Rice Dumping in Haiti and the Development Box Proposal
Study prepared by Celine Charveriat and Penny Fowler for the Friends of the development box. March 2002.
The proposal to incorporate a Development Box in the WTO Agreement on Agriculture (AoA) aims to ensure that there is sufficient flexibility in world agricultural trade rules for developing countries to address their food security concerns and to preserve and improve rural livelihoods.
The case of agricultural trade liberalisation in Haiti demonstrates the devastating impact that overly rapid market opening to imports of a food security crop, in this case rice, can have on the livelihoods of large numbers of rural people who have few alternative livelihood opportunities. It also shows the enormous costs of pushing for agricultural import liberalisation in developing countries, while developed countries, in this particular case the United States, are allowed under the AoA to subsidise and dump agricultural products on the world market.
This note aims to frame the experience of Haiti in relation to the issues that the Development Box aims to address, and the instruments that the Development Box may include. As the WTO negotiations on agriculture proceed and developing countries are pushed to reduce their bound tariffs, a key concern is to allow poor countries, such as Haiti, to protect small Low Resource/Income Poor farmers against the effects of continuing agricultural dumping by developed countries and pursue policies aimed at improving food security and reducing rural poverty, including through the use of targeted subsidies and border measures.
Rice is a key food security crop in Haiti, and is grown primarily by small farmers
Haiti is the poorest country in the Western Hemisphere
Rice production provides livelihoods for around 20% of the population
II- Impact of trade liberalisation on the rice sector in Haiti
Haiti has undergone a rapid trade liberalisation process and is now one of the most open economies in the world: this has resulted in a huge increase in rice imports and a reduction in domestic rice production.
Tariffs on rice imports were cut from 35% to 3% in a single stroke in 1995 with devastating effects on producer prices, domestic production and the livelihoods of small farmers
Local rice production decreased from more than 110,000 tonnes in 1985 to around 80,000 tonnes in 1995 with negative impacts on small producers
Benefits to poor consumers of cheap rice imports, which have been substantial at the start of trade liberalisation, are now rapidly decreasing, especially among the poorest of the poor, who live in rural areas.
Table 1: Comparison of local and imported rice prices (gourdes per pound)
Source: IMF, 2001 ‘Haiti: Selected issues’.
Food dependence in Haiti is reaching an unsustainable level: almost half of Haiti’s food needs are met through imports and food represents 43% of all imports.
In the near future, Haiti could fall into a vicious circle of macroeconomic imbalance, food and aid dependency.
There has been a lack of public support for and investment in the Haitian rice sector over time. This has affected the ability of small rice producers to improve their productivity and increase domestic production
In addition to US rice dumping, the rice sector in Haiti faces a number of constraints to increasing production including the following issues mentioned by farmers interviewed by Oxfam:
III- Relevance of the Development Box Proposal
The development box specifically aims at providing developing countries with enough flexibility to protect the production of food security crops and of livelihoods Low Resource/Income Poor farmers in developing countries. This perfectly fits the case of the Haitian rice sector.
It is clear that, to date, developing countries have come under more pressure to implement rapid agricultural trade liberalisation from WB/IMF programmes than from the WTO AoA. Haiti was required to liberalise its rice tariffs under an IMF structural adjustment programme rather than because of its WTO commitments. Its current applied tariff is 3%, and its bound tariff 50%.
While Haiti could in theory increase its tariff to its bound level, its dependence on IMF/WB financing would make it difficult for them to reverse their policy, unless WTO rules clearly reaffirmed the rights of poor countries to use trade instruments to pursue food security and rural poverty reduction objectives.
However, it is important that the forthcoming WTO negotiations do not lock in Haiti’s tariffs at the current applied rates and leave the Haitian government flexibility to raise rice tariffs in the future if they choose, on the grounds that Haiti’s domestic support is below the de minimis level and the need to protect large numbers of small producers of a food security crop from unfair competition from subsidised US rice imports.
If Haiti faces difficulty in sourcing sufficient quantities of affordable rice from the world market due to foreign exchange constraints, it may decide to pursue a different strategy of protecting and promoting domestic production. Haitian rice producers have requested that tariffs be raised at harvest time to provide them with a degree of protection from cheap imports. Some donors have recommended that the government should raise tariffs to 20-25% in order to secure higher producer prices, but the IMF and World Bank continue to push for a low tariff policy.
Finally, it is crucial that Haiti retains flexibility to use targeted subsidies to assist Low Income/Resource Poor farmers in terms of productivity, transportation and marketing. Even if the current flexibility has not been used by the government due to lack of budgetary funds, this situation could change in the future thanks to increased availability of donor funds.
The DB would provide Haiti with a guaranteed option under world trade rules to adopt an alternative strategy of protecting domestic rice production in the future as a means of securing higher producer prices and promoting rural livelihoods. Moreover, a clear reaffirmation of the validity of such policies by WTO rules would enhance the negotiating position of Haiti when faced with the pressure of IFIs.
Jean Marie Robert Chery. Study of the Impact of Trade Liberalisation in the Rice Sector. May 2001. Research commissioned by OXFAM.
Field research done by OXFAM in March 2001 in the Artibonite Valley.
OXFAM. 1999. Impact des mesures de libéralisation sur la sécurité alimentaire, l’environnement et la vie des petits producteurs ruraux.
IMF. January 2001. Haiti: selected issues. IMF Staff Country Report no.01/04. Washington D.C.
FAO. 2001. The State of Food and Agriculture. Rome.
RESAL. December 1998.Food Security diagnosis.
Grassroots International. Feeding Dependency, Starving Democracy. USAID policies in Haiti. May 1996