Initiative for Policy Dialogue and the South Centre Working Paper, March 2013

This paper: (i) examines the latest IMF government spending projections for 181 countries by comparing the four distinct periods of 2005-07 (pre-crisis), 2008-09 (crisis phase I: fiscal expansion), 2010-12 (crisis phase II: onset of fiscal contraction) and 2013-15 (crisis phase III: intensification of fiscal contraction); (ii) reviews 314 IMF country reports in 174 countries to identify the main adjustment measures considered in high-income and developing countries; (iv) discusses the threats of austerity to development goals and social progress; and (v) calls for urgent action by governments to adopt alternative and equitable policies for socio-economic recovery.

This issue of South Bulletin focuses on how developing countries in Asia, Latin America and Africa are now facing an economic slowdown with a deterioration in GDP growth, exports and lending conditions.  The effects of the Eurozone recession and the US slowdown are now increasingly felt in the South.

Global food prices have been rising steadily since 2002 and during 2007 and 2008 only, food prices rose by 52 per cent. Spiralling food prices have led, in the past few months, to global hot spots of unrest in many developing countries.

With every crisis, there is an opportunity. This is why the causes of the current crisis must be properly analysed and understood. The South must seize this opportunity to rethink concepts such as self-reliance, self-sufficiency and food sovereignty and to reflect on aspects of the global environment which have led countries to prioritise the production of food over export crops, and imports over local production, and which have affected national ownership and control over main resources for food production.

The 1 August issue of the South Bulletin: Reflections and Foresights focuses on the collapse of the WTO Mini-Ministerial Meeting in Geneva and the successfully concluded 15th Ministerial Meeting of the Non-Aligned Movement (NAM) in Tehran. 

The Editorial by Executive Director of the South Centre is on "Non-Aligned Movement and the Collapse of the Doha Round" while the Op-Ed piece is on "Population, Production and Price Dimensions of Food Security" by Jean Feyder, Ambassador and Permanent Representative of Luxembourg to the UN Mission in Geneva.

Analysis and commentaries appearing in the Bulletin, include those on An Old WTO for a New World?; World Bank Climate  Investment Funds: Corporocracy to Carbocracy; IP Rights in Standards Impede Competition; The ASEAN Charter: Where To, What Next?; and on ‘Agricultural Revolution’, Japan’s Rescue Package for Africa.

Research Papers 12

EXECUTIVE SUMMARY

Horticultural trade, especially fresh fruits and vegetables from Sub-Saharan African to European market, has received a great deal of attention over the past decade due to the rapid and sustained growth of its exports to Europe. This impressive growth has undoubtedly contributed to increased national incomes and has reduced rural poverty in Sub-Saharan Africa. Good examples in this respect are Kenya, South Africa and, to some extent, Zimbabwe. Despite this growth, the inclusion and proportion of the rent obtained from this lucrative business for smallholder farmers, who in the past used to be the major players, have been worsening over the span of the horticultural trade. One of the major contributing factors is the recent changes and dynamism of the global governance of fresh fruits and vegetables value chain. The changes of governance of global value chains for FFV from the market based coordination to the explicit vertically integrated coordination, coupled with other factors such as stringent phytosanitary measures, private standards like EurepGAP, and the increased consumers’ demand and choices, have led to the exclusion of smallholder farmers in the value chain because of their failure to comply with different requirements and standards. This poses a potential threat to the efforts of addressing chronic poverty and well being of the rural poor in the region.

Thus, the purpose and scope of this paper were: to investigate, compile and analyze concrete evidence regarding the nature of changes in the governance of fresh fruits and vegetables value chain and their causes; to identify the opportunities and challenges stemming from these changes and what determine success and failure in the new future governance and architecture; to see how the competitive advantage of FFV producers is affected by the changes in the governance of FFV value chains; to discuss the implication of the changes for the aspirations of economic diversification of commodity dependent developing countries. Finally, the paper provides recommendations on copping mechanisms, private sector strategies, and public policy responses that would enable developing countries’ producers, taking into account ownership and equity considerations, to appropriate a fair share of the rents in the FFV value chains.

 

Research Papers 1

INTRODUCTION

A number of developing countries,1 and especially least developed countries (LDCs), rely on agriculture for their food security, export earnings and rural development. It has been estimated that the agricultural sector accounts for between 30 per cent and 60 per cent of gross domestic product (GDP) for many of these countries, and is the major source of foreign exchange. The Food and Agriculture Organization of the United Nations (FAO) (2002) noted that the economies of many developing countries depend on the exports of one or a few commodity exports, making them particularly vulnerable to price variations on specific commodities. It noted that single commodity-dependence is more pronounced in tropical regions, and notably so for specific tropical products including sugar, coffee, bananas, cotton lint and cocoa beans. The variability and decline of commodity prices is well documented (FAO, 2005). It erodes the competitiveness of commodities exported from non-subsidizing developing countries, discourages investment and expansion of their food exporting sectors and, in the event that developing countries depend heavily on agricultural exports, worsen their terms of trade.

According to the FAO’s State of Agricultural Commodity Markets (2005), the variability and decline in international agricultural commodity prices has serious implications for developing countries that are highly dependent on commodity export earnings, especially from traditional tropical crops. Since tariff escalation in agricultural markets is regarded as one of the major factors hindering the processing of traditional products for export, analysts have explored the potential for exporting non - traditional fresh fruits and vegetables to QUAD countries (Canada, the EU, Japan and the United States). These are valid alternatives because first, tropical fruits and vegetables are not usually cultivated in QUAD countries and therefore, their trade is not distorted by domestic producer support measures. Secondly, consumer tastes in QUAD countries are diversifying into ‘exotic’ tropical fruits and vegetables. The FAO for example, is currently helping market players to develop international trade for organic mangoes and pineapples produced in Sub-Saharan Africa.

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