Africa's agriculture and value addition magazine

Hope for Africa as rich nations agree to end farm subsidies

Posted in Policy & Legislation

AFRICA - African nations Thursday won a major concession at the World Trade Organisation’s (WTO) Nairobi ministerial conference after rich countries agreed to phase out market-distorting farm subsidies in five years.

Negotiators representing rich countries tentatively settled on 2020 as the last date by which their taxpayers will be shouldering the burden of farm subsidies, putting the world on the cusp of concluding one of the longest and most difficult trade agreements the WTO has negotiated.

 “That is the progress so far,” said World Trade Organisation’s spokesperson Rockwell Keith. “The eventual wording may change but that is what has been presented to the ministers for approval.”

The offer, if approved by Trade ministers, will put to rest the long-standing dispute that has stalled global trade negotiations in the past 14 years.

Scrapping agricultural subsidies promises African growers a level playing ground in the agricultural sector that generates the bulk of the continent’s food and employment. Agriculture accounts for a quarter of Kenya’s GDP.

In reciprocation, poor states such as Kenya will be required to eliminate their support to farmers in eight years, with 2023 as the closing date.

That means the Sh3 billion that Kenya spends on fertiliser subsidy and the Sh1 billion certified seed support, for instance, will no longer be factored into the budgets of national or county governments.

Export development and promotion schemes that poor nations have used to attract foreign direct investments and boost the sale of industrial products in the global market will also have to go in the push for a level playing ground.

In Kenya, it costs about Sh100 billion a year in forgone taxes and direct budgetary allocation to sustain subsidy schemes.

The Export Promotion Zone, which offers investors a 10-year tax holiday, is one such scheme that will be scrapped under the trade-offs made by the negotiators.

“Generally, any export support programme that is crafted to last longer than 18 months will have to be removed,” said Mr Rockwell.

The concessions are based on a list of 15 items that the WTO Secretariat prepared ahead of the Nairobi forum. 

Other items on the list are financial and technical support to enable the least developed states access global markets, the information and technology agreement passed late Wednesday and the environmental goods agreement on which negotiations are expected to resume in January.

Kenya’s foreign affairs minister Amina Mohamed will read the ministers’ final declaration this morning.

 “Members still maintain hard positions and negotiations are still going on but the draft we have so far shows that members have not made significant changes to the agenda that WTO brought to Nairobi,” said Mr Rockwell.

Farm subsidies are a hot political issue in economies like the US and the EU where farmers have formed strong lobbies to bargain for favourable policies.

The US taxpayers part with about $20 billion annually to finance farming operations, according to recent data compiled by the US Government Accountability Office. The EU on the other hand spends about 40 per cent of its budget on farm subsidies.

Under the text that largely reflects the draft agenda that the WTO prepared for the Nairobi forum, subsidies on cotton will be the first to go by July next year.

The WTO Secretariat announced the offers Thursday as group of civil society groups claiming to represent farmers poured onto the streets of Nairobi to protest the dominance of multinational corporations in all spheres of agriculture.

Steady supply of food

 “We will not allow corporate dominance of our farms,” members of a group called Kenya Small Scale Farmers’ Forum shouted as they made their way through the streets.

Despite criticism of the West, the farm subsidies have ensured a steady supply of affordable foodstuff to developing countries, including Africa, which imports more than 80 per cent of its annual consumption.

If rich nations make good their pledge to cut farm subsidies, the onus will fall on the African states to ramp up their production to plug domestic shortfalls even as they try to ride the level ground and grow agriculture exports.

It is estimated that 60 per cent of Africa’s arable land lies fallow and the majority of growers still rely on rain-fed production.

African governments have a daunting task of turning their agriculture into viable commercial sectors within the eight-year subsidy phase-out period — a goal that has eluded them since independence.

 “Once our farmers are certain that they can compete fairly in all the markets across the world, they will be motivated to expand their farms and produce in large quantities,” said Ghanaian Trade and Industry minister Ekwor Spio-Garbrah.

The African Group also won a long-fought battle to rein in illegal fishing on its shores after top fishing states struck a deal to immediately cut subsidies to fishing “that negatively affect overfished fish stocks.”

 “We will also seek to prohibit subsidies to vessels or operators engaged in illegal, unreported and unregulated fishing, and we commit not to provide any such subsidies,” said the Fishing States Ministers in a statement.

Kenya alone estimates that about Sh10 billion worth of fishery stocks are trawled away illegally from its poorly regulated portion of the Indian Ocean every year.

Australia, Argentina, Canada, Colombia, Costa Rica, Fiji, Iceland, Mexico, New Zealand, Norway, Pakistan, Paraguay, Papua New Guinea, Peru, Solomon Islands are among the states that made the commitments seeking to curb illegal fishing.

Others are Switzerland, United States, Uruguay, Vanuatu and OECS Economic Union WTO Members (Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, St Lucia and St Vincent and the Grenadines).