the trade balance of agricultural products, from 1995 to 2003, China
maintained a favourable trade balance of more than USD 2.2 billion. But in 2004, the
trade balance became unfavourable and the deficit reached USD 5.036 billion. It was
estimated that in 2005, although the numbers would be reduced, the trade balance for
agricultural products would continue to remain unfavourable. In any case, the scenario of
favourable trade balances which lasted for nearly 20 years, seems to have changed.
Chinas grain trade structure

In 2003, China grain output fell to the lowest it had been since 1990. Simultaneously
however, China exported the largest quantities of grain in history. The net exports of
grain reached 16.16 million tonnes. Corn exports alone amounted to 16.39 million
tonnes - a record-breaking amount (Zhang, 2004).
With regard to cereals, China went from being a net exporter in 2003 to a net importer
in 2004. Imported wheat counted to 7.23 million tonnes while the import of soybeans
amounted to 20.23 million tonnes.
In 1996, Chinese State Council issued a white book named Chinese Grain Issues.
This book suggested that in order to achieve relative self-sufficiency in grain
consumption, net imports of grain could not exceed 5% of domestic consumption.
Statistics however show that in 2004, net imports accounted for 5.2% of domestic
consumption (Zhang, 2005).
A close relationship existed between the expansion of world grain trade and the
expansion of Chinese grain imports. World grain trade increased from 505 million tonnes
in 1990 to 676 million tonnes in 2003. World grain imports increased from 251 million
tonnes in 1990 to 337 million tonnes in 2003. In 2003, Chinese grain imports accounted
for 9.5% of world grain imports. In 2004, the net imports of grain amounted to
USD 8.3 billion while net imports of grain reached 24.84 million tonnes (Table 7). In
2004, soybean accounted for 67% of the total volume of grains imported while wheat
accounted for 24% of the total volume of imported grains. In terms of value, soybean
accounted for 92% of the total value of imported grains (Chen, 2005).
Table 7. The change of grain import and export, China
2002 2003 2004

Export turnover (million USD) 1 846 2 818 1 055
Import turnover (million USD) 3 060 5 998 9 364
Export- import (million USD) -1 213 -3 179 -8 309
Export volume (million tonnes) 15.14 22.30 5.14
Import volume (million tonnes) 14.17 22.83 29.98
Export volume-import volume (million tonnes) 0.98 -0.53 -24.84
Grain trade turnover indicated the commodities whose tariff codes are HS10, 11, 1201, the figures of grain trade volume are quoted
from Chinese Agricultural Development Report, 2005.
Source: Chinese Agricultural Development Report, 2005, Statistical Division of Chinese Custom quoted from Chen (2005).
It is possible that the structure of Chinese trade in grains will change as the total
import of grain (including soybean) will soon approach 30 million tonnes. While the
United States benefited significantly from Chinas increasing imports of grain and
soybean, it is also one of Chinas fastest growing markets. Chinese agricultural exports to
the United States increased by 43% between 2002 and 2004 (Fred Gale, 2005). But such a
situation will inevitably influence Chinas effective and sustainable grain supply
structure. The livelihoods and incomes of Chinese grain producers, especially those of
soybean producers in the north-eastern areas and wheat producers in the central areas will
be influenced.
The prospects for Chinas agricultural trade

Some factors will influence the long-term domestic grain supply. These include the
reduction of cultivated land; the prices of grain products which provide the main
incentives for farmers to produce grain, and the demand for raw materials in industrial
sectors. According to a report from the Chinese Vegetable Oil Association, by the end of
2004, the processing capacity of 169 large scale soybean processing enterprises had
already reached 70.10 million tonnes while their capacity utilisation rate was only 40%. A
similar situation applied to cotton. The processing capacity of cotton is three times greater
than market demand (Zhang, 2004). This overheating will cause severe competition
among regions for raw materials and will in turn influence the import needs of the
country. In the long run, it is very possible that there will be a deficit between domestic
grain supply and demand. It is important to manage such a situation while maintaining an
effective and sustainable grain supply mechanism.
Since arable land and water are scarce resources in China and because there is an
abundant surplus of rural labour, it seems intuitive that China should import more land
and water intensive products (such as corn and wheat) while simultaneously exporting
labour-intensive products (such as horticultural products, fruit, poultry and meat). Such a
policy would allow China to capitalise on its comparative advantages (Rural
Development Institute, Chinese Academy of Social Sciences and Rural Social and
Economic Survey Department, State Statistical Bureau of PRC, 2000, p. 13).
The impact on Chinese farmers of Chinese agricultural trade policies in relation with
world agricultural trade policies should be analysed according to different regions,
different products and different farming groups. While it is not possible to say
conclusively as to who the potential winners and losers may be, it can be tentatively
suggested that the cash crop producers who are mostly living in the coastal may be the
potential beneficiaries and the staple food producers living in the north-eastern regions,
and the middle regions of China would be the possible losers in light of Chinas
membership to the WTO.
There are however some concerns. Firstly, recent data on exports and imports show
that although those projected to lose have done so in reality, it will be difficult for those
projected to gain to do so in reality.
Secondly, China mainly exported vegetables, processed foods, fruits and animal
husbandry products to offset the deficits. But in terms of sorting, grading, packing,
quality control and quarantine, China has a long way to go when it comes to meeting
international standards and in overcoming the non-tariff barriers (green barriers). Since
China will not be regarded as a market economy country for some 15 more years, the
domestic prices of exported products cannot be used as yardsticks in the context of anti-
dumping issues. This will make the situation even more difficult for the exporters of
Conclusion
In Chinas case, policy coherence means policy adjustments and deepening reforms.
These are not easy to implement. At the governmental level, the contradiction between
various sectors can jeopardise comprehensive social schemes. Each government
department has its vested interests and officials are inclined to pursue and maintain their
vested interests through rent-setting and rent-seeking activities. As the background paper
pointed out, achieving policy coherence is difficult because of multiple policy objectives
and conflicting interests.
In the new version of the World Bank report (Reaching the Rural Poor - Strategy for
Rural Development), the writers correctly point out that the question of how national
policies contribute to greater inclusion in or exclusion from the benefits of globalisation is
critical (p. 3, Csaba Csaki, 2003). It should be pointed out that during the past two
decades and a half, especially during the globalisation process, there has been a tendency
in China toward the capitalisation of power and the empowerment of capital. The most
important task for China is therefore, to deepen internal reform and undertake policy
adjustments through institutional changes and organisational innovation. This will help
the country in meeting the challenge of globalisation and in protecting the rights and
interests of excluded or vulnerable groups.
In forming the new national policy framework, in order to reduce corruption caused
by rent-setting and rent-seeking activities, priority should be given to political and
administrative reform.
On 28 June 1986, Mr. Deng Xiaopiong said in a speech that We will not succeed if
we only undertake economic reforms without reforming the political system. Such
reforms will finally not find the support of the people. Problems have to be solved by the
people. What could you do, if you want to decentralise power, but he wants to keep the
power in his hands? From this perspective, whether or not reforms are successful will
finally depend on reforming the political system. (p. 164, Deng, 1993).
Democratisation could act as a powerful instrument in facilitating inclusion and in
enabling local people to express, share, enhance, analyse their knowledge and
experiences. This can also help them formulate new policies and to use them to their
advantage. Therefore, reforms have to be deepened in order to promote the democratic
process and to empower individuals (citizens) and their organisations.
Participation will also ensure the involvement of excluded and vulnerable social
groups. By combining top-down approaches with bottom-up initiatives, a new and more
effective development strategy can be formulated. It is therefore clear that only the
empowerment of the masses can balance the empowerment of capital.
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Development Framework Converging with the MDGs to Build Chinas Overall Xiao-Kang
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Xiaoping, Deng (1993), Deng Xiaopings Selection, Peoples Publishing House, Beijing, China.
Xiaoshan, Zhang and Cui Hongzhi (2001), The Key Issue - Adjusting the Redistribution System
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Xiaoshan, Zhang (2004), Increasing Farmers Income and Ensuring Grain Safety, in Analyses on
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Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger 165
PART III. CONTRIBUTING TO THE MILLENNIUM DEVELOPMENT

GOAL OF ERADICATING EXTREME
POVERTY AND HUNGER
Chapter 10.
ERADICATING EXTREME POVERTY AND HUNGER:
TOWARDS A COHERENT POLICY AGENDA1
Prabhu Pingali, Kostas Stamoulis and Randy Stringer
Agricultural and Development Economics Division
United Nations Food and Agriculture Organization
Abstract
The most recent food security data present a rather bleak picture for a large number
of developing countries. The reduction of hunger and the attainment of many other
Millennium Development Goals are inter-related. Key policy lessons learned from past
successes and failures in hunger and poverty reduction show that the following factors
play an important role in enhancing food security and reducing poverty in developing
countries: agricultural growth, hunger reduction, appropriate technology, trade, public
investment, and development assistance.
Policy interventions need to be designed in the context of emerging global, regional
and national trends. These are:
Rapid urbanisation in the developing world and its impact on food markets.
Increasing integration of global food markets through trade.
Deterioration of the natural resource base and the degradation of global and local
commons.
Rising transactions costs in the acquisition and use of science and technology for
development.
While policy agendas are context specific, the essential elements of policy coherence
include:
Focussing on hotspots.
Focussing on the long-term while responding to immediate needs.
Enhancing productivity of smallholder agriculture.
Seek complementarities between trade and domestic policy.
Increase effectiveness of Official Development Assistance.
Ensure complementarities of public resources and ODA.
Create an environment conducive to private investment.
Include food security and rural development in PRSPs.
Combine poverty reduction programmes with increased provision of global public
goods.
1. This paper is prepared for OECDs 2005 Global Forum on Agriculture: Policy Coherence for
Development. Prabhu Pingali is Director, and Kostas Stamoulis and Randy Stringer are Service Chiefs,
Agricultural and Development Economics Division, FAO. This paper draws from the background paper
prepared by FAO for the International Dialogue on Agriculture and Rural Development in the
21st Century, held in Beijing China from 9-10 September 2005.
168 Part III. Contributing to the Millennium Development Goal of Eradicating Extreme Poverty and Hunger
Introduction and overview
The most recent food security data present a rather bleak picture for a large number of
developing countries. Between 1995-97 and 2000-02, the number of undernourished
people in the developing countries increased by 18 million (SOFI, 2005), a disturbing
development, given the global communitys commitment to food security concerns, its
capacity to produce more than enough food for every human being, and its power to use
modern information systems to pinpoint exactly where food is needed and to mobilise
rapid transport systems to move food quickly around the globe. The food security
problem remains a persistent, formidable and elusive development problem.
From a long term perspective, progress in hunger reduction has been nothing short of
remarkable. The proportion of people in developing countries living with average daily
food intakes of less than 2 200 kcal fell from 57% in the early 1960s to just 10% by the
end of the century. In spite of a near doubling of their population during this period,
average per capita food consumption in developing countries increased 30%. A large
number of countries have shown that success is possible. More than 30 developing
countries, with a total population exceeding 2.2 billion people, have reduced the
population of their undernourished by 25%.
FAOs most recent estimates indicate that the number of undernourished people in the
world in 2000-02 is 852 million, of which 815 million are in the developing countries
(Figure 1). Just under two-thirds of the total number of undernourished are found in Asia
and the Pacific, followed by sub-Saharan Africa, which accounts for 24% of the total
(SOFI, 2005). Undernourishment is defined as food consumption insufficient to meet
minimum levels of dietary energy requirements.
The proportion of the population which is undernourished varies between the
different developing country regions (Figure 2). The highest incidence of
undernourishment is found in sub-Saharan Africa, where FAO estimates 33% of the
population to be undernourished. This is well above the 16% undernourished estimated
for Asia and the Pacific and the 10% estimated for both Latin America and the Caribbean
and the Near East and North Africa.
Figure 1. Undernourished population by region, 2000-02 (millions)
Developed
Market
Countries in Economies
Transition 9
28
Sub-Saharan
Africa
204 Asia and the
Pacific
519
Near East and

North Africa
39
Latin America
and the
Caribbean
53
Source: FAO (2005).
Figure 2. Percentage of population undernourished, by region, 2000-02
%
35
30
25
20
15
10
0
Developing Asia and Latin Near East Sub- C ountries in
C ountries the Pacific America and North Saharan Transition
and the Africa Africa
C aribbean
Source: FAO (2005).
One of the more conspicuous characteristics gleaned from food security indicators is
the difference between progress in availability of food and the lack of progress in access
to food. To date, growth of global agricultural production has been more than sufficient to
meet the growth of effective demand for food coming from expanding populations and
rising incomes.
The average global calorie supply per person grew by 19% since the mid-1960s to
reach 2 800 kcal/person/day in 2002, with the developing country average expanding by
more than 30%. An encouraging feature of this rapid food production growth is that
developing countries growth rates are higher than the world average during the last three
decades, both in aggregate and in per caput terms (Figure 3). The declining trends in
world commodity prices and rising real incomes in many developing countries mean that
consumers today have access to more efficient calories at lower prices than consumers of
past generations.
Even as developing countries attempt to solve the perennial problems of poverty and
food insecurity they face new policy challenges emerging from rapid urbanisation and
globalisation and the consequent changes in diets and lifestyles. Evolving food supply
systems driven by the rapid rise in demand for food are placing unprecedented pressure
on environmental resources at the local and global levels. The policy agenda for hunger
and poverty reduction in the 21st century needs to address these emerging challenges even
as it pursues the unfinished business of the last century.
Figure 3. Long-term trend in per caput food production by developing country region
(Index 1999-2001 = 100)
Index
120
110
100
90
80
70
60
50
40
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04
World Developing Countries Developed Countries
Source: FAO (2005).
Measuring progress: MDG 1 and the World Food Summit goal
At FAOs 1996 World Food Summit (WFS), and again at the 2002 Millennium
Summit, the international development community established an ambitious agenda for
reducing hunger and poverty. The MDGs and WFS both set targets for 2015, using 1990
as a benchmark. The MDG 1 Goal includes two targets: i) halving the proportion of
population which is undernourished and ii) halving the proportion of people living in
poverty. The WFS target is to halve the number of undernourished people over this
25 year period. The latter is a more ambitious target given the rising populations in
At the global level the MDG hunger goal to half the proportion of undernourished
does appear to be within reach, presuming high levels of investment and policy
commitment to enhancing food security. Table 1 summarises FAOs most recent data and
projections to 2015. In 1990, 20% of developing country population (824 million) was
undernourished, while FAOs most recent estimate of undernourished people in the world
(2000/02) is 17% of the population (815 million). The projection for 2015 is 11%.
The regional data suggest that East Asia, South East Asia, Latin America and the
Caribbean can reach their Millennium Development Goal (MDG) target. By the year
2000/02, East Asia had reduced its undernourished population from 16% to 11% with a
target of 8% for the year 2015. The corresponding numbers for South Asia are a decrease
from 26% in 1990 to 22% in 2000-02, with a target of 12% in 2015. The target for Latin
America is a decline from 13% in 1990 to 10% in 2000/02, with a target of 6.5% in 2015.
The highest incidence of undernourishment is found in sub-Saharan Africa, where the
FAO estimates 33% of the population to be undernourished, and where the target of 18%
by 2015 would not be reached for more than 100 years at the current rate of progress.
Table 1. Projections of food and hunger indicators by region
Near East Latin

Sub-Saharan Developing
Year and North South Asia East Asia America and
Africa Countries
Africa Caribbean
Per capita food consumption (kcal/person/day)

1964-66 2 058 2 290 2 017 1 957 2 393 2 054
(1)
2000-02 2 195 3 006 2 403 2 921 2 824 2 800
2015 2 360 3 090 2 700 3 060 2 980 2 850
2030 2 540 3 170 2 900 3 190 3 140 2 980
Millions of persons undernourished
1990-92 168 25 289 275 59 824
2000-02(1) 204 39 301 217 53 815
2015 205 37 195 135 40 610
2030 183 34 119 82 25 443
Percentage of population undernourished
1990-92 35 8 26 16 13 20
(1)
2000-02 33 10 22 11 10 17
2015 23 7 12 6 6 11
2030 15 5 6 4 4 6
1. Projections to 2015 and 2030 have 1997-99 as base period.

Source: FAO, World Agriculture Towards 2015/30, Summary Report, Rome 2002.
Because of the successes in much of Asia, including China and Indonesia, the long
term incidence of undernourishment in developing countries has declined steadily from
37% of the total population in 1969-71 to 17% in 2000-02. Asia reduced the proportion of
its undernourished by 25%. Nevertheless, Asia and the Pacific account for more than
half of the total number of the undernourished (61%), followed by sub-Saharan Africa,
which accounts for 24% of the total. In sub-Saharan Africa, the number of
undernourished actually rose from 92 million in 1969-71 to 204 million in 2000-02. Latin
America and the Caribbean experienced a significant decrease in both the proportion and
absolute numbers of undernourished in the 1970s, but have made little progress since
(SOFI, 2005).
In contrast to the MDG hunger reduction target, only East Asia and a few countries in
Latin America will reach the more ambitious World Food Summit (WFS) goal of halving
the number of hungry people, from about 800 million to 400 million. World population is
expected to grow by approximately two billion between the baseline period (199092)
and 2015. So, even if the proportion of that larger population who are undernourished is
reduced by half, nearly 600 million people in the developing world will continue to suffer
from chronic hunger. To reach the WFS target of 400 million, the proportion of the
population who are undernourished would need to be reduced not by half, but by two
thirds.
The poverty target

The MDG 1 poverty reduction goal to halve the proportion of poverty between 1990
and 2015 is on track based on the World Bank poverty projections (less than USD 1 per
day). At the global level, poverty has declined both in absolute numbers (if only
marginally) and in relative terms. The East Asia region met its poverty reduction target by
2001, 14 years ahead of the timetable. In China and East Asia, GDP per capita more than
tripled and the proportion of people in extreme poverty fell from 56% to 17% over the
past two decades. South Asia, too, made considerable progress in percentage terms during
the 1990s, and achieving the goal of halving USD 1/day poverty is feasible.
The poverty reduction goals seem much more challenging in the other regions. In
sub-Saharan Africa poverty has in fact increased between 1990 and 1999. The available
projections suggest that for sub-Saharan Africa the MDG poverty goal may be beyond
reach. Very little progress will be made unless performance is significantly enhanced in
the near future, and the absolute number of poor may in fact rise considerably. Should
this scenario materialise, close to half the world's poor will live in sub-Saharan Africa in
2015.
Latin America and the Near East/North Africa have made only marginal progress (in
relative terms) during the 1990s. If the forecasts are accurate they should at least come
within reach of the poverty reduction target. The transition countries in Eastern Europe
and Central Asia present a different picture. A big surge in poverty occurred in the region
after 1990 (the base year for the target). Most of these countries were then on the brink of
a recession after the collapse of the centrally planned regimes and the beginning of the
transition towards market economies.
At present, the hunger and poverty projections imply that:
At a global level, the goal of halving by 2015 the proportion of hungry people from that
prevailing in 1990-92 may be achieved provided high levels of investments and policy
commitment are targeted toward hunger reduction.
Sub-Saharan Africa and South Asia will continue to account for a high proportion of
the global population of hungry in 2015.
The goal of reducing the actual number of hungry people by half by 2015 is probably
not attainable, given current trends in hunger reduction and projected population
growth rates.
The goal of halving by 2015 the proportion of people living in poverty from that
prevailing in 1990 may be achieved the proportion falls from 29.0% in 1990 to 12.3%
in 2015.
As they decline from 1.27 billion in 1990 to 0.75 billion in 2015, poverty in absolute
numbers may not be halved.
Much of the decline in poverty results from prospective developments in East Asia and
South Asia, and
In contrast, sub-Saharan Africas absolute numbers in poverty kept increasing in the
1990s and are projected to continue to do so until 2015.
Lessons from past performance in poverty and hunger reduction
The reduction of hunger and the attainment of many other Millennium Development
Goals are inter-related. Levels of child and maternal mortality and low rates of school
attendance in developing countries are intimately linked to the prevalence of hunger and
undernourishment. The same applies to environmental sustainability. The
overexploitation or misuse of natural resources too often compromises peoples food
security. To a great extent the achievement of most of the MDGs depends critically on
progress in improving nutrition and reducing hunger.
The following are some of the key policy lessons learnt from past successes and
failures in hunger and poverty reduction.
Agricultural growth plays a critical role in enhancing food security and

reducing poverty in developing countries.
There is ample evidence that combating hunger and extreme poverty requires a
renewed and expanded commitment to agriculture and rural development in developing
countries. Overall, some 70% of the poor in developing countries live in rural areas and
derive their livelihoods from agriculture directly or indirectly. This dependence on
agriculture is greater in those countries where hunger is most prevalent. Figure 4 presents
the percentage share of agriculture in GDP in 1998-2002 for developing countries
grouped according to the incidence of undernourishment in 2000-02. For countries where
more than one third of the population undernourished, the share of agriculture in GDP is
almost 25%.
The lessons to date suggest that no sustainable reduction in poverty is possible
without improving rural livelihoods. Economic growth originating in agriculture can have
a particularly strong impact in reducing poverty and hunger. Increasing employment and
incomes in agriculture stimulates demand for non-agricultural goods and services,
providing a boost to non-farm rural incomes as well. The corollary to this is that
additional demand for agricultural products must come from outside of the rural
communities and the communities must be able to meet the expectations of these external
markets.
Figure 4. Agricultural GDP and undernourishment
Developing
>34%
% Undernourished
20-34%
5-19%
2.5-4%
<2.5%
0 5 10 15 20 25 30
Ag GDP / Total GDP
Source: FAO (2004) and World Bank.
Hunger reduction is a prerequisite for fast development and poverty reduction

Poverty causes hunger, but it is equally true that hungry people will always be poor.
Hungry people cannot take full advantage of a pro-poor development strategy because
hunger negatively affects health, labour productivity and investment choices, and thus
perpetuates poverty. It has been calculated that for each passing year for which hunger is
not reduced, developing countries suffer a total loss of about USD 500 billion in terms of
lifetime earnings foregone due to hunger and nutritional deficiencies (SOFI, 2004).
Investment in hunger reduction is too often seen as welfare whereas, in practice, it is an
investment with a potential for generating high economic rates of return.
It is obvious that hunger reduction is critical not only for reducing poverty but also for
meeting the international goals related to health, child and maternal mortality, education
and literacy. Poverty reduction is faster when carefully targeted programmes such as food
for work provide immediate hunger relief. As another example, school meal programmes
lead to long-term inter-generational gains in poverty reduction.
Technology can make a difference but under the right conditions

Improved technology, especially for small-scale farmers, hastens poverty reduction
through increased crop yields and higher incomes. The decline in food prices, in real
terms, has benefited poor consumers, including the rural poor. However, the access poor
farmers have to technology has been hampered by gaps in infrastructure, seed and input
markets, extension systems, and very often their inability to afford these inputs. Market,
institutional and policy failures have exacerbated the problem. A great deal needs to be
done to alleviate the constraints small farmers face when it comes to access to
technology. Technologies that build on and complement local knowledge tend to be
particularly effective in meeting the needs of poor farmers in marginal environments.
Trade can lead to substantial reductions in hunger and poverty

Trade offers opportunities for the poor and food insecure by acting as a catalyst for
change and by promoting conditions in which the food insecure are able to raise their
incomes and live longer, healthier and more productive lives. Trade can also have adverse
effects, especially in the short run as productive sectors and labour markets adjust.
Opening national agricultural markets to international competition especially from
subsidised competitors before basic market institutions and infrastructure are in place
can undermine the agricultural sector with long term negative consequences for poverty
and food security. Some households may lose, even in the long run. To minimise the
adverse effects and to take better advantage of emerging opportunities, such as those
arising from agriculture diversification to bio energy and other non-food products,
governments need to understand better how trade policy fits into the national strategy of
promoting poverty reduction and food security. Expanding the benefits of trade for the
poor requires a range of other facilities including market infrastructure, institutions and
domestic policy reforms.
Public investment fails to reflect the importance of agriculture

Public investment in infrastructure, agricultural research, education and extension is
essential in stimulating private investment, agricultural production and resource
conservation. But actual public expenditures for agriculture and rural development in the
developing world do not reflect the importance of the sector to their national economies
and the livelihood of their populations. In fact, government expenditures on agriculture
come closest to matching the economic importance of the sector in those countries where
hunger is least prevalent.
For the group of countries where undernourishment is most widespread, the share of
government spending devoted to agriculture falls far short of matching the sectors
importance in the economy. The trends are discouraging as well. Throughout the 1990s
public investments targeted towards agriculture have been declining in countries where
the prevalence of undernourishment is highest (Figure 5). Private investment, including
farmers investments, tend to follow the trends set by the state. Rural communities have
typically not benefited from privatisation of infrastructure in the way that urban dwellers
have and there is little (if any) evidence of the effective use of public private partnerships
to provide new rural infrastructure.
Figure 5. Agricultural orientation of public investment
% Population undernourished
<2.5%
2.5 - 4% 1990-92 average
5 - 19%
1996-98 (or most
20 - 34% recent period for
w hich data are
>= 35% available)
0.0 0.1 0.2 0.3 0.4 0.5

Agricultural orientation index1
1. Share of agriculture in total public expenditure/share of agriculture in GDP.
Development assistance does not target the neediest countries

Development assistance is critical for very poor countries with limited ability to
mobilise domestic private and public savings for investment. It is particularly critical for
agriculture which is largely bypassed by foreign private investors. And yet official
development assistance to agriculture, broadly defined, declined by an alarming 24%
between 199092 and 19992001 in real terms. The countries with the highest prevalence
of undernourishment were the hardest hit (Figure 6). In those countries, External
Assistance to Agriculture (EAA) declined by 49% in real terms (FAO, 2002).
Many of these countries are badly starved of resources that can be invested. For these
countries, international assistance, which can be a lasting solution to the debt problem,
would be a sure and tangible sign that the commitments to reach the World Food Summit
and the Millennium Development goals are being honoured. The recent decisions by
major donors to increase ODA and to cancel debts of the poorest nations are very
encouraging in this regard. The Council of the European Union has set an ODI/GNI ratio
of 0.56% by 2010 rising to 0.70% by 2015. Moreover the recent agreement reached by
the G8 cancels all debts owed to them by 18 countries without a reduction in the overall
funds available to those or other countries. These are important steps towards
implementing the Monterrey consensus which will also require a greater share of funds
going to agriculture and rural areas.
Figure 6. External assistance to agriculture per agricultural worker (1998-2000)
35% or more
% Undernourished
20 to 34%
5 to 19%
less than 5%
0 5 10 15 20 25
USD/worker
Peace and stability are sine quo non conditions for growth and poverty
reduction
Protracted conflicts and civil crises disrupt food production and undermine food
security as they drive people from their homes, strike at the foundations of their
livelihoods and erode the social fabric of families, communities and countries.
Conversely, food insecurity may lead to or exacerbate conflict, particularly when
compounded by other shocks and stresses.
The interface between food insecurity and conflict has critical implications for food
security and conflict prevention programmes alike. Assessing and addressing the risk
factors common to food insecurity and conflict, can serve as a mechanism both for
preventing conflict and reducing hunger. A growing body of experience confirms the
importance of strengthening the resilience of societies and food systems before crises
erupt and of factoring resilience into responses to protracted crises. Relief and
rehabilitation efforts are far more effective if they build on the foundation of resilience
rather than relying exclusively on injections of external inputs, technology and
institutions.
The changing world and persistent policy challenges
Alleviating hunger and poverty has been and continues to be the pre-dominant policy
challenge facing global and national decision makers. However, policy interventions for
addressing this challenge ought to be designed in the context of emerging global, regional
and national trends. This section discusses four major trends that are shaping the future
food economy and consequently the prospects for meeting hunger and poverty goals.
These are: i) rapid urbanisation in the developing world and its impact on food markets;
ii) increasing integration of global food markets through trade; iii) deterioration of natural
resource bases and the degradation of the global and local commons; and iv) rising
transactions costs in the acquisition and use of science and technology for development.
Urbanisation and the transformation of food markets

With urban areas expected to account for virtually all of the worlds population
growth between 2000 and 2030, provisioning the expanding urban markets is a major
challenge for agriculture and food marketing systems in the years to come. Rapidly rising
urban food demand, accompanied by trends towards diet diversification, induces an
increasingly commercial orientation of production systems, while inefficiencies in the
marketing and transport infrastructure will either provide incentives for the location of
production in semi-urban areas or encourage lower cost imports. The determinants and
nature of food security are different in an urban as compared to a rural context. Compared
to their rural counterparts, the urban poor rely almost exclusively on market purchases of
food, and depend on wage income or self-employment in the informal sector.
Urbanisation increases the scope for economies of scale in food marketing and
distribution, while reductions in transactions costs increase the size of the market for
distributors and retailers. The result is not only an impressive increase in the volume of
food marketing handled by supermarkets, but also substantial organisational and
institutional changes throughout the food marketing chain. Such changes include the
setting of private grades and standards for food quality and safety, and the adoption of
contracts between buyers and sellers at various points along the food marketing chain.
Sub-contracting for products of specified quality and traits is likely to proliferate as a
form of interaction between retail food chains, processors and producers.
The pressures to meet the requirements of a more exacting food system have brought
with it a renewed interest in small farm welfare. For the small farmer there are difficulties
in commercialisation that arise from poor public good provision. These hinder market
exchange and a new set of transaction costs that emerge from dealing with a food system
characterised by different rules, regulations and players.
Changing patterns of trade in food

In general, the emergence and strengthening of international trade agreements have
resulted in substantial improvements in the three aspects of food security: availability,
access and stability. On the other hand, this has also meant that nations have reduced their
control over the flows of goods and services between countries. The challenge facing the
members of the WTO is to manage and further adjust the new rules-based agricultural
trading system in a way which is conducive to achieving greater efficiency, transparency
and fairness with equal opportunities for all international agricultural trade. In this regard,
the Doha development agenda recognises explicitly the food security and rural
development needs of developing countries by granting them special and differential
treatment. The practical question is how this recognition can be translated into concrete
rules and modalities on which all WTO members can agree.
Developing countries are increasingly net importers of food and many have negative
net agricultural trade balances due to the fact that their domestic agricultural sectors are
not very competitive, a trend that is likely to continue (even if OECD countries eliminate
their agricultural protection and support policies). This is often the result of inappropriate
policies and of insufficient resource mobilisation which fail to enhance the
competitiveness of poor rural communities, the sustainable use of natural resources and
adequate investment in market infrastructure and research. Limitations in domestic
capacity to meet increasingly strict sanitary and phyto-sanitary standards exacerbate the
problem of low competitiveness particularly with respect to the growing market for
processed products.
Resource use and resource degradation

Over the past fifty years, human beings have changed ecosystems more rapidly and
extensively than in any comparable period of time in human history, largely to meet
rapidly growing demands for food, fresh water, timber, fibre, and fuel.2 As a consequence
many ecosystem services are being degraded or used unsustainably, including fresh
water, capture fisheries, air and water purification, the regulation of regional and local
climate, natural hazards, and pests. The Millennium Ecosystem Assessment concludes
that the degradation of ecosystem services could grow significantly worse during the first
half of this century and is a barrier to achieving the Millennium Development Goals. For
example, observed recent changes in climate, especially warmer regional temperatures,
have already had significant impacts on biodiversity and ecosystems, especially in dry
land environments such as the African Sahel. Degradation of ecosystem services is
exacerbating the problems of poverty and food insecurity in the developing world,
particularly in the poorest countries.
Because many ecosystem services are not traded in markets, markets fail to provide
appropriate signals that might otherwise contribute to the efficient allocation and
sustainable use of the services. The Millennium Assessment suggests a wide range of
economic and financial instruments for influencing individual behaviour with respect to
the use of ecosystem services. These include: the elimination of subsidies that promote
excessive use of ecosystem services; and the promotion of market based approaches
including user fees and payments for environmental and ecosystem services. In addition
to market instruments, strengthening institutional and environmental governance
mechanisms, including the empowerment of local communities, is absolutely crucial for
the effective management of environmental resources.
Harnessing science and technology for development

Harnessing the best of scientific knowledge and technological breakthroughs is
crucial as we attempt to retool agriculture to face the challenges of an increasingly
commercialised and globalised agriculture sector. Modern science and technology can
also help provide new impetus for addressing the age-old problems of production
variability and food insecurity of rural populations living in marginal production
environments. Whilst the real and potential gains from science and technology are
apparent, it is also necessary to take into consideration the fact that research and
technology development are more and more in the private domain: biotechnology is a
prime example.
Biotechnology holds great promise, but may involve new risks. In most countries, the
scientific, political, economic or institutional basis is not yet in place to provide adequate
safeguards for biotechnology development and application, and to reap all the potential
benefits. Clearly the question is not what is technically possible, but where and how life
sciences and biotechnology can contribute to meeting the challenges of sustainable
agriculture and development in the twenty-first century, based on a science-based
evaluation system that would objectively determine, case by case, the benefits and risks
2. This section draws from the Millennium Ecosystem Assessment, Synthesis Report, 2005.
of each individual GMO. Similarly, the evolution of food chains has been led by the
private sector with obvious benefits in terms of food safety and food price reductions.
However, there have been casualties as some farmers and firms have been marginalised.
In this case the question becomes one of whether there are technical solutions and
business models that can enable engagement of such marginalised groups.
Modern science can also provide opportunities for enhancing input efficiencies and
for developing more sustainable production systems. The extent to which farmers in
developing countries benefit from such technologies, which are often highly knowledge
intensive is a matter of debate. Furthermore, it is doubtful if they are compensated for the
environmental good that such changes effect.
Designing a coherent policy agenda for hunger and poverty reduction3
Rapid progress in achieving the Millennium Development goal of hunger and poverty
reduction would require coherence in international as well as domestic policies and
harmonisation between the two. It would require coherence in the setting of priorities and
in the financing of agricultural and rural development. It would also require coherence
between interventions designed to manage short-term crisis situations and long term
development goals. Finally, peace, stability and good governance are crucial enabling
conditions for improving the lives and livelihoods of the hungry and the poor. While the
specific policy agenda is context specific, the following are some of the essential
elements that ensure policy coherence.
Focus on the hotspots. Programmes and investments must focus on poverty and
hunger hotspots those areas around the world and within a country where a
significant proportion of people suffer from malnutrition and high incidence of poverty.
Implementation of plans of action for country groups or regions (e.g. NEPAD) should be
supported in the context of the strategies to achieve the MDGs, tailored to their specific
contexts.
Focus on the long term while responding to immediate needs. Hunger and poverty
reduction requires a twin-track approach which combines, a) direct interventions and
social investments to address the immediate needs of the poor and hungry (social safety
nets, conditional or unconditional cash transfers, health interventions, food and nutrition
programmes), and b) long-term development programmes to enhance the performance of
the productive sectors (especially to promote agriculture and rural development), create
employment and increase the value of the assets held by the poor (physical, human,
financial). Coherence between policies and investments to increase productivity and
economic efficiency in the social sectors improves the effectiveness of both.
Enhance productivity of smallholder agriculture. Enhancing food security in the
rural areas involves scaling-up actions to improve the productivity of smallholder
agriculture. In the first instance, this strategy improves nutritional standards and thereby
opens opportunities for further performance improvements. In the long term it broadens
participation in market-led growth. Promoting sustainable use of natural resources,
improving rural infrastructure, research and communications, facilitating the functioning
of markets and enhancing rural institutions are integral parts of the strategy. Productivity-
3. Based on the Background note for Round Table 1: Eradication of Poverty and Hunger, ECOSOC 2005,
High Level Segment, 29 June-1 July 2005, United Nations, New York.
induced agricultural growth has a wider impact on rural areas through the strengthening
of off-farm activities, rural employment and wages.
Seek complimentarity between trade and domestic policy. Trade liberalisation can be
a powerful tool to promote economic growth. However, low income countries, in order to
benefit from trade reform, will need to enhance domestic competitiveness through policy
and institutional reform. Furthermore, in view of the continuing distortions on world
markets, they must be granted more policy space which is necessary to reduce poverty
and hunger by developing their rural areas and agricultural sectors. Trade liberalisation
should go hand in hand with donor support for improving agriculture productivity.
Increase effectiveness of Official Development Assistance. It is widely recognised
that there is ample scope for increasing the effectiveness of ODA. The Paris Declaration
on Aid Effectiveness, adopted in March 2005, calls for: ownership, i.e. aid should reflect
recipient rather than donor priorities; alignment, i.e. aid should be aligned with recipient
countries budgetary cycles and behind national strategies and programmes; and
harmonisation, i.e. there should be more donor co-ordination to exploit
complementarities, combined with simplified procedures for disbursement.
Ensure complementarities of public resources, domestic and international. Given
the common purpose, ODA and public domestic resources for reducing poverty and
hunger should be well co-ordinated and targeted. The key notion should be mutual
accountability of donor and partner countries for development results. Therefore,
recipient countries would strive to involve all stakeholders, including parliaments, in the
formulation of national development strategies. Donors should commit to providing
timely, transparent and untied aid flows to allow partners to manage these resources more
effectively.
Create an environment conducive to private investment. Public investments must be
accompanied by policies that induce complementary flows of private investment. The
quality and transparency of governance and public administration political stability,
reliance on market signals and macroeconomic discipline and stability, are essential for
stimulating private investment.
Make PRSPs more inclusive in addressing food security and rural development.
The implementation of the PRSPs in many countries still lacks focus on food insecurity
and a clear appreciation of the potential of rural and agricultural development in reducing
poverty. The result is insufficient budgetary allocations to these key areas. The dilution of
institutional responsibilities for rural development and the inadequate empowerment of
rural stakeholders have to be addressed in order to strengthen the political leverage for
increased rural resources. Furthermore, there is a need for greater
integration/co-ordination of PRSPs and existing national food security and rural
development policies and strategies.
Combine poverty reduction with increased provision of global public goods.
Financing of payments to farmers for e.g. maintaining agricultural biological diversity
and for following practices which result in reduced carbon emissions in the atmosphere
can result in both poverty reduction while promoting environmental and resource
sustainability.
REFERENCES
FAO (2002), World Agriculture Towards 2015/30, Summary Report, FAO, Rome.
FAO (2002), The State of Food Insecurity, FAO, Rome.
FAO (2005), The State of Food and Agriculture, FAO, Rome.
UNDP (2005), Human Development Report, International Cooperation at a Crossroads: Aid,
Trade and Security in an Unequal World, UNDP, New York.
Chapter 11.
HOW CAN POLICY COHERENCE IN AGRICULTURE CONTRIBUTE
TO THE ERADICATION OF EXTREME POVERTY AND HUNGER?
Tom Arnold
Concern Worldwide
Abstract
This paper attempts to offer some insights into how policy coherence can play a
significant role in eradicating extreme poverty and hunger in the developing world. It
focuses specifically on what policy coherence can contribute to a key target of the first
Millennium Development Goal (MDG) to halve, between 1990 and 2015, the
proportion of people in the world who suffer from hunger (hereafter referred to as the
Hunger MDG).
The paper starts by discussing the location, scale and nature of hunger and its
associated costs. It is argued that the concept of policy coherence necessary to achieve
the Hunger MDG must be broadly conceived. The discussion of policy coherence thus far
has predominantly focused on how OECD agricultural policies and international
agricultural trade policy have been incoherent with the development policies of
developing countries and with the development co-operation aid policies of OECD
countries. It is asserted that this analytical framework is not broad-based enough.
Specifically, the primary importance of the domestic policy framework needs to be
recognised while acknowledging the importance of a favourable international
environment. The need for policy differentiation to reflect the development needs of
different categories of developing countries is stressed. The importance of policy
sequencing is emphasised.
Three overarching factors conflict, governance standards and the disease burden,
including HIV/AIDS have a key influence on the development possibilities for
developing countries. Progress in each of these areas is necessary if the Hunger MDG is
to be achieved.
The paper draws on the work of the Millennium Project Hunger Task Force (HTF)
and on the experience of Concern Worldwide in fighting famine and hunger over
37 years. It highlights the priority policies which the key stakeholders governments of
developing and developed countries, the UN and the wider international community, the
private sector and civil society, in developing countries and international non-
governmental organisations (NGOs) should adopt in working towards the achievement
of the Hunger MDG by 2015.
These include increased investment in agricultural and rural development (including
rural infrastructure), targeted nutrition interventions to break the cycle of maternal and
child malnutrition, investment in institutional capacity building in developing countries
and improved donor coherence. Civil society can make a critical contribution to the
eradication of extreme poverty and hunger.
Introduction
The first Millennium Development Goal (MDG) is aimed at eliminating poverty and
hunger in the world. It has two targets to halve between 1990 and 2015 (a) the
proportion of people whose income is less than USD 1 a day and (b) the proportion of
people who suffer from hunger. Achievement of MDG 1 would underpin the achievement
of the other MDGs of which there are eight in total.
The question I try to answer in this paper is what role policy coherence can play in
achieving the halving of hunger by 2015, as set down in MDG 1. I had the honour of
serving on the Millennium Projects Hunger Task Force (HTF), along with two fellow
participants in this OECD Global Forum: Joachim von Braun of the International Food
Policy Research Institute (IFPRI) and Kevin Cleaver of the World Bank. The Task Force
proposed a detailed policy agenda for the achievement of this objective. This paper draws
on the work of the Hunger Task Force and on the experience of my own organisation,
Concern Worldwide, which has been working to fight famine and hunger and to promote
development during the 37 years of its existence.
The paper has four sections:

Hunger in the world today its location, scale and nature, and its cost in human,
economic and social terms.
Aspects of policy coherence which are relevant to an agenda for halving world hunger
by 2015.
Overarching factors such as conflict, governance and the disease burden, including
HIV/AIDS, on which progress must be made if policies aimed at eliminating hunger
are to succeed.
Key factors in achieving the Hunger MDG and the policies that should be implemented
if it is to be achieved. The key actors are the governments of developing and developed
countries; the UN and the international community; the private sector; and civil society,
both in developing countries and developed countries. The proposed policies are those,
which based on available evidence, have worked in a range of different circumstances.
Hunger in todays world
We need to begin from an understanding of the scale and nature of hunger in todays
world.
The HTF report noted that, over the past 20 years, the proportion of the worlds
population which is hungry declined from one fifth to one sixth. But today, some
852 million people, mainly in the developing world, are acutely or chronically hungry.
Most of them are in Asia, particularly India (221 million) and China (142 million). In
both these countries and in other countries in Asia, rapid economic growth is contributing
to a significant reduction in the number of hungry people. This is not the case in Sub
Saharan Africa, which has 204 million hungry people and is the only region in the world
where hunger is increasing. If current trends continue, this region will fail to meet the
MDG. Because this is the region with the most acute problem, I will mainly focus on the
specific policy requirements of Africa in meeting the Hunger MDG.
Further analysis from the HTF classifies the hungry into four main categories which
include farm households (400 million), rural landless households (176 million), urban
households (160 million), and herders, fishers and forest dependent households
(64 million) (HTF, 2005).
There are multiple causes for hunger and include poverty, low production, poor
education of mothers, climatic factors and poor water and sanitation. The situation in
Africa is aggravated by falling levels of per capita cereal production, which is now 10%
less than in 1960, and by rapid population growth. Policy failure, macroeconomic
instability, lack of support for agriculture and the collapse of infrastructure have also
contributed to the decline in food production.
Hunger is generally classified according to three forms: acute, chronic and hidden.
Acute hunger involving severe undernourishment over a sustained time-period, is
reflected in wasting and starvation, and is caused by emergency situations which require
immediate food aid. Acute hunger is what grabs the headlines this year we remembered
the Ethiopian famine of 20 years ago and we had to deal with a severe food crisis in
Niger. Unless urgent action is taken, I fear we may see similar scenes in the coming
months in Malawi and Zimbabwe. But, terrible as it is, acute hunger represents less than
10% of the hungry.
The vast majority of hungry people are chronically undernourished. Chronic hunger
resulting in malnutrition is caused by a lack of access to the right quantity and quality of
food as well as other health related factors. It causes under-weight and leads to stunting,
most notably in children. Stunting, in particular, is an indication of the long term
nutritional situation of the population. An increase in child mortality brought on by
associated diseases often occurs. In an analysis of the target population Concern has dealt
with Eritrea, where over the past four years, 32% of the children were stunted. In Malawi,
49% of children suffer from stunting.
Hidden hunger refers to micronutrient and/or vitamin deficiencies found in vast
numbers of people who otherwise have access to adequate calories and protein. It affects
more than 2 billion people.
The costs of hunger manifest themselves in different ways. The human costs are the
most significant. Underweight status is the leading cause of human mortality and
morbidity. Of the total number of 852 million who are hungry, over 300 million are
children. An estimated 60% of deaths of children less than five years of age in the
developing world from all causes, particularly diarrhoea, malaria, measles are
associated with under nutrition. Between 5-6 million children under 5 die each year from
these preventable diseases. Undernutrition in childhood leaves a legacy of physical and
mental retardation which can last for generations. At an adult level, there is a clear inter-
linkage between undernutrition, HIV/AIDS and tuberculosis.
The economic and social costs of hunger are manifested in diminished labour
efficiency, greater susceptibility to illness, intergenerational transmission of poor
nutritional status, risk adverse behaviour and a decline in national economic performance.
On the latter, it has been estimated that hunger costs developing countries 610% of GNP
in labour productivity annually (HTF, 2005).
What role can policy coherence play in achieving MDG 1
Faced with a problem on this scale, what role can policy coherence play in fighting
hunger and in achieving the Hunger MDG? What aspects of policy coherence are
important in working towards this objective?
A recent report by the OECD titled Policy Coherence for Development states that
achieving policy coherence is a process through which governments make efforts to
design policies that take account of the interests of other policy communities, minimise
conflicts, maximise synergies and avoid unintended incoherence (OECD, 2005).
I will offer an interpretation of this in laymans language. My proposed definition of
policy coherence is doing the right thing for the right people in the right sequence.
This definition immediately raises a question as to what a right policy means? My
answer is based on evidence of how effective policies have been in reducing hunger and
in achieving development. This is the purpose of the Global Forum to discuss
experiences and models which can be applied to our own national or local circumstances
so that resources can be used more effectively and sustainable development can be
achieved more quickly.
The discussion on policy coherence for development has predominantly focused on
how OECD agricultural policies and international agricultural trade policy have been
incoherent with the development policies of developing countries and with the
development co-operationaid policies of OECD countries.
I would assert that this focus does not capture key elements of policy necessary to
achieve the Hunger MDG. It is significant that the HTF saw trade liberalisation in
agriculture as being of second order importance in the hierarchy of policy priorities in
order to achieve the Hunger MDG.
Louise Fresco of FAO contends that policy coherence is based on three related myths:
Myth 1. We can actually achieve policy coherence.
Myth 2. Once policy coherence is achieved, everything will fall into place.
Myth 3. Policy coherence is about trade policies of developed or OECD countries.
In my view, the conception of policy coherence necessary to achieve the Hunger

MDG needs to be a more complex and multilayered version than the more narrowly trade
and development policy focused concept which has dominated the discourse. This
broader concept of coherence needs to recognise the relative importance of domestic and
international policy, the need for policy differentiation to reflect the differences between
developing countries and the importance of policy sequencing and synergies. I will
discuss each of these factors in turn.
The importance of national policy

The primary importance of having an appropriate domestic policy framework in
achieving development needs to be more clearly recognised. Faced with a similar
international trade and policy environment, there are considerable differences in
economic performance between developing countries. The reasons for this must be better
understood and the lessons drawn from it.
The African Union (AU), through the establishment of the New Economic
Partnership for African Development (NEPAD), and the Blair Commission on Africa
have emphasised the critical importance of African leadership if development is to be
achieved. Only with high governance standards, a commitment to democracy and an
emphasis on the rule of law can genuine change take place in Africa. Ultimately, the only
people who can achieve real change in Africa are Africans themselves.
Leadership for the development of any country be driven by domestic stakeholders
and policy makers, and must come from within The failure of many projects and
programmes in the past, due to a lack of ownership, has taught us this simple fact. If the
MDGs are to be achieved, developing country governments must adopt development
strategies bold enough to meet the challenge.
But if the primacy of national policy is recognised, the need for external assistance to
those leaders and policy makers who are genuinely seeking to achieve development
should also be acknowledged. One critical aspect of this assistance relates to human
resources for development.
The importance of having the capacity to frame and to administer policy needs more
explicit recognition. Many of the poorest countries are beset by glaring weaknesses in
capacity. The HIV/AIDS pandemic is undermining the human capital base. The available
capacity is further strained by the differing administrative and reporting demands of
donors. Developing countries, supported by donors, need to have capacity building at the
heart of their development strategies.
Policy differentiation
It is essential to differentiate between the policy priorities of developing economies
which are increasingly integrating into the world economy and those of the least
developed countries (LDCs) which remain marginalised from it. This latter group of
countries have a minimal share of world trade and a limited capacity, for the foreseeable
future, to engage in international trade, even with the most favourable trading
arrangements. Many of these countries are in Sub Saharan Africa and are the countries
where Concern works. They require a combination of safety nets to deal with food crises
or chronic food insecurity. These include long term investment in basic social services
such as health and education and measures to boost the productive capacity of their
economies. Because of existing structural economic weakness and an inadequate tax base,
international development assistance will have to provide additional resources to these
countries for the medium term future.
As I will discuss later, the WTO recognises the necessity for special and differential
treatment for the poorest developing countries. According to the UN classification, 77
countries fall into the category of least developed and 32 of these are members of the
WTO.
Policy sequencing
Frequently, debates on policy coherence do not adequately specify the sequence of
policies which will provide the best basis for development. This is an important practical
issue as politicians and policy makers face choices with regard to what the kind of
balance between short and long term policy measures which can secure development.
The HTF recognised the importance of this sequencing issue. It attempted to identify
the priority actions which need to be taken immediately and simultaneously if the Hunger
MDG is to be achieved. It focused on entry points, i.e. those first order interventions
that are essential to start certain processes of transformation. These should then be
followed by second order interventions which can only be addressed after the entry
points have been successfully addressed (Arnold, 2004).
The Task Force also identified a number of synergistic interventions which addressed
the hunger problem in more ways than one, or triggered additional innovations which
further strengthened anti-hunger efforts and contributed to achieving other MDGs.
The overarching issues
The HTF made a series of policy recommendations across three main headings:
global, national and community. The rest of this paper will broadly reflect this approach,
drawing particular attention to the connections and symmetries between the three areas.
But the Task Force clearly recognised that there is a wider political and economic
framework within which these recommendations will be implemented. Three elements
within that framework are key if the specific recommendations dealing with hunger are to
have any chance of being implemented. These elements relate to conflict, governance and
the disease burden, including HIV/AIDS.
Concern works in many countries either currently experiencing conflict or where
there has been conflict in the relatively recent past. Conflict is one of the greatest
impediments to development in these countries and conflict resolution is central to the
commencement of the development process.
Conflict directly impacts on the level of hunger and food insecurity. I could give
many examples. Between 1998 and 2005, between 3 to 5 million people are estimated to
have died from conflict, disease and hunger in the Democratic Republic of Congo (DRC).
This has occurred in a country richly endowed with natural resources. But because of
conflict, the infrastructure roads, schools, hospitals has been destroyed and, in parts of
the country, the economy reduced to subsistence.
In Darfur in Sudan, over 2 million people are in camps, driven from their villages by
conflict and fear. Camps are sustained by a massive international humanitarian operation,
and this is the third year in camps for many of these people. Unless there is a political
settlement which improves security and allows people to return to their villages, this
operation will stretch into the foreseeable future.
Emergency food situations are increasingly being driven by man-made factors.
Whereas human induced disasters contributed to only about 10% of total emergencies in
1984, by the end of the century they were a determining factor in more than 50% of the
cases. Preventing/minimising conflict and its impact requires new political arrangements
at international level (as highlighted by the proposals of UN Secretary General Kofi
Annan) for the reform of the UN, including the establishment of a Peacebuilding
Commission and more resources for conflict prevention and resolution.
Improving governance goes beyond the obvious solution of trying to tackle
corruption. It involves positive things like encouraging a spirit of democracy. It means
more than elections. It means a political culture in which citizens and minority groups
have rights and where civil society organisations have the space to flourish. As Amartya
Sen highlighted in his seminal analysis, famine in the twentieth century only happened in
countries without genuinely accountable administrations. This has implications for aid
programmes aimed at achieving the Hunger MDG. Donors must be prepared to make
long term investments in supporting accountable governance arrangements and in
building governmental and administrative capacity.
There is an obvious link between health, poverty and hunger. These conditions
represent a vicious cycle from which it is extremely difficult to break. The HIV/AIDS
pandemic is a historical event and there needs to be a far greater awareness of the
devastating impact it is currently having, particularly - but by no means exclusively - in
Sub Saharan Africa.
The link between food insecurity and HIV/AIDS is most destructive at community
levels. HIV/AIDS affects the most productive working age groups and has major
implications for food security in Sub-Saharan Africa where 70-80% of the population
depend on small-scale subsistence agriculture. Since 1985 about 7 million African
agricultural workers have died from AIDS in the 25 most affected countries and
16 million more deaths are likely in the next two decades. Tackling the HIV/AIDS
pandemic is, quite simply, an imperative of global human security (Arnold, 2004).
Similarly, increased investments in preventing diseases such as tuberculosis and malaria
is necessary.
Without significant improvements in each of these areas conflict, governance and
the disease burden progress in working towards the Hunger MDG will be compromised,
even if good policies are followed across a range of other sectors.
The agenda to achieve the Hunger MDG
The HTF proposed a broad range of policy measures, at global, national and
community levels, which it believed are necessary if the Hunger MDG is to be achieved.
The broad policy recommendations fall under the following headings:
Move from political commitment to action.
Reform policies and create an enabling environment.
Increase the agricultural productivity of food-insecure farmers.
Improve nutrition for the chronically hungry and vulnerable.
Reduce vulnerability of the acutely hungry through productive safety nets.
Increase incomes and make markets work for the poor.
Restore and conserve the natural resources essential for food security.
Under each of these headings there are a range of more detailed recommendations.
However, rather than repeat the HTF recommendations in this paper, I will instead
pinpoint what I believe are the priority policies which each of the key actors
governments of developing and developed countries, donors, the international
community, the private sector and civil society should adopt in order to achieve the
Hunger MDG. As stated above, I base these priorities on what I understand is the
evidence of what has worked.
Governments of developing countries

The priority policies for developing countries should include:
Increased investment in agricultural and rural development.
Investment in basic infrastructure.
Investment in education and health systems relevant to the Hunger MDG.
Nutrition interventions.
Investment in agricultural and rural development

Three quarters of the worlds poor are estimated to live in rural areas and depend on
agriculture, either directly or indirectly, for their incomes and food security. In most
African economies, 30-50% of national income and 70-80% of total employment comes
from agriculture. Various studies have shown that the industrial sector in Africa has
generally underperformed relative to the agricultural sector. Since 1980, growth within
the agricultural sector has been, on average, 2.5% per annum, compared to only 1.2% in
the industrial sector (Hazell, 2005).
A successful agricultural sector can have a huge impact on incomes as a whole on
farms directly, on the local economy through secondary linkages. If rapid agricultural
growth leads to reduced prices for food and raw materials, the real incomes of the urban
poor are raised (Matthews, 2005). Agricultural development can contribute to the overall
growth of an economy by supplying food and inputs to the industrial sector, generating
foreign exchange and providing a domestic market for non-agricultural goods and
services.
However, over the past number of decades growth in agricultural production in many
developing countries has been disappointing. The agricultural trade surplus of developing
countries has virtually disappeared and the outlook to 2030 suggests that they will, as a
group, become net importers of agricultural commodities, especially of temperate-zone
commodities. The least developed countries (LDCs) became net importers of agricultural
products as early as the mid-1980s, due to the operation of global comparative advantage
and poorly-designed policies. Many developing countries effectively taxed their
agricultural sectors and it is only recently that this bias against agriculture in development
strategies is gradually being overcome (Arnold, 2004). Even now, a surprising number of
poor African countries give only limited priority to agricultural and rural development in
their Poverty Reduction Strategy Papers (PRSPs). This should be rectified.
The HTF made a number of key recommendations for the development of domestic
agriculture. It recognises the key role of government in providing macroeconomic
stability. Evidence, especially from the 1980s, shows that macroeconomic stability is
crucial if agricultural development policies are to succeed. On specific agricultural policy,
the HTF recommends that African governments should, at a minimum, meet the NEPAD
target of spending 10% of their total budget on agriculture and rural development and that
the poor must have more land available to them. It also recommends reduced internal and
external barriers to trade, the linking of nutrition and hunger interventions, and the
promotion of female empowerment (HTF, 2005).
If these recommendations are supported over the long term, the potential for many
developing countries could be significant. It is projected that, over the next two decades,
the worlds population will increase by 24% to reach 7.5 billion in 2020. Virtually all of
this growth will take place in developing countries, with much of it in urban areas. This
will have profound effects on food preferences and demands. IFPRI projects that between
1997 and 2020, global demand for cereals will increase by 35%, and for meat by 57%,
with almost all of this increase being accounted for by developing countries.
However, as stated recently by Hazell (2005), such broad-based outcomes can only be
achieved if the whole of the agricultural sector, rather than just small subsections such as
high value exports, is developed. In this case as well, there needs to be serious analysis
and differentiation between the hugely disparate countries on the African continent. What
is true for the resource rich, and infrastructurally well developed (relatively), is not
necessarily pertinent for the land locked and resource poor.
Basic infrastructure
Many developing countries have major infrastructural deficits which need to be
addressed if their productive and export capacity is to be strengthened. This will require
major commitments on the part of developing countries, as well as donors. The Africa
Commission stated that these investments should be focussed on everything from rural
roads and small-scale irrigation to regional highways, railways, larger power projects and
Information & Communications Technology (ICT). IFPRI has shown that investment in
rural roads is crucial to development. Drawing on evidence from China, they concluded
that in terms of poverty reduction, low-quality roads raise far more rural and urban poor
above the poverty line per yuan invested than high-quality roads (IFPRI, 2005).
However, beyond roads, railways and ports, institutions dedicated to freeing up trade
between suppliers and their respective markets should be established at national, regional
and local levels. Similarly, trade supporting bodies need to be established at regional
levels between trading partners.
Health and education systems

Investments are necessary in both the health and education systems of developing
countries to guarantee and strengthen the sustainability of investments in the economy as
a whole, and in agriculture in particular. As highlighted by the Millennium Project,
practical investments and policies for a functioning health system include training and
retaining competent, motivated health workers, strengthening management systems,
providing adequate supplies of drugs, and building clinics and laboratory facilities,
(Millennium Project, 2005). IFPRI analysis shows that there are very high returns from
investing in girls education.
Nutrition interventions
If the cycle of disease and poverty is to be broken, malnutrition, particularly in the
under five-year olds, has to be tackled. Undernutrition in childhood leaves a legacy of
physical and mental retardation which can last for generations. Research shows a clear
link between malnutrition, anaemia, cognitive function and school performance.
Improving nutrition is therefore key not only to the Hunger MDG, but to six of the eight
MDGs. The HTF makes very clear and specific recommendations in this area: promote
mother and infant nutrition (as primary carers, women are particularly important for
improving nutritional levels); reduce malnutrition among school-age children and
adolescents; and reduce the prevalence of infectious diseases that contribute to

malnutrition.
Governments of developed countries

The priorities for donor governments should be the following:
Increase the quantity and quality of aid.
Increase aid to agricultural and rural development.
Invest in long term institutional capacity building in developing countries.
Improve donor coherence.
Quantity and quality of aid

The donor community made important commitments during 2005, at the G8 Summit
in Gleneagles and the UN Summit in New York, to increase aid to developing countries
and to reduce the debt burden on a number of heavily indebted countries. The OECDs
Development Assistance Committee (DAC) should monitor how these commitments are
being delivered on.
The Millennium Projects report Investing in Development estimated the total cost
of achieving the MDGs by 2015 and the contribution required of OECD countries
through their aid programmes. It estimated that ODA for direct MDG support will need to
rise to USD 73 billion in 2006 and USD 135 billion in 2015 if all countries are to meet
the MDGs. It recommended that developed countries should meet the UNs aid target of
0.7% of GNP and that increased aid and debt relief should be targeted specifically at
meeting the MDGs.
To increase aid alone is insufficient; improvement in the quality and effectiveness of
aid is also necessary. Aid needs to be more predictable, targeted at long term needs,
untied and donated on the basis of need rather than political orientation. Country-level
needs should be approached systematically by donors and fit within the country owned
PRSP.
Aid to agriculture
As already stated, agricultural and rural development should get higher support in
national development strategies of poor countries. This should also be reflected in aid
allocations from donors.
A brief analysis of aid to agriculture shows that official donations have been steadily
falling over the past twenty years. Overall DAC bilateral aid to agriculture has fallen from
12% of total bilateral aid in 1980-81 to 6% of the total in 2000-01. For individual donors,
the decline is even more striking. For Canada, the decrease was from 22 to 4%; for New
Zealand, from 25 to 3%; for the Netherlands, from 21 to 3% and from 18 to 4% for the
United States. The multilateral institutions have also reduced aid flows to agriculture,
from 35% of their total flows in 1980-81 to 7% in 2000-01 (Matthews, 2005).
Table 1. Aid to agriculture by donor and share in total aid; commitments, 1980-2001
1980-81 1985-86 1990-91 1995-96 2000-01 2000-01

% of donor total USD million
Total DAC 12 12 7 8 6 2 569
Total multilateral 35 30 25 16 10 1 541
Total 16 16 10 10 7 4 110
Source: Matthews (2005); OECD (2004b).
The reasons for the reassignment of aid from agriculture included the high failure rate
of agricultural projects, the complexity, risk and high transactions costs (preparation,
supervision and monitoring) involved in agricultural and rural development projects, a
dearth of suitably qualified staff, unfavourable domestic policies which discriminated
against the agricultural sector, and the increased profile of the poverty alleviation
objective which led many donors to give priority to social spending in the sectors of
health and education (Matthews, 2003). Some of these conditions have now changed and
there is a growing recognition among donors that agricultural and rural development
should receive a higher priority. The World Bank appears ready to increase its lending
portfolio to agricultural and rural development.
There are opportunities for additional aid to support agricultural production, rural
infrastructure, and the provision of global public goods such as agricultural research,
disease control, water, land and forest management that are aimed at the specific crops
and challenges of Least Developed Countries. There is also a greater need for aid to
increase the capacity of developing countries to engage in trade. The increased
monitoring of this jointly by the WTO and OECD will ensure that it receives greater
prominence in the future (Matthews, 2005).
Institutional capacity building

Institutional capacity building is of crucial importance to developing countries. Long
term donor support for the building of national capacity in service-oriented public
management is essential. This will require investments in strengthening public sector
management through training, information technology, and higher salaries to retain the
skill base. It will also require sufficient training and retention of adequate numbers to
deliver services on the ground through community health workers and teachers
(Millennium Project, 2005).
Donor coherence
Beyond the volume and the quality of aid donation, donor coherence needs to be
improved. Donor coherence involves the adoption of a co-ordinated approach by donors,
in line with agreed host country policies, with simplified procedures and reliable
disbursement of funds. Donor coherence includes the co-ordination of policies and
programmes across the different branches (trade, international finance, foreign policy etc)
of a donor government whose decisions impact on developing countries.
Lack of donor coherence is a serious problem for recipient governments. Many
developing countries are overstretched by excessive donor planning missions. A few
years ago, Tanzania, exhausted by the constant round of visitors, imposed a six-month
moratorium on aid visits. To alleviate this problem, in executing aid missions, Ireland
now teams up with like-minded donors - the UK, Holland and some of the Scandinavian
countries.
A good example of best practice taking place in this field is the three ones policy
promoted by UNAIDS. This includes an agreed HIV/AIDS action framework, a national
AIDS co-ordinating authority, and a monitoring and evaluation system. The fourth one,
yet to be adopted, is a donor planning, financing and accounting process. This approach
warrants further support from OECD countries specifically with regard to country-owned
and agreed Poverty Reduction Strategies in developing countries.
The international community

The international community has a key role in working toward achieving the Hunger
MDG. The functioning of the UN system and the range of international agreements which
shape the international economic and trading environment and the operation of are of
particular importance.
In this paper, I will focus on priorities in two areas: emergency response capacity and
the international trading system, negotiations for which occur under the aegis of the
World Trade Organisation (WTO).
Emergency response capacity

After the succession of disasters in 2005 the Asian tsunami, the food crisis in Niger,
Hurricane Katrina in the US and the earthquake in Pakistan it is apparent that the world
needs a more effective system of emergency response. The current situation of appealing
to donors on an ad-hoc basis for funding regularly fails to meet commitments and is
simply not adequate in dealing with the complexity and frequency of disasters today. The
UN Emergency Co-ordinator, Jan Egeland recently pointed out:
Imagine if your local fire department had to petition the mayor for money
every time it needed water to douse a raging fire. That's the predicament faced
by anguished humanitarian aid workers when they seek to save lives but have
no funds to pay for the water, medicine, shelter, or food urgently needed to put
out a fire.
The UN Secretary General, Kofi Annan, proposed a series of measures to the
September UN Summit to meet this need. They included:
Strengthening the overall humanitarian response capacity.
Predictable funding for emergency response through the establishment of a
USD 500 million rolling fund.
Improved humanitarian co-ordination through organising UN agencies and NGOs
into sectoral clusters e.g. shelter, nutrition, health - which build the specialised
capacity to respond quickly and effectively to disasters.
Decisions taken at the UN Summit and subsequently have gone some way to
implementing the Secretary Generals proposals but more progress is necessary and more
resources need be committed.
Trade
Reform of the international agricultural trading system and of OECD policies on
domestic agricultural support are clearly important to developing countries. It is a key
demand in the current WTO trade negotiations which will be held in Ministerial session
meeting in Hong Kong later this month.
Developing countries which export agricultural commodities should unambiguously
gain from fairer export competition on world markets and from improved access to the
markets of developed countries. For net food importing developing countries and for
countries who currently have preferential trading arrangements with a major developed
country trading bloc, the situation is more complex.
Matthews makes the point that, There is a growing awareness that some developing
countries, and particularly LDCs, could lose out from OECD country reforms in the short
run. Thus the design of the liberalisation process, its sequencing and the availability of
accompanying measures to provide a safety-net or compensation to countries adversely
affected are all important issues (Matthews, 2005)
This suggests that policy makers should implement a differentiated approach to
distinguishing between the differing needs of developing countries. The Uruguay Round
(concluded in 1993) acknowledged the need for such differentiation in accepting (a) the
need for Special and Differentiated Treatment (SDT) for certain developing countries in
the context of tariff reduction and market access and (b) the Marrakesh Decision which
provided for compensatory financing mechanisms for net food-importing countries in the
event of higher food prices arising from trade liberalisation. This decision has not been
implemented.
For the current Doha development round, poorer developing countries need support in
two key areas:
Assistance in developing their trade capacities.
The provision of safety nets which will protect them against shocks arising from trade
liberalisation or other phenomena.
Many of the least developed countries, particularly in Africa, are marginal to the
current international trading economy. They will have to first focus on strengthening their
domestic economies and improving their trade capacities regionally before turning to
expanding their international trading capacity.
An Aid for Trade initiative aimed at the Least Developed Country group is slated
for discussion during the Hong Kong Ministerial meeting. This is a welcome indicator of
the fact that WTO members are serious about this round development round.
Aid for Trade Assistance could involve infrastructure improvements for roads and
waterways, schemes to enable traders to meet international trading standards like sanitary
and health standards; assistance with WTO negotiations (from funding think tanks to
providing IT training for trade analysis), and projects to modernise customs and border
procedures.
African governments also need to work in conjunction with each other for trade
facilitation, through the African Union and NEPAD. Such bodies play a key role in
encouraging greater trade between countries at the regional level and in lowering South-
South trade barriers. Tariff barriers affecting the poorest countries are imposed not just by
OECD countries, but by middle-income developing countries. In addition, tariff barriers

between poorer developing countries are frequently high. A trade agenda for development
needs to tackle all of these issues.
The provision of safety net arrangements for poor countries should be part of any
Doha round outcome. Traditionally, food aid has been seen as one such safety net. The
Food Aid Convention (FAC) dates back to the 1960s and requires signatories to the
Convention to commit quantities of food or money to meet emergency food needs and,
through programme food aid, support development programmes.
Food aid has become a contentious issue in the current WTO negotiations. In light of
evidence that the USA sometimes uses food aid to dump agricultural surpluses and to
attempt to create new markets for its exports, and as part of the Doha Round negotiations,
many agricultural exporting developing countries and the EU have called for new
disciplines on food aid. These practices create substantial adverse side-effects in trade
that damage local markets and affect the livelihoods of poor farmers. A recent OECD
study has shown that food aid sourced in donor countries costs 50% more than local
purchase of food and 33% more than purchase in third countries.
Whatever the outcome of the WTO negotiations, it is important that sufficient
quantities of food aid are available to meet emergency needs. The re-negotiation of the
FAC in 2006 is an opportunity to agree on the modalities and future quantities of food aid
so that it can operate as an effective safety net in the future.
Private sector engagement

The private sector must play a key role if the MDGs are to be achieved. Many
developing countries have a poorly developed private sector. Political and economic
instability, poorly developed legal and financial systems and, in certain cases, corruption,
explain this situation. Investments are required in many countries to develop the rule of
law, to promote anti-corruption measures and to build financial systems.
The private sector has also become increasingly involved in recent years in corporate
social responsibility. According to the latest research from the World Economic Forum,
the business sector is increasingly coming to the table to actively engage in efforts to
achieve the MDGs (WEF, 2005). This is giving rise to many new models of partnership
between the private and public sectors and between the private sector and international
NGOs in pursuit of development objectives.
Local Civil Society Organisations (CSOs)

Civil society, within developing countries and at the international level has a crucial
role to play in achieving the MDGs.
Within many developing countries, there has been a notable growth in civil society
over the past decade. But the record is mixed. In many African countries, governments
have not given civil society political space or freedom of expression and action. In other
countries, the capacity of civil society groups is very weak. Part of the international
development agenda should involve encouraging and assisting governments to create
such a space for their own civil society (Arnold, 2004).
Where civil society has the opportunity and capacity to contribute, it can play an
important role in working with and helping donors learn about the poorest sections of the
population. Civil Society organisations (CSOs) can play a key role in targeting the hungry
and destitute. They can also assist in improving understanding of the impact of national
and international policies at the household level. There has been inadequate attention to
this level of analysis over the years.
The role of local CSOs has tended to focus on informing the poor of their rights and
articulating their voice at the national level. The participatory approaches used by such
organisations should be supported further. Better information about services which the
poor are entitled to is an important part of delivering more effective accountability.
Furthermore, such organisations have a role to play in the area of agricultural
development. Public sector resources should be directed towards farming organisations to
help strengthen the local agri-business sectors. Similarly, such support can be used to
enable farming organisations to represent their sector, to improve the standards of their
marketed output and to access markets (WEF, 2005).
International NGOs
The past 10-15 years has seen huge structural changes in international non-
governmental organisations (NGOs). A number of them have become family
federations with a fundraising base spread across a number of developed countries. As
representatives of civil society in developed countries, NGOs have played an important
advocacy role in public policy. At a practical level, NGOs are an essential partner with
the main UN agencies in responding to humanitarian crises and in promoting long term
development.
International NGOs can make an important contribution to the achievement of the
Hunger MDG in the following ways:
Advocacy: NGOs have played an increasingly important role in recent years in
advocating for changes in economic structure and rules which impact on the poor for
example, this years Global Call for Action against Poverty (GCAP), the Make Poverty
History (MPH) in the UK and Ireland and the One campaign in the US. Going forward,
NGOs will have a crucial role in holding their governments accountable in
implementing the commitments made to achieve the MDGs.
Building capacity with southern civil society: This is a slow, complex and sensitive task
which is of significant long term importance.
New models of partnership: I have already referred to new models of partnership
emerging between NGOs, governments, the UN agencies and the private sector. These
are likely to increase in importance in the future.
Innovation: A number of NGOs have now reached a scale and capacity where they can
be important agents of innovation in new approaches to meeting humanitarian and
development challenges. I would like to provide an example relevant to the Hunger
MDG which my organisation, Concern Worldwide, has been involved in.
Concern has developed a new approach to tackling malnutrition, Community

Therapeutic Care (CTC), in association with a private consultancy firm, Valid
International. CTC is based on public health principles and aims to maximise impact and
minimise risk by treating the majority of people suffering from malnutrition in their
homes. It combines newly designed ready-to-use therapeutic food for the outpatient
treatment of severe malnutrition with techniques aimed at mobilising populations,
combined with information drawn from development thinking. This generates many
positive benefits for those involved in the care and treatment of the patient. These include
fewer hours away from home, fewer hours spent travelling to treatment centres,
ingredients purchased locally where possible, and training firmly rooted within the
community. These advantages greatly strengthen the sustainability of the approach.
The CTC approach was field tested in a number of countries with the co-operation of
the governments. Results have been carefully monitored, reported on to the international
nutrition community and subjected to rigorous peer review. As a result, a number of aid
agencies have adopted CTC as their programme approach to tackling malnutrition. A
number of governments have also built CTC into their public health systems.
Conclusions
Policy coherence plays a key role in achieving the Hunger MDG to halve the
proportion of people suffering from hunger by 2015. But it needs to be conceived of in a
broad way. Thinking of policy coherence solely in terms of agricultural policy, or of the
interaction between OECD agricultural policies, OECD development assistance policies
and international agricultural trade policy, is not an adequate analytical framework.
Specifically, the primary importance of the domestic policy framework needs to be
recognised while acknowledging the importance of a favourable international
environment. The need for policy differentiation to reflect the development needs of
different categories of developing countries is stressed. The importance of policy
sequencing is emphasised.
A series of overarching factors, including conflict, governance standards and the
disease burden, including the HIV/AIDS pandemic, determine the overall environment
within which more specific sectoral policies aimed at achieving the Hunger MDG are
framed. Political decisions and actions aimed at improving the situation in each of these
areas are essential to creating the enabling environment which will facilitate the halving
of hunger over the next decade.
This objective can best be achieved within the vision of partnership which underpins
the MDGs. Developing countries must take responsibility and own their development
strategies, must improve standards of governance, must create an investment climate
conducive to investment and must provide political space for civil society to contribute to
the achievement of the MDGs. Developed countries must increase their aid to achieve the
MDGs, must be prepared to commit to long term support for institutional capacity
building in governmental services and must create a fairer international trading system
which takes account of the needs of developing countries. The private sector and civil
society, both within developing countries and internationally, are also key partners in
achieving the MDGs. New and exciting models of partnership between the various actors
are increasingly being formed and should contribute to the achievement of the MDGs.
REFERENCES
Arnold, T. (2002), Perspectives on Agriculture Policy A Developing Country Perspective,

Speech delivered to the Irish Agricultural Science Association (ASA) Conference, Dublin.
Arnold, T. (2004), Agriculture, Trade and Development: Why Policy Coherence Matters,
Speech delivered to OECD Committee for Agriculture and Secretariat Consultation with Civil
Society Organisations, May 2004, Paris.
Arnold, T. (2004), Ethics, Hunger and Agriculture, Speech delivered to Cornell University
Workshop on Hunger, 2004.
Collier, P. (2005), Is Agriculture still relevant to Poverty Reduction in Africa?, Speech delivered
to British Parliamentary Group on Overseas Development, www.odi.org.uk, London.
Commission for Africa (2005), Our Common Interest, Commission for Africa, London.
Hazell, P. (2005), Is Agriculture Still Relevant to Poverty Reduction in Africa?, Speech
delivered to British Parliamentary Group on Overseas Development, www.odi.org.uk, London.
IFPRI (2005), Road Development, Economic Growth and Poverty Reduction in China, IFPRI,
Washington, DC.
Matthews, A. (2005), Policy Coherence for Development: Issues in Agriculture: An Overview
Paper, Trinity College, Dublin.
Millennium Project - Hunger Task Force (2005), Halving Hunger: It Can Be Done (Summary
version), UN, New York.
Millennium Project (2005), Investing in Development: A Practical Plan to Achieve the Millennium
Development Goals, UN, New York.
OECD (2005), Policy Coherence for Development: Promoting Institutional Good Practice,
OECD, Paris.
Sen, A. (1999), Development as Freedom, Anchor Books, New York.
WEF (2005), Report of Expert Group on Poverty and Hunger, WEF, Geneva.
Chapter 12.
FOOD GRAIN SURPLUSES, YIELDS AND PRICES IN INDIA1
Raghav Gaiha
Faculty of Management Studies, University of Delhi
and
Vani S. Kulkarni
Centre for Population and Development, Harvard University
Abstract
This study analyses some aspects of state intervention in the foodgrain market in
India and to assess how these have impacted foodgrain productivity, accumulation of
stocks, wholesale and consumer prices, and exports. The main conclusions of the study
are as follows:
Growing agricultural subsidies - including food subsidies - have slowed down wheat
and rice yields by constraining public investment in agriculture. A related concern is
that higher private investment-mainly in ground water exploitation - may have resulted
in negative externalities for other farmers in the same village by lowering the water
table.
The Minimum Support Prices (MSPs) have had significant positive effects on wheat
and rice procurement but these effects have weakened during the late 1990s,
presumably as a result of removal of restrictions on domestic and international trade.
Wheat and rice off-takes fall with higher MSPs, as the wedge between market and
subsidised prices narrows down.
Foodgrain stocks have grown as a consequence of higher MSPs but at a diminishing
rate.
The inflationary effects of hikes in the MSP are corroborated. The Wholesale Food
Price Index (WFPI) is very sensitive to the MSP, and the former in turn raises the
Consumer Price Index for Agricultural Labourers (CPIAL). As rural poverty is
positively correlated with (unanticipated) increases in the CPIAL, the effects on the
poor are larger than those registered by just lower food entitlements.
Because international food prices crashed in the 1990s, the MSP - independent of
changes in the real effective exchange rate - impacted foodgrain exports unfavourably.
Exports were made feasible by subsidies. As a result, a vicious circle of hikes in the
MSP, leading to higher food stocks and export subsidies to reduce them was created.
Briefly, state intervention in the foodgrain sector has hampered productivity growth,
regional shifts in foodgrain production more conducive to sustainable agricultural
growth, a more diversified pattern of agricultural growth in major foodgrain producing
1. We are grateful to Wayne Jones and Michael Ryan for the invitation to present this paper at the Global
Forum on Agriculture: Policy Coherence for Development, organized by OECD, Paris, and for helpful
suggestions. We are also grateful to Raghbendra Jha, Prabhu Pingali, Ganesh Thapa, Anil Deolalikar,
Pasquale Scandizzo, and several participants at the Global Forum for constructive and insightful
suggestions. The econometric analysis could not be performed without Raj Bhatias computational
expertise. The views expressed here are, however, our own and we take full responsibility for any
deficiencies.
states, and has hurt the poor in different ways (e.g. limited expansion of employment
opportunities, lower food and other entitlements).
Various options have been proposed to replace the present form of the MSP. These
include freezing of the MSP at current levels with the aim of phasing it out, and deploying
the resources saved in improving farmer access to technical advice, credit and rural
infrastructure in order to facilitate a shift to higher value crops and agribusiness
activities. More specific proposals include investment grants to induce a shift from
foodgrain production to higher value crops and agribusiness, contract farming and
income support measures (e.g. a lump sum annual or seasonal payment to farmers based
on crop area cultivated), and strengthening of other safety nets (e.g. national rural
employment guarantee scheme). However, little can be said about their workability in the
present context except that a package of reforms with a clear and coherent rationale may
have greater acceptability across Indias political spectrum.
Introduction
In recent years, foodgrain surpluses in India have exceeded the buffer stock norms. In
2002, for example, the Food Corporation of India (FCI) had accumulated over 60 million
tonnes of foodgrains - nearly three times the normal requirements for buffer stocks and
the Public Distribution System (PDS) (Rao, 2005, World Bank, 2005). The objective of
this paper is to analyse this trend.
The sharp rise in the quantity of foodgrains procured and in the stocks held by the
FCI is a recent phenomenon. The annual procurement for most years during the 1990s
was 24 million tonnes until 1998-99, and increased to 31 and 36 million tonnes in the two
subsequent years, respectively. This implies an addition of 19 million tonnes to the FCI
stocks. Moreover, the off-take declined by 5 million tonnes in 2000-01. Larger
procurements together with a decline in off-take accounted for 24 million tonnes of
additional stocks. Therefore, while both larger procurements and declining off-take
resulted in larger stocks, the former is the more important factor.
Foodgrain procurements are influenced by output and procurement prices. Available
evidence points to a slowing down of the growth of foodgrain output in recent years.
Although there was a decline in foodgrain output of 6% in 2000-01, procurement
increased by 5%. The steep rise in procurement is thus not just a result of growth of
foodgrain output at the all-India level. But a strong link between the concentration of
foodgrain output in Haryana, Punjab and Andhra Pradesh - mainly of rice and wheat - and
procurements cannot be ruled out. In Haryana and Punjab for example, states which
account for the bulk of wheat procurement, the growth rate of wheat output was nearly
double of the all-India growth rate during 1998-2000.
Steep hikes in the Minimum Support Prices (MSPs) is yet another significant factor.
The MSPs fixed by the government have been higher than those recommended by the
Commission on Agricultural Costs and Prices (CACP). There was, for example, a 25%
rise in the MSP for wheat in 1997-98 followed by continuous increases in each of the
subsequent years. As a result, the MSP rose by 54% over the period 1997-2001. Although
the MSPs for rice rose less steeply, they were higher by 34% over the same period.
Finally, although net exports of foodgrains have averaged 7 million tonnes during the
last seven years, they may have contributed in a small measure to the FCI stocks, as there
was a decline in the international prices of food grains.
While the stocks have accumulated through high MSPs, and foodgrain allocations to
the PDS (Public Distribution System) have increased, the subsidies have risen too.2 Food
subsidies, for example, rose from INR 19.6 billion in 1981-82 to INR 105 billion in 2001-
02 (at 1993-94 prices). The total sum of agricultural subsidies increased from
INR 59.2 billion in 1981-02 to INR 364.2 billion in 1999-2000, and the corresponding
shares in GDP increased from 1.2% to 3% during the same time period. The fact that
these subsidies were associated with reductions in public investment in agriculture is
corroborated by a sharp decline in the latter until 2000-1 (from INR 71.3 billion in 1981-
82 to INR 44.2 billion in 2000-01), followed by a slight increase in 2001-02
(INR 52.6 billion) and a negligible reduction in 2002-03 (INR 51.5 billion) (World Bank,
2005). That this decline in public investment is associated with a slowing down of growth
of productivity in foodgrains is indisputable.3
The main concern of the present study is therefore to analyse some aspects of state
intervention in the foodgrain market and to assess how it has impacted foodgrain
productivity, accumulation of stocks, wholesale and consumer prices, and exports. This is
done by econometrically analysing a comprehensive data base, compiled from the
Reserve Bank of India, Ministry of Agriculture and Ministry of Consumer Affairs, Food
and Public Distribution. Our findings illustrate that the forms of state intervention
analysed have hampered agricultural growth, regional and crop diversification, expansion
of agricultural exports and hurt the poor in different ways- through, for example, higher
food prices. It is necessary therefore to phase out the MSP and transfer the resources
saved to build rural infrastructure, extend irrigation and ensure better access of farmers to
agricultural support services. But the feasibility of various policy options remains a major
concern.
Foodgrain (wheat and rice) policy
The Government of India (GOI) foodgrain policy is motivated by two concerns: (i) to
protect producers against sharp reductions in prices, through procurement and price
support operations; and (ii) to ensure that low income households have access to
foodgrains at reasonable prices, through the Public Distribution System (PDS) and buffer
stock operations. In pursuing these objectives, the Food Corporation of India (FCI) - a
government parastatal - was created. FCI or its designated state government agency
procure paddy and wheat at the MSP. In addition, FCI obtains additional rice supplies
through a rice levy on rice mills. This ranges from 10% to 75% of milled rice output at
a government prescribed levy rice. On average levy rice accounts for about 60% of total
rice procurement by the FCI. Paddy/rice and wheat stocks are then used for the PDS,
buffer stocks and other welfare measures.
The GOI (Government of India) sets minimum support prices for 24 major crops,
including paddy, wheat, maize, pulses and oilseeds. The Commission of Agricultural
2. Note that, while foodgrain allocation rose from 21.59 million tonnes in 1993-94 to 30.01 million tonnes
in 2001-02, the share of off-take in total foodgrain allocation dropped sharply from 0.67 to 0.45. This
resulted in a slight reduction in the amount of off-take over this period (World Bank, 2005).
3. Public capital formation comprises mainly investments in major and medium irrigation schemes. Gulati
and Batla (2002) broaden the coverage to investments in power. In both cases, public capital investments
declined. They also show that a 10% increase in public investment (including irrigation and power)
results in a 2.4% decline in agricultural GDP growth. Further, there is a strong complementarity between
public and private investments in agriculture.
Costs and Prices (CACP) recommends MSPs for these crops every year. Farmers can sell
their produce in the open market or to the FCI or its designated agency at the MSP. A
growing concern is the rapidly rising MSPs for rice and paddy and the fiscal burden these
MSPs impose. Further, increasing MSPs have led to a decrease in public investment.
Until recently, the GOI generally adhered to the CACP recommendation of MSPs for
rice and wheat. The CACP bases its recommendations on the C2 costs of production,
including all expenses in cash and in kind, plus rent paid for leased land, imputed value of
family labour and interest on owned capital. Since 1997-98, the MSPs have been set at
higher than the C2 benchmark. In 2001-02, for example, the weighted average C2 costs of
eight wheat producing states was INR 4.83 per kg while the MSP was set at INR 6.20 per
kg. In 2002-03 the GOIs attempts to freeze the MSPs were resisted by the main
beneficiary states (Punjab, Haryana and Andhra Pradesh). Although the MSPs were
frozen at 2001-02 levels, compensations took the form of a drought relief bonus
(INR 200 per tonne to the paddy MSP and of INR 100 per tonne to the wheat MSP). The
bonuses overlooked the fact that these crops are largely grown in irrigated areas. As a
consequence, the FCI was forced to procure more, resulting in increasing foodgrain
stocks (World Bank, 2005).
The (direct) benefits of MSPs accrued to a few states where procurements were the
largest. Wheat procurement is concentrated in three states: Punjab, Haryana and Western
Uttar Pradesh (accounting for 95% of total wheat procurement), while rice procurement is
concentrated in five states: Punjab, Andhra Pradesh, Haryana, Uttar Pradesh and Tamil
Nadu (accounting for 85-90% of total procurement). In 2001-02, the total fiscal transfers
to Punjab amounted to INR 19.8 billion, while those to Haryana and Andhra Pradesh
amounted to INR 9.4 billion and INR 4.9 billion respectively (World Bank, 2005).
What is perhaps an equally serious concern is that the benefits of the MSPs accrue
mostly to larger wheat and rice farmers. Combining the 54th round of the NSS with two
cost estimates for 1998, it turns out that transfers to a large rice farmer in Punjab were
nearly 10 times the amount to a marginal farmer; and, to a large wheat farmer in the same
state, nearly 13 times the amount transferred to a marginal farmer (World Bank, 2005).4
Wheat and rice yields
There is growing concern that the production of foodgrains has slowed down as a
result of slowing down of public investment in agriculture. As pointed out earlier, the
latter is largely a consequence of the mounting burden of subsidies.5
Both rice and wheat yields exhibit a positive but diminishing trend. As shown in
Figures 1 and 2, 1996 onwards there was a marked reduction in yields per hectare-
particularly of wheat.6
4. The cost estimates are C2 and A2+FL. The latter includes all cash costs and imputed cost of family
labour. The transfers per household are twice as high with the A2+FL benchmark. Also, it is higher for
wheat than for rice. For details, see World Bank (2005).
5. For a more detailed exposition with illustrative evidence, see World Bank (2005), Chand (2005), and
Chadha and Sharma (2005).
6. A quadratic time trend was fitted to logs of wheat and rice yields per hectare, with a dummy variable that
takes the value 1 from 1996 on and 0 for all the earlier years. In both cases, the dummy variable has a
significant negative coefficient.
In a series of econometric exercises, the following results are corroborated. In the

case of wheat, productivity is positively correlated with the use of fertilisers and to public
investment in irrigation. However, controlling for these effects and for that of net sown
area, increases in capital formation - implying essentially greater private investment in
wells, tube wells - are negatively related to yields.7 This may seem somewhat
contradictory but if there are negative externalities associated with groundwater
exploitation by individual farmers in Haryana, (for example, the average water table
depth falls annually by 1-33 cm), higher productivity on individual farms would be
associated with lower productivity on other farms.8 The negative relationship between
wheat yields and gross capital formation is, however, robust to different specifications.
Figure 1. Wheat yields
3500
3000
2500
Yield (Kg/Hectare)
2000
Actual
Predicted
1500
1000
500
0
50
52
54
56
58
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
19
19
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19
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19
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19
20
20
Year
Source: Various sources as listed in the text.
Similar results are obtained for rice yields. Both fertiliser and net sown area have
positive effects on yields. The effect of public investment is positive as well, while that of
overall capital formation in agriculture is negative. The negative effect of overall capital
formation persists even after a dummy variable is inserted. This variable takes the value 1
for the years starting 1996 and is set at 0 for the preceding years.9
As may be noted from Figures 1 and 2, in both cases, estimated yields track actual
yields closely.
An important conclusion that can be drawn is that the rapid decline in public
investment in agriculture during the 1990s had a major role in explaining the fall in rice
and wheat productivities not just directly but also indirectly through private investment in
7. For details, see Table A.1.

8. In a recent paper based on household data collected by the National Council of Applied Economic
Research, Foster and Rosenzweig (2005) show that a farmers tubewell depth when he digs a new
tubewell is deeper by 2.9% if the number of wells in the village is higher by 10%.
ground water utilisation resulting in negative externalities for other farmers in the same
village.10
Foodgrain procurement, off-take and stocks
The increasing divergence between the MSPs for wheat and rice and their costs of
production (attributable mainly to the political clout of farmers in these states), larger
procurements, declining off-takes and failure to export larger values of foodgrains
contributed to the accumulation of foodgrain stocks, considerably in excess of buffer
stock norms. Some important results of econometric exercises - focusing mainly on the
key role of the MSP in the accumulation of foodgrain stocks and higher foodgrain prices -
are shown.
Figure 2. Rice yields
2500
2000
Yield (Kg/Hectare)
1500
Actual
Predicted
1000
500
0
50
52
54
56
58
60
62
64
66
68
70
72
74
76
78
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20
Year
Procurements of wheat and rice increase at a diminishing rate. The same is true for
the off-take of rice. There is, however, a sharp reduction from 1996 onwards, which is
captured by a significant negative coefficient of the dummy variable. Wheat off-take
shows a positive trend except that the dummy variable has a negative but weakly
significant coefficient. Not surprisingly, stocks of wheat and rice also increase at a
diminishing rate.
In order to examine the effect of the MSP on the accumulation of stocks, some
additional exercises were carried out.
Wheat procurement exhibits a strong positive relationship with the MSP. So the
higher the MSP, the greater is the wheat procurement. Controlling for this effect, the
dummy variable that takes the value 1 for 1996 and the subsequent years, and 0 for the
years before 1996 has a significant negative coefficient, implying a weakening of the
positive effect of the MSP in more recent years.11 Off-take of wheat is negatively related
10. For illustrative evidence on deceleration of total factor productivity associated with declining public
investment in agriculture, see Chadha and Sharma (2005).
11. For details, see Table A.3 in the annex.
to the MSP (as the issue price rises), as also to (predicted) wheat yields. Controlling for
these effects, there is a positive time trend.12 Stocks of wheat are positively related to
production of wheat. Controlling for this effect, the share of wheat production in
Haryana, Punjab and Andhra Pradesh has a negative effect. The overall effect of the
MSP-including that of the interaction with wheat production - is positive, given the larger
absolute value of wheat production. This result implies that higher production in
combination with higher wheat MSP would contribute substantially to the building of
wheat stocks. However, the negative coefficient of the dummy implies a weakening of
these effects since 1996.13
Rice procurement is positively related to the MSP. This effect weakens slightly
starting 1996. It is also positively linked to the rice output in Haryana, Punjab and Andhra
Pradesh.14 Rice off-take is negatively related to both rice output (at a national level) and
to the share of these three states in national rice output. Controlling for these effects, there
MSP has a negative effect, and exhibits a residual positive time trend.15 Rice stocks vary
with the MSP, but less so starting 1996. Controlling for the effect of the MSP, rice output
of the three largest rice producing states does not have a significant effect on rice stocks.16
How closely our specifications approximate actual rice and wheat stocks are illustrated in
Figures 3 and 4.
Figure 3. Actual and estimated rice stocks
30
25
20
Actual
15
Predicted
10
0
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
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01
02
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20
20
20
Year
12. In an alternative specification, off-take of wheat is negatively related to all-India production of wheat,
and negatively to the MSP. Controlling for these effects, there is a positive time trend. Details will be
furnished on request.
14. In an alternative specification, rice procurement is positively related to all-India rice output as well as to
the share of Haryana, Punjab and Andhra Pradesh in all-India rice output. Controlling for these two
effects, there is a positive effect of the MSP. For details of the results reported in the main text, see
Table A.6.
Figure 4. Actual and estimated wheat stocks

30
25
20
Actual
15
Predicted
10
0
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
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20
Year
Inflationary effects of MSP
MSP hikes have also contributed to higher wholesale and consumer prices.
Unanticipated increases in the latter tend to aggravate rural poverty independently of the
level of agricultural production and land inequality (Bliss, 1985; Gaiha, 1989, 1995).
Figure 5. Wholesale food price indices

600
500
400
Actual
300
Predicted
200
100
81 982 983 984 985 986 987 988 989 990 991 992 993 994 995 996 997 998 999 000 001 002
19 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2
Year
An econometric analysis confirms the positive effect of the (combined rice and
wheat) MSP on the wholesale food price index (WFPI). Controlling for this effect, neither
the gross fiscal deficit nor the money supply (M3) has a significant effect on the WFPI.
There is a residual positive time trend which weakens over time.17 That this specification
tracks the actual WFPI well is illustrated in Figure 5.
The Consumer Price Index for Agricultural Labourers (CPIAL) in turn varies with the
(predicted) WFPI. The former is not affected by (predicted) wheat and rice off-takes. Nor
is it affected by a measure of money supply.18 There is, however, a declining residual
time trend. This specification also tracks the actual CPIAL closely, as shown below in
Figure 6.19
Figure 6. Consumer Price Index for agricultural labourers
2000
1800
1600
1400
1200
Actual
1000
Predicted
800
600
400
200
0
81
82
83
84
85
86
87
88
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90
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92
93
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20
Year
Prices, exchange rates and foodgrain exports
Not only has the state intervention in the foodgrain marketing through the MSP
hampered greater public investment in agriculture and hurt the poor through higher
prices, but it has also dampened expansion of foodgrain exports. Even though the share of
rice and wheat exports grew from about 14.5% in 1993-94 to about 19% in 2003-04, with
17. In alternative specifications, larger (predicted) stocks of wheat and rice replacing the MSP have a
positive effect on WFPI but not money supply (M3). Details will be furnished on request.
18. Here money supply (M3) is multiplied by its velocity.
sharp fluctuations in the dollar value of wheat exports, it is arguable that a more rapid
expansion was hampered by the sharp increases in WFPI, stemming from hikes in the
MSP.20, 21 An econometric analysis corroborates this link.22 The MSP has a negative
effect on foodgrain exports while the real effective exchange rate does not have a
significant effect. There is a positive residual time trend which has weakened over time.23
That this specification yields estimates which closely track the actual value of rice and
wheat exports is illustrated below.
Figure 7. Value of foodgrain exports
250
200
150
Actual
Predicted
100
50
0
90
91
92
93
94
95
96
97
98
99
00
01
02
19
19
19
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19
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20
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20
Year
20. Export subsidies for cereals were introduced in early 2000. The GOI resorted to subsidies as world cereal
prices crashed in the late 1990s, coinciding with sharp hikes in the MSPs. As a result, government
foodstocks rose to 60 million tones. In November 2000, the GOI decided to offer private traders wheat
for export at a price equal to the Food Corporation of Indias economic cost minus two years carrying
cost, but not lower than the central issue price for below the poverty line households (World Bank,
2005). In 2003, the scheme was expanded to cover rice. The GOI justified its export support policy under
the exemption for developing countries contained in Article 9.4 of the Agreement on Agriculture. The
exports rose but so did the subsidies.
21. Chadha and Sharma (2005) point out that agricultural sub-sectors with lower levels of government
intervention such as fruits and vegetables, and dairy and poultry products recorded higher rates of growth
than foodgrains.
22. Export values are expressed in terms of a nominal (effective) exchange rate.
Concluding observations
Some observations on the preceding analysis are made below from a broad policy
perspective.
State intervention in foodgrain marketing in India - especially in rice and wheat -
aims at protecting producers against sharp reductions in prices, and ensuring adequate
availability and access of low income households to foodgrains. The subsidies involved
have, however, grown rapidly and contributed in large measure to fiscal stress in recent
years. Moreover, the (direct) benefits of the subsidies have accrued mostly to large
farmers in a few of the major wheat and rice producing states. Not only is the targeting of
subsidised food through the Public Distribution System (PDS) a continuing concern, it is
also far from a cost-effective way of transferring food/real income to the poor.24 In fact,
there has been a sharp decline in the foodgrain off-take over the period 1993/04 - 2001/02
(the ratio of off-take to allocation plummeted from 0.67 to 0.45) due to a narrowing of the
wedge between subsidised prices and market prices. Although targeting has improved
with the switch to the Targeted Public Distribution System (TPDS), a large proportion of
the poorest remains excluded for various reasons (e.g. unavailability of the item in ration
shops, unsatisfactory quality).25
A major concern is the role of the MSP as a deterrent to the shifting of wheat and rice
production to northern and eastern states, which possess highly favourable agro-
ecological conditions. Existing major producers such as Haryana, Punjab and Tamil Nadu
are constrained by increasing water scarcity.26 For a regionally more differentiated
agricultural strategy that would be sustainable over the long-term, it is vital that these
states shift to a more diversified agricultural patterns, growing less water-intensive and
higher value crops (World Bank, 2005). Simultaneously, larger investments in rural
infrastructure (e.g. roads, better maintenance of surface irrigation) and agricultural
support services (e.g. research and extension) are a major priority.
The specific concerns raised by our analysis are:
Growing agricultural subsidies have slowed down yields of wheat and rice by
constraining public investment in agriculture. A related concern is that higher private
investment - mainly in ground water exploitation - has resulted in negative externalities
for other farmers in the same village by lowering the water table.
The MSPs have had significant positive effects on wheat and rice procurement but
these effects have weakened during the late 1990s, presumably as a result of removal of
restrictions on domestic and international trade.
24. A not-so-recent but detailed analysis of the PDS in Andhra Pradesh, for example, shows that when both
central and state expenses are accounted for, a rupee of income transferred to the poor cost INR 6.35. If it
was as dismal as this in Andhra Pradesh with a relatively efficient administration, it is likely to be much
worse in other states such as Uttar Pradesh and Bihar. For details, see Radhakrishna et al. (1997), and for
a review of this and other estimates, see Gaiha (1999, 2002, 2003).
25. A recent review of the TPDS points to low targeting accuracy (i.e. barely 25% of the poor households
bought foodgrains), and a low caloric elasticity with respect to food subsidies (0.08). For details, see
Kochar (2005).
26. The fact that foodgrain production has remained concentrated in a few states, such as Haryana, Punjab,
and Tamil Nadu, is attributable to a perverse incentive structure embodied in the MSP, and water and
power subsidies. For illustrative evidence, see World Bank (2005), and Chadha and Sharma (2005).
Wheat and rice off-takes fall with higher MSPs, as the wedge between market and
subsidised prices narrows down.
Foodgrain stocks have grown as a consequence of higher MSPs but at a diminishing
rate.
The inflationary effects of hikes in the MSP are corroborated. The Wholesale Food
Price Index (WFPI) is very sensitive to the MSP, and the former in turn raises the
Consumer Price Index for Agricultural Labourers (CPIAL). As rural poverty varies
positively with (unanticipated) increases in the CPIAL, the effects on the poor are
larger than just lower food entitlements.
The MSP - independent of changes in the real effective exchange rate - impacted
unfavourably on foodgrain exports- especially because international food prices
crashed in the 1990s. Exports were feasible only with subsidies. So a vicious circle of
hikes in the MSP, leading to higher food stocks, and export subsidies to reduce them
was created.
Briefly, state intervention in the foodgrain sector has hampered productivity growth,
regional shifts in foodgrain production more conducive to sustainable agricultural growth,
and a more diversified pattern of agricultural growth in major foodgrain producing states.
It has also hurt the poor in different ways (e.g. limited expansion of employment
opportunities, lower food and other entitlements).
Various options have been proposed to replace the present form of the MSP. These
include freezing of the MSP at current levels with a view to phasing it out, and deploying
the resources saved in improving farmer access to technical advice, credit and rural
infrastructure, in order to facilitate a shift to higher value crops and agribusiness
activities. More specific proposals include investment grants to induce a shift from
foodgrain production to higher value crops and agribusiness; contract farming; and
income support measures (e.g. a lump sum annual or seasonal payment to farmers based
on crop area cultivated); and strengthening of other safety nets (e.g. national rural
employment guarantee scheme). Little, however, can be said about their workability in
the present context except that a package of reforms with a clear and coherent rationale
may have greater acceptability across Indias political spectrum.
Appendix
List of variables
The variables used in the regressions are listed first, followed by the results. Note that
l denotes logarithmic transformation of a variable.
y_w- wheat yield (Kg/per hectare)
y_r-rice yield (Kg/per hectare)
hyv-area under fertiliser (million hectares)
fert-fertiliser consumed in lakh tonnes
nsa-net sown area (million hectares)
public-fixed public investment in agriculture
gfc-gross fixed capital formation in agriculture
proc_w- procurement of wheat
off_w-off-take of wheat
p_o-predicted off take of rice and wheat
proc_r- procurement of rice
off_r-off-take of rice
prod 3_w- production of wheat in Haryana, Punjab and Andhra Pradesh
prod 3_r- production of rice in Haryana, Punjab and Andhra Pradesh
msp_w- minimum support price of wheat
prod 3r_r- production of rice in Haryana, Punjab and Andhra Pradesh
productiona_r- production of rice at all-India level
wfpi-wholesale food price index
p_wfpi-predicted wholesale food price index
cpil-consumer price index for agricultural labourers
msp_r- minimum support price of rice
stock_w-stock of wheat
stock_r-stock of rice
p_s-predicted foodgrain stock
m3-measure of broad money
m3v-broad money multiplied by velocity
t- year
d4-a dummy variable that takes the value 1 for 1996 and subsequent years, and 0 for all other years
gdp-fiscal deficit as a proportion of GDP
export-exports of rice and wheat
reer-real effective exchange rate
Regression results
A selection of regression results is given below.
Table A.1. Determinants of wheat yields per hectare
. reg ly_w l_fert l_hyv l_nsa l_public l_gfc
Source | SS df MS Number of obs = 29

-------------+------------------------------ F( 5, 23) = 121.90
Model | 1.74638616 5 .349277232 Prob > F = 0.0000
Residual | .065902365 23 .00286532 R-squared = 0.9636
-------------+------------------------------ Adj R-squared = 0.9557
Total | 1.81228853 28 .06472459 Root MSE = .05353
------------------------------------------------------------------------------
ly_w | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
l_fert | .3970201 .0701265 5.66 0.000 .2519524 .5420878
l_hyv | .0318791 .1094206 0.29 0.773 -.1944746 .2582328
l_nsa | .0842052 .7619551 0.11 0.913 -1.492019 1.660429
l_public | .1867698 .1030926 1.81 0.083 -.0264934 .400033
l_gfc | -.3725182 .1442052 -2.58 0.017 -.6708293 -.0742071
_cons | 7.161421 3.737476 1.92 0.068 -.5701372 14.89298
------------------------------------------------------------------------------
Durbin-Watson d-statistic( 6, 29) = 1.848832
Table A.2. Determinants of rice yields per hectare
. reg ly_r l_fert l_hyv l_nsa l_public l_gfc

-------------+------------------------------ F( 5, 23) = 111.15
Model | 1.1654518 5 .233090359 Prob > F = 0.0000
-------------+------------------------------ Adj R-squared = 0.9516
Total | 1.213684 28 .043345857 Root MSE = .04579
------------------------------------------------------------------------------
ly_r | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
l_fert | .2930058 .0599929 4.88 0.000 .1689009 .4171106
l_hyv | .079827 .0936089 0.85 0.403 -.1138177 .2734717
l_nsa | 2.38765 .6518497 3.66 0.001 1.039196 3.736104
l_public | .2283495 .0881953 2.59 0.016 .0459037 .4107953
l_gfc | -.5400347 .123367 -4.38 0.000 -.7952387 -.2848307
_cons | -3.0007 3.197396 -0.94 0.358 -9.615018 3.613618
------------------------------------------------------------------------------
Table A.3. Determinants of wheat procurement
reg lproc_w lmsp_w d4

-------------+------------------------------ F( 2, 25) = 24.57
Model | 2.786745 2 1.3933725 Prob > F = 0.0000
Residual | 1.41798287 25 .056719315 R-squared = 0.6628
-------------+------------------------------ Adj R-squared = 0.6358
Total | 4.20472787 27 .155730662 Root MSE = .23816
------------------------------------------------------------------------------
lproc_w | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
lmsp_w | .7009209 .1428624 4.91 0.000 .4066902 .9951516
d4 | -.2856172 .1753093 -1.63 0.116 -.6466735 .0754391
_cons | -1.481225 .7048169 -2.10 0.046 -2.932823 -.0296279
------------------------------------------------------------------------------
Table A.4. Determinants of wheat off-take
. reg loff_w P2y_w lmsp_w lprod3r_w t

-------------+------------------------------ F( 4, 14) = 4.52
Model | .486438766 4 .121609691 Prob > F = 0.0149
-------------+------------------------------ Adj R-squared = 0.4390
Total | .863044004 18 .047946889 Root MSE = .16401
------------------------------------------------------------------------------
loff_w | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
P2y_w | -4.04519 1.406203 -2.88 0.012 -7.061196 -1.029183
lmsp_w | -1.588698 .5230233 -3.04 0.009 -2.710471 -.4669246
lprod3r_w | .6718056 1.103084 0.61 0.552 -1.694073 3.037685
t | .2543796 .0704038 3.61 0.003 .1033786 .4053807
_cons | 34.51119 10.85437 3.18 0.007 11.23087 57.7915
------------------------------------------------------------------------------
Table A.5. Determinants of wheat stocks
. reg stock_w lproda_w lmsp_w lprod3r_w lmsp_lprod3r_w d4

-------------+------------------------------ F( 5, 17) = 10.21
Model | 629.077326 5 125.815465 Prob > F = 0.0001
Residual | 209.442194 17 12.3201291 R-squared = 0.7502
-------------+------------------------------ Adj R-squared = 0.6768
Total | 838.519521 22 38.1145237 Root MSE = 3.51
------------------------------------------------------------------------------
stock_w | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
lproda_w | 30.22979 13.97772 2.16 0.045 .7393812 59.72021
lmsp_w | -303.5929 101.6075 -2.99 0.008 -517.9661 -89.21974
lprod3r_w | -457.2067 164.6097 -2.78 0.013 -804.5028 -109.9106
lmsp_lprod~w | 87.28221 28.45391 3.07 0.007 27.24972 147.3147
d4 | -11.71217 3.023529 -3.87 0.001 -18.09126 -5.333076
_cons | 1275.065 548.4879 2.32 0.033 117.8565 2432.273
------------------------------------------------------------------------------
Table A.6. Determinants of rice procurement
. reg lproc_r lprod3_r lmsp_r d4lmsp_r

-------------+------------------------------ F( 3, 19) = 29.34
Model | 2.38132124 3 .793773747 Prob > F = 0.0000
-------------+------------------------------ Adj R-squared = 0.7944
Total | 2.89531348 22 .131605158 Root MSE = .16448
------------------------------------------------------------------------------
lproc_r | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
lprod3_r | 1.119585 .5027261 2.23 0.038 .067367 2.171803
lmsp_r | .3777641 .1597507 2.36 0.029 .043402 .7121261
d4lmsp_r | -.0418761 .03027 -1.38 0.183 -.105232 .0214798
_cons | -10.43792 4.359485 -2.39 0.027 -19.56243 -1.313413
------------------------------------------------------------------------------
Table A.7. Determinants of rice off-take
. reg loff_r lproda_r lmsp_r lprod3r_r t

-------------+------------------------------ F( 4, 18) = 43.07
Model | 1.95096133 4 .487740332 Prob > F = 0.0000
-------------+------------------------------ Adj R-squared = 0.8844
Total | 2.1548056 22 .097945709 Root MSE = .10642
------------------------------------------------------------------------------
loff_r | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
lproda_r | -1.476232 .2943581 -5.02 0.000 -2.094656 -.8578089
lmsp_r | -.6052373 .2874419 -2.11 0.050 -1.20913 -.0013443
lprod3r_r | -.7297286 .4206878 -1.73 0.100 -1.613561 .1541036
t | .1278471 .0241974 5.28 0.000 .0770102 .178684
_cons | 21.5815 3.87392 5.57 0.000 13.44269 29.7203
------------------------------------------------------------------------------
Table A.8. Determinants of rice stocks
. reg lstock_r lprod3_r lmsp_r d4lmsp_r

-------------+------------------------------ F( 3, 19) = 23.38
Model | 4.14854474 3 1.38284825 Prob > F = 0.0000
Residual | 1.12396884 19 .059156255 R-squared = 0.7868
-------------+------------------------------ Adj R-squared = 0.7532
Total | 5.27251357 22 .239659708 Root MSE = .24322
------------------------------------------------------------------------------
lstock_r | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
lprod3_r | .2648605 .7434133 0.36 0.726 -1.291121 1.820842
lmsp_r | 1.058798 .2362336 4.48 0.000 .5643558 1.553241
d4lmsp_r | -.0908384 .0447622 -2.03 0.057 -.1845268 .00285
_cons | -5.720489 6.44665 -0.89 0.386 -19.21348 7.772504
------------------------------------------------------------------------------
Table A.9. Determinants of wholesale food price index
reg lwfpi lmsp t t_sq lgdp

-------------+------------------------------ F( 4, 17) = 1443.01
Model | 6.2775142 4 1.56937855 Prob > F = 0.0000
-------------+------------------------------ Adj R-squared = 0.9964
Total | 6.29600291 21 .299809662 Root MSE = .03298
------------------------------------------------------------------------------
lwfpi | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
lmsp | .4897218 .1202888 4.07 0.001 .2359346 .743509
t | .0823942 .0130857 6.30 0.000 .0547858 .1100025
t_sq | -.0008895 .0002037 -4.37 0.000 -.0013193 -.0004598
lgdp | -.0840261 .0690123 -1.22 0.240 -.2296292 .0615771
_cons | 1.199785 .6444351 1.86 0.080 -.1598544 2.559424
------------------------------------------------------------------------------
Table A.10. Determinants of Consumer Price Index for Agricultural Labourers (CPIAL)
reg lcpil p_lwfpi t t_sq lp_o lm3v

-------------+------------------------------ F( 5, 16) = 1550.34
Model | 5.23677061 5 1.04735412 Prob > F = 0.0000
-------------+------------------------------ Adj R-squared = 0.9973
Total | 5.24757967 21 .249884746 Root MSE = .02599
------------------------------------------------------------------------------
lcpil | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
p_lwfpi | 1.183712 .1300023 9.11 0.000 .9081196 1.459305
t | -.0990314 .0721378 -1.37 0.189 -.2519568 .0538939
t_sq | .0001382 .0002324 0.59 0.560 -.0003545 .000631
lp_o | -.0460181 .1001097 -0.46 0.652 -.2582411 .1662049
lm3v | .4468396 .4400847 1.02 0.325 -.4860982 1.379777
_cons | -3.046769 3.796471 -0.80 0.434 -11.09493 5.00139
------------------------------------------------------------------------------
Table A.11. Determinants of foodgrain exports
reg lexport lmsp lreer t t_sq

-------------+------------------------------ F( 4, 8) = 33.20
Model | 12.8545073 4 3.21362683 Prob > F = 0.0000
-------------+------------------------------ Adj R-squared = 0.9148
Total | 13.6288872 12 1.1357406 Root MSE = .31112
------------------------------------------------------------------------------
lexport | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
lmsp | -9.365794 4.624371 -2.03 0.077 -20.02961 1.298025
lreer | -4.03542 3.278745 -1.23 0.253 -11.59622 3.525379
t | 4.039484 1.262311 3.20 0.013 1.128591 6.950378
t_sq | -.0561465 .0175522 -3.20 0.013 -.0966221 -.015671
_cons | 16.29379 26.63452 0.61 0.558 -45.12551 77.71309
------------------------------------------------------------------------------
REFERENCES
Bliss, C.J. (1985), A Note on the Price Variable, in J.W. Mellor and G.M. Desai (eds.),
Agricultural Change and Rural Poverty: Variations on a Theme, by Dharm Narain, Baltimore:
Johns Hopkins University Press.
Chadha, R. and P. Sharma (2005), Liberalising Indian Agriculture, Margin, Vol. 37, No. 3.
Chand, R. (2005), Whither Indias Food Policy? From Food Security to Food Deprivation,
Economic and Political Weekly, Vol. XI, No. 11.
Foster, A. and M. Rosenzweig (2005), Inequality and the Sustainability of Agricultural
Productivity Growth: Groundwater and the Green Revolution in India, A paper presented at
the Indian Policy Conference at Stanford University, June 2005, mimeo.
Gaiha, R. (1989), Poverty, Agricultural Production and Prices in India - A Reformulation,
Cambridge Journal of Economics, Vol. 13.
Gaiha, R. (1995), Does Agricultural Growth Matter in Poverty Alleviation?, Development and
Change, Vol. 26.
Gaiha, R. (1999), Food, Prices and Income, Canadian Journal of Development Studies,
Vol. XX.
Gaiha, R. (2002), Income and Expenditure Switching Among the Impoverished During Structural
Adjustment in India, Economics of Planning, Vol. 35.
Gaiha, R. (2003), Does the Right to Food Matter?, Economic and Political Weekly, 4 October.
Gulati, A. and S. Batla (2002), Capital Formation in Indian Agriculture: Trends, Composition and
Implications for Growth, Mumbai: Occasional Paper 24, National Bank for Agriculture and
Rural Development.
Kochar, A. (2005), Can Targeted Food Programmes Improve Nutrition? An Empirical Analysis
of Indias Public Distribution System, Economic Development and Cultural Change, Vol. 54,
No. 1.
Radhakrishna, R., K. Subbarao, S. Indrakant and C. Ravi (1997), Indias Public Distribution
System: A National and International Perspective, Washington, DC: World Bank, mimeo.
Rao, C.H.H. (2005), Agriculture, Food Security, Poverty and Environment, Essays on Post-Reform
India, New Delhi: Oxford University Press.
World Bank (2005), India: Re-energising the Agricultural Sector to Sustain Growth and Reduce
Poverty, New Delhi: Oxford University Press.
Chapter 13.
COHERENCE OF INTERNATIONAL TRADE LIBERALISATION
POLICY WITH THE OBJECTIVES OF RURAL POVERTY REDUCTION:
LISTENING TO THE VIEWS OF THE
RURAL PEOPLE IN SUB-SAHARAN AFRICA
Mohamed Beavogui
Western and Central Africa Division, IFAD
Abstract
The gap between the Millennium Development Goals (MDGs) set for 2015 and the
present situation in Sub-Saharan Africa (SSA) is not closing fast enough, despite the
positive aggregate economic performance of the last six to seven years. Favourable
aggregate results tend to mask important inter-country differences and also important
inter-sectoral differences within countries. Agriculture in SSA has been hit by the serious
international market crises that befell the major export crops of the sub-continent namely
coffee, tea, cocoa and cotton. Setbacks in the agricultural sector have a severe impact on
poverty in SSA, since 70% of the sub-continents poor people depend on agriculture for
their livelihoods.
The disappointing performance of agricultural production is attributed to a complex
set of state and market failures that constrain the potential for development in rural areas
and, subsequently, the prospects for poor rural people to lift themselves out of poverty.
Lack of coherence between different policy objectives, and between policy objectives and
policy implementation practices, increases the incidence of state and markets failures in
SSA. Eight issues in policy coherence are discussed in this paper. Four issues concern the
governments of industrialised countries while the other four concern the governments of
SSA countries.
The issues regarding the governments of industrialised countries include: (i) the total
amount of Official Development Assistance (ODA) disbursed to SSA, (ii) the distribution
of ODA expenditure by sector, (iii) the expected impact of trade liberalisation in light of
the SSA experience and (iv) the impact of the domestic protection of domestic agriculture
in industrialised countries. The issues regarding the governments of SSA countries
include: (i) the coherence of the system of incentives available to agricultural producers,
(ii) the coherence of the international trade policy of SSA governments, with the objective
of promoting an expanding the market for African farmers, (iii) the coherence between
the pace at which SSA governments pursue regional economic integration objectives and
the formulation of common regional agricultural development policies with the need to
develop capacity for fast reactions to the challenges of globalisation of international
markets, and (iv) the coherence of the policies for institutional development currently
promoted in SSA with the establishment of an environment which encourages the
development of grass-root institutions which promote the emergence of new leaderships
and strong producers and community organisations.
The ODA received by SSA in 2003 was about the same as in 1993 in nominal terms,
with the agricultural sector receiving a much smaller share than ten years before. The
Doha development programme of 2001 emphasises the importance of agriculture for

poverty reduction in Africa, but progress in negotiating implementation has been very
slow. Little agreement has actually been reached on concrete measures to disentangle
critical international trade policy issues influencing African agricultural development.
Reaching the MDGs by 2015 in SSA requires urgent and major corrections to policy
incoherence. Agricultural development also requires expanding markets, remunerative
prices for agricultural producers and competition among equal trading partners. Faster
integration of the African regional economies, common regional agricultural
development policies focused on rural poverty reduction, and appropriate protection
against unfair competition from outside the common markets would strengthen the
technical and financial basis of SSA agriculture. The establishment of enabling
institutions at grassroots levels would encourage the emergence of strong producers and
community-based organisations, improve local governance and mobilise the energies and
consensus required to react positively to the incentives provided for improving
agricultural production and productivity.
The paper ends with five considerations related to the political dimension of the
agricultural and rural poverty reduction challenges in SSA.
The Millennium Development Goals and Sub-Saharan Africa: the gaps are not
closing fast enough
Three Millennium Development Goals (MDGs) directly involve the linkages between
agricultural development policy and international trade policy: (i) halving the number of
rural people living in extreme poverty, (ii) halving malnutrition, and (iii) improved
governance in rural areas. There has been wide agreement in the international community
on the need for these objectives to be achieved by 2015. What progress is being made in
SSA? And what are the perceptions of the rural poor about the coherence of the declared
policy intentions of their governments and the available system of incentives which will
enable the rural poor to lift themselves out of poverty?
The average rate of growth of Gross Domestic Product in SSA from 1996 to 2002
was 3.8%. Growth accelerated during 2003 and 2004, with some countries in West Africa
growing at more than 5% per annum.1 This was the result of a number of factors
including the economic policy reforms carried out during the 1990s, the abatement of a
number of serious civil disturbances and the impact of high international market prices of
some key SSA exports (e.g. oil and metals), which offset the serious drop in the
international market price of agricultural primary commodities (coffee and tea in the late
90s, followed by cotton and cocoa in the early 2000s). However, the strong aggregate
economic performance of SSA should not detract from the fact that there are considerable
variations between countries2 and, within countries, from one sector to another. Such
variations are highly relevant with respect to achieving the MDGs in a timely manner.
In fact, the Organisation for Economic Co-operation and Development (OECD)
estimates3 that only several countries in SSA are likely to achieve the MDGs by 2015.
1. OECD, Perspectives Economiques en Afrique, 2004/2005.

2. Half of SSA countries recorded near-zero growth rate between 1990 and 2002: FAO The State of Food Insecurity in
the World 2003-2004.
3. OECD, Perspectives Economiques en Afrique, 2004/2005.
Only 10 out of 47 countries (21%) are performing satisfactorily towards the objective of
halving extreme monetary poverty and hunger. For the remaining 79%, the level of
economic growth that would be required to halve the number of people living on less than
USD 1 per day is far beyond what can be reasonably projected. In addition, the
development policies in those countries do not seem adequately geared to addressing the
problems of the agricultural sector, from which the largest share of poor African people
struggle to earn their livelihood. The number of people who live on USD 1 per day in
SSA are estimated to number 230 million. More than 70% of this population lives in rural
areas and draws its livelihood from agriculture. These numbers show few signs of
decreasing, what with agricultural gross national product (GNP) not growing fast enough
in most countries, and actually declining in some cases due to the impact of falling
international market prices of primary agricultural commodities.
From 1995/97 to 2000/02, the incidence of undernourishment increased by 3% in
Central Africa, but decreased 1% in West Africa and 5% in Southern Africa. Overall in
SSA, one third of the population is still undernourished, and 27% of the children are
underweight. Vulnerability to food insecurity increased, signalled by the large increase in
the importation of cereals (up 60 during the same period) compared to that of the rest of
the world (up only 18%).
With respect to the issue of governance in SSA, progress has been made in the overall
development of democratic institutions at national and provincial/district levels. Reform
of public administration carried out in many countries has strengthened local
governments to a considerable extent, although generating additional burdens on
overstretched public finances. Nevertheless, there is considerable additional ground to be
covered in order to develop an effective linkage between government and the rural
people, and to create a path towards truly pluralistic governance in rural areas. Rural
populations point out that the emphasis at the district/municipality level on public
administration reform has not yet developed adequate instruments for the voice of the
village to be heard. This is particularly true when it comes to decisions about the use of
public funds in matters that directly concern livelihoods of rural communities. Farmers
organisations are emerging and growing stronger, but much remains to be done to
establish genuine enabling institutions at that level.
OECD countries contribution to reaching the Millennium Development Goals in

Sub-Saharan Africa
In 2003, the total net Official Development Assistance (ODA) of the OECD countries
to SSA was USD 21 billion, about the same level in current prices as it was in 1993.
From 1995 to 2000, there was a significant reduction in aid flow, with the lowest ODA in
1999 of less than USD 16 billion. The reduction was combined with a gradually growing
share of debt relief and of emergency aid towards the end of the period. The share of SSA
in the total ODA (USD 69 billion) stood at a little over 30% in 2003, of which almost one
third was emergency assistance and debt relief combined (approximately in the ratio of
one to two thirds, respectively). If emergency aid is excluded, the ODA disbursed in 2003
to SSA was equivalent to less than USD 90 per person living in conditions of extreme
poverty. The following graph, taken from the OECD/African Development Bank (AfDB)
2005 report Economic Perspective in Africa, includes the ODA disbursed to all African
countries, the great majority of which was to SSA.
Between 1993 and 2003, debt relief resulted in a change in the structure of ODA, but
not in an increased flow of resources to SSA. This presumably increased the degree of
freedom SSA governments had in using those resources no longer directly allocated to
specific development programmes. It may or may not result in more investment for
agriculture and rural poverty reduction, depending on the pressure of recurrent
expenditure on the total resources available to finance government budgets.
The ODA disbursed by the OECD countries in SSA was clearly insufficient to help
generate the kind of economic growth required for reaching the MDGs by 2015.4
Following the Monterrey and Kananaskis meetings of the G8, OECD countries
committed themselves to increasing their total annual ODA, including debt service, from
USD 69 billion to USD 88 billion in 2006, and to USD 100 billion in 2010, and to
allocate half of the larger flow to SSA. The commitment for the future looks somewhat
brighter, although even a flow of USD 50 billion per year to SSA would represent only a
marginal increase in real terms with respect to the inflow of aid in the very early 1990s.
Among the representatives of the rural people of SSA, there is a certain amount of
scepticism as to whether the promises made at Monterrey, Kananaskis, Doha, Cancun and
after will actually be kept and when. The situation should become clearer at the Hong
Kong meetings scheduled for December 2005. Even if promises on the total aid
disbursement and on the share for Africa were actually fulfilled in the time proposed,
there is recognition that it is not enough to reach the MDGs by 2015. There is a growing
feeling that African people must increasingly find a solution to their poverty-reduction
problems by relying more on themselves than on external assistance. At the same time,
there is awareness that ODA from the OECD countries will remain a key engine of
development in SSA for quite some time.
4. The Zerillo Report, UN, 2001 estimates total ODA requirements to reach the MDGs by 2015 at about
USD 120 billion annually in 2006.
At the root of slow progress: state and market failures, incoherent policies
The reasons for the slow progress towards the MDGs in SSA are obviously complex
and vary from country to country. The African perception, however, goes beyond
inadequate external investment resources. Of paramount importance is a combination of
two conditions: the failure of the states to set in motion a sustainable process of
agricultural development; and the failure of the market to efficiently allocate resources
with equal opportunities and benefits for all trading partners. State failures have impacted
both the governments of the OECD countries in addressing the agricultural development
process in SSA, and the governments of SSA countries themselves. It is the latter who are
ultimately responsible for developing the economic sector where the largest impact on
poverty reduction can be achieved.
Government failures are to a large extent the result of incoherence in the policies in
different areas of public spending. This incoherence produces contradictory rather than
consistent results. Market failures are the result of the asymmetric distribution of
opportunities, including access to information, assets and external economies. This
asymmetric distribution is often enhanced by incoherence among desired policy
objectives and the policies actually pursued.
Eight issues of policy coherence
In SSA, rural people perceive a number of important areas where lack of policy
coherence directly impacts their livelihoods and diminishes opportunities available to the
poorer segments of the population for lifting themselves out of poverty. This paper
addresses eight issues that were highlighted on several occasions. Of these, four policy
coherence issues concern the governments of the OECD countries, and while the other
four concern the governments of the SSA countries.
Since most of the rural poor in SSA depend on agriculture, the four issues that
concern the policies of governments of OECD countries are best presented in the form of
the following questions:
Is the country allocation of the ODA funded by OECD countries coherent with the
objective of reaching the MDGs in SSA?
Is the structure- by sector- of expenditure of ODA in SSA coherent with the objective
of developing agriculture?
Is the liberalisation of international markets advocated by OECD countries for SSA
coherent with the objective of activating fast agricultural development in SSA?
Is the protection of domestic agriculture in developed countries coherent with the
poverty-reduction objectives of their own ODA?
The questions related to the four issues concerning the policies of governments of
SSA countries are:
Is the system of incentives that confronts agricultural producers in SSA coherent with
the objective of fast growth and equity in the agricultural sector?
Are the international trade policies of SSA governments coherent with their objectives
of agricultural development and rural poverty reduction?
Is the pace at which SSA governments pursue regional economic integration and their
approach towards a common regional agricultural development policy coherent with
the objective of accelerating the growth of agriculture?
Are the institutional transformations currently pursued in SSA coherent with the need
to develop strong grassroots institutions?
Policy coherence issue no. 1: geographical distribution of ODA
A guiding principle of ODA allocation by country is that priority should be given to

countries that have large number of poor people and are also capable of effectively using
external resources. This approach generates a bias in favour of large developing countries
such as India and China that combine a great number of people who live below the
poverty line with proven capacity to use resources quite effectively. For industrialised
countries, a concentration of ODA in middle-income countries has the added advantage
of stimulating the growth of economies that represent attractive and rapidly expanding
markets for their own products.
This guiding principle has not been strictly followed by all donor governments.
Equity demands that the poorest countries, which are often also the weakest states, be
supported to an even larger extent than middle-income countries precisely because of
their poor capacity to mobilise domestic resources and to use technical and financial
assistance as effectively as the middle-income countries.
To what extent is the current actual allocation by country coherent with the objective
or reaching the MDGs in SSA? Recent research by the Institute of Development Studies
of the University of Sussex5 analysed the distribution of ODA with respect to four MDG
indicators: extreme poverty, child malnutrition, children not enrolled in school, and
mortality rates among children under-five years of age. Aid concentration curves were
constructed for the total ODA disbursed in 2003 by all OECD countries, and by the major
donors individually.
The research shows that all major donors distribute their ODA by giving higher
priority to reducing extreme poverty and lowest priority to reducing under-five mortality.
It also shows that, while the World Bank, the UN and the UK concentrate their
concessionary assistance in the poorest countries (negative Suits indices, see Table 1), the
US and the EU spend the majority of their aid budgets in middle-income countries,
which have already met, or are on track to meet, the MDGs. France, Germany and
Japan spend less than half of their ODA in the poorest countries, with large poor
countries (such as India and Nigeria) receiving much less aid than some former colonies.
5. Bob Baulch, Aid Distribution and the MDGs, CPRC Working Paper, November 2004.
Table 1. Suits indices for major bilateral and multilateral donors
Donor MDGs
(in descending order of ODA Extreme poverty Child malnutrition Children not in Under-five mortality
disbursed) school
USA 0.364 0.416 0.414 0.457

Japan 0.217 0.298 0.319 0.370
EU 0.303 0.346 0.359 0.370
World Bank -0.371 -0.308 -0.210 -0.176
France 0.180 0.254 0.237 0.290
Germany 0.152 0.212 0.233 0.275
UN -0.314 -0.257 -0.172 -0.138
UK -0.314 -0.257 -0.172 -0.138
Total DAC 0.123 0.187 0.210 0.254
Negative value indicates progressivity, i.e. aid concentration towards the poorest countries.
Source: B. Baulch, 2004.
The Baulch study is based on data from 73 developing countries and does not
specifically construct aid concentration curves for SSA. However, since most of the
poorest countries in the series are in SSA, the conclusions of the study mostly concern the
sub-continent. The study draws attention to the fact that some important donors are not
distributing their ODA in a way that is coherent with the MDGs they are committed to
help reaching by 2015. If the inconsistencies are not addressed, the paper concludes, it is
likely that even the promised big push in the level of ODA disbursement will fall short of
reaching the target.
After Monterrey and Kananaskis, more ODA to SSA is now an official policy of the
OECD countries. This shift may correct the inconsistencies in the major donors country
allocation of aid to development. Encouraging commitments have already been made by
some industrialised countries towards the interim target of USD 88 billion by 2006,
including significant debt relief. Whether the increase and the adjustment in the share of
SSA will actually take place in full and in the time scheduled, and whether the larger
share of aid pledged to Africa will be disbursed in time to have an impact, remains to be
seen.
Policy coherence issue no. 2: sector-wide distribution of ODA expenditure
The structure of ODA expenditure by sector is an issue that directly affects the
interests of rural people in Africa. Research undertaken by African farmers organisations
shows that the ODA allocated to agriculture in SSA fell from 14 to 16% of the total flow
in 1990 to about 4% in 2000.6 In absolute terms, the decline was more severe due to the
reduction of ODA to SSA during the 1990s. Given the share of poor people that draw
their livelihood from agriculture, the question is legitimately raised as to whether the
6. Mamadou Cissokho et Jacques Berthelet, Cohrence des Politiques de Dveloppement, Questions pour
lAgriculture Africaine , draft paper, 2005.
decline of ODA expenditure in agriculture is coherent with the declared policy objective
of reaching the MDGs in SSA.
Furthermore, whereas the erosion of the real value of the ODA due to inflation was
probably offset by the appreciation of the USD in the 1990s, the opposite occurred after
the USD started to depreciate in 2002. Countries in SSA with their currency linked to the
Euro have been seriously affected.
It is important to highlight that the drastic reduction of ODA expenditure in
agriculture followed large structural adjustments already undertaken in developing
countries during the 1980s. Since ODA determines to a very large extent all African
governments development expenditure, the entire public expenditure in agriculture was
affected. The evolution was the result of a deliberate policy, shared by donors and
receiving governments alike, to scale down the agricultural development service delivery
system built after independence, largely with the help of the international community. In
the process, many government organisations that provided African farmers with key
services such as extension, research, credit, input distribution and marketing support were
liquidated or significantly reduced in size and resources.
The drastic scaling down of the public sector was justified on grounds of efficiency,
effectiveness and sustainability of the public expenditure incurred, considerations that
were, and still are, widely accepted. However, the policy for reconstruction based on a
different service delivery and infrastructure system in agriculture, formulated in the early
and middle 1990s, has not been implemented forcefully enough. These factors, combined
with unfavourable events in the international market of primary agricultural commodities,
have seriously handicapped the chances of sustained agricultural development in most of
SSA, and with it the scope for rural poverty reduction.
Policy coherence issue no. 3: trade liberalisation and agricultural development in

SSA
The Doha Development Programme (DDP), launched at the closing of 2001, aimed to
promote accelerated economic growth in developing countries through increased
opportunities resulting from trade liberalisation. Negotiations on the DDP dragged on for
about three years, going through a setback at Cancun until some agreement was reached
in mid-2004 - a major stumbling block concerned Africa and SSA agriculture.
A key policy coherence issue is to what extent and under what conditions trade
liberalisation policies would really contribute, in the short and long term, to the growth of
African agriculture. A quick look at some basic facts and at the recent experience of
agricultural producers in SSA casts some light on this matter.
Key facts
Three key factual considerations are in order. The first consideration is that SSA
countries are indeed very open economies, as indicated in the following summary table.
This suggests that African governments can do little to further increase the share of
international trade on the national economies.
Table 2. Share of international trade on GNP
Average of SSA countries 53%

World average 42%
Average in the Middle East and North Africa 50%
USA and Japan 20%
France 44%
Source: Documents presented to the 2005 Forum organised in Ouagadougou by Runion des organisations Paysannes des Pays
de lAfrique de lOuest (ROPPA).
The second consideration is that a major share of the trade of SSA is with countries of
the EU. Most countries of SSA have had free access to these countries since the mid-
1990s, on a non-reciprocal basis, by virtue of unilateral concessions made by the EU
within the framework of the Lom Agreement. Under the circumstances, the expected
beneficial effects of trade liberalisation should have already begun to emerge.
The third consideration is that, despite liberalisation, the share of SSA in the world
market declined from 2% in 1990 to 1.6% in 2000, and there was no appreciable growth
of export earnings from 1998 to 2002, except in countries which export oil and metal.7 On
the other side of the trade balance, significant increases of food imports have been
recorded, with import of cereals, for example, growing at a rate three times higher than in
the rest of the world.
Recent experiences of agricultural producers

Trade liberalisation is historically associated with falling prices of agricultural
primary commodities. In SSA the most affected commodities are coffee, tea, cocoa, sugar
and cotton - commodities that make up the bulk of the export earning potential of many
countries that are among the poorest in the world. Since the mid-1990s, a series of
international market crises have affected those commodities: coffee and tea markets
plunged during the last years of the 90s, cotton and cocoa in the first years of the new
century.
After the collapse of the International Coffee Agreement (ICA), the world market
price of coffee declined sharply. From a range of 110 to 160 USD cents per pound during
the 1980s, prices fell to between 50 and 85 USD cents per pound during 1990-94.
Thereafter, a series of sharp fluctuations around a steep downward trend began, which
brought the price in the early 2000s at the lowest level ever recorded, and the current
inter-annual price volatility rate at 50%, compared to 10 or 15% during the time of ICA
regulatory clauses.
What was the impact on industrialised countries? The margins between the price paid
to exporters in developing countries and the price paid by consumers in the importing
countries increased very significantly, with consumers in industrialised countries
enjoying no benefit of the drastic reduction of the remuneration of producers in
developing countries. Trading companies and roasters accumulated large profits, despite
the significant increase in the cost of retail marketing. The facts are summarised in
7. OECD, 2005, shows that about half of the countries in SSA actually recorded negative growth of export earnings
during that period.
Table 3 below. Low-income countries-including a number of SSA least-developed

countries (LDCS with little diversification of export earnings) were hit particularly hard.
Smallholder coffee farmers lost a significant share of their cash earnings, having no
flexibility to grow other crops, and losing forever their investment in coffee trees. It is
only now that the coffee situation in rural Africa is being viewed as an example of the
negative impact of liberalisation and globalisation on the economies of poor countries.
Table 3. Coffee export earnings as per cent of the retail value of coffee sold in developed countries:
early 1980s and early 2000
Early 1980 Early 2000

(ICA enforced) (unregulated market)
Retail value of coffee sales in developed countries, USD billion 30 55

Coffee export earnings 10 8
Share of exporting countries, % 33 14.5
Source: IFAD. Rwanda. Appraisal of cash crop development project, 2003. Elaboration of ICO data.
Whereas the impact of falling international market prices of agricultural commodities

on the balance of payments of the exporting countries is well appreciated and well
researched, the impact on poverty in the exporting countries is much less known,
although recently it has been the subject of some interesting case studies. One such study
concerns the cotton sector. Between January and May 2002 the international market price
fell by 40%, reaching a level that was half the nominal price prevailing during the mid-
1990s. The subsequent impact on poverty is well represented by the case of cotton
growers in Benin.
In Benin, as in other African countries, cotton is a smallholder crop that is grown
more by the less wealthy segments of the rural population. Before the recent price fall, the
income of 37% of the cotton growers in Benin was below the poverty line. For these
households, cotton is the major, if not the only, source of cash income. A recent World
Bank study8 shows that the 40% fall in the international market price of cotton lint was
associated with a 20% reduction of growers seed cotton prices, which in the short term
raised the incidence of poverty among cotton growers from 37 to 59%. Taking indirect
effects into account, the incidence of poverty among all Benin farmers cotton growers
and non-cotton growers increased from 40 to 48%. The long-term impact, taking into
account the adjustments of the farming practices that are likely to intervene, is only
marginally different. The data are summarised in Table 4 below.
8. N. Minot and L. Daniels, Impact of Global Cotton Markets on Rural Poverty in Benin, Washington, DC, 2002.
Table 4. Impact of the fall of the international market price of cotton on rural poverty in Benin
Change in the international market price of cotton lint -40%

Impact on the domestic price of seed cotton in Benin -20%
Short-term impact in Benin:
Percent of cotton growers below the poverty line:
* before the price change 37%
* after the price change 59%
Increase in the number of farmers (cotton growers and non-cotton growers) below the poverty line From 40% to 48%
Long term impact (after expected adjustments in the cropping patterns of cotton growers)
* percent of poor among cotton growers 47%
* percent of poor among all farmers 46%
Similar conclusions were reached by investigations in other cotton-producing

countries of SSA.
Scope for diversification of agricultural exports from SSA

The potential offered by the EU preferential treatment of SSA for developing exports
of non-conventional agricultural products is often mentioned as a benefit of free trade that
may be underestimated. For many years, considerable attention has been paid to such
opportunities by international financial institutions, bilateral co-operation agencies, and
by a number of NGOs and private entrepreneurs from the developed world. Two strategic
policies have been implemented. One supports the production and export of products that
are either new to European markets (e.g. tropical fruit) or are supplied in competition
with European producers, filling seasonal gaps in European supplies (e.g. finger beans).
The other consists of the exploitation of market niches such as those of very high quality
specialty products by the Fair Trade Network. The certification of the organic origin of
agricultural products must also be mentioned, although this has been applied much more
by large-scale producers (e.g. banana plantations) than on smallholders crops because of
the current high cost of market-accepted certification.
A number of successful export diversification projects have indeed been implemented
in Africa over the years. They cover a wide variety of products, ranging from cut flowers
to cassava chips, and from finger beans to gooseberry. The emerging opportunities are of
considerable interest in themselves and deserve to be strongly supported, but the size of
the operations, and their future prospects, are still marginal compared to the gap in
resources generated by worsening terms of trade for the traditional exports. Furthermore,
the success stories have proven difficult to replicate. For example, the Kenya finger
beans story, surely the most successful example of African export diversification in recent
times, is proving hard to replicate in areas that are less well served by the rural
infrastructure and international air transport network. This has been demonstrated by the
difficulties that similar programmes in Ethiopia and in the countries of the Sahel are still
facing after years of external support, and despite the high level of entrepreneurship and
horticultural skill that the local farmers possess.
Fair Trade organisations, on the other hand, deal with traditional export crops such as
coffee, tea, bananas, sugar, etc. They tap the opportunities emerging through
diversification of consumer demand for high-quality products in affluent communities.
They also help assure that the corresponding extra trading margins are paid to producers
and are used for development purposes by producers. In the case of coffee, for example,
the Fair Trade Network manages to pay prices twice as high as those offered by other
traders for the share of high-quality products of the smallholder co-operatives it sponsors
in Latin America, Asia and Africa. It also helps the co-operatives to sell their lower-
quality output better by providing market information, quality certification and
negotiation assistance. The impact of these initiatives at the village levels is very
encouraging, but the size of the high-quality retail market controlled by the Fair Trade
Network is a tiny fraction of the total world coffee market, and this is not likely to
significantly change for a long time.
Policy coherence issue no. 4: protection of domestic agriculture in the industrialised

countries
It is estimated that the protection of agriculture by the OECD countries costs the
developing world between USD 5 billion and 10 billion per annum.9 Analysts suggest10
that even if OECD protection were significantly reduced, in a scenario of full-trade
liberalisation the benefits for the LDCs would be marginal. Moreover, LDCs would
actually lose out in the short and medium term due to supply inelasticity in their own
production systems, and from the application of reciprocity in preferential market access.
In SSA the medium-term supply inelasticity argument is contradicted by a fair
amount of experience accumulated over the years, which provides evidence of the quick
reaction of African farmers to remunerative prices. However, farm-gate prices in Africa
are closely influenced by the protection of domestic agriculture in most OECD
countries, the US, the EU and Japan. The perception of the rural people in SSA is that the
complete removal of this protection is unlikely, since industrialised countries will always
want to maintain a minimum of strategic production in agriculture in order to secure their
food sovereignty, so to speak. Nevertheless, African farmers do urge their political
leaders to fight on their behalf for the elimination of at least the worst effects of that
protectionist policy, which would significantly benefit African farmers and the OECD
taxpayer countries as well.
The worst effects of the protection policies concern the impact that subsidised exports
from industrialised countries have on the level of international market prices of
commodities exported by SSA, and on the unfair competition of subsidised exporters in
the domestic markets of SSA.
The extent of the potential gain that SSA may expect from a significant reduction in
the subsidisation of some of the least efficient cropping activities in the OECD countries
is also well illustrated in the case of cotton. In 2002, the World Bank estimated11 that the
abolition of the US subsidy to cotton growers would increase the international market
price of cotton lint by USD 12 per pound. For the West African cotton-exporting
countries alone, this would generate increased net trading resources to the extent of
USD 250 million per annum. The World Bank paper estimates that this amount would be
equivalent to 14% of the current flow of ODA from all sources to West African countries.
9. A. Matthews, Policy Coherence for Development: Issues in Agriculture: An Overview, 2005.

10. Matthews, 2005.
11. Cotton Sector Strategy in West Central Africa, World Bank Policy Research Paper 2957, Washington, DC,
July 2002.
Similarly, in the EU the abolition of support to cotton growers would open to

international suppliers a market equivalent to the current level of the combined cotton lint
exported by all the SSA countries that now enjoy preferential treatment on the EU
market. In the short run, such a measure would generate a further significant price
increase, perhaps of the same magnitude of that expected from the abolition of the US
subsidy. For West African countries alone, the two measures combined might well
represent annual trading benefits equivalent to some 30% of the resource transfer now
channelled to them through ODA.
In addition, a strong incentive to real growth in the African economies would result.
African farmers and ginneries have proven their capacity to increase production in
response to market demand in a competitive environment. In the CFA zone of West
Africa alone, production doubled from 1990 to 2000, keeping consistently good-quality
cotton lint standards, high crop yields (over 1 tonne/ha) and ginning ratios higher (about
43%) than in other areas of the developing world. A further doubling can certainly be
achieved in a shorter time if price prospects were favourable. One need only consider
experience to date, the under-utilisation of the natural potential for growing the crop
successfully, and the human and physical capital that has accumulated in the sector since
the early 1980s.
The cotton case may be emblematic, but it is does not tell the entire story. Country
and case studies reveal a disturbing scenario for the economic development prospects of
agriculture and of the agro-industries in SSA. A recent review of the situation in Ghana
provides insight into this situation with respect to poultry rice, and tomato processing.12
West Africa imports 8% of the total exports of chicken meat from the EU, which is
directly and indirectly heavily subsidised. One third of the EU exports to SSA enter the
Ghana market. By the end of the 1990s, Ghana had abolished all import quotas and
reduced the tariffs on agricultural and agro-industrial products to a fraction of what the
country is allowed under World Trade Organization (WTO) rules. This resulted in a very
large increase in the import of frozen chicken meat from the EU in particular. About half
of the imports consist of backs and necks that would otherwise have been sold to the
pet food industry in Europe. The Ghanaian poultry industry, previously thriving under
solid tariff protection, was severely hit. The share of the market supplied by domestic
producers fell from 50% in the mid-90s to 11% in 2002. Approximately 400 000 chicken
farmers in Ghana were involved, with a large number of them being forced out of
business, hatcheries closing down, slaughterhouse facilities being utilised at a fraction of
capacity, and employees being laid off. Given the number of people involved (estimated
at 1.5 million), Ghanaian farmers believe that import liberalisation and tariff reduction is
somewhat of a national disaster. A similar scenario describes the disruption of the
tomato-growing and processing industry and of rice production as well.
Ghanaian producers suffered considerable losses; to what extent did Ghanaian
consumers benefit? Low-quality imported poultry products are indeed available in the
urban markets for a significantly lower price than domestic products, which are
admittedly of significantly higher quality. Some poor people now can afford the backs
and necks of broilers, which add taste, some fat and a little protein to their soup.
However, these advantages, which benefit mostly urban consumers in the largest cities,
are not obtained without risk. Although a reliable measure of the sanitary risks is hard to
12. M. Khor and Tetteh Hormeku, The Impact of Globalisation and Liberalisation on Agriculture and Small Farmers:
the Experience of Ghana, 2005.
obtain, controls on the imported frozen meat are not very effective in African countries.
Some of the samples checked in Ghana and Cameroon reported 15% salmonella
infections at the point of entry. There is also the very real risk of thaw caused by freezing
several times in transit from Europe to retailing in Africa.
The incoherence of EU protection of agriculture is even greater with respect to highly
labour-intensive production that has little to do with food sovereignty, such as
horticultural products. The EU has invested heavily in developing hothouse production of
crops that can be grown much more cheaply in Africas open fields. Because of labour
scarcity in Europe, horticulturalists utilise immigrant labour to a very large extent. A fair
percentage of this labour is illegal. Illegal immigration is associated with an increase in
criminality, and with rising costs of policy enforcement of immigration rules. To these
conditions must be added the subsidies paid to high-cost producers of the same products
that the illegal immigrants could legally produce in their own countries if they were
allowed to sell them to the EU, with beneficial effects for European consumers, European
taxpayers and African farmers alike.
The July Agreement

The African perception is that the negotiations of the first half of 2004 that led to the
July Agreement have succeeded at long last to initiate a serious debate on the need for
industrialised countries to make a real effort to support agricultural development in SSA.
In this connection there are signals that the World Bank as well may begin to look at the
African agricultural development issue with a new frame of mind.
The stumbling block at Cancun was influenced by the very marginal progress made in
the US Farm Bill of 2002 on the subsidy issue, and to the EU Common Agricultural
Policy (CAP) approved in 2003, which modified nothing in the level of public support to
domestic agriculture, including the subsidies to exporters of agricultural and agro-
industrial products.
The July Agreement concerns only the modalities for the continuation of
negotiations. In that framework, developing countries have accepted the principle that
OECD countries have the right to maintain a high level on tariff protection for critical
products, on the condition that this be compensated by a larger liberalisation of imports
of other products. The interpretation of this clause in African farmers circles is that it
meets the interests of the emerging middle-income countries much more than their own.
The language of the protocol shifts the solution of issues of tariffs and subsidies to a
future, but not specified, time. There is, however, room for negotiating some reduction in
the protection of domestic producers, when it results in trade distortion. The level
proposed for the initial year of implementation (a reduction by 20%) is a fraction of the
domestic protection that enables US and EU producers to either seriously disturb
international market prices or to compete in the domestic markets of developing
countries. Furthermore, the very definition of the factors of trade distortion is challenged
by the organisations of African farmers on solid technical grounds.
The July Agreement on agriculture includes measures concerned with the case of
cotton. But what was envisaged is only the establishment of an ad hoc Investigating
Committee, actually nominated in November 2004. One year later, a report is being
hastily put together for the December 2005 Hong Kong meeting. Twelve million people
in SSA alone await the concrete outcome of the results of yet another round of
discussions.
Policy coherence issue no. 5: system of incentives confronting agricultural

producers in SSA
Most governments in SSA have produced Poverty Reduction Strategy Papers (PRSP)
that emphasise the importance of faster growth of agriculture for achieving significant
reductions in rural poverty. How consistent is the system of incentives provided by the
current agricultural policies with the strategies recommended by the PRSPs?
The relevant system of incentives includes the entire framework of factors that can
facilitate growth with equity in the agricultural sector. Policy coherence would require
enhanced efforts to rebuild, on new bases, the network of service delivery to agricultural
producers that was drastically scaled down by the structural adjustments of the 1980s.
Rural people in SSA believe that their governments, and their financiers and advisors, are
not doing enough to establish an enabling environment for the emergence of efficient and
effective providers of services to agricultural producers in critical fields (e.g. research and
technology transfer, rural financial services, agro-industrial credit, crop and product
marketing). Competition among service providers for public funds and full accountability
for performance to their farming clients are pre-conditions of efficiency and
effectiveness. Competition between private and public service providers for public funds,
combined with instruments that ensure that providers are accountable to the users of
services, has been successfully introduced in other parts of the developing world. It is
lagging in SSA. SSA governments need to ask themselves in what way they are
responsible for the slow progress. They will uncover many reasons, including the
reluctance of their own administrations to respond to the challenge of competition, and
their incapacity to develop their roles from that of performing pre-determined field tasks
to that of governing development processes.
The amount of public financial resources made available to the agricultural sector is
only part of the package of measures that may result in rural poverty reduction.
Nevertheless, it is one of the necessary conditions. A key aspect where the coherence of
SSA governments policies for rural development will be tested is with respect to the
share of budget expenditure allocated to agricultural development, the quality of that
expenditure, and the ratio of total public expenditure in the rural vs. urban areas. In this
connection, it is important to recall the decision taken at the Maputo meeting of Heads of
State in 2003 that the budget allocation to agriculture in all countries of SSA should be no
less than 10%. It is also important to entrust the monitoring of implementation of this
decision to the New Partnership for Africas Development (NEPAD).
The elimination of policy incoherence is very important indeed. However, the view in
rural Africa is that the key factor of an effective system of incentives is an expanding
market at remunerative prices for African producers. This introduces the second issue of
coherence raised by representatives of African farmers with respect to their own
governments policies.
Policy coherence issue no. 6: international trade policies of SSA governments
Organisations of African farmers emphasise the lack of coherence between the

international trade polices pursued by many governments in SSA and the objective of
providing an expanding market at remunerative prices for African agricultural producers,
which is a critical condition for a sizeable and sustainable impact on rural poverty.
In July 2005, the Runion des Organisations Paysannes et des Producteurs des Pays
de lAfrique de lOuest (ROPPA) organised a Forum at Ouagadougou to discuss the
implications for African agriculture of the Cotonu Agreement, and of the Economic
Partnership Agreements (EPA) proposed by the EU as the main instrument of the
implementation of the Cotonu Agreement.
The Forum highlighted the lack of coherence between two main factors: the
objectives of the Cotonu Agreement (poverty reduction, food security, enhancing
development opportunities) and the recognition of the need for flexibility in addressing
the situation of the weaker trading partners, and the acceleration of market liberalisation
and the abolition of preferential treatment for African products under the time phasing
suggested in the EPA road map.13 Participants pointed out the manipulation by OECD
countries of definitions and rules of the WTO on dumping and subsidisation, which
allows the continuation of protection of their high-cost producers and exporters and
causes considerable damage to the emerging economies in SSA.
Four key considerations are at the basis of the views held by most participants:
International market prices determine the level of farm-gate prices in SSA.
African producers are ready and willing to operate in a competitive market, provided
competition is among equal partners.
Competition among African producers is among equal partners. However, African
producers are not equal partners with those non-African producers who have much
better access to information, credit, technology and external economies as well as
special protection of their governments.
SSA governments are not doing enough to redress the situation for example, by
keeping the tariff protection of domestic agriculture at 20%, well below the level
admitted by WTO regulation (which allows up to 100%).
At Ouagadougou, there was consensus that the EU-proposed EPA represents a

setback from the conditions enjoyed under the Lom Agreement and the subsequent
concessions unilaterally granted by the EU within that framework. Basically, Cotonu adds
reciprocity to the free entry of the products of most SSA countries, a change that benefits
only EU producers, with no additional benefit for SSA. Giving up the privileged positions
of African producers will unquestionably result in less production and income. How can
SSA governments reconcile the acceptance of such losses with their poverty reduction
objectives?
Would African consumers benefit from the EPA? At Ouagadougou it was pointed out
that the EPA proposal has a very regressive pro-urban bias. Consumers in African
villages would hardly notice the free entry of EU goods (consumer goods of European
origin are not in great demand among African village dwellers). On the other hand, the
investment goods they demand (e.g. fertiliser) already enter duty-free. In short, farmers
would not be affected by the change. With the larger benefits accruing to the wealthier
people who can afford to buy expensive goods imported from Europe, such changes
would make a difference to city dwellers.
13. Rflexions sur la mise en oeuvre de ECOWAP dans le cadre des accords commerciaux internationaux de
lAPE e de lOMC, Ouagadougou 2005 ; Termes de Rfrence du Forum Regional sur la Souverainet
Alimentaire ; O se battre pour que les pauvres puissent profiter des marchs ?
Concerns were also expressed with respect to the implications of drastic reductions in
the tariffs currently placed on goods imported from the EU on the SSA governments
fiscal base. SSA governments would be forced to replace the lost revenue (some
estimates were as high as 80% of current total receipts from import duties) with other
forms of taxation that may be considerably more difficult to enforce, particularly by
administrations with poor human physical and financial resources. This would have a
negative impact on the financial position of governments that already experience serious
budgetary difficulties, and would further curtail the chances that public expenditure on
agriculture and rural development could increase as required to achieve rural poverty
reduction objectives. The possible recovery of lost revenue from an increasing tax base
due to economic growth resulting from liberalised markets is a potential that nobody
doubts will take a long time to materialise.
Participants in the ROPPA Forum pointed out that African agriculture and agro-
industries will never be able to compete with subsidised competitors unless they
themselves are supported with public subsidies (which is an unsustainable option in
Africa). They also pointed out that they need time to expand their technical and financial
bases to be able to compete effectively in the international arenas. Historically, areas of
free exchange were established by the developed nations among clusters of countries in
which industrial and human development and basic infrastructure were reasonably
balanced so that competition was encouraged among equal partners. It is this process that
African governments should encourage more forcefully.
The conclusion is a double request for a coherent rural poverty reduction policy:
(i) phasing the EPA over a long period of time (at least 20 years) and in step with the
reduction of EU subsidies to their own domestic agricultural producers and exporters of
agricultural and agro-industrial products and (ii) strengthening the African regional
common markets to expand the opportunities of African producers, working towards a
solid common protection, and a much stronger integration of the regional economies than
has been achieved so far.
Policy coherence issue no. 7: pace of regional economic integration and toward
common regional agricultural development policies in SSA
There seems to be consensus in SSA on the need to co-ordinate regional economic

integration policies with the formulation and implementation of coherent regional
agricultural development policies.
A positive feature of the Cotonu Agreement is that the EPAs will not be negotiated
between the EU and the SSA countries individually, but between the EU and the different
common market organisations established in SSA: Economic Community of West
African States (ECOWAS) in West Africa, Communaut Economique et Montaire de
LAfrique Centrale (CEMAC) in Central Africa, East African Community (EAC) in
Eastern Africa, and Southern Africa Development Community (SADC) in Southern
Africa. If closely adhered to, this approach will encourage an acceleration of the process
of regional economic integration. In order to bring about significant progress in rural
poverty reduction though, this process and the related international trade policies, must be
made coherent with a common regional agriculture development policy. At the moment,
common regional agricultural development policies are not yet in sight.
Organisations of African producers are strongly advocating functioning common
African markets. They see a coherent African strategy geared towards establishing an
appropriately protected, internally competitive environment in the regional common

markets. Within those markets, there should be active competition among private, public
and co-operative economic organisations, with no special privileges granted to specific
markets or organisations. Was this not the way the European common market was first
established and nursed since the time of the Treaty of Rome almost fifty years ago? Was
the European common market not conceived as a protected market? Why should African
countries that are less developed than the European countries of the 1950s expose
themselves to situations in which unequal partners would be allowed to play a dominant
role (not too differently than in colonial days)?
The other clear message points to the incoherence between the need for accelerating
the integration of the regional economies to build a strong basis for African production,
and the lack of a common agricultural development policy shared by all the concerned
countries. Regional organisations exist that can provide venues, mechanisms and
institutions to facilitate the elaboration of such common policy and eventually the
monitoring and evaluation of its implementation.
Policy coherence issue no. 8: how enabling is the environment for developing strong
institutions at grassroots level?
The reform of the public administration has gone a long way in changing the political
environment in several countries of SSA. In these countries, democratically elected local
governments are established in districts and provinces, bringing government nearer to
the people. The international community supported this process with large contributions
of public finance, training and advice, concentrating on the decentralisation of the public
administration to the district level. Critical responsibilities have been devolved in matters
of key local interest, such as basic social services and agriculture. The cost of
decentralisation often turns out to be, in practice, much higher than that forecast by the
advocates of the reform. Nevertheless, it has also proven to be politically achievable, and
made to work.
To what extent are rural people in SSA satisfied with the institutional evolution that is
taking place? The question raises issues that are not directly related to the relationship
between agricultural development and trading policies, yet they must be briefly
mentioned because local governance is one of the key MDGs of particular importance in
SSA. Moreover, the quality of the process aimed at improving governance has a bearing
on the response of people in rural areas.
Some observers are of the opinion that the district level is still far too distant from the
rural communities for people to have an influence in matters that affect their livelihoods.
District administrations are dominated by professional political intermediaries who have a
double allegiance to their constituency and to the party that engineers and finances their
election. The latter predominates in the long run, because it is in the party organisation
that a local politician has a career prospect. Other observers maintain that, even if
dominated by professional politicians and controlled by the apparatus of centralised
political parties, district governments are a great step forward in the right direction. They
also maintain that, in a number of countries where the process has advanced,
improvements in local governance are noticeable.
What is relevant for the rural people in SSA is the scope left by the evolving
decentralised administrations for grassroots-level institutions to develop, in particular
with respect to: the emergence of new local leaders, the formation of a strong and
autonomous community and professional organisations with bargaining power vis--vis

district administrators and with the capacity to establish new linkages with the market and
with a variety of potential sources of partnership in development.
Peoples empowerment is critical for generating and mobilising consensus for poverty
reduction. It is more than a key contribution to the mechanisms that improve livelihoods
and increase production. It is part and parcel of poverty reduction. A coherent
institutional development policy would work in that direction. This coherence is not
emerging clearly enough and bringing it about requires more imagination, understanding,
good will and political determination than has been mobilised so far.
A final word: the political dimension
Coherent poverty reduction policies in SSA cannot be formulated without due

reference to the political framework as it affects both donors and receiving countries.
What really counts in history is the political interest behind the determination to address
problems, and the balance of power that determines whether sets of decisions coherent
with policy objectives can really be carried out. A realistic assessment of the political
premises and implications of policy coherence is thus required. Five main considerations
are offered in this respect.
Critical mass. The first consideration concerns the critical political mass of most
countries in SSA: they are too small and politically lack the influence to negotiate
successfully with large traditional counterparts such as the US, the EU, the World Bank
and the International Monetary Fund IMF. As a result of the emergence of large and fast-
developing middle-income countries, which combined, account for half of the worlds
population (China, India, Brazil), in addition to a number of smaller but very dynamic
economies, mostly in Asia, the world is no longer divided between North and South.
The African regional common market organisations could become politically significant
entities. However, this would depend on the extent to which they consolidate the level of
integration of the economies of member countries, develop large regional markets and
corresponding economies of scale, and present a united front vis--vis their external
partners in development and trade.
Food sovereignty. The second consideration is that the political setting in
industrialised countries only allows their governments to reason in terms of food
sovereignty. The list of critical products that make up an acceptable level of
sovereignty is a matter of tough internal and external negotiations. This situation is
made more critical by a growing threat to the still fragile African economies posed by
new competitors entering the international market arena. These are facts of life which
Africans begin to feel they are in no position to modify or influence. Accordingly, the
African response cannot be but to develop its own policy on the same grounds. Good
political and economic reasons suggest that African countries must accelerate their
economic integration on a regional basis, and that the integration must include
appropriate protection against unfair competition from outside the regional common
markets.
Political drive. The third consideration is that African governments must show much
stronger determination in removing obstacles to agricultural development. This requires
the political courage and the capacity to introduce and manage a different relationship
between the urban and rural worlds in their own countries. A significant acceleration of
agricultural development and rural poverty reduction requires political drive, which is
about mobilising energies and maintaining momentum. It requires the mobilisation of

larger domestic resources, i.e. a change in the urban-rural bias in public expenditure to
match a much larger inflow of external resources i.e. a change in the share of
agriculture in the ODA disbursed in SSA. It also requires a new balance in the roles of
state and market to bring about more rural infrastructure, more technological change
and more financial services in a nutshell, an enabling environment for a faster and more
effective delivery system that responds to the demands of agricultural producers in SSA.
Decision-making capacity. The fourth consideration concerns the capacity of
decision makers to analyse and assess situations and to effectively manage polices that
are coherent with set objectives. With regard to central governments, this is all the more
urgent and relevant if the structure of ODA will include an even larger proportion of debt
relief and thus provide more freedom in the use of public resources by governments and
political intermediaries.
Consensus. The fifth consideration concerns the consensus, and the political process
that brings about consensus. This is a key issue of governance in rural areas, and is not
simply a question of providing more services to people. It is about the development of
enabling grassroots institutions and the emergence of new leaders at community level,
strong farmers associations, sustainable co-operative micro-finance associations, etc. in
short, creating a network that empowers people to drive their own socio-economic and
human development.
Annex 241
ANNEX. AGENDA AND LIST OF PARTICIPANTS
Annex 243
AGENDA
GLOBAL FORUM ON AGRICULTURE
POLICY COHERENCE FOR DEVELOPMENT
30 November 1 December 2005, OECD, Paris, France

Background
While the phrase policy coherence for development (PCD) is hard to define it
recognises a very important concept that the achievement of international development
and poverty reduction targets depend not only on aid but on the policy decisions taken
across a wide range of sectoral and macroeconomic policies in both developed and
developing countries. It is a process whereby a government makes an effort to design
policies that take account of other policy communities, minimise conflicts and maximise
synergies. Achieving policy coherence is difficult because of multiple policy objectives
and conflicting interests. Consequently, a degree of incoherence may be inevitable but the
trade-offs should be made transparent and action taken to minimise the negative impacts
on development.
At the OECD, the initial focus was on improving internal policy coherence of
development policies, i.e. improving the targeting, management and evaluation of aid
agency programmes and projects. In recent years, increased attention has been given to
integrating the development dimension across the work of other policy areas,
i.e. understanding how policies for migration, agricultural, investment etc. affect
Objectives
The purpose of the Forum is to bring together developed and developing country
representatives from both the agriculture and development communities to discuss issues
relating to the inter-linkages between agricultural-related policies and development
objectives. To this end, the key objectives of the Forum are the following.
a) Identify the impacts of OECD agricultural policies on developing countries and
consider their relative importance and the implications for coherence with development
objectives.
b) Illuminate positive examples of coherency between agricultural policies and
development objectives, and discuss how these could be applied elsewhere.
c) Examine the role of various stakeholders in improving policy coherence.
d) Investigate how policy coherence for development can be better integrated into OECD
government policy making with specific reference to agricultural policies.
An annotated agenda for the Forum has been developed to meet the four key
objectives and to focus on the coherence of agricultural-related policies in meeting
development priorities. The first session will set the scene be introducing the concept of
agricultural PCD from the perspective and practice of policy makers, producers, and the
poor. The second and third sessions examine the coherency of various agricultural-related
policy measures (such as export subsidies, tariffs, payments, import regulations, aid
assistance etc.) in addressing two of the crucial development objectives relevant to
agriculture (expanding trade, and alleviating hunger and poverty). The fourth session will
bring together the lessons learnt through a high-level round table discussion between
invited experts from the field of agriculture and development, and the private and public
sectors.
244 Annex
Wednesday, 30 November 2005

Chair: Neil FRASER (New Zealand)
SESSION 1. SETTING THE SCENE
The session will provide the context for the Forum by defining the meeting objectives, the key issues
that need to be considered in terms of agricultural policy coherence for development (PCD), and
introductory thoughts on the concept and practice of PCD from country, producer and poor
perspectives.
Forum Introduction Herwig SCHLGL, Deputy Secretary-General, OECD
Policy Coherence for Development: Distilling Lessons from OECD Work

Kiyo AKASAKA, Deputy Secretary-General, OECD
Policy Coherence for Development: Issues in Agriculture Alan

MATTHEWS, Trinity College Dublin
This will outline the main PCD issues for agriculture, drawing on the original paper
and work done by Ireland to put the framework into practice in developing countries,
e.g. in Tanzania and Uganda.
Policy Coherence for Development: Making it Work Pertti MAJANEN,

Finnish Ambassador to the OECD
This will discuss how PCD has been achieved in Finland, the issues, the obstacles,
and how they have been overcome, with particular reference to agriculture.
Policy Coherence for Development: What it Means for Farmers

Raul MONTEMAYOR, Chair, IFAPs Asian Farmers Committee
This will discuss the issue from the farmers perspective (e.g. what needs to be done,
what the biggest issues are, etc.) including the role of producer organisation in
achieving PCD.
Policy Coherence for Development: What it Means to the Poor

Ibrahim Assane MAYAKI, Executive Director, The Hub for Supporting Rural
Development in Western and Central Africa
This will provide, from the perspective of the poor, an understanding of what aspects
of agricultural-related PCD are important and why, some examples of where PCD
has been achieved, and comment on the role of non-government organisations/civil
society in achieving PCD.
Annex 245
Wednesday, 30 November 2005

SESSION 2. ENHANCING GLOBAL AGRICULTURAL TRADE THROUGH
A FAIR AND MARKET ORIENTATED TRADING SYSTEM
WTO members have committed themselves to achieving a fair and market orientated trading system
for agriculture. This session will consider the issue of PCD in terms of enhancing global agricultural
trade, examining both the extent to which policy (in)coherence is impacting on trade, and the
relationship between trade and development.
Enhancing Global Agricultural Trade: A Status Report Carmel CAHILL, Head

of Policies, Trade and Adjustment Division, Directorate for Food, Agriculture
and Fisheries, OECD
Drawing on recent OECD work, this will provide an overview of developments in
agricultural-related trade policies (export subsidies, tariffs, payments, SPS and other
NTB) and trade flows since the mid-1990s, and the work done in linking trade
liberalisation and household income.
How Can Policy Coherence Enhance Global Agricultural Trade? Joachim von
BRAUN, Director General, IFPRI
This will discuss the role of policy coherence in enhancing trade and the link to
development, providing examples of where policy coherence has enhanced trade and
subsequently led to development, and where it has not, emphasising priority areas for
action, and how PCD can be better integrated into the policy making process.
Policy Coherence for Development: Issues for Brazil Fabio CHADDAD,

Professor, Ibmec Business School and Marcos JANK, President, Institute for
International Trade Negotiations Studies (ICONE)
This will provide a Brazilian perspective on the issue of PCD as it relates to
agriculture, drawing on Brazils experience with OECD agricultural-related policies
(e.g. tariffs, NTBs, export subsidies, payments) and Brazilian agricultural-related
policies (e.g. rural development, farm support, trade), examining the extent to which
these are acting in a coherent manner, with emphasis on enhancing global agricultural
trade, commenting where possible on the relevance for other Latin American
countries.
Policy Coherence for Development: Issues for China Xiaoshan ZHANG,

Director, Institute of Rural Development, Chinese Academy of Social Sciences
This will provide a Chinese perspective on the issue of PCD as it relates to agriculture,
drawing on Chinas experience with aid policies (bilateral, multilateral and NGO),
OECD agricultural-related policies (e.g. tariffs, NTBs, export subsidies, payments),
and Chinese agricultural-related policies (e.g. rural development, farm support, trade),
examining the extent to which these are acting in a coherent manner, with emphasis on
enhancing global agricultural trade, commenting where possible on the relevance for
other Asian countries.
246 Annex
Thursday, 1 December 2005
SESSION 3. CONTRIBUTING TO THE MILLENNIUM DEVELOPMENT

GOAL OF ERADICATING EXTREME POVERTY AND HUNGER
Of the eight millennium development goals, the first goal, to eradicate extreme poverty and hunger, is
most directly relevant for agriculture. This goal has two targets: to halve, between 1990 and 2015,
(1) the proportion of people whose income is less than one dollar a day; and (2) the proportion of
people who suffer from hunger. This session will discuss the issues that are raised when considering
this goal and targets through the lens of policy coherence.
Eradicating Extreme Poverty and Hunger: Towards a Coherent Policy Agenda

Prabhu PINGALI, Director, Agriculture and Development Economics Division,
FAO
This will provide an up-to-date account of progress towards the goal of eradicating
poverty and hunger, including the main obstacles encountered and the success stories
that have occurred, emphasising the extent to which these have been the result of
policy (in)coherence.
How Can Policy Coherence in Agriculture Contribute to the Eradication of

Extreme Poverty and Hunger? Tom ARNOLD, Chief Executive, Concern
Worldwide
This will examine the role PCD in agriculture can take in achieving the millennium
development goals by 2015, including priorities for action and the role of various
stakeholders in the process.
Food Grain Surpluses, Yields and Prices in India Raghav GAIHA, University
of Dehli
This will provide an Indian perspective on the issue of PCD as it relates to agriculture,
drawing on Indias experience with aid policies (bilateral, multilateral and NGO),
OECD agricultural-related policies (e.g. tariffs, NTBs, export subsidies, payments),
and Indian agricultural-related policies (e.g. rural development, farm support, trade)
the goals of eradicating hunger and poverty, commenting where possible on the
relevance for other Asian countries.
Coherence of International Trade Liberalisation Policy with the Objectives of

Rural Poverty Reduction: Listening to the Views of the Rural People in
Sub-Saharan Africa Mohamed BEAVOGUI, Director, Western and Central
Africa Division, IFAD
This will provide an African perspective on the issue of PCD as it relates to
agriculture, drawing on Africas experience with aid policy (bilateral, multilateral and
NGO), OECD agricultural policies (e.g. tariffs, NTBs, export subsidies, payments),
and African agricultural policy (e.g. rural development, farm support, trade),
the goals of eradicating hunger and poverty.
Annex 247
Thursday, 1 December 2005
SESSION 4. WHAT HAVE WE LEARNT?
The aim of Session 4 is to review what has been learnt in relation to the four Forum objectives. The
session will be organised around a high-level roundtable discussion between invited experts from the
field of agriculture and development, and the private and public sectors. The roundtable participants
will have an opportunity to exchange their views and assessments of the issues raised in the previous
sessions, including the identification of common points and areas of divergence, areas of coherency
and incoherency, and their prioritisation of the actions that need to be taken.
High-Level Roundtable Discussion
Moderator: Alexandra Trzeciak-Duval, Head of the Policy Co-ordination

Division, Development Co-operation Directorate, OECD
Willem-Jan LAAN, Unilever and Vice-Chair, BIAC Food and Agriculture

Committee
Kevin CLEAVER, Director, Agriculture and Rural Development, World Bank
Jeremy HOBBS, Executive Director, OXFAM International
Richard MANNING, Chair of the OECD Development Assistance Committee
Abdus Salam Mohammad KARAAN, Chairperson, National Agricultural

Marketing Council, South Africa
Pinit KORSIEPORN, Deputy Secretary-General, Office of Agricultural

Economics, Ministry of Agriculture and Cooperatives, Thailand
Stefan TANGERMANN, Director, Directorate for Food, Agriculture and

Fisheries, OECD
Jack WILKINSON, President, International Federation of Agricultural

Producers (IFAP)
Concluding Remarks Neil FRASER, Chair
248 Annex
Liste des Participants / List of Participants

Prsident / Chairman: Mr. Neil Fraser, New Zealand
Afrique du Sud / South Africa

Mr. Abdus Salam Mohammad KARAAN Mr. I. Winston MAKABANYANE
Chairperson Counsellor (Agriculture)
National Agricultural Marketing Council South African Mission to the EU
P.O. Box X1 26 Rue de la Loi 26, Btes 7-8
7602 Matieland, South Africa B-1040 Brussels, Belgium
Email : asmk@sun.ac.za Email : agric@southafrica.be
Dr. Shadrack MOEPHULI Mr. Gunter MULLER

Assistant Director General Deputy Director: International Trade
South African National Department of Agriculture South African National Department of Agriculture
Private Bag X973 Private Bag X250
0001 Pretoria, South Africa 0001 Pretoria, South Africa
Email : adgap@nda.agric.za Email : gunterm@nda-agric.za
Mr. Attie SWART Mr. Ben VAN WYK

Deputy Director-General: Agricultural and Business Senior Manager: Production and Resource Economics
Development South African National Department of Agriculture
South African National Department of Agriculture Private Bag X416
Private Bag X250 0001 Pretoria, South Africa
0001 Pretoria, South Africa
Email : smea@nda.agric.za
Email : adgtbd@nda.agric.za
Allemagne / Germany
Mr. Achim BURKART Mr. Sebastian GRAF VON KEYSERLINGK
Counsellor Bundesministerium fr Verbraucherschutz, Ernhrung und
Permanent Delegation of Germany to the OECD Landwirtschaft
9, rue Maspro Wilhelmstr. 54
75116 Paris, France 10117 Berlin, Germany
Email : wi-2-oecd@pari.auswaertiges-amt.de Email : sebastian.keyserlingk@bmvel.bund.de
Dr. Christoph KOHLMEYER

Head, Div 314: Rural Development; Global Food Security
German Federal Ministry for Economic Cooperation and
Development
Friedrich-Ebert-Allee 50
53113 Bonn, Germany
Email : christoph.kohlmeyer@bmz.bund.de
Annex 249
Argentine / Argentina
Mr. Csar Alberto FAES Mr. Gustavo IDIGORAS
Secretary Agricultural Counsellor
Embassy of Argentina in France Argentina Embassy to the EC
6, rue Cimarosa Secretary of Agriculture, Livestock, Fisheries and
75116 Paris, France Food of Argentina
225 Avenue Louise, 4th Floor
Email : efraneco@noos.fr B-1050 Brussels, Belgium
Email : gidigoras@agricola-ue.org
Australie / Australia
Mr. Brendan BERNE Ms. Joanne FREDERIKSEN
Deputy Permanent Representative Permanent Delegation of Australia to the OECD
Permanent Delegation of Australia to the OECD 4, rue Jean Rey
4, rue Jean Rey 75015 Paris, France
Paris 75724 Cedex 15, France
Email : brendan.berne@dfat.gov.au
Autriche / Austria
Ms. Christa BAUER
Counsellor for Agriculture
Permanent Delegation of Austria to the OECD
3, rue Albric Magnard
F-75116 Paris, France
Email : christa.bauer@bka.gv.at
Belgique / Belgium
M. Paul DEPAUW M. Frank DUHAMEL
Conseiller Agricole M.R.W. Secrtaire d'Ambassade
Ambassade de Belgique Dlgation Permanente de la Belgique auprs de lOCDE
Via dei Monti Parioli 49 14, rue Octave Feuillet
I 00197 Roma, Italy F-75116 Paris, France
Email : belgagriroma@mclink.it Email : frank.duhamel@diplobel.be
M. Gabriel YSEBAERT
Ministre de la Communaut Flamande
Division de la Politique Agricole et de la Pche
WTC Tour III, 4me tage, 30 boulevard Simon Bolivar
B-1000 Brussels, Belgium
Email : gabriel.ysebaert@ewbl.vlaanderen.be
250 Annex
Brsil / Brazil
Professor Fabio CHADDAD Mr. Jos Gerardo FONTELLES
Professor Special Assessor of the Minister of Finance
Ibmec Business School Ministry of Finance
Economics and Business Esplanada dos Ministrios
Rua Maestro Cardim 1170 Bloco "P" 2 andar
01323-001 Sao Paulo, Brazil 70048-900 Brasilia DF, Brazil
Email : FabioRC@ibmec.br Email : jose.fontelles@fazenda.gov.br
Mr. Edilson GUIMARAES Mr. Marcos JANK

Director of the Department of Agricultural Economy President
Ministry of Agriculture, Livestock and Food Supply Institute for International Trade Negotiations
Esplanada dos Ministrios, Bloco "D", Sala 538 Av. General Furtado Nascimento, 740, conj. 81
70043-900 Brasilia DF, Brazil Alto de Pinheiros
05465-070 Sao Paulo SP, Brazil
Email : edguima@agricultura.gov.br
Email : Msjank@iconebrasil.org.br
Mr. Ivan WEDEKIN

Secretary of Secretariat of Agricultural Policy
Ministry of Agriculture, Livestock and Food Supply
Esplanada dos Ministrios
Bloco "D", Sala 502
70043-900 Brasilia DF, Brazil
Email : ivanwedekin@agricultura.gov.br
Bulgarie / Bulgaria
Mrs. Rositsa GEORGOVA
Head of Department
Ministry of Agriculture and Forestry
bul. "Christo Botev", 55
1040 Sofia, Bulgaria
Email : rossygeorgova@yahoo.com
Cameroun / Cameroon
Mme Elisabeth BALEPA M. Roger MBASSA NDIN
Secrtaire Gnral Secrtaire Gnral
Ministre de l'Agriculture, du Dveloppement Rural Ministre de la Planification, de la Programmation du
Yaounde, Cameroun Dveloppement et de l'Amnagement du Territoire
BP 1452 Yaounde, Cameroun
Email : elisabethbalepa@yahoo.fr
Email : mbassandine@yahoo.fr
Canada
Mr. Stuart CARRE Ms. Wendy CYMBAL
Counsellor Agriculture and Agri-Food Canada
Permanent Delegation of Canada to the OECD AAFC, Policy Analysis Division
15 bis, rue de Franqueville Sir John Carling Building, Room 6109
75116 Paris, France 930 Carling Ave
Ottawa, Ontario K1A 0C5, Canada
Email : stuart.carre@international.gc.ca
Email : cymbalw@agr.gc.ca
Annex 251
Ms. Jan DYER

A/Director General
Research and Analysis Directorate
Agriculture and Agri-Food Canada
930 Carling Avenue
Ottawa, Ontario K1A 0C5, Canada
Email : dyerjan@agr.gc.ca
Chili / Chile
Mr. Marcelo GARCIA Mr. Hugo MARTINEZ
Permanent Representative from Chile to the OECD Deputy Director
Embassy of Chile in France ODEPA - Oficina de Estudios y Politicas Agrarias
2, avenue de la Motte Picquet Teatinos 40, Piso 8
75007 Paris, France Santiago, Chile
Email : mgarcia@amb-chili.fr Email : hmartine@odepa.gob.cl
Mr. Ramiro PIZARRO

Economic Counsellor
Permanent Delegation to the OECD
Embassy of Chile
2, avenue de la Motte Picquet
75007 Paris, France
Email : ramiro.pizarro@wanadoo.fr
Chine / China
Mr. Xiaoshan ZHANG
Professor, Director
Chinese Academy of Social Sciences
Institute of Rural Development
5 Jianneidajie
100732 Beijing, China
Email : zxs@public.bta.net.cn
Core / Korea
Mr. Dae Geun KIM
First Secretary
Permanent Delegation of Korea to the OECD
2-4, rue Louis David
75016 Paris, France
Email : kimde10045@hanmail.net
Danemark / Denmark
Mr. Mads Ranbll WOLFF
Attach
Permanent Delegation of Denmark to the OECD
77, avenue Marceau
75116 Paris, France
Email : madwol@um.dk
252 Annex
Espagne / Spain
Ms. Mara Teresa AMBRS M. Enrique CASTA FERNNDEZ
Attach au Bureau de l'Agriculture, de la Pche et Conseiller pour l'Agriculture, la Pche et l'Alimentation
de l'Alimentation Ambassade d'Espagne
Dlgation Permanente de lEspagne auprs de lOCDE 22, avenue Marceau
22, avenue Marceau 75008 Paris, France
75008 Paris, France
Email : enriquecf@wanadoo.fr
Email : 2agric-esp@wanadoo.fr
M. Vicente FLORES REDONDO

Conseiller pour l'Agriculture, la Pche et l'Alimentation
Dlgation Permanente de lEspagne auprs de lOCDE
22, avenue Marceau
75008 Paris, France
Email : agric-esp@wanadoo.fr
Estonie / Estonia
Mr. Olavi PETRON
Head of the European Union and
Foreign Affairs Department
Ministry of Agriculture
Lai str 39/41
15056 Tallinn, Estonia
Email : olavi.petron@agri.ee
Etats-Unis / United States

Mr. George CARNER Mr. Arthur COFFING
US Representative to the DAC Agricultural Economist
Minister Counselor USDA/FAS
Permanent Delegation of the United States to the OECD Rm 5540 S. Bldg
19, rue de Franqueville 14th & Independent
75116 Paris, France Washington, DC 20250, United States
Email : carnergx@state.gov Email : coffing@fas.usda.gov
Mrs. Helen RECINOS Ms. Susan THOMPSON

Advisor for Trade Policy and Agriculture Senior Policy Advisor / Co-chair, DAC PovNet
Permanent Delegation of the United States to the OECD Agriculture Task Team
12, avenue Raphal U.S. Agency for International
75016 CEDEX 16 Paris, France Development (USAID EGAT/AG)
Bureau for Economic Growth, Agriculture and Trade
Email : recinoshg2@state.gov 2.11-094 RRB
1300 Pennsylvania Avenue, NW
Washington, DC 20523-2110, United States
Email : sthompson@usaid.gov
Annex 253
Finlande / Finland
Ms. Tiina INGMAN Ms. Pirkko-Liisa KYSTIL
Senior Officer Counsellor
Ministry of Agriculture and Forestry Permanent Delegation of Finland to the OECD
P.O. Box 30 6, rue de Franqueville
00023 Government FI, Finland 75116 PARIS F, France
Email : tiina.ingman@mmm.fi Email : pirkko-liisa.kyostila@formin.fi
Mr. Pertti MAJANEN Mr. Kimmo NRHINEN

Ambassador, Permanent Representative Counsellor
Permanent Delegation of Finland to the OECD Permanent Delegation of Finland to the OECD
6, rue de Franqueville 6, rue de Franqueville
75116 PARIS F, France 75116 PARIS F, France
Email : pertti.majanen@formin.fi Email : kimmo.narhinen@formin.fi
Mr. Antero TUOMINEN

Director
Ministry of Agriculture and Forestry
P.O. Box 30
00023 GOVERNMENT FIN, Finland
Email : antero.tuominen@mmm.fi
France
M. Jean-Guillaume BRETENOUX M. Jo CADILHON
Charg de Mission Charg de Mission
Ministre de l'Agriculture, de la Pche et de l'Alimentation Ministre de l'Agriculture, de la Pche et de l'Alimentation
SRI/DPEI DPEI
3, rue Barbet de Jouy 3, rue Barbet de Jouy
75349 Paris SP, France 75349 Paris SP, France
Email : jean-guillaume.bretenoux@agriculture.gouv.fr Email : jo.cadilhon@agriculture.gouv.fr
Mme Anne-Sophie CERISOLA Mr. Philippe CHEDANNE

Task Manager Agence Franaise de Dveloppement
Ministre de l'Agriculture et de la Pche 5, rue Roland Barthes
3, rue Barbet Jouy 75012 Paris, France
75349 Paris Cedex 07, France
Email : chedannep@afd.fr
Email : anne-sophie.cerisola@agriculture.gouv.fr
Ms. Marjolaine COUR Miss Philippa DRUCE

Agence Franaise de Dveloppement Stagiarie
5, rue Roland Barthes Dlgation Permanente de la France auprs de lOCDE
75598 Paris Cedex 12, France Service Economique
5, rue Oswaldo Cruz
Email : courm@afd.fr 75016 Paris, France
Email : philippa.druce@missioneco.org
254 Annex
Mr. Damien LAGANDRE Mme Elisabeth LANGELLA

Stagiaire Adjointe au Chef de Secteur OCDE
Agence Franaise de Dveloppement Secrtariat Gnral des Affaires Europennes (SGAE)
5, rue Roland Barthes 2, Bd Diderot
75598 Paris Cedex 12, France 75572 Paris Cedex 12, France
Email : lagandred@afd.fr Email : elisabeth.langella@sgae.gouv.fr
Mme Florence LASBENNES Mme Anna LIPCHITZ

Chef de Bureau Charge de Mission
Ministre des Affaires Etrangres Ministre de l'Economie et des Finances
20, rue Monsieur DGTPE
75700 Paris 07 SP, France 139, rue de Bercy
Paris, France
Email : florence.lasbennes@diplomatie.gouv.fr
Email : anna.lipchitz@dgtpe.fr
Mme Marie-Alix MONTFORT Mlle. Katharina PESCHEN

Ministre de l'Economie, des Finances et de l'Industrie Stagiaire (Charge du CAD)
DGTPE Service des Politiques Publiques / Bureau SGCI
Environnement Agriculture 2, Bd Diderot
139, rue de Bercy 75012 Paris, France
75572 Paris Cedex 12, France
Email : katharina.peschen@sgci.gouv.fr
Email : Marie-Alix.MONTFORT@dgtpe.fr
M. Michel PRE Mme Elise REGNIER

Ministre des Affaires Etrangres Charge de Mission
DGCID-DCT/EPS MAPA - Ministre de l'Agriculture, de la Pche et de
20, rue Monsieur l'Alimentation
75007 Paris, France SRI/DPEI - MAP
3, rue Barbet de Jouy
Email : michel.pre@diplomatie.gouv.fr 75349 Paris SP, France
Email : elise.regnier@agriculture.gouv.fr
Mme Franoise SIMON M. Jacques TEYSSIER D'ORFEUIL

Charge de Mission au Bureau des Relations Conseiller Economique et Commercial
Extrieures l'UE Dlgation Permanente de la France auprs de lOCDE
Ministre de l'Agriculture et de la Pche 5, rue Oswaldo Cruz
DPEI/SRI, BREUE 75116 Paris, France
3, rue Barbet de Jouy
75349 Paris 7, France Email : jacques.teyssierdorfeuil@missioneco.org
Email : francoise-m.simon@agriculture.gouv.fr
Mme Marie-Ccile THIRION

Charge de Mission Scurit Alimentaire
Ministre des Affaires Etrangres
DGCID/DCT
20, rue Monsieur
75007 Paris, France
Email : marie-cecile.thirion@diplomatie.gouv.fr
Annex 255
Grce / Greece
Dr. Vassiliki KARATHANASSI Mr. Andreas VAROTSOS
Agroeconomist, Directorate for Agricultural Policy and First Secretary
International Affairs Permanent Delegation of Greece to the OECD
Division of EU, Int. Relations and Trade 15, Villa Said
Ministry of Rural Development and Food 75116 Paris, France
Acharnon 5
Athens, Greece Email : a.varotsos@greece-oecd.org
Email : ax5u004@minagric.gr
Hongrie / Hungary
Mr. Tams VRNAI
Third Secretary
Permanent Delegation of Hungary to the OECD
140, avenue Victor-Hugo
75116 Paris, France
Email : tamas.varnai@delhongrie-ocde.fr
Inde / India
Mr. Raghav Das GAIHA
Professor of Public Policy
University of Delhi
Faculty of Management Studies
122 Malcha Marg. Chanakyapuri
110021 New Delhi, India
Email : rdg@bol.net.in
Irlande / Ireland
Mr. John HOLLAND Mr. Alan MATTHEWS
Department of Agriculture & Food Head of Department
Economics & Planning Trinity College Dublin
Kildare Street Department of Economics
Dublin 2, Ireland Dublin 2, Ireland
Email : john.holland@agriculture.gov.ie Email : Alan.Matthews@tcd.ie
Italie / Italy
Mme Paola COLITTI M. Claudio PADUA
Commercial Attach Attach for Commercial Affairs
Dlgation Permanente de lItalie auprs de lOCDE Dlgation Permanente de lItalie auprs de lOCDE
50, rue de Varenne 50, rue de Varenne
75007 Paris, France F-75007 Paris, France
Email : paola.colitti@esteri.it Email : claudio.padua@esteri.it
256 Annex
Japon / Japan
M. Jiro HASHIMOTO Ms. Reiko KAWAMURA
Counsellor Advisor for Development
Permanent Delegation of Japan to the OECD Permanent Delegation of Japan to the OECD
11, avenue Hoche 11, avenue Hoche
75008 Paris, France 75008 Paris, France
Email : hashimoto@deljp-ocde.fr Email : kawamura@deljp-ocde.fr
Mr. Kaname MOTOKI Mr. Mitsuaki SHINDO

Assistant Director Second Secretary
Ministry of Agriculture, Forestry and Fisheries Permanent Delegation of Japan to the OECD
International Economic Affairs Division Agriculture, Forestry and Fisheries
1-2-1, Kasumigaseki, Chiyoda-ku 11, avenue Hoche
100 8950 Tokyo, Japan 75008 Paris, France
Email : kaname_motoki@nm.maff.go.jp Email : shindo@deljp-ocde.fr
Mr. Yasunari UEDA

Deputy Director
Ministry of Agriculture, Forestry and Fisheries
International Economic Affairs Division
1-2-1 Kasumigaseki, Chiyoda-ku
100-8950 Tokyo, Japan
Email : yasunari_ueda@nm.maff.go.jp
Kazakhstan
Mrs. Anara JUMABAYEVA Mrs. Liliya MUSINA
Economist Vice-Minister of Agriculture
Investment Centre, FAO Ministry of Agriculture of the Republic of Kazakhstan
Viale delle Terme di Caracalla 25, Prospect Abaya
Room D-615 473000 Astana, Kazakhstan
Rome, Italy
Email : lsm_2000@mail.ru
Email : Anara.Jumabayeva@fao.org
M. Zhambyl SEIITKUL
Third Secretary
Embassy of Kazakhstan
59, rue Pierre Charron
75008 Paris, France
Email : amb.kaz3@wanadoo.fr
Lettonie / Latvia
Ms. Ginta JAKOBSONE
Deputy Director of Department of Common
Agricultural Policy
Ministry of Agriculture
Republikas laukums 2
LV-1981 Riga, Latvia
Email : Ginta.Jakobsone@zm.gov.lv
Annex 257
Lituanie / Lithuania
Mr. Vygantas KATKEVICIUS Mr. Gediminas RADZEVICIUS
Director Under-Secretary of the Ministry
Ministry of Agriculture of the Republic of Lithuania Ministry of Agriculture of the Republic of Lithuania
Economics and Finance Department Gedimino av. 19 (Levelio 6)
Gedimino av. 19 (Levelio 6) LT-01103 Vilnius, Lithuania
LT-01103 Vilnius, Lithuania
Email : G.Radzevicius@zum.lt
Email : VygantasK@zum.lt
Ms. Egle STONKUTE

Head of Agricultural Policy Division
Lithuanian Institute of Agrarian Economics
V. Kudirkos Str. 18
LT-03105 Vilnius, Lithuania
Email : egle@laei.lt
Mali
Dr. Hamadoun SOW
Directeur Gnral
Cellule de Planification et de Statistiques
Ministre de l'Agriculture du Mali
BP 2357 Bamako, Mali
Email : hsow@cpsma.gov.ml
Mexique / Mexico
Mr. Gerardo BRACHO Y CARPIZO Mrs. Adriana RODRGUEZ
First Secretary Vice-Director of the General Unit of International Trade
Permanent Delegation of Mexico to the OECD Negociations and Economic Studies
8, rue de Berri ASERCA SAGARPA
Paris, France Municipio Libre 377
Piso 6, Ala B
Email : gbracho@sre.gob.mx Col. Santa Cruz Atoyac
03310 Mexico-City, Mexico
Email : adrodriguez.aserca@procampo.gob.mx
Nouvelle-Zlande / New Zealand

Ms. Caroline BERESFORD Mr. Neil FRASER (Prsident / Chairman)
Second Secretary Manager, International Liaison
Permanent Delegation of New Zealand to the OECD International Policy
7 ter, rue Lonard de Vinci Ministry of Agriculture and Forestry
75116 Paris, France Pastoral House, 25 The Terrace
PO Box 2526
Email : caroline.beresford@mfat.govt.nz Wellington, New Zealand
Email : neil.fraser@maf.govt.nz
258 Annex
Pays-Bas / Netherlands
Mr. Gerrit MEESTER Mr. Co NEETESON
Agricultural Policy Adviser Senior Policy Officer
Ministry of Agriculture, Nature and Food Quality Ministry of Agriculture, Nature and Food Quality
Department of International Affairs Department for International Affairs
P.O. Box 20401 P.O. Box 20401
The Hague, Netherlands The Hague, Netherlands
Email : g.meester@minlnv.nl Email : j.j.neeteson@minlnv.nl
M. Ancel VAN ROYEN

Counsellor
Permanent Delegation of the Netherlands to the OECD
Agriculture
12-14, rue Octave-Feuillet
Paris, France
Email : ancel-van.royen@minbuza.nl
Pologne / Poland
Mr. Cezary BANKA
First Secretary
Permanent Delegation of Poland to the OECD
136, rue de Longchamp
F-75116 Paris, France
Email : cezary.banka@oecd.pologne-org.net
Portugal
M. Pedro LIBERATO
Conseiller
Dlgation Permanente du Portugal auprs de lOCDE
10 bis, rue Edouard Fournier
75116 Paris, France
Email : pedro.liberato@ocde-portugal.com
Rpublique Slovaque / Slovak Republic

Mrs. Eva KOLESAROVA Mr. Martin SZENTIVNY
Director Second Secretary
Ministry of Agriculture of the Slovak Republic Permanent Delegation of the Slovak Republic to the OECD
Dept. of International Relations 28, avenue d'Eylau
Dobrovicova 12 75016 Paris, France
812 66 Bratislava, Slovak Republic
Email : szentivany@oecd-sr.com
Email : eva.kolesarova@land.gov.sk
Annex 259
Roumanie / Romania
Mlle Roxana GHERGHE Mme Mirela ORZAN
Conseiller auprs du Secrtaire dEtat Directeur de la Direction de Monitoring des
Ministre de lAgriculture, des Forts et du Processus dAdhsion
Dveloppement Rural Ministre de lAgriculture, des Forts et du
Dveloppement Rural
Email : roxana.gherghe@maa.ro
Email : mirela.orzan@maa.ro
Mlle Mihaela POPESCU M. Viorel TOMESCU

Troisime Secrtaire Ministre Conseiller
Ambassade de Roumanie Affaires Europenes
5, rue de lExposition Ambassade de Roumanie
75343 Paris Cedex 07, France 5, rue de lExposition
75007 Paris, France
Email : viorel.tomescu@amb-roumanie.fr
Royaume-Uni / United Kingdom

Ms. Laura KELLY Mr. Jack McIVER
Senior Trade Advisor First Secretary Trade, Finance & Agriculture
Department for International Development (DFID) UK Delegation to the OECD
International Trade Department 140, avenue Victor Hugo
1 Palace Street 75116 Paris, France
London SW1E 5HE, United Kingdom
Email : jack.mciver@fco.gov.uk
Email : L-Kelly@dfid.gov.uk
Mr. Richard MOBERLY

Head Renewable Natural Resources and Agricultural Team
Department for International Development
1 Palace Street
SW1E 5HE London, United Kingdom
Email : r-moberly@dfid.gov.uk
Fdration de Russie / Russian Federation

Mr. Igor NOSKOV Mrs. Eugenia SEROVA
Counsellor President
Embassy of the Russian Federation in France Analytical Centre on Agri-Food Economics
40-50, boulevard Lannes 5, Gazetny per.
75116 Paris, France 125993 Moscow, Russian Federation
Email : ig.nos@wanadoo.fr Email : serova@iet.ru
Sude / Sweden
Mr. Daniel BLOCKERT Ms. Ingrid JEGOU
Deputy Director Analyst
Ministry for Foreign Affairs Swedish National Board of Trade
Division for International Trade Affairs Box 6803
S-113 86 Stockholm, Sweden
Email : daniel.blockert@foreign.ministry.se
Email : ingrid.jegou@kommers.se
260 Annex
Mr. Anders KLUM Ms. Kristin PLSSON

Director Deputy Director
Ministry of Agriculture, Food and Fisheries Ministry for Foreign Affairs
Drottninggatan 21 S-103 39 Stockholm, Sweden
10333 Stockholm, Sweden
Email : kristin.palsson@foreign.ministry.se
Email : anders.klum@agriculture.ministry.se
Mrs. Marie SUNDBERG Mr. Christer WRETBORN

Minister, Deputy Permanent Representative Ambassador
Permanent Delegation Swedish Embassy Rome
IPC Piazza Rio de Janeiro 3
Bruxelles 1040, Belgium 00161 Rome, Italy
Email : marie.sundberg@di.se Email : christer.wretborn@foreign.ministry.se
Suisse / Switzerland
Mme Dominique JORDAN Mr. Anton STADLER
Conseillre conomique Conseiller
Dlgation Permanente de la Suisse auprs de lOCDE Dlgation Permanente de la Suisse auprs de lOCDE
28, rue de Martignac 28, rue de Martignac
Email : dominique.jordan@eda.admin.ch Email : anton.stadler@eda.admin.ch
Taipei chinois / Chinese Taipei

Mr. Shin-Fa CHEN Ms. Anne CHOW
Commercial Secretary Director
Dlgation Economique du Taipei chinois Dlgation Economique du Taipei chinois
75 bis, avenue Marceau 75 bis, avenue Marceau
Email : martinchen@noos.fr Email : capec@noos.fr
Mr. Ching-Yung HUANG Dr. Pai-Po LEE

Commercial Secretary Assistant Secretary General
Dlgation Economique du Taipei chinois International Cooperation and Development Fund (ICDF)
75 bis, avenue Marceau 14F, No. 9, Lane 62,
75116 Paris, France Tien-Mou West Road
11157 Taipei, Chinese Taipei
Email : cyhuang@noos.fr
Email : P.P.Lee@icdf.org.tw
Mr. Ain-Ding LIAW Mr. Hsiao-Yin WU

Director-General of Planning Department Commercial Secretary
Council of Agriculture, Executive Yuan Dlgation Economique du Taipei chinois
37, Nan-hai Road 75 bis, avenue Marceau
Taipei, Chinese Taipei 75116 Paris, France
Email : Ed6962@mail.coa.gov.tw Email : leonwu@noos.fr
Annex 261
Thalande / Thailand
Mr. Pinit KORSIEPORN Ms. Sawitree SANGJANSOMPORN
Deputy Secretary-General First Secretary
Ministry of Agriculture and Cooperatives Ambassade Royale de Thailande
Office of Agricultural Economics 8, rue Greuze
Phaholyothin Road, Chatuchak 75116 Paris, France
10900 Bangkok, Thailand
Email : sawitres@mfa.go.th
Email : pinitk@oae.go.th
Turquie / Turkey
Mr. Ahmet COSKUN Mr. Sevki EMINKAHYAGIL
Under Secretary of Treasury Deputy Permanent Representative
General Directorate of State Enterprises Permanent Delegation
Department of Agriculture 9, rue Alfred Dehodencq
Hazine Mstesarligi 75116 Paris, France
Inn Bulvari No. 36
06510 Emek/ Ankara, Turkey Email : sevki.eminkahyagil@mfa.gov.tr
Email : ahmet.coskun@hazine.gov.tr
Ukraine
Ms. Irina KOBUTA
Strategic Area Manager
UNDP project
4th Floor
1/14 Sadova St.
01008 Kiev, Ukraine
Email : kobouta@agpol.kiev.ua
CE / EC
Mr. Rdiger ALTPETER Mr. Michael GRAMS
Principal Administrator European Commission
European Commission DG Economics and Financial Affairs
200 rue de la Loi Belgium
1049 Brussels, Belgium
Email : michael.grams@cec.eu.int
Email : ruediger.altpeter@cec.eu.int
Ms. Florence VAN HOUTTE Mr. Rainer WICHERN

Agronomist - Civil Servant Economist
European Commission - DG Development European Commission
DG Development - Rue de Genve 12 Office 5/54 DG Economics and Financial Affairs
Evere, Belgium BU-1, 0/91, Belgium
Email : Florence.van-houtte@cec.eu.int Email : rainer.wichern@cec.eu.int
262 Annex
Comit consultatif conomique et industriel (BIAC) /

Business and Industry Advisory Committee (BIAC)
Mr. Malcolm BAILEY Mr. Willem-Jan LAAN
Bailey Agriculture Limited Vice-Chair of BIAC Food and Agriculture Committee
R.D.7 Unilever Netherlands
5600 Feilding, New Zealand Weena 455
3013 AL Rotterdam, Netherlands
Email : m.g.bailey@xtra.co.nz
Email : willem-jan.laan@unilever.com
Ms. Carolin LOEHR Ms. Hanni ROSENBAUM

Business and Industry Advisory Committee to the Senior Policy Manager
OECD (BIAC) Business and Industry Advisory Committee to the
13-15, Chausse de la Muette OECD (BIAC)
75016 Paris, France 13-15, Chausse de la Muette
75016 Paris, France
Email : rosenbaum@biac.org
Mr. Nikolaus SCHULTZE Mr. Alper UCOK

Head of Strategy Chief of Industry, Services and Agriculture Department
Syngenta Foundation for Sustainable Agriculture TUSIAD- Turkish Industrialists' and
WRO-1002.11.66 Businessmen's Association
CH-4002 Basel, Switzerland Mesrutiyet Cad. 74
80050 Tepebasi, Istanbul, Turkey
Email : nikolaus.schultze@syngenta.com
Email : aucok@tusiad.org
Food and Agricultural Organization (FAO)

Mr. Prabhu PINGALI
Director
Food and Agriculture Organization (FAO)
ESA
Via delle Terme di Caracalla
Rome, Italy
Email : prabhu.pingali@fao.org
The Hub for Supporting Rural Development in Western and Central Africa
M. Ibrahim Assane MAYAKI
Executive Director / Directeur excutif
The Hub for Supporting Rural Development in Western and
Central Africa / La Plateforme pour le Dveloppement
rural en Afrique de l'Ouest et du Centre
Immeuble Ousseynou Thiam Gueye Point E
Rue G x 4, BP. 15702
CP 12524 Dakar Fann, Senegal
Email : Ibrahimassanem@unops.org
Annex 263
Inter-American Development Bank (IADB)

Mrs. Carolyn ROBERT
Trade Specialist
Inter-American Development Bank
Office in Europe
66, avenue d'Iena
75116 Paris, France
Email : carolynr@iadb.org
International Federation of Agricultural Producers (IFAP)

Mrs. Mercy KARANJA Mr. David KING
Development Policy Co-ordinator Secretary General
International Federation of Agricultural Producers (IFAP) International Federation of Agricultural Producers (IFAP)
60, rue Saint Lazare 60, rue St. Lazare
Email : ifap@ifap.org Email : david.king@ifap.org
Mr. Raul MONTEMAYOR Mr. Jack WILKINSON

National Business Manager / Chair IFAP's Asian Farmers President
Committee International Federation of Agricultural Producers (IFAP)
Federation of Free Farmers 60, rue Saint-Lazare
41 Highland Drive, Blue Ridge 75009 Paris, France
Quezon City, Philippines
Email : president@ifap.org
Email : freefarm@mozcom.com
International Food Policy Research Institute (IFPRI)

Mr. Joachim VON BRAUN
Director General
International Food Policy Research Institute (IFPRI)
2033 K Street, NW
Washington, DC 20006-1002, United States
Email : j.vonbraun@cgiar.org
International Fund for Agricultural Development (IFAD)

M. Mohamed BEAVOGUI Mr. Mohamed MANSSOURI
Directeur Division Afrique de l'Ouest et Centrale Country Programme Manager
Fonds International de Dveloppement Agricole (FIDA) International Fund for Agricultural Development (IFAD)
Via del Serafico, 107 Western and Central Africa Division
00142 Rome, Italy Via Del Serafico, 107
00142 Rome, Italy
Email : m.beavogui@ifad.org
Email : m.manssouri@ifad.org
264 Annex
Oxfam International
Mr. Jeremy HOBBS
Executive Director
Oxfam International
266 Banbury Road
Oxford OX2 7DL, United Kingdom
Email : jeremy.hobbs@oxfaminternational.org
United Nations Foundation

Ms. Janet HALL
Senior Policy Advisor
United Nations Foundation
1225 Connecticut Avenue, NW
Suite 400
Washington, DC 20036, United States
Email : jhall@unfoundation.org
World Bank
Mr. Kevin CLEAVER Mrs. Barbara GENEVAZ
Sector Director, Agriculture and Rural Development Senior Counsellor for the UK and Ireland
World Bank World Bank Office Paris
1818 H Street NW 66, avenue d'Iena
Washington D.C. DC 20433, United States 75116 Paris, France
Email : kcleaver@worldbank.org Email : bgenevaz@worldbank.org
Mr. William MARTIN Mr. Brian NGO

Lead Economist Lead Economist
World Bank World Bank Office Paris
8619 Coral Gables Lane 66, avenue d'Iena
Vienna, VA 22182, United States 75116 Paris, France
Email : Wmartin1@worldbank.org Email : bngo@worldbank.org
World Trade Organization (WTO)

Ms. Alicja WIELGUS
Economic Affairs Officer
World Trade Organization (WTO)
Agriculture and Commodities Division
Rue de Lausanne 154
1211 Geneva 21, Switzerland
Email : alicja.wielgus@wto.org
Concern Worldwide
Tom ARNOLD
Chief Executive
Concern Worldwide
52-55 Lower Camden Street
2 Dublin, Ireland
Email : tom.arnold@concern.net
Annex 265
Other Participants
Mme Thrse PUJOLLE
President Sahel and West Africa Club
Centre d'Analyse Prvisionnelle
37, Quai d'Orsay
75007 Paris, France
Email : therese.pujolle@ac-versailles.fr
OCDE / OECD
2, rue Andr-Pascal
75016 Paris
France
Mr. Kiyotaka AKASAKA Mr. Herwig SCHLGL

Deputy Secretary-General Deputy Secretary-General
Email : kiyo.akasaka@oecd.org Email : Herwig.SCHLOGL@oecd.org
Mr. Richard MANNING M. Normand LAUZON

DAC Chairman Director
DEVELOPMENT CO-OPERATION DIRECTORATE SAHEL AND WEST AFRICA CLUB
Email : Richard.MANNING@OECD.ORG Email : normand.lauzon@oecd.org
Mr. Michael ROESKAU Mr. Stefan TANGERMANN

Director Director
DEVELOPMENT CO-OPERATION DIRECTORATE DIRECTORATE FOR FOOD, AGRICULTURE AND
Email : michael.roeskau@oecd.org FISHERIES
Email : Stefan.TANGERMANN@oecd.org
Mr. Ken ASH Mrs. Carmel CAHILL

Deputy Director Head, Policies, Trade and Adjustment Division
DIRECTORATE FOR FOOD, AGRICULTURE AND DIRECTORATE FOR FOOD, AGRICULTURE AND
FISHERIES FISHERIES
Email : Ken.ASH@oecd.org Email : Carmel.CAHILL@oecd.org
Mr. Wayne JONES Ms. Alexandra TRZECIAK-DUVAL

Head, Non-Member Economies Division Head, Policy Co-ordination Division
DIRECTORATE FOR FOOD, AGRICULTURE AND DEVELOPMENT CO-OPERATION DIRECTORATE
FISHERIES Email : Alexandra.TRZECIAK-DUVAL@oecd.org
Email : Wayne.JONES@oecd.org
Mrs. Sunhilt SCHUMACHER Ms. Ebba DOHLMAN

Advisor Principal Administrator
SAHEL AND WEST AFRICA CLUB DCD/PRG
Email : Sunhilt.SCHUMACHER@oecd.org DEVELOPMENT CO-OPERATION DIRECTORATE
Email : Ebba.DOHLMAN@oecd.org
Mr. Joe DEWBRE Mr. Andrzej KWIECINSKI

Senior Analyst, Non-Member Economies Division Senior Analyst, Non-Member Economies Division
FISHERIES FISHERIES
Email : Joe.DEWBRE@oecd.org Email : Andrzej.KWIECINSKI@oecd.org
266 Annex
M. Jean-Paul PRADERE Mr. Michael RYAN

Consultant (West and Central Africa), Non-Member Analyst, Non-Member Economies Division
Economies Division DIRECTORATE FOR FOOD, AGRICULTURE AND
DIRECTORATE FOR FOOD, AGRICULTURE AND FISHERIES
FISHERIES Email : Michael.RYAN@oecd.org
Email : Jean-Paul.PRADERE@oecd.org
Ms. Olga MELYUKHINA Ms. Uma DIXIT

Consultant, Non-Member Economies Division Consultant, Non-Member Economies Division
FISHERIES FISHERIES
Email : Olga.MELYUKHINA@oecd.org Email : agr.consultnme@oecd.org
Mlle. Florence MAUCLERT Ms. Anita LARI

Statistical Assistant, Non-Member Economies Division Assistant, Non-Member Economies Division
FISHERIES FISHERIES
Email : Florence.MAUCLERT@oecd.org Email : Anita.LARI@oecd.org
Ms. Stefanie MILOWSKI

Assistant, Non-Member Economies Division
DIRECTORATE FOR FOOD, AGRICULTURE AND
FISHERIES
Email : Stefanie.MILOWSKI@oecd.org
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5IF%FWFMPQNFOU%JNFOTJPO

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

This OECD Global Forum on Agriculture, held 30 November 1 December 2005 in

Part I. Setting the Scene ................................................................................................................. 21

Chapter 2. Policy Coherence for Development: Issues in Agriculture

Chapter 3. Policy Coherence for Development: Making it Work

Chapter 4. Policy Coherence for Development: What it Means for Farmers

Chapter 5. Policy Coherence for Development: What it Means to the Poor

Part II. Enhancing Global Agricultural Trade Through a Fair and

Chapter 7. How can Policy Coherence Enhance Global Agricultural Trade?

Chapter 8. Policy Coherence for Development: Issues for Brazil

Chapter 9. Policy Coherence for Development: Issues for China

Part III. Contributing to the Millennium Development Goal of

Chapter 11. How can Policy Coherence in Agriculture Contribute to the

Chapter 12. Food Grain Surpluses, Yields and Prices in India

Annex. Agenda and List of Participants..................................................................................... 241

Liste des Participants / List of Participants..................................................................................... 248

The OECD Global Forum on Agriculture, held on 30 November 1 December 2005,

Le Forum mondial sur lagriculture, qui sest tenu les 30 novembre et

Toutes ces questions sont au cur du cycle de ngociations commerciales

Coopratives de la Thalande) a fait observer que la cohrence des politiques constitue,

PART I. SETTING THE SCENE

Mandate, meaning and method

Why the OECD? Contributing to development is a key objective of the OECD. As an

promotion of mutually supportive policies across government to help achieve mutually

Institutional approaches to PCD

Box 4. Analytical framework: institutional mechanisms to

Source: OECD, 2005b.

Sectoral approaches to examining PCD

This paper touches upon a number of sectoral work-streams at various stages of

Regional and country case-based approaches

A series of regional studies of coherence are underway to focus on the impacts of

Monitoring and evaluation

Concluding remarks: future challenges

Coherence is most effective when it is practiced by both developing and developed

Policy coherence for development is a process whereby a government, in pursuing its

What we are discussing

Table 1 presents a typology of agriculture and agricultural-related policies relevant to

Table 1. Policy coherence between agriculture and development policies a framework

Policy actor Policy domain Examples of policy instruments affecting agricultural

Policy coherence analysis in agriculture requires an understanding of the ways in

Source: Adapted from Brooks, 2003.

The status of agricultural policy

Table 2. OECD indicators of support to agriculture

Indicator 1986-88 1993-95 2002-04

Figure 2. Changing composition of OECD producer support

Source: OECD, PSE/CSE database, Paris, 2005.

Developing country impacts of OECD agricultural country policies

Table 3. Effect of varying model assumptions on welfare gains from global

USD billion 2015 Base 2001 Scaled 2001 GTAP GTAP

Gainers and losers

multilateral reduction in trade barriers. They are fundamentally a short-term solution,

Tariffs applied by EU25 US Asia developed Cairns developed

Source: Chaplin and Matthews, 2006, based on Eurostat.

PREPARATIONS OF MILLING INDUSTRY

Source: Chaplin and Matthews, 2006, based on Eurostat.

Table 5. Welfare effects of the Harbinson proposal, USD million

EU US Tanzania Uganda Rest of SSA

Just examining the aggregate welfare impacts on developing countries may

Development co-operation policy

preference erosion is a bilateral or multilateral responsibility. Because the most important

Developing country policy coherence

Policy coherence analysis for agriculture