Home > FEATS Second Geneva International Conference > Full Statement by Pascal Lamy...
 

Full Statement by Pascal Lamy, DG of the WTO at
CUTS FEATS Conference
Geneva, 21 February 2011

Director-General Pascal Lamy, in opening the conference on “Harnessing Agriculture for Development through Trade” sponsored by CUTS in Geneva on 21 February 2011, said that “the Doha Round will help level the playing field for Africa, correcting historical injustices in the world trade rule-book”. He also said that “African agriculture needs to become more efficient, and in that efficiency it needs to discover ‘specialization’”. This is what he said:

Ladies and gentlemen,

It is my pleasure to be here with you today. When CUTS invited me to deliver the opening address for the launch of its latest publication on agriculture in Africa, my first instinct was a cautious one. I need to see that publication first, I said. And when I read it, I can assure you, there was no way I was going to decline.

The publication responds to a question that I had put my own staff to research almost as soon as I took up my post at the World Trade Organization: why has Africa become a net-food importer, I asked. What explains this situation? Africa, as you know, became a net-food importer in the 1980s, when the prices of its key commodity exports tumbled and its agriculture slowed down. Its food trade deficit is now in the ballpark of USD 20 billion. The publication that we collectively launch today goes a long way towards answering a question that has long been on my mind. I personally congratulate the authors.

Prior to commenting on the specifics of the publication, and offering my thoughts on African agriculture more generally, I'd like to start by framing the discussion. While it is indeed interesting, if not vital, to understand how Africa moved from being a net-food exporter, to being a net-importer, the goal of this discussion should not be how to bring Africa back to export supremacy. Rather, the goal should be to see how African agriculture can become more efficient and competitive. Efficiency and self-sufficiency are two different concepts.

To explain, a country can have a perfectly efficient and competitive agricultural system but still be an important importer of food, or even a “net-importer.” These issues are not tied. Europe, for example, exports 9% of the world's food, and imports 12%. The United States exports 10% and imports 8%. Being a food export power-house does not preclude being a major importer too.

Students of economics are taught this concept in an amusing way. Take Einstein and his Assistant is what professors often say. Einstein is so incredibly smart, he can do everything better than his Assistant (or, in fact, better than most of us I would say!), all the way from creating science to processing documents. But while Einstein can indeed do everything better, it makes no sense for him to live without an Assistant. It makes no sense for him to become self-sufficient. Why is that? Because while he is able to create 20 times more science than his Assistant per minute, he only outpaces the Assistant by 10 in the processing of documents. The world benefits far more, therefore, when all his time is dedicated to what he is so much better at doing, which is science, than to having him write, type and edit his own letters too!

The same for Africa. African agriculture needs to become more efficient, and in that efficiency it needs to discover “specialization.” It would make no sense for Africa to produce everything for itself, just as it makes no sense for Einstein to process documents too.

I would add another point to the “framing” of the discussion before going to the publication. African agricultural exports, as a fraction of Africa's total merchandise exports, have also fallen sharply over the years. From 1960 to today, that share fell from 42% to 6%. But I would also caution on how we assess this statistic. This, in and of itself, is not a bad sign. In fact, it simply mirrors what has happened at the global level. In 1960, agriculture was about 50% of world trade, and today is only about 6%. All this says is that the world, as well as Africa, have industrialized.

Turning now to the publication, I would say that, through its five country case-studies, it gives us a wealth of information to work with. Amongst its principal findings are that African agriculture has been shackled by: (1) colonial patterns of trade that have locked Africa into commodity exports; and (2) macroeconomic and trade policies aimed at import-substitution and food self-sufficiency that have achieved the exact opposite of their goal. In taxing agriculture, and shielding it from international competition, these policies made African agriculture less competitive. In Africa, Einstein became, at once, the creator of science and the documents processor; producing much less science than before.

The publication documents incredible infrastructural bottlenecks in Africa, which for trade in perishables is a very serious problem. It also documents the limited regional food trade that exists in Africa, sometimes because of a lack of product complementarity, but sometimes also because of a simple lack of regional integration. And I have often heard it be said that it is a shame that a food-surplus country can sit, side-by-side, with a food-deficit country in Africa, and be unable to trade. Shortages to agricultural inputs are also a problem, many of which are imported. In fact, from first-hand experience, I know that animal vaccines and improved seeds in Africa are often considered a luxury.

The publication also puts an astonishing statistic on the table. It says, I quote, that “about 80% of trade in agricultural produce and food in the East African region is informal and not statistically recorded.” Clearly, these are all issues that are in need of our urgent attention.

Stagnant agriculture, combined with a population growth rate in the continent that is higher than the world average, is obviously leading to food insecurity. The publication tells us, for instance, that food prices in Kenya are amongst the highest in Sub-Saharan Africa. In fact, as you all know, expenditure on food in Africa is a very high percentage of total expenditure, and much higher than in the OECD. In Gabon, it is about 50% of the total expenditure. Clearly, therefore, food security is also about food “affordability.” Greater competition and international trade helps brings down the price of food.

And I have often disagreed with the United Nations Rapporteur on the Right to Food, when he has said that (I quote) “the world needs to end its addiction to cheap food.” In many parts of the world, people pray that their food will become cheaper.

African agriculture has clearly gone through various phases. A phase of state-control and import substitution in the 1960s, in which Africa's food-deficit started building, followed by the Structural Adjustment era of the 1980s. This era was marked by the gradual privatization of state-owned farms, and the dismantling of marketing boards for key commodities. However, Africa's food-deficit has persisted. But what preoccupies me the most is that its agricultural productivity continues to languish.

The CUTS study sets out a very important menu of recommendations for our consideration. The need to increase agricultural productivity, to promote regional trade, to “facilitate” trade through better infrastructure, and the need to educate and build the capacities of farmers and traders. But the need to rapidly conclude the Doha Round of trade negotiations features too in this menu. It is referred to as a priority.

Contrary to what some have been saying about international trade somehow being responsible for the plight of African agriculture, this publication as well as several others demonstrate that import-substitution policies and lack of investment in agriculture have been the principal culprits.

In my view, here is how the Doha Round can make a modest contribution to helping lift Africa's agriculture. It will give least-developed countries duty-free, quota-free, access to export markets. It will deal with the colonial patterns of trade referred to in the study by reducing the phenomenon of tariff escalation. The high tariffs imposed on processed coffee and chocolate, relative to coffee and cocoa powder, for example. The Doha Round will also reduce the subsidies of the rich world that have made it difficult for Africa to compete on international markets, and flooded African markets with cheap imports. Yes the world needs cheaper food, but food that is produced under conditions of fair competition. In short, the Doha Round will help level the playing field for Africa, correcting historical injustices in the world trade rule-book.

Through Aid for Trade, it is also my hope that the WTO will help address some of the infrastructural bottlenecks that the CUTS study refers to. In an Aid for Trade success story, we have managed for example to better link Mali's mango exports to markets, through the introduction of refrigerated containers. We have managed in Lesotho to help farmers add value to mushrooms by exploring and exploiting their medicinal potential. But, clearly, there is much more for us to do.

Ladies and gentlemen, let greater efficiency be the aim. And I will certainly be apprising myself of your deliberations today. A final word of congratulations to Pradeep Mehta for his tireless efforts to shed more light, through CUTS, on what are complex debates.

It is my pleasure to be here with you today. When CUTS invited me to deliver the opening address for the launch of its latest publication on agriculture in Africa, my first instinct was a cautious one. I need to see that publication first, I said. And when I read it, I can assure you, there was no way I was going to decline.

The publication responds to a question that I had put my own staff to research almost as soon as I took up my post at the World Trade Organization: why has Africa become a net-food importer, I asked. What explains this situation? Africa, as you know, became a net-food importer in the 1980s, when the prices of its key commodity exports tumbled and its agriculture slowed down. Its food trade deficit is now in the ballpark of USD 20 billion. The publication that we collectively launch today goes a long way towards answering a question that has long been on my mind. I personally congratulate the authors.

Prior to commenting on the specifics of the publication, and offering my thoughts on African agriculture more generally, I'd like to start by framing the discussion. While it is indeed interesting, if not vital, to understand how Africa moved from being a net-food exporter, to being a net-importer, the goal of this discussion should not be how to bring Africa back to export supremacy. Rather, the goal should be to see how African agriculture can become more efficient and competitive. Efficiency and self-sufficiency are two different concepts.

To explain, a country can have a perfectly efficient and competitive agricultural system but still be an important importer of food, or even a “net-importer.” These issues are not tied. Europe, for example, exports 9% of the world's food, and imports 12%. The United States exports 10% and imports 8%. Being a food export power-house, does not preclude being a major importer too.

Students of economics are taught this concept in an amusing way. Take Einstein and his Assistant, is what professors often say. Einstein is so incredibly smart, he can do everything better than his Assistant (or, in fact, better than most of us I would say!), all the way from creating science to processing documents. But while Einstein can indeed do everything better, it makes no sense for him to live without an Assistant. It makes no sense for him to become self-sufficient. Why is that? Because while he is able to create 20 times more science than his Assistant per minute, he only outpaces the Assistant by 10, in the processing of documents. The world benefits far more, therefore, when all his time is dedicated to what he is so much better at doing, which is science, than to having him write, type and edit his own letters too!

The same for Africa. African agriculture needs to become more efficient, and in that efficiency it needs to discover “specialization.” It would make no sense for Africa to produce everything for itself, just as makes no sense for Einstein to process documents too.

I would add another point to the “framing” of the discussion, before going to the publication. African agricultural exports, as a fraction of Africa's total merchandise exports, have also fallen sharply over the years. From 1960 to today, that share fell from 42% to 6%. But I would also caution on how we assess this statistic. This, in and of itself, is not a bad sign. In fact, it simply mirrors what has happened at the global level. In 1960, agriculture was about 50% world trade, and today is only about 6%. All this says is that the world, as well as Africa, have industrialized.

Turning now to the publication, I would say that, through its 5 country case-studies, it gives us a wealth of information to work with. Amongst its principal findings are that African agriculture has been shackled by: (1) colonial patterns of trade, that have locked Africa into commodity exports; and (2) macroeconomic and trade policies aimed at import-substitution and food self-sufficiency, that have achieved the exact opposite of their goal. In taxing agriculture, and shielding it from international competition, these policies made African agriculture less competitive. In Africa, Einstein became, at once, the creator of science and the documents processor; producing much less science than before.

The publication documents incredible infrastructural bottlenecks in Africa, which for trade in perishables, is a very serious problem. It also documents the limited regional food trade that exists in Africa, sometimes because of a lack of product complementarity, but sometimes also because of a simple lack of regional integration. And I have often heard it be said that it is a shame that a food-surplus country can sit, side-by-side, with a food-deficit country in Africa, and be unable to trade. Shortages to agricultural inputs are also problem, many of which are imported. In fact, from first-hand experience, I know that animal vaccines and improved seeds in Africa, are often considered a luxury.

The publication also puts an astonishing statistic on the table. It says, I quote, that “about 80% of trade in agricultural produce and food in the East African region is informal and not statistically recorded.” Clearly, these are all issues that are in need of our urgent attention.

Stagnant agriculture, combined with a population growth rate in the continent that is higher than the world average, is obviously leading to food insecurity. The publication tells us, for instance, that food prices in Kenya are amongst the highest in Sub-Saharan Africa. In fact, as you all know, expenditure on food in Africa is very high percentage of total expenditure, and much higher than in the OECD. In Gabon, it is about 50% of the total expenditure. Clearly, therefore, food security is also about food “affordability.” Greater competition and international trade, helps brings down the price of food.

And I have often disagreed with the United Nations Rapporteur on the Right to Food, when he has said that (I quote) “the world needs to end its addiction to cheap food.” In many parts of the world, people pray that their food will become cheaper.

African agriculture has clearly gone through various phases. A phase of state-control and import substitution in the 1960s, in which Africa's food-deficit started building, followed by the Structural Adjustment era of the 1980s. This era was marked by the gradual privatization of state-owned farms, and the dismantling of marketing boards for key commodities. However, Africa's food-deficit has persisted. But what preoccupies me the most, is that its agricultural productivity continues to languish.

The CUTS study sets out a very important menu of recommendations for our consideration. The need to increase agricultural productivity, to promote regional trade, to “facilitate” trade through better infrastructure, and the need to educate and build the capacities of farmers and traders. But the need to rapidly conclude the Doha Round of trade negotiations features too in this menu. It is referred to as a priority.

Contrary to what some have been saying about international trade somehow being responsible for the plight of African agriculture, this publication as well as several others, demonstrate that import-substitution policies and lack of investment in agriculture have been the principal culprits.

In my view, here is how the Doha Round can make a modest contribution to helping lift Africa's agriculture. It will give Least-Developed Countries duty-free, quota-free, access to export markets. It will deal with the colonial patterns of trade referred to in the study, by reducing the phenomenon of tariff escalation. The high tariffs imposed on processed coffee and chocolate, relative to coffee and cocoa powder, for example. The Doha Round will also reduce the subsidies of the rich world, that have made it difficult for Africa to compete on international markets, and flooded African markets with cheap imports. Yes the world needs cheaper food, but food that is produced under conditions of fair competition. In short, the Doha Round will help level the playing the field for Africa, correcting historical injustices in the world trade rule-book.

Through Aid-for-Trade, it is also my hope that the WTO will help address some of the infrastructural bottlenecks that the CUTS study refers to. In an Aid-for-Trade success story, we have managed for example to better link Mali's mango exports to markets, through the introduction of refrigerated containers. We have managed in Lesotho, to help farmers add value to mushrooms by exploring and exploiting their medicinal potential. But, clearly, there is much more for us to do.

Ladies and gentlemen, let greater efficiency be the aim. And I will certainly be apprising myself of your deliberations today. A final word of congratulations to Pradeep Mehta for his tireless efforts to shed more light, through CUTS, on what are complex debates.

The story can also be viewed at: http://www.wto.org/