Agri-Marketing: Curable Gaps between the Cup and the Lips

Dr BK Mukhopadhyay

A noted management economist and an international commentator on business and economic affairs. He may be reached at m.bibhas@gmail.com

It remains a matter of deep regret that in spite of latent potentialities developing world cannot make much headway. Ignorance about the main tenants of international marketing, faulty planning and poor implementation of the same, among others, did not allow economies like India to make the desired foray into the vast international markets. The sincerity on the part of the Governments is not questioned on this score in as much as, for example, India’s latest Foreign Trade Policy had some newness indeed. But that what is lacking is absence of a proper regional development plan which could enable the implementation agencies to move systematically.

As the things stand now, in the overall sense the reality also is not good to note - a prominent feature of agricultural commodity exports in many developing countries is that relatively few commodities account for a large share of total export earnings. Often they depend, rather continue to depend, on a small number of agricultural commodities for their merchandise export revenues. The sluggish demand for primary agricultural commodities and the recurring conditions of boom and slump in their exports have created problems for commodity-dependent economies. Unstable commodity prices and export earnings are well known to make development planning more difficult and to generate adverse short-term effects on income, investment and employment.

What is more, with slow demand conditions, countries specializing in production of primary commodities can be expected to have a declining share in world trade unless they have a major cost or quality advantage over competitors.

Integrated Scheme for Agricultural Marketing aims to (i) promote agri-marketing through creation of marketing and agribusiness infrastructure including storage, (ii)incentivize agri-market reforms, (iii) provide market linkages to farmers, (iv) provide access to agri-market information and (v) support quality certification of agriculture commodities.

Definitely: fears are not unfounded: many developing countries complain that their exports still face high tariffs and other barriers in developed countries’ markets and that their attempts to develop processing industries are hampered by tariff escalation (higher import duties on processed products compared to raw materials). They want to see substantial cuts in these barriers.

Side by side: some smaller developing countries have expressed concerns about import barriers in developed countries falling too fast. They say they depend on a few basic commodities that currently need preferential treatment (such as duty-free trade) in order to preserve the value of their access to richer countries’ markets. If normal tariffs fall too fast, their preferential treatment is eroded, they say. Some developing countries see this situation as almost permanent. Others view it as a transition, and are calling for binding commitments on technical and financial assistance to help them adjust, including the creation of a technical assistance fund for the purpose.

A number of countries view that World Trade Organization (WTO ) - the only global international organization dealing with the rules of trade between nations - at its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments, where the very goal is to help producers of goods and services, exporters, and importers conduct their business]should see that arrangements should be more flexible so that developing countries can support and protect their agricultural and rural development and ensure the livelihoods of their large agrarian populations whose farming is quite different from the scale and methods in developing countries. They argue, for example, that subsidies and protection are needed to ensure food security, to support small scale farming, to make up for a lack of capital, or to prevent the rural poor from migrating into already over-congested cities.

At the same time it may be noted that a number of developing countries that depend on imports for their food supply are also concerned about possible rises in world food prices as a result of reductions in richer countries’ subsidies. Although they accept that higher prices can benefit farmers and increase domestic production, they feel that their concerns about food imports need to be addressed more effectively.

Some developing countries make a clear distinction between their needs and what they consider to be the desire of much richer countries to spend large amounts subsidizing agriculture at the expense of poorer countries. Whatever is: it is clear that subsidy cannot be a lasting solution; at best it can give short term benefits. Once it is stopped there would be hue and cry because the recipients were attuned to that and old habits die hard! So why not to restrict the same at the initial stages only??

United Nations MDG Gap Task Force Report expresses concern about the harmful effects on MDGs of the continued high level of trade-distorting subsidies by OECD countries. Even when subsidies are targeted at locally consumed products, they still represent a barrier to trade and thus limit access for developing country exports. By boosting production in developed countries, subsidies crowd out developing country production and lower commodity prices below their market rate. Furthermore, subsidized agricultural imports from developed countries compete unfairly with local producers. They can therefore contribute to undermining the productive capacities of poor countries, deterring investments in their agricultural sectors. Many of the above factors potentially aggravate food security problems.

The UN recognised that though EU has made progress on subsidies and tariffs affecting poor countries. However, in many areas, market access remains insufficient. Much remains to be done to remove remaining distortions, whilst EU rules and regulations are frequently too complex for producers in developing countries to navigate.

Simultaneously, efforts made to reduce tariffs in order to open doors to imports from developing countries should not be jeopardized by putting in place new non-tariff barriers. For example, stringent standards not fully justified by health and safety concerns should be reviewed since they are often too costly for small farmers from the poorest developing countries to apply and therefore de facto shut them out of European markets.

Of late, however, the silver lining is that WTO statistics, on the other hand, confirms that developing countries as a whole have seen a significant increase in agricultural exports. Agricultural trade rose globally and out of this, developing countries’ share of world agricultural exports increased.

It is also a fact that in case of some individual developing countries agricultural trade balance deteriorated — their imports have risen faster than their exports. It is positive to mention here that the WTO Committee on Agriculture also regularly reviews actions within the framework of the decision, in such areas as technical and financial assistance provided by industrialized countries to least-developed and net-food importing countries to assist in improving their agricultural productivity and infrastructure

Is it not a well known fact that global hunger is not the result of insufficient food supplies but of their uneven distribution across the globe: 1.02 billion people are going hungry entirely unnecessarily? 70 percent of the world’s poor live in rural areas; a healthy agricultural sector is of paramount importance to their sustainable development and food security and to reducing global poverty.