the implications for burkina faso of the july 2008 draft agricultural modalities

8/14/2019 The implications for Burkina Faso of the July 2008 Draft Agricultural Modalities

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November 2008l International Centre for Trade and Sustainable Development (ICTSD)

The implications for Burkina Faso of theJuly 2008 Draft Agricultural Modalities

ByAbdoulaye Zonon Centre dAnalyse des Politiques Economiques et Sociales (CAPES)


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ICTSD

November 2008l International Centre for Trade and Sustainable Development (ICTSD)

The implications for Burkina Faso of the

July 2008 Draft Agricultural Modalities

By Abdoulaye Zonon Centre dAnalyse des Politiques Economiques et Sociales (CAPES)


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Citation:Zonon,A(2008).ImplicationsforBurkinaFasooftheJuly2008DraftAgriculturalModalities.

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ISSN1887-3551

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Abdoulaye Zonon The implications for Burkina Faso of the July 2008 DraftAgricultural Modalities

Table of Contents

List of acronyms iv

List of tables v

List of gures v

Executive summary vi

INTRODUCTION viii

1. Domestic support 1

1.1. The situation of agricultural subsidies in Burkina 1

1.2. The status of cotton 3

2. Market access 8

2.1. Market access for cotton 8

2.2. The impact on preference erosion of dierent options for

the liberalization of tropical products 8

2.3. The situation of Cte dIvoire (non-LDC) and its impact on Burkina 9

2.4. Implications of special products, sensitive products and tropical products

and preference erosion 11

2.5. The impact of the draft text on Burkinas major exports 12

2.6. Impact of the special agricultural safeguard (SSG), special safeguard

mechanism (SSM), sensitive products and special products on Burkinas

exports 14

2.7. Implications of options for the Special Safeguard Mechanism 14

2.7.1. Milk 14

2.7.2. Meat 16

2.8. Impact of quota restrictions on Burkinas exports 16

3. Export competition 173.1. Export subsidies and the structure of Burkinas imports 17

3.2. Export companies 17

3.3. Export competition and cotton 17

3.4. Food aid 18

CONCLUSIONS 20

ENDNOTES 21

BIBLIOGRAPHY 22

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List of acronyms

ACP: African, Caribbean and Pacic group

AFC: African Financial Community

AGOA: African Growth and Opportunity Act

AMS: Aggregate Measure of Support (the amber box)

CET: Common External Tari

DAGRIS: Dveloppement des Agro-Industries du Sud (now Geocoton)

DSB: Dispute Settlement Body

ECOWAS: Economic Community Of West African States

EPA: Economic Partnership Agreements

EWG: Environmental Working Group

FCFA: West African CFA franc (monetary unit)

FOB: Free on Board

FSF: Food Support Funds

GAO: Government Accountability Oce

GATT: General Agreement on Taris and Trade

GDP: Gross Domestic Product

IFPRI: International Food Policy Research Institute

INSD: National Institute for Statistics and Demographics (Institut National de laStatistique et de la Dmographie)

LDC: Least Developed Countries

MDG: Millennium Development Goals

NCFS: National Council on Food Security (Conseil National de Scurit Alimentaire)

NOET: National Oce of External Trade (Oce Nationale du Commerce Extrieur)

OECD: Organization for Economic Co-operation and Development

RMA: Risk Management Agency

SAP: Structural Adjustment Program

SFFS: Support Fund for Food Security (Fonds dAppui le Scurit Alimentaire)

SONAGESS: National Society for the Management of Food Security Stocks (Socit Nationalede Gestion des Stocks de Scurit)

SSG: Special agricultural safeguard

SSM: Special safeguard mechanism

US: United States

USDA: United States Department of Agriculture

WAEMU: West African Economic and Monetary Union

WTO: World Trade Organization

ICTSD Programme on Agricultural Trade and Sustainable Developmentiv


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List of tabLes

Table 1: Development of public expenditures in agriculture in Burkina(in millions $US) ................................................................................................................... 1

Table 2: Rate of growth compared to MDGs (in millions $US) ............................................... 2

Table 3: Summary of principal results of simulation models of the impact ofcotton subsidies .................................................................................................................. 3

Table 4: Growth of subsidies for cotton in EU from 1995 to 2004........................................ 4

Table 5: Historic data on cotton and prices FOB.................................................................. 6

Table 6: Domestic subsidies in US for cotton and cotton exports from 1995 to 2004 .......... 7

Table 7: Domestic EU subsidies for cotton and cotton exports from 1997 to 2004(in Euros) ............................................................................................................................. 7

Table 8: US production, consumption and imports (millions of tonnes)................................ 8

Table 9: Formula to assuage tari reductions for developing countries ............................... 9

Table 10: Cte dIvoire taris after the application of the new modality............................... 9

Table 11: List of possible special products of Cte dIvoire................................................ 10

Table 12: Main exports from Burkina ................................................................................. 12

Table 13: Production of meat and poultry in Cte dIvoire and imports from2000 to 2003 .................................................................................................................... 13

Table 14: Evolution of prices in FCFA per unit ................................................................... 15

Table 15: Development of meat imports ($US) ................................................................... 16

Table 17: Food aid received by Burkina (in million $US) ..................................................... 18

List of figures

Figure 1: Exports of meat and poultry from Burkina (in equivalent tonnes of meat)............ 13

Figure 2: Development of Burkinas dairy imports (in $US)................................................. 15


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ICTSD Programme on Agricultural Trade and Sustainable Development

In July 2008, the chair of the agricultural

negotiations, Crawford Falconer, presented anewdrafttextwithrevisedmodalitiesforthe

agriculturalnegotiations.

ThedrafttextproposedbyFalconercontains

changeswhichwillhaverepercussionsonthe

Agreement on Agriculture. It also includes

revised modalities for the various key

sections of the Agreement on Agriculture. It

affects domestic support, market access and

exportcompetition.

Falconers draft agriculture text is a step

forwardintheagriculturalnegotiations.

Intheareaofdomesticsupport,Burkinahasnot

notied any support to the WTO. The current

levelofBurkinascommitmentisonly3.7percent

of the value of agricultural production. With

riotsoverthecostofliving,thegovernmentis

undergrowingpressuretoincreaseitssupport

to agriculture so as to reach the Millennium

DevelopmentGoals(MDGs)(reducebyhalfthe

proportionofpeoplewhosufferfromhunger)

ortorespecttheMaputoDeclaration,(commit

10percentofthebudgettoagriculture).

Burkina,whichhasbeentheprimaryexporterof

cottoninAfrica,willeventuallygainfromthis

textinsofarascottonisgivenspecialtreatment

inaccordancewiththepositionBurkinaholds

in the C4 negotiating group (which includes

Benin, Burkina Faso, Mali and Chad). Therise in prices expected from the reduction in

American subsidies as presented in the draft

text will probably be very limited, since the

reductiononlyinvolvesasmallpartofAmerican

support. The support that the US has notied

infactrepresentsonlyasmallshareoftheir

totalsubsidies.Thegoodmanagementofthe

cotton production system by Burkinas cotton

producers will result in signicant production

increases if prices are protable. The C4 maywant to review its position on the denition

of US subsidies and their proposals for

reducingthese.

Aftercotton,theprincipalexportsofBurkina

are livestock, shea, fruits and vegetables,cerealsandsesame.Thenewtextwillprobablyimpactonalargenumberoftheseproducts.

Livestock exports, which are mainly to CtedIvoireandGhana,willprobablybecompetingwithanimalproductsfromLatinAmericaand

theEuropeanUnion.Tariffreductionsbythesecountries encourage meat imports, as these

will be relatively cheaper compared withbeforehand.Thiserosionoftradepreferences

willalsoaffectmeatproducts.

Leathers and skins are primarily sold in the

European Union and already benet from

importdutiesexemptions.Theirsituationwillnotchangegreatlywiththenewtext.However,

tariff reductions in other importing countriesmay allow a diversication of Burkinas

exportmarkets.

SheaissoldprimarilytoEurope,andBurkina,

as well as its main competitors, will gain bypreferentialaccesstothismarket.Inprinciple,thenewtextwillnotmakeamajorchangetoBurkinassituation.

SesameisexportedfromBurkinatotheEuropeanUnion,andalsotoAsia(NearEast,Japanand

India),wheretariffreductionswillincreasethecompetitivenessofsesamefromBurkina.

CerealsexportedfromBurkinagothesubregion

(Mali and Niger): these are mostly sorghum,milletandcorn.Nothinginthenewtextwill

affectthistrade.Thesameappliesforpeanuts,whicharealsosoldinthesubregion.

Forfruitsandvegetables-mostlygreenbeans

and mangos - the main export market is theEuropeanUnion.Thereisariskofpreference

erosion since the major competitors ofBurkina (India and China) do not benet from

preferentialaccesstotheEuropeanmarket.

Burkina also exports fruits and vegetables

to European countries where it benets from

executive summary

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importdutyexemptions.Theglobalreductionof import duties in developed countries willattract more products that will be relativelymorecompetitive.Thereisthereforeariskof

preferenceerosionforproductsfromBurkina.However,thissituationwillnotaffectBurkinabecause its exports of these products aremarginaltodate.

CtedIvoire,whichistheonlynon-LDCintheWAEMUandisthemajoreconomicpartnerofBurkinainthesub-region,willberequiredbythenewtexttoreduceitsimporttariffs.Thissituation creates a problem for the WAEMUwhichhasaCommonExternalTariff(CET),and

willalsocreateproblemsforBurkinasexportsto Cte dIvoire. Concerning the rst problem,

areformoftheCETmustbeconsideredsoastomaintaintheunityofthesub-region.Peoplearenotpreparedforthiseventuality,allthemoreso because in the ECOWAS group a proposedfth tariff band is under consideration so as

to protect local productsmoreeffectively. Inthe second case, it is feared there will be aloss of preferences for Burkinas exports toCte dIvoire. Livestock (cattle, sheep, goats

and poultry) compete with imports from theEuropean Union and LatinAmerica which areconsiderablycheapereventhoughtheproductsfromBurkinaareofhigherquality.

Forthemoment,Burkinahasnotmadeuseofthe existing safeguard mechanism. A specialsafeguard mechanism would represent anopportunityinthiscase.Giventhedevelopmentofcertainsectors,itisprobablethatBurkina

willtrytoprotectitselffromimportsofcertainproducts,inparticularsubsidisedmilkandmeatfromtheEuropeanUnion.In2003,akilogramofimportedpoultrycost350FCFAcomparedto

1150FCFAforlocalpoultry,andin2008,akilooflocalmeatcost1670FCFA.In2006,thecostofproductionofreconstitutedmilkfromEuropewas200FCFAper litrewhilemilkdeliveredtothedairycost300350FCFA.Thismayresultinincreasesinproduction,generatinginstabilityintheindustriesconcerned.

WiththeStructuralAdjustmentProgramme,allmarketingboardsweredismantled.Companiesexporting raw products (shea nuts, peanuts)

and importing food products were dissolved.As a result, Burkina has practically nomarketingboardsinvolvedin sellingproducts.ThenewtextwillnotchangethesituationinBurkinaevenif itprovides somerelief tothegovernmentinitseffortstosupportthecottonsector,whichisexperiencingamajorcrisis.Torescuethesystem,whichisalmostbankrupt,the government injected 198 million dollarsin2007.

Faced with climatic changes and poor livingconditions,Burkinahasfrequentlyneededfoodaid.Anorganizedsystemisinplacetomanagethis food aid. So far, the greatest amount offood aid has been sold in affected areas atreduced prices. The new text does not allowthe monetization of food aid except in veryspecic conditions. However, monetisation

allowsabetterdistributionofaidbyavoidingpartisanbiaswhentheaidissharedout.

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ICTSD Programme on Agricultural Trade and Sustainable Development

In July 2008, the chair of the agriculturalnegotiations, Crawford Falconer, presented a

newdrafttextwithrevisedmodalitiesfortheagriculturalnegotiations.InApril2007,hehadcirculatedadocumentinwhichheproposedaworkinghypothesiswhich,afterdiscussionwithMembers, would serve as a base for revisingthe text of the agreement. The purpose ofthe document was to encourage Members torespond in order to resume the negotiationssincetheyseemedtobeslowingdownagain.Inhistext,Falconerdiscussedinorderthestateofnegotiationsineachofthreeareaswithintheagriculturalcommitteesbrief,thatis,domesticsupport,marketaccessandexportcompetition.NegotiationshadresultedinFebruary2008ina

rst revision of the draft agriculture modalities.

Thedraftweareconsideringinthisstudyisthethirdrevision.

The proposed draft calls for changes whichmayhaverepercussionsontheAgreementonAgriculture.Itwillcertainlyhaveanimpacton

Burkinaasaleast-developedcountry(LDC).

Burkina is basically a farming country withmorethan80percentofitspopulationworkingintheagriculturalsector.TheGrossDomesticProductforagricultureisabout40percentofthetotal.Farmingismainlycerealproduction(millet,sorghum,corn,riceandfonio)whichrepresentsabouttwothirds(63percent)ofthevalueaddedinthesector.Theseareproducedinaruralsubsistencefarmingsystem.About

15percentoftheproductionistraded.Andatinyshareofthisproduction(1.5percent)isexportedtoneighbouringcountries,orabout10percentofthetotalamounttraded.Cerealproduction has increased slightly, exceptfor corn which has doubled in ten years,partlybecausecornisrotatedwithcottonin

annualplanting.

Cotton is the main source of revenue. It

occupies an area only 17 percent of thatcovered by cereals, but its contribution in

agricultural value added is more signicant (21

percent). The economic inuence of cotton is

also important in generating revenue. Cottonrepresents more than 60 percent of export

revenues.Theseresourcesaretheonlysourceofincomeformorethan250,000smallfamilyholdings,whichthusobtain35percentoftotalfarminghouseholdrevenues.

Almost all farmers are involved in raisinglivestock to varying degrees, in an extensiveproduction system. The size of the herds issignicant (7.3 million cattle; 6.7 million sheep

and 10 million goats). To this can be addedaround37millionpoultry.Livestockproduction

is estimated at 11 percent of GDP. Livestock(liveanimalonly)areexportedtoneighbouringcountries,representinganestimated36billionFCFA($72millionUS)in2005.Salesoflivestockare the primary source of income in ruralhouseholds.Itcreates27percentoftheirtotalcash ow, compared to 16 percent for farming.

The draft proposal sets out modalities forkeysectionsoftheAgreementonAgriculture,

affectingdomesticsupport,marketaccessandexportcompetition.

Thisstudyexaminestheimpactthesemeasureswilleventuallyhaveonthe agriculturalsectorinBurkinaaswellasonagriculturalpolicies.

Specically, it will focus on the follow-ingissues:

i. Domesticsupport

Will the draft involve changes in domestic supportinBurkinaandwhataretheprobablerestrictionson

domesticsupport?

What are the implications for Burkina of changes in

overall support levels in the US and Europe for specic

productssuchascotton?

Will Burkina gain from new exibilities for developing

countriesinGreenBoxsupport?WillitaffectBurkinas

policiesinthefuture?

Will export subsidies change the structure of Burkinas

exports?

Will this have a greater impact on cotton than other

crops?Inwhatway?

ii. Marketaccess

What would be the implications for trade ows of the

variousoptionsfortropicalproductliberalisationand

introduction

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preferenceerosion?Whichproductswillbeaffected,

towhatdegreeandinwhichmarkets?

Given that other members of WAEMU and ECOWAS are

notLDCsandhavetoreducetheirtariffsattheWTO,

willBurkinahavetoreduceitstariffstomeetthe

conditionsofthe CET?Whichproductswillbe mostaffected? How will Burkina be affected by certain

exibilities for these countries, such as those for

specialproductsandsensitiveproducts?

How will the overlap of sensitive and tropical products

beaffectedbypreferenceerosion?

How will the different elements proposed in the draft

textaffectBurkinasmainexports?

What might be the consequences of the special

agricultural safeguard (SSG), the special safeguard

mechanism (SSM) and sensitive products for

Burkina? Concretely, what will these exibilities and

restrictionsimply?

What are the implications of the options for the special

safeguard mechanism? How willWTO commitments

interact with EPA commitments and exibilities for

sensitiveproducts?

How will the commitment to duty-free, quota-freemarketaccessaffectBurkinasexports?

How would tariff escalation provisions, tariff rate

quota (TRQ) administration and tariff simplication

languageaffectBurkinaFasosexports?

Exportcompetition

HowwillBurkinabeaffectedbytheproposalfor new restrictions on export competition?Specically, what are the consequences for

food aid, export nancing, export subsidies and

exportmarketingboards?

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1ICTSD Programme on Agricultural Trade and Sustainable Development

Burkina has not notied any domestic support

to the WTO. The country has no scheduleddomesticsupportwithintheWTOscategories.In fact, with structural adjustment programs(SAPs) in place since 1991, the State haswithdrawnfromtheagriculturalsectorandhasliberalizedit.Subsidies,notablyforfertilizer,havebeenalmostentirelyeliminated,evenifthegovernmenthasinrecentyearsoccasionallyprovided them. It is worth noting that thesesubsidies were often just provided at specic

moments in time and were therefore notincludedinthegovernmentbudget.

With Burkinas agriculture being under-developed, the support of the State and ofdonors has always been necessary for theachievement of development goals related to

food security. This support is handled mainlyby the ministries of agriculture and livestock.Projectsandprogramsareregularlyinitiatedtopromotecertainindustries,forfoodaswellascashcrops.

Someoftheseinitiativesincludemachinerythatis provided at a subsidised price. No preciseestimateoftheamountsexists,butthescopeoftheseprojectsisminor.

Ingeneral,onlyasmallshareofthebudgetisallocatedtoagriculture.Beforetheministryofagricultureincludedsomeenvironmentalissuesinitsportfolio,thebudgetarycontributionstoagriculturedidnotexceed7percent.Thiswasprimarilyusedforcivilservantsalariesandtocoveradministrativeexpensesforagriculture.

1. domestic support

1.1 t ll b

Table1:DevelopmentofpublicexpendituresinagricultureinBurkina(inmillions$US)

2000 2001 2002 2003 2004 2005 2006 Average

MinistryofAgriculture

28026 27872 50148

MinistryofAgriculture+partofenvironment

145620 169336 188405 222813

MinistryofLivestock

5235 5087 8337 13096 10690 10939 11968

Total 33261 32959 58485 158716 180027 199344 234781 128225

Share 5,1% 5,0% 7,1% 15,0% 14,5% 13,3% 14,5% 11,9%

StateBudget 647259 661746 827324 1060060 1245101 1494303 1621995 1079684

Publicsupport

foragriculturaldevelopment

51600 50012 90549 79711 67968

Share 88,2% 31,5% 50,3% 40,0% 45,6%

Source : Statistics Annual of INSD (2006), Ministry of Economy and Finance (2005)

Apparently the public resources earmarked

for nancing agriculture are insufcient

given thescaleof need, at least according to

certain experts and farmers organizations.

Nevertheless, the country has undertaken a

numberofinternationalcommitmentsrequiringamoresubstantialcontributiontoagriculture.

The Millennium Development Goals (MDGs)

commitBurkinatoreducebyhalftheproportion

of people who suffer from hunger by 2015.

BurkinawasasignatorytotheMaputoDeclaration

at the June 2004 Maputo summit, where the

headsofstateandgovernmentsofACPcountriescommitted themselves to allocate within 5


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2Abdoulaye Zonon The implications for Burkina Faso of the July 2008 DraftAgricultural Modalities

years, 10percent oftheir national budgets toagriculture.In2006,duringtheAbjuasummitonfertilizers, African countries including Burkinacommitted to increasing the use of fertilizers

from8to50kg/haby2015.

So far these different commitments have yetto be implemented; according to a study by

IFPRI,thegrowthrateofagricultureinBurkina

is presently 5.4 percent while a rate of 6.8

percentwouldbeneededinordertoreachthe

MDG that relates to the reduction of hunger.

To do this, $2,524 million would have been

neededforagriculture.ToachievetheMaputoobjectives,annualdisbursementsof$282million

areneeded.ItisobviousthatBurkinaisfarfrom

reaching these gures.

Table2:RateofgrowthcomparedtotheMDGs(inmillions$US)

Currentrateofgrowthinagriculture(19902004) 5,2%

AnnualrateofgrowthrequiredtomeettheMDGs 6,8%

AnnualamountofexpensesrequiredinagriculturetomeettheMDGs 2524

AnnualexpendituresrequiredunderMaputoDeclaration(10%ofnationalbudget) 282

Source : IFPRI (See Tidiane Ngaido, 2006)

Theriotsthisyearoverthehighcostofliving

woke the government from its inaction on

agricultural issues. This year, subsidies were

announcedofmorethan16billiontoaidcereal

producerstopurchaseimprovedseed,fertilizer

andpesticidesaswellassupportservices.Also,

another6.5billionwillbegrantedtothecotton

sector,makingatotalof22.5billioninsupportofagricultureinthe20082009campaign.

Thissupport,takentogether,representsonly3.7

percentofthevalueofagriculturalproduction.

Inthecaseofcotton,theStatecommitteda

total sum of 89,284 million FCFA, or around

$198billion,in20062007tokeepthecotton

industry from bankruptcy. The total value of

cottonproductionin2005beforethecrisiswas

$292million.

The government will remain under pressure

to increase its contribution to agriculture so

as to reach the millennium goals or respect

the Maputo Declaration. The government

has already promised to be more involved in

helpingproducerswhousemechanizedfarming

by helping them to acquire tractors, powered

pumps,ploughsandsprayers.

ThenewmodalitiesfortheGreenBoxgivenewopportunitiestodevelopingcountriestosupport

theiragriculture.Burkinacertainlydoesnothavethe means to prot from these arrangements

in the short term despite pressure on theGovernmenttogivemorehelp toproducersinspecialcircumstances.

For example, in disaster situations producershave not beneted from any support other

than food aid. Yet in the mid term thismight be possible, for example through cropinsurancewhichisbeingstudiedbythenationalgovernment. The obvious risks in agriculturalproduction are such that the private sectoris not interested in this kind of market. Thegovernment needs to take the initiative andlatertransferittotheprivatesector.

The government has been involved in several

timelyinterventionsininvestmentsupport,butwishestoexpandthiskindofactivityinordertomodernizeagriculture.

Thenewtextmakesitmoreinteresting,fromalegalperspective,forthegovernmenttomakethesetypesofintervention.

However,forthemomentthegovernmenthasnotannouncedanysupportprogramsintheshorttermormediumterm.Thereisnoregulatorymechanism

oranobvioussupportprogramwhichmightmakeitpossibletotracebackStateinterventionsunder


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American subsidies lower world marketpriceswherevertheyrepresentanimportantshareinexports(SumnerandBuck,2007).Thisis the caseforcotton,asshown byanumberofstudies(seeTable3).American

subsidies artificially inflate the supply oninternational markets and depress exportprices.Consequentlythisreducestheexportrevenues of countries heavily dependentoncotton.

1.2 t

Table 3 : Summary of the main ndings of simulation models of the impact of cotton subsidies

Authors Simulation Change in worldprice (%)

Goreux(2003) EliminationofsubsidiesintheUS,ChinaandEU +12ODI(2004) EliminationofsubsidiesintheUS,ChinaandEU +22to28

Reevesetal.(2002) Multilateralremovalofsupportforcottonandrestrictionsontextileimports

+2.3

Tokarick(2003) EliminationofAmericansupport +2.8

Poonythetal.(2004) Multilateralremovalofsupportforcottonandtariffs +3.1

FAPRI(2002) Multilateralliberalizationofallproducts +11.4

Summer(2003) EliminationofAmericansupportforcotton +12.6

Panetal.(2004) EliminationofAmericansupportforcotton +2.43

Bonjeanetal.(2006) EliminationofsubsidiesintheUSandEU +2.68to10.7

Source : based on Bonjean et al. (2006)

Thenew draft text proposes modalities which

seem at rst sight to accommodate Burkinas

interests.ThisisaninitiativeoftheC4ofwhichBurkinaisamember.Thenewmodalityproposes

areductioninAmericansubsidiesofabout82.2percent over a period of 20 months. In the

base period of 19952000, the US notied an

averageof$623million.Theapplicationofthe

new reduction formula would result in a dropin American subsidies of about $510 million,bringingthemdownto$113million.

Mostofthestudieswhichconcludethatarisein world prices would follow a reduction insubsidiesconsiderAmericansupporttobemore

substantial than the AMS notied by the US.

According to the methods and scenarios usedbythesestudies,worldpriceswill riseby 2to

28 percent.According to a number of sources(seeTable4)theAmericanAMSwillreach$5.102billionin2005.Thisamountincludesproductionexibility contracts and xed direct payments

which the WTOs Dispute Settlement Panel oncotton of 3 March 2005 placed in the AmberBox, supplemented by certain supports notied

butnot included in this database (support for

stockpiling and interest on commercial loans)andby several subsidies that were improperlynotied as non product-specic AMS. As Table

4shows,averagetrade-distortingsubsidiesforcottonshouldhavebeen$1,737 billionfor theperiod 19952000 (instead of the notied $623

million),$2,471billionfortheperiod19952004(instead of the notied $1,151 billion) and $2,710

billion for 19952005 (instead of the notied

$1,194billion).

specic categories of domestic support. The

subsidieswhichhavebeenprovidedweredonesoonan adhocbasisto addresscertainneedsorrespondtoparticularpressures.


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Table4:EvolutionofUScottonsubsidiesfrom1995to2004

$Millions 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Subsidiesforfarminginsuranceforcotton

CottonsubsidiesaccordingtoEWG 30 647 595 1163 1721 1850 3033 2389 2697 1654 3331

Cottonsubsidies/insurance 365 160 213 271 409 425 444 386 378 320 268

STEP2 88 34 6 416 280 446 237 182 455 363 582

STEP2forexporters 180 113 185 91 106 198 158 253

Warehousingandmarketingsubsidies

9 12 11 111 216 63 87 270 552 500 782

Valueofcottonproduction 6570 6410 5980 4120 3810 4260 3120 3780 5520 4850 5700

Valueoffarmingproduction(VFP)(109of$)*

190 206 204 191 185 190 199 195 216 236 236

Cottonas%ofVFP 3,5 3,1 2,9 2,2 2,1 2,3 1,6 1,9 2,6 2,1 2,4

Totaloffarmloansubsidies 7 19 713 610 610 610 610 610 610 610 610 610Totaloffarmloansubsidiesforcotton

25 22 18 13 13 14 10 12 16 13 15

Totalsubsidiesforfarmfuel 2385 2385 2385 2385 2385 2385 2385 2385 2385 2385 2385

Totalsubsidiesforfarmfuelforcotton

83 74 70 52 49 54 37 46 61 49 58

Subsidiesforcottonirrigation

66 66 66 66 66 66 66 66 66 66 66

Totalsubsidiesforcotton 666 1015 979 2092 2754 2918 3914 3181 4225 2965 5102

Totalsubsidiesforcottonforexporters

180 113 185 91 106 198 158 253

Exportsubsidies/cottonsubsidies(%)

8,6 4,1 6,3 2,3 3,3 4,7 5,3 5,0

AMS notied for cotton 32 3 466 935 2353 1050 2810 1187 435 2238 1621

Sources : Environmental Working Groups Farm Subsidy Database1); USDA, RMA, Summary of Business Reports and Data2;

US Notications to the WTO; National Cotton Council3; Government Accountability Ofce (GAO)s report of 7 June 20074 ;(OECD, Producer and Consumer Support Estimates, OECD Database 198620055; USDA, Farm and ranch irrigation survey (2003),

November 2004; USDA, Table 35-Net outlays per commodity and function6

Giventhissituation,therearereasonstofear

that the reduction proposal, as applied, will

not changeglobal prices much even though itoriginateswiththeC4.Somepredictthatifthe

C4anddevelopingcountriesingeneraldonot

ght to change the denition of export subsidies,

the difcult situation of producers in the C4 will

continuesincetheworldpriceforcottonwillnotchange signicantly if the US only has to reduce

thelimitedpercentageofsubsidiesjustatthe


15/34


exportlevel-whichwasonly7.1percentin2005(Berthelot7, 2008). In fact this is not a new idea;since GATT we knew that certain denitions

(decoupled subsidies,dumping8etc.)werenot

exempt from criticism and would give rise todisputes.Itwasforthisreasonthatwithinthe

WTOframeworkthepeaceclause9wasadopted,

so that certain Members would not triggerhostilitieswhichwouldcertainlydirectenergies

towardsundesirablegoalsthatcouldleadtothe

negotiations.Theexpiryofthepeaceclausein

2003openedthewaytonumeroussubsidiesbeingchallenged,eventhosethesehadnotpreviously

been considered as creating price distortions.

IntheUS,evenCongressendedupconvincedofthedistortingnatureofvariouskindsofsupport

grantedtofarmers.Severalreportspresentedto

theAmericanCongressindicatedsupportlevels

far above those notied (Schnepf, 2008; Schnepf

Randy and Jasper Womach, 200810). Congress

thus became more aware of the well-founded

basisofchallengesagainsttheUS,particularly

inthecaseofcotton.TheDisputeSettlementBody(DSB)oftheWTOsupportedBrazilsclaim

bydeclaringnumeroussupportsashavingbeen

illegally classied as green box, whereas inrealitytheseshouldeitherhavebeenconsidered

asexportsubsidiesorasAmberBoxpayments

(themostdistortingtypeofsubsidies,whichare

subject to a maximum ceiling commitment attheWTO).Thisdecisionopensthedoortoother

challengesrelatedtoothertypesofsupportsuch

asthosementionedinTable4[notableref].

It should also be noted that farm prices in

general have been rising. Cotton is not proting

fromthisupturn:thereferencepriceforcotton

(IndexAofCotlook)hasonlyrisen24.1percentinJuly2007comparedto49.6percentforpalm

oil, 49.8 percent for cocoa and 97.3 percentforcorn.

However, production of cotton in Burkina issensitivetoworldprices.Thesupplyelasticitycomparedtopriceisestimatedatbetween0.4and 0.8 (Bonjean et al, 2006). With the dropinworldprices,theBurkinacottonsectorhashadproblemsduringthelasttwocottonseasons(20062007and20072008).Cottonproductionfell by almost half in two years, to 360,000tonnes in 20072008 compared to 750,000tonnesin2005.Withproductionattheselevels,BurkinaFaso-whichhadbeenthemajorcottonproducer inAfrica since 2005 - has now been

supplantedbyEgypt.Thiswasprimarilybecausefarmerslostinterestinthissectorbecauseofthedropinpricespaidtoproducers.In20042005,theyreceived210FCFA/kg(40cents/kg).In20052006and20062007theyonlyreceived175 and 165 FCFA respectively. In 20072008,thefarmpricewasonly145FCFA.

Thesituationisworsenedbythereductioninprice of cotton bre per kilo FOB. Between

2004 and 2006, despite the rise in cost offarm inputs, the FOB price for cotton bre has

droppedfrom768FCFAperkiloto631FCFA,adeclineofabout18percent.

One of the major problems for the cottonsectoristhedropinthedollar.TheaverageintheCotlookIndexAforthe20072008seasoniscurrentlyashighas72.9centsapound,13centsmorethanthepreviousseason,anincreaseof23percent,and16centsmorethanthe2005-2006season,oranincreaseof27percent.Thisriseintheinternationalpriceofcottonindollarsoverthe last three seasons does not benet Burkinas

farmers,whoarepenalizedbythedropinthe


16/34


Table5:HistoricdataoncottonandFOBprices

Years IndexACent/pound RateFCFA/$ IndexAFCFA/kg FOBpriceFCFA/kg

94/95 86.3 541 1027 97995/96 94.4 495 1028 980

96/97 79.3 522 913 865

97/98 76.6 596 1005 957

98/99 62.0 586 802 754

99/00 52.3 636 733 685

00/01 61.0 724 974 926

01/02 43.8 742 717 669

02/03 50.2 661 727 679

03/04 66.4 559 816 768

04/05 56.6 522 654 60605/06 57.0 540 679 631

06/07 59.1 454 592 647a

07/08 72.9 415 667 692a

Source : Cotlook (a) Automatic forecast process (Ministry of Economy and Finance (June 2007); Interprofessional associationof Burkina cotton producers (2006)

dollarcomparedtotheEuro.Overthisperiod,

theimprovementinpricereturnsinFCFAisonly

6percent.

For the 20082009 season, cotton companieshave increased their purchase price to

cotton farmers.They are set at 180 and 155

FCFA respectively for rst and second grade.

Howeverthisisalongwayfrom210FCFAforthe

20052006season.

The proposal to reduce cotton subsidies in

Falconers new text should not allow for a

substantial rise in prices because it involves

onlyasmallpartofthetotalsubsidiesthatare

infactallocated.Withtheweakdollar,inorder

for Burkina to prot from the price increases

theremustbeamuchgreaterdropinAmerican

subsidies than that notied by the US to

theWTO.

Another problem affecting the situation ofcountries like Burkina with regard to priceincreasesisthedomesticsupportoftheUSand

EUforexportedcotton.TheinabilityoftheUSandEUtofaceuptocompetitionfromChinesetextileswillreduceconsiderablytheirdomesticconsumption. This will logically increase theirexports, a pattern which is already apparent.Table6showsthatAmericanexportsaregrowing,notreducingandin2007represented85percentofallproduction.IntheEUin2007theyreached86.3percent.Thetwotablesshowthatdomesticsupport on exported cotton has gone up andcontinuestorise.

Although Falconers draft proposes a 50

percent drop in export subsidies upon signing

the agreement, and the elimination of these

subsidiesby2013,thiswillnotsolvethisbroader

problem-whichisoneofthecausesofthedrop

inprices.

Countries like Burkina will continue to suffer

negative effects from these subsidies which

preventpricesfromrisingbeyondtheircurrent

levels. Furthermore, the Burkina government

doesnothavethemeanstograntsubsidiestoits

owncottonfarmers.


17/34


Table6:USdomesticsupportforcottonandexportedcottonfrom1995to2004

$ Millions 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Exports 1673,2 1496,6 1635 936,96 1471,5 1469,3 2398 2594,2 2999,2 3147 3825,7 2836,2 3531,6

Exports/

production

0,429 0,362 0,399 0 ,309 0,398 0,392 0,542 0 ,692 0,754 0,621 0 ,735 0,603 0,859

Total cottonsubsidies

666 1015 979 2092 2754 2918 3914 3181 4225 2965 5102

Step 211 88 34 6 416 280 446 237 182 455 363 582

Step 2exportsubsidies

38 15 3 180 113 185 91 106 198 158 253

Step 2domesticconsumption

50 19 3 236 167 261 146 76 257 205 329

Domesticsupport

628 1000 976 1912 2641 2733 3823 3075 4027 2807 4849

Domesticfarm support

578 981 973 1676 2474 2472 3677 2999 3770 2602 4520

Domesticsubsidies forexportedcotton

248 355 388 518 985 969 1993 2075 2843 1616 3322

Totalsubsidies forexportedcotton

286 367 391 698 1098 1154 2084 2181 3041 1774 3575

Step 2export

0,133 0,041 0,008 0,258 0,103 0,16 0,044 0 ,049 0,065 0,089 0,071

Source : Table 4

Table7:EUdomesticsupportforcottonandexportedcottonfrom1997to2004(inEuros)

1997 1998 1999 2000 2001 2002 2003 2004

Production(1000tonnes)

478 501 572 521 514 445 463 460

Imports(1000tonnes)

932 857 691 761 675 685 532 439

Exports(1000tonnes)

178 130 251 234 245 203 255 284

Exportsen%production 37,20% 25,90% 43,90% 44,90% 47,70% 45,60% 55,10% 61,70%

Consumption 1232 1228 1012 1048 944 927 740 615

Cottonsubsidies(106)

800 761 903 855 733 804 873 835

Subsidiesforexportcotton(106)

298 197 396 384 350 367 481 515

Source : European Commission, Directorate-General for Agriculture and Rural Development


18/34


Table8:USproduction,consumptionandimports(millionsoftonnes)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Production 3902 4129 4097 3034 3699 3747 4426 3752 3980 5 069 5208 4706 4112Imports 88,94 87,85 2,834 73,9 21,15 3,488 4,578 14,61 9,81 6,322 6,104 4,142 4,36

Consumption 2321 2425 2474 2267 2222 1932 1678 1586 1366 1459 1280 1078 1003

Imports/consumption

3,8% 3,6% 0,1% 3,3% 1,0% 0,2% 0,3% 0,9% 0,7% 0,4% 0,5% 0,4% 0,4%

Source : USDA, 200712

Burkina exports greenbeansand certain fruits

andvegetablessuchasmangostotheEuropeanUnionandcertainMiddleEasterncountries.Sofarthevolumeoftheseexportshasbeenmodest.The major target market is Europe, wheretropical products from Burkina already benet

fromduty-freeaccess.Inthismarket,Burkinais

competingwithanumberofexportingcountriessuchasIndia,ChinaandLatinAmericancountries

which do not benet from preferences in the

Europeanmarket.Thenewarrangementsinthedraftwillincreaseslightlythecompetitivenessof these countries, with consequent risk ofpreferenceerosionforBurkinasproducts.ItisworthnotinghoweverthatBurkinasexportsoftropicalproductsremainmodest.Thisshouldnot

haveseriousconsequencesontheeconomyintheshortterm.

Article 145 of the draft text says that

Developed country Members and developingcountry Members declaring themselves tobeinapositiontodososhallgiveduty-andquota-freeaccessforcottonexportsfromleast-developed country Members from the rst day

oftheimplementationperiod.

TheUShasatariffquotaof5percentofdomesticconsumption. Customs duties in the in-quotatariffvaryfrom0to4.4cents/kg,whiledutiesoutsidethequotaareleviedatarateof31.4

cents/kg. TheAmericansacceptthe import ofAfrican cotton with zero duties but problemsariseintheapplicationofthisprinciple.Sincethe import quota is a function of domesticconsumption, it is unlikely that this kind ofcommitmentbytheUSwillproducemeaningfulbenets for African cotton exporters. US domestic

consumptionisdroppingsteadily.Between2000

and2007,itfellbyabout48percentbecauseof more competitive Chinese textiles. Table 8

shows that US cotton imports have remained

farbelowthequotaof5percentofdomestic

consumption. For example, between 2000 and

2007, they averaged 0.5 percent of domestic

consumption. In this situation, the Americans

willbeobligedtoincreasetheircottonexports.

A reduction in subsidies will lower American

production,butthefactthatdomesticdemand

continuestodropmeansthatthereisnoreasontoexpectanincreaseinimports.

Thisnewsituationwillnotleadtogainsinthe

AmericanmarketforcountrieslikeBurkina.The

sameappliestotheEUmarket,where,between

2000and2007,importsfellby62percent.

2. market access

2.1 m

2.2 The impact on preference erosion of dierent options for the liberalization of

l


19/34


2.3 The situation of Cte dIvoire (non-LDC) and its impact on Burkina.

BurkinaispartoftheWAEMU,alongwithCte

dIvoire,whichistheonlycountryintheUnion

thatisnotanLDC.WithintheEPAframework,

because Cte dIvoire does not benet from

concessionsgrantedtoLDCs,ithadtosignan

interim agreement while waiting for the sub-

regiontobepreparedtosignacollectiveEPA.

CtedIvoireisBurkinassecond-largesttrading

partner, after France. Burkina exports live

animals (sheep, cattle and poultry) and fruit

andvegetables.Itimportsagriculturalandagri-

food products from Cte dIvoire, as well asmineralproducts.

WAEMU has put in place a Common ExternalTariff(CET)andgrantsacommunitypreferencefor products coming from within the Union.Despitethesearrangements,tradewithinWAEMUremainslimited(14percentoftotaltrade).

The modalities for developing country tariffreductionsproposedinthedrafttextaregivenintable9:

Table9:FormulatoassuagetariffreductionsfordevelopingcountriesTariff level Tariff in % % of reduction

I 0-30 32-34.6

II 30-80 36.6-40

II 80-130 41.3-43.3

IV >130 44-48.6

Average Max 36

TheWAEMUCET,towhichCtedIvoireisalsosubject,willhavetobereducedinaccordancewiththe gures in the following table:

Table10:CtedIvoiretariffsaftertheapplicationofthenewmodalities

Current rates in % New rates in %

1 5 3,35

2 10 6,70

3 20 13,40

This situation will create problems for the

customs union. Normally WAEMU has observerstatus with the WTO but does not meet the

conditionsofarticle24oftheGATT.Inprinciple,WTOdecisionsoverridethoseoftheunion-a

situationwhichwasnotforeseenbytheWAEMU.The union treaty stipulates that membercountriescannothaveatradeagreementwhich

runscountertoitsownaccords.

Severalconceivablesolutionscouldmanagethis

situationwithintheWAEMU:

CtedIvoiremightusethespecialproductsmechanisms for those products for which

trade distortion might be an issue;

WAEMUmightredoubleitseffortstosatisfy

theconditionsofarticle24ofGATTandthus

movefromobserverstatustobecomingthe

representativeofaregionalgroup

Tothesetwopossibilitiesmustbeaddedthatthe

CETmightbealteredtotakeaccountofthenew

situationofCtedIvoire.

The reduction in tariffs in Cte dIvoire, in

principle, will not affect imports to Burkina

originatinginCtedIvoire.However,thesame

cannotbesaidforexports.ProductsfromBurkina

willnowbeincompetitionwithproductsfrom

outside the WAEMU. For example this will be

thecaseformeat,whichcouldcomefromLatin

America and the European Union. Preference

erosionwillaccentuatethissituation.


20/34


CtedIvoireispartoftheG33,alsoknownas

thefriendsofspecialproducts,acoalitionof

developingcountriesthatwouldlikedeveloping

countries to be granted some exibility by being

allowedtoopentheiragriculturalmarketsonlytoamorelimiteddegree.Assuch,itisamong

the countries which have proposed an SSM to

whichalldevelopingcountrieswouldbeableto

haverecourse.

Meanwhile, since non-LDCs do not benet from

the Everything ButArmsinitiativeofthe EU

thatwasestablishedaftertheendoftheACP/EU

accords,CtedIvoirehashadtosignaninterim

EPAwiththeEU.Alistofsensitiveproducts 13

wasattachedtotheAccord:

Table 11 lists the main elements of this. The

specialproductswhichCtedIvoirewillchoose

willhavetoincludeatleasttheitemsinthislist,

towhichmustbeaddedcertainproductstraded

withtherestoftheworld.Withtheseconditions,

the erosionofpreferenceswillbe less marked

forBurkinasexportstoCtedIvoire,whichare

madeupprimarilyoflivestock,poultryandfruits

andvegetables.

Itisimportanttonuancethisanalysistosome

extent, however, asthe optionsset out inthenewtextpresentsomeimportantrestrictionson

theuseoftheSSMindevelopingcountries.The

additionalsafeguarddutywhichthesecountries

canapplyisonlyanadditionaldutyof15percent

above thebound rate established in the Doha

Round,or15pointsadvaloremabovethebound

rateestablishedintheUruguayRound,andonly

for2to6productsforagivenperiod.

Sincetheboundrates14

ofCtedIvoirearenothigh, even if this additional safeguard duty is

taken into consideration, the rate will not be

high enough to protect the country from the

importofcertainproducts.Untilnow,itisthe

additional tax on imported meats which has

limitedimports.Whatwillhappenifamember

countrychallengesthesetaxesattheWTO?They

willprobablyhavelittlechanceofsurviving.

Table11:ListofpossiblespecialproductsofCtedIvoire

Currenttariff

Reducedtariff

Rice

100610 5 3,5

100620,100630,100640, 10 6,7

Bananas

080300 20 13,4

Manioc

071410,071490 20 13,4

Corn

100510,100590 5 3,5

170111 10 6,7

110220,170112,170191,170199 20 13,4

Oils and Fats

150300,150500,150510,150590 5 3,5

150100,150200,150410,150420,150430,150600,150710,150810,150910,151000,151110,151190,151211,151221,151311,51321,151410,151411,151419,151511,151521,151530,151540,151550,151560,151590,151620

10 6,7

150790 20 13,4


21/34


150890,150990,151219,151229,151319,151329,151490,151491,151499,151519,151529,151610,151710,151790,151800

20 13,4

Sugar

170111 10 6,7

170112,170191,170199 20 13,4Vegetables

070110 5 3,5

070190,070200,070310,070320,070390,070610,070700,070990 20 13,4

Meat

020110,020120,020130,020210,020220,020230,020311,020312,020319,020321,020322,020329,020410,020421,020422,020423,020430,020441,020442,020443,020450,020500,020610,020621,020622,020629,020630,020641,020649,020680,020690,020711,020712,020713,020714,020724,020725,020726,020727,020732,020733,020734,020735,020736,020810,020820,020830,020840,020850,020890

20 13,4

Milk

040210,040221,040229,040390, 5 3,5040110,040120,040130,040291,040299,040310 20 13,4

Cocoa

180100 5 3,5

180200,180310,180320,180400, 10 6,7

180500,180610,180620,180631,180632,180690 20 13,4

Coffee

090111,090112,090121,090122,090190 20 13,4

Peanuts

120210,120220 5 3,5

Juice

200911,200912,200919,200920,200921,200929,200930,200931,200939,200940,200941,200949,200950

20 13,4

beverages

220110,220190,220210,220290,220300 20 13,4

Exports from Burkina being concentrated on

onesingleproduct,cotton,Burkinawillnotbe

reallyaffectedbythereductionofpreferencesfor this product. But exports of green beans

and mangos may be affected by preference

erosion. The major export market for these

products isthe European Union, and Burkinas

competitors do not benet from free entry on

theEuropeanmarket.Thenewmodalitiesofthe

textwillincreasethecompetitivenessofthese

countries.ItaffectsIndiawhichalonehasnearly

46percentofworldproductionofmangos,China(12.8percent),Mexico(6percent)andThailand

(5.4percent).Forgreenbeans,China,Indonesia

andIndiaareaffected.

Burkina is in the process of making major

investmentsinirrigationwhichshouldimprove

the production of fruits and vegetables whicharelargelyintendedfortheEuropeanmarkets.

Preference erosion from the country on the

Europeanmarketmightaffectthisinitiative.

In2005,BurkinawasselectedtojointheAfrican

Growth and Opportunities Act (AGOA) by the

US.ThisofferallowsBurkinasexportsduty-free

accesstotheAmericanmarket.Sofar,Burkina

hasnotexportedanyagriculturalproductstothis

market.However,bysigningtheaccord,BurkinahopestoexporttotheUSproductssuchasfresh

orfrozenbeans,freshordriedmahoganybeans,

sesame,cottonseed,cottonseedoil,sheepand

2.4 Implications of special products, sensitive products and tropical products and


22/34


2.5 The impact of the draft text on Burkinas major exports

ThemajorproductsexportedfromBurkinaarelistedinTable12.

Table12:MainexportsfromBurkina

Products Portion of exports

Impact of new text

Cotton 63,64% WillgainfrompriceincreaseduetoreductioninAmericansubsidies

Liveanimals 6.66% ExportedmainlytoCtedIvoireandneighboringcoastal

countries,riskoflosingcompetitivenesstoitsmainbuyer(CtedIvoire)duetopreferenceerosion

Leathersandskins 5.68% Possibilityofdiversifyingexportmarkets

Shea 4.45% Neutralimpact

Cereals 4.07% Mainly traded in sub-region; neutral effect

Sesame 2.03% IncreaseincompetitivenessinAsianmarketsduetolowertariffs

Peanuts 1.50% Neutralimpact

Meatsand[giblets] 0.75% PreferenceerosioninCtedIvoiremarket

Fruitsandvegetables(beans,mangos)

0.66% PreferenceerosioninEuropeanmarkets

Source : Burkina Ministry of Economy

lambskins,goatandkidskins,woodencarvings,

cotton,sheaandsheabutter.

It is hard to speak of preference erosion on

exportsfromBurkinatotheUSinsofarasthereis

practicallynoexportfromBurkinatothismarket.

Thisismostlyduetotheweakmarketingofthese

exportproducts.Sofar,otherthancotton,the

countrydoesnothaveaneffectivestrategyto

promoteexports.

Thenewtextwillprobablyhaveimpactsonalargenumberoftheseproducts.

Cotton, which is the main export crop ofBurkina, will eventually gain from a slightriseinpricewhichwillfollowtheacceleratedreductionofAmericanandEuropeansubsidies.The efcient management of cotton production

by theBurkina cotton producerswill generatesignicant increases in production if the prices

are remunerative. Besides, the elasticity incotton production compared to price is high(between0.4and0.8).

Livestock exports, which are mainly to CtedIvoire and Ghana, will probably have tocompete with animal products from LatinAmerica.Thetariffreductionsbythesecountrieswill encourage the import of meat which will

berelatively lessexpensivethantodate.Thispreference reduction will also affect meat. In2003, three years after the application oftheCommon External Tariff, imports of poultry to

CtedIvoirefromtheEuropeanUniongrew442

percent, from 2 838 tonnes to 15 391 tonnes

(Table12).Suchimportsaredetrimentaltolocal

production, but also to imports from Burkina.

However, in comparison to frozen products,

meatsfromSahelareconsideredbettertasting

and benet from a price for prime quality. In

2003, a kilo of imported meat inAbidjan sold

for 1200 FCFA (1.83) while local meat from theSahel was 1600 to 1800 FCFA (2.44 to 2.74).

In 2005, Cte dIvoire ofcials responded to

thislossincompetitionfrommassiveimportsin

lowcostmeatandpoultry.Tohelpthenational

poultryindustry, they institutedan import tax

onmeatand poultry.Thistaxof700FCFA per

kiloofimportedmeatwasimposedonallmeat

imported by non-members of the Economic

Community of West African States (ECOWAS).

Thecurrentcustomsdutyfortheseproductsis

20percentand,withthenewFalconermodality,

willmoveto13.4percent.


23/34


Table13:ProductionofmeatandpoultryinCtedIvoireandimportsfrom2000to2003

Years 2000 2001 2002 2003

Production (in tonnes) 12360 13240 10000 7500

Imports in tonnes 2838 2152 5676 15391

Source : Annual report of the activities of the Ministry of Agriculture and Animal Resources 2004

Suchadecision,evenifitdoesnotconformtotheWTO(equaltreatment)preventsthelossofpreferences for meat from Burkina which willcontinue to benet from competitive prices.

Furthermore meat exports from Burkina tocountries on the coast have been increasingsteadily since 2003 (Figure 1). However, an

examinationoftradeinCtedIvoire(thelast

report dates from 1995) will eventually put

the tax on non-ECOWAS meats in debate and

lead to its elimination. If this happens, meat

exportsfromcountriessuchasBurkinawillbein

difculty, unless Cte dIvoire includes meats in

itsspecialproducts,whichislikely.

Figure1:ExportsofmeatandpoultryfromBurkina(inequivalenttonnesofmeat)

0

10000

20000

30000

40000

50000

60000

70000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Poultry B e e f S h e e p /G o a t s Total

Source : Automatic forecast process (Ministry of Economy and Finance)

LeatherandskinsaremainlysoldintotheEU

and arealready duty-free.Theirsituation will

notchangemuchwiththenewtext.However,

the reduction in tariffs in other importing

countries may allow a diversication of

exportmarkets.

SheaisexportedmostlytoEurope,andwiththe

AGOA it is likely that it will also be exported

to the US. Burkina and its main competitorcountries benet from preferential access inthesedifferentmarkets.Apriori,thenewtext

willnotimplygreatchangesforBurkina.

SesamefromBurkinaisexportedtotheEuropean

UnionandAsia(MiddleEast,JapanandIndia).

Tariffreductionsforthelatterwillincreasethe

competitivenessofBurkinassesame.

Cereals(sorghum,milletandcorn)areexported

by Burkina to the sub-region (MaliandNiger).

Nothing in the new text affects this trade.

Peanuts,whicharealsosoldinthesub-region,

willsimilarlyremainunaffected.

Fruitsandvegetables,mainlygreenbeansand

mangos, are exported largelyto theEuropean


24/34


2.6 Impact of the special agricultural safeguard (SSG), special safeguard mechanism

(SSM), sensitive products and special products on Burkinas exports.

2.7 il sl s m

For now, Burkina has not decided to haverecoursetoasafeguardmechanism,althoughinanumberofcasesitwouldhavehadtherighttodoso.BurkinaisamongstthosecountrieswhichhaveaccesstothespecialsafeguardundertheAgreementonAgriculture(SSG) 15.AccordingtoastudybytheFAO,Burkinacouldhaveinvokedthe right almost 50 times between 1984 and

2000; these cases correspond to a sudden inux16ofimportedfoodproducts.

ThespecialsafeguardmechanismnowsupportsBurkinainitsclaims.Givendevelopmentinsomesectors, it isprobable that Burkina will try to

protect itself against certain imports.Already,

withintheframeworkoftheEPA-whereanalmost

total liberalisation of trade between Burkina

andtheEuropeanUnionisanticipated,withthe

exceptionofsensitiveproducts-pressureis

building forthegovernmentto eventually use

these mechanisms for certain products which

werenotselectedtobeincludedinthelistof

sensitiveproducts.

Two product groups could be immediate

candidatesforthespecialsafeguardmechanism:

dairyproducts,andmeat(especiallypoultry).

The requirements which limit recourse tosensitiveproductsaswellastothesafeguardmechanism might give some assurance toBurkina, which for the moment isworking totargetthetropicalproductmarketsofdevelopedcountriesandsomedevelopingcountries.

However, for the moment, Burkina does notexport much except cotton. Moreover, the

countrys exports are only 8 percent of GDP

compared to 25 percent for the countries of

thesubregion.TheGovernmentisawareofthis

situationandisputtinginplacemeasureswhich

will encourage the production of exportable

products by an improved organization of the

industry and the creation of new industries,

especiallyonesfortropicalfruits.

2.7.1 Milk

Union. There is a risk of preference erosionsincetheprimarycompetitorsforBurkina(India,China) do not have preferential access to the

European market. They will now have lowercustoms duties although their products arealreadymorecompetitive.

Burkinahasalargedairyherdestimatedin2002at 1.6 million head with a total production of

167000tonnesofmilk.Foralongtimethislocalmilk was not exploited commercially and wasconsumedlocally(85percent).Milkconsumptionin the cities was mostly from imports, whichreached14000tonnesin2002.

In recent years, there has been an importantdevelopmentinlocalmilkmarketinggroupswith

thecreationofminidairiesthroughoutthecountry.Thesedairiesofferaproductwhichreplacesthe

dairyproductsimportedmainlyfromtheEU,sothat there was a signicant drop in dairy imports

between1999and2002(Figure2).Thesedairieshaveanimportantpotentialbecausecurrentlyitisestimatedthatonly15percentofthemilkfromthishugedairyherdismarketed.Localmilkhastofacestrongcompetitionfromimportedmilk:thecostpriceofthisreconstitutedmilkis200FCFA


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perlitrewhilemilkdeliveredtothedairycost300to325FCFA.Itisestimatedthatimportedmilk products toBurkina were subsidized toaminimumamountof470FCFAperkiloin2002

2003,asubsidyequivalentto30percentofthevalueofakilooftheproductimportedin25kilobags.Between2000and2007,beforethepriceexplosion in 2008, the price of dairy productswasdropping.Thissituationthreatensthemilksector, which has a signicant potential. The

tariffprotectionoftheCETisonly5percentformost dairy products and is considered insufcient

bytheindustryplayers.Theyproposeclassifyingmilkinthetopband,whichwouldmeana20

percenttariff.Concentratedmilkisalreadyin

this level; the imposition of an excise tax on this

milkshouldresolvethequestionofcompetitionforlocalmilk.

With the support of the government, a major

program of milk production is under way, in

addition to existing initiatives. Burkina hastherefore an overriding interest in protecting

thissector.

Table14:EvolutionofpricesinFCFAperunit

2003 2007 2008Variation

2003-2007 (%)Variation

2007-2008 (%)

Powdered milk (25 kg bag) 8074 8203 10111 1,60 23,30

Local live chickens17 1037 1263 1504 21,80 19,10

Sweetened yogurt (jar) 175 175 200 -2,80 14,30

Fresh beef (kg) 777 1011 1110 30,10 9,80

Fresh mutton (kg) 996 1401 1439 40,70 2,70

Sweetened concentrated milk (1kg can) 1233 1100 1233 -10,80 12,10

Source : Institut national de la statistique et de la dmographie (INSD)

Figure2:DevelopmentofdairyimportstoBurkina(in$US)

Dairy Products

0

5 000 000

10 000 000

15 000 000

20 000 000

25 000 000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source : FAO stat


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Table15:Developmentofmeatimports($US)1996 1997 1998 1999 2000 2001 2002 2003 2004

Duck 0 3000 0 0 2000 1000 0 0 0

Turkey 2000 1000 13440 1000 0 4000 17000 0 0

Other fowl 3000 1000 13440 24000 0 1000 2000 2000 12000

Total 5000 5000 26880 25000 2000 6000 19000 2000 12000

Source: FAO stat

The only major market for Burkina whichapplies tariffs is China, for which Burkinahasbecomethethirdlargestsupplierafterthe US and Uzbekistan. Quota reductions

and their implications will not have muchimpactonBurkinabecauseBurkinascottonis sold there under the lowest tariff,1percent.

2.7.2 Meat

Burkina has a signicant livestock sector: cattle

areestimatedin2007atabout8millionhead,goatsand sheep at19million. Poultry for thesame period is about 35 million birds. Theproductivityofthissectorispoor,whiledemandisconstantlyrising.Productionisnotfollowingthe same trend, leading to rising prices. Forpoultry, the situation is worsened by thesystematic slaughter organised in the wake ofthe avian u epidemic. Between 2003 and 2007,

thepriceofpoultry,beefandveal,andmuttonand lamb rose respectively by 21.8 percent,30.1percentand40.7percent(Table14).These

various increases were continuedin 2008,andfor poultry an increase of 19.1 percent wasrecordedbetweenFebruary2007andFebruary2008,makingatotalincreaseof45percent.

Faced with this situation, importers tried tobring in frozen poultry from Europe but thegovernmentvigorouslyopposedthismove.Also,the import of cheap cuts stopped ofcially in

2003followingmeatseizures.Table15indicates

thatbetween2002and2003meatimportsfell

89 percent. The reaction of the government

was motivatedby the need toprotectfarmers

forwhomraisingpoultryconstitutedtheirmain

sourceofincome.Iftheseimportshadcontinued

theentireindustrywouldhavebeenindanger,

because low income households tendedto buy

thismeatat350FCFAperkiloversus1150FCFA

perkilooflocalpoultrymeat.

Inthelongterm,iftheimportshadcontinuedthe

poultryindustrywouldhavebeendestabilised,

sincemiddleclasshouseholdswerebeginningto

preferfrozenbirds.Thecontinuingriseinprice

doesnotprotecttheindustryfromcompetition

withfrozenEuropeanmeats.

Itishighlylikelythatintheseconditionsmeat

ingeneralwillbecomeaprotectedareathrough

thesafeguardmechanism.

2.8 Impact of quota restrictions on Burkinas exports


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Burkinasexportstructureishighlyconcentrated,withcottonrepresenting63.64percentoftotalfarmexports.Thisisfaraheadofthesecondmost signicant agricultural export, animal

products,whichrepresent6.64percent.

As noted above, existing subsidies have beenalmost completely abolished with StructuralAdjustmentProgrammes(SAPs).Loansavailableforagriculturearealsolow.Thesamesituationappliesforsupportstructuresforexporters.The

National Ofce of External Trade (NOET), which

before the SAPs was partially nanced by the

volumeofexternaltrade,doesnothavealargeenough budget to nance activity to promote

exporttrade.

Withtheseconsiderations,itmaybesaidthatintheshortterm,andeveninthemediumterm,it will be difcult to change this structure,

no matter what changes are made in exportsubsidies. Cotton will continue to be thecountryslargestexportbyfar.

3. export competition

3.1 Export subsidies and the structure of Burkinas imports

3.2 e

WiththeStructuralAdjustmentProgrammes,allstatemarketingboardsweredismantled.Exportboardsforrawproducts(sheanuts,peanuts)andimportboardsforfoodproductswereeliminated.TheresultisthattodayBurkinahaspracticallynostatemarketingboards.

The cotton export boards were also graduallyprivatised. This process has left three cottoncompanieswithaminoritygovernmentshareinownership.In2007,allthreeofthesecompaniesreportedlargelossesandwereontheedgeofbankruptcy because their cumulative lossesexceededtheircapitalresources.

Duetotheimportanceofthecottonindustrytothecountry,thegovernmenthadtorescuethe ailing rms. Faced with the challenges

associatedwithadropinglobalcottonpricesandariseininputcosts,thegovernment,withthe aid of donors, took measures to protectproducersandavoidacollapseoftheindustry.Theseactionsincluded:

Stateunderwritingtoincreasethecapitalof

the cotton companies by US$26.75 million;

StateunderwritingtodividepartsofDAGRIS

(majorityshareholdernowretired)ofUS$26

million;

Financial aid by the State to producers

to allow them to participate in therecapitalisationtotheamountofUS$27.8

million;

GuaranteeofUS$111 milliongiven by the

statetobanksforthedischargeofcredit

arrears for the season;

Specialsubsidy of US$6.6 milliontoassist

withthecostoffertilizertransportation.

In sum the Government injected $198 million

intothecottonsectorin2007.Itmustbenoted

thatthisStateinterventionisintermittent,and

overanumber ofyears farmers waited invain

forStateinputsubsidies.

3.3 e

AnnexJofthedrafttextshowswhichformsof

exportsubsidiesareunacceptable:

Theseexportcredits,exportcreditguaranteesandinsuranceprograms(hereinafterreferredto

as export nancing support) shall comprise:

a. direct nancing support, comprising direct

credits/nancing, renancing, and interest

rate support;

b. risk cover, comprising export creditinsurance or reinsurance and export

credit guarantees;


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c. government-to-government credit agree-

mentscoveringtheimportsofagricultural

productsfromthecreditorcountryunder

whichsomeoralloftheriskisundertaken

by the government of the exportingcountry; and

d. any other form of governmental export

creditsupport,directorindirect,including

deferred invoicing and foreign exchange

riskhedging.

Thiswayofconsideringexportsubsidiesdoesnot

takeaccountofdomesticsubsidiesforproducts

which will be exported. Once these subsidies

benet exports, it seems logical to consider any

domesticsupporttoanexportedproductasanexportsubsidy.However,thenewdrafttextdoesnotgothisfar.Itisnoteworthyinthisrespectthat one of the arguments which the US used

beforetheDisputeSettlementBodyinthecasebroughtbyBrazilwasthatAmericanexportswasfalling as a share of total world exports, andthereforeitwasnotfairtosaythatUSexportscausedadropinworldprices.

Tables 6 and 7, which analyze this question,show that forcotton, these types ofsubsidiesareimportantnotonlyfortheUSbutalsofortheEU.Itwillcertainlyhaveanegativeimpactonprices.

3.4 f

AsacountryintheSahelwithirregularrainfalland low water supply, Burkina faces recurrentfoodproblems.Inalmostoneyearoutofeveryve, harvests are poor and the Government has

toaskforfoodaid.Thefollowingtablegivesthevalueoffoodaidin$USfrom2000to2005.Overthisperiodtheaveragevalueoffoodaidgivenwas$2.3million.

Table16:FoodaidreceivedbyBurkina(inmillion$US)

2000 2001 2002 2003 2004 2005

Food aid 6235 4324 2238 1953 1946 3327

Source : Burkina Ministry of Economy and Finance 2003 et 2005

To manage the food aid efciently, the

Government established a National Council ofFood Security(NCFS) tosupervise setting upastrategy for food security. A Support Fund forFoodSecurity(FASA)wasalsoestablished.Thisallows Burkina to establish a food supply of35 000 tonnes of local cereals, from a nancial

fundrepresentinganexchangevalueof25000

tonnes of cereals and an emergency supplyentirely nanced by the government. Annually,

thevolumeoffoodaidisanaverageofabout49000tonnesandemergencyaidisestimatedat4000tonnesperyear.

About 80 percentof food aid received by thecountryisascerealproducts,primarilyimports.HoweverBurkinasauthoritieshaveoftenwantedtoprocurefoodproductsonthedomesticmarketorinthesub-region,butonly17percentofthe

productsarelocal.Thissituationoftencreates

perverse effects. For example, in 2003, 1000

tonnes of dates delivered as aid from Saudi

Arabia to people returning from Cte dIvoire

weretradedinthesouthandsouthwestregions

formillet,sorghumorcorn.Thisaidwouldhave

beenmoreusefuliftheSaudishadboughtcereals

directlyonthelocalmarketforredistribution.

When there is a food problem, the NationalSociety for the Management of Food Security

Stocks (SONAGESS) - which is responsible for

nationalsecuritysuppliesandfoodaidaswellas

themanagementofinformationonagricultural

markets-releasescerealsuppliesatsupported

prices for thezones affected.Forexample,in

2008,11000tonnesofcerealsweresuppliedto

affectedzonesatasupportedpriceof$21US

(9000FCFA)per100kgbagcomparedtoamarket

pricewhichisoften$47US(20000FCFA).


29/34


According to the new Falconer text, themonetization of food aid in kind will beprohibited except when it is necessary tonance internal transportation and delivery of

thefoodaid...18

.

To date, in practicefood aid has been mostlysold at lower than market prices. There hasbeenverylittledirectdistributionoffoodaid.This is explained by the fact that there is no

effectivepolicytoidentifytheindividualswho

areinneedoffood.Theriskoffraudisalsohigh

in distribution directly to communities. Also,

in recent years many local ofcials have been

chargedinprovenfoodaidcorruptioncases.

It would not be realistic to exclude the

monetisation of food aid, since this allows

equalityofaccesstofoodaid.


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TheFalconerdrafttextonagricultureisastepforward in agricultural negotiations. Burkina,asthelargestexporterofcottoninAfrica,willgainfromthistextinsofarascottonistreatedin a specic manner in accordance with the

positionswhichBurkinahastakenasamemberoftheC4.CottonisanationalissueinBurkina,unleashing energy and also strong emotions.TheriseinpricesthatcanbeexpectedfromthereductionofAmericansubsidiesaspresentedinthedrafttextwillprobablybeslight,especiallyasthereductionconcernsonlyasmallpartofAmericansubsidies.

Burkina also exports fruits and vegetables toEuropean countries where they benet from

duty-free status. The general reduction indeveloped country tariffs will result in moreproductsbecomingmorecompetitive.Itislikelythattherewillbesomeerosionofpreferencesfor Burkinas products. However, this situationwill not affect Burkina signicantly since to date

theexportoftheseproductsismarginal.

Burkina has not notied support to the WTO forthegoodreasonthat,sincetheimplementationofstructuraladjustmentprogrammes,allsubsidieshave been dismantled. Nevertheless, subsidieshavebeenofferedonanadhocbasistofarmersand the cotton industry that are bankruptbecauseofthefallinpricesinCFAfrancs.Thenewtextprovidesabasisforassistingproducersinamorepredictablemanner.

CtedIvoire,whichistheonlynon-LDCinthe

WAEMUandBurkinasmaintradingpartnerinthesub-region,willberequiredtoreduceitscustomsdutiesbythenewtext.Thiscreates,ontheonehand,aproblemforWAEMUwhichhasacommonexternaltariff(CET)andontheother,willcauseproblemsforBurkinasexportstoCtedIvoire.Firstly,areformoftheCETmustbeconsideredtosafeguardtheunityofthesub-region.Peoplearepreparedforthiseventuality,especiallybecause

within the ECOWAS group a proposed fth band

is under consideration so as to protect local

productsmoreeffectively.Secondly,itisfearedtherewillbealossofpreferencesforBurkinas

exports to Cte dIvoire. This is especially an

issue for livestock (cattle, sheep, goats and

poultry), which must compete with products

importedfromtheEUandLatinAmericawhich

are signicantly cheaper even though Burkinas

productsareofhigherquality.

For the moment, Burkina does not have

recourse to any safeguard mechanism. The

special safeguard mechanism currently offersthis possibility. Itis nowlikely that, giventhe

development of certain sectors, Burkina will

try to protect itself from imports of certain

products,particularlysubsidisedmilkandmeat

fromtheEuropeanUnion.

WiththeStructuralAdjustmentProgrammes,all

statemarketingboardshavebeendismantled.

Export boards for raw products (shea nuts,

peanuts) and import boards for food productshavebeendismantled.Asaresult,Burkinahas

practicallynostateboardsinvolvedinmarketing

products.Thenewdrafttextwillnotchangethe

situationinBurkinaevenifitdoesprovidesome

relieftothegovernmentinitseffortstosupport

the cotton sector, which is experiencing a

majorcrisis.

Faced with climatic difculties and low food

production,Burkinahasoftenneededfoodaid.Anorganisedsystemisinplacetomanagethis

foodaid.Todate,mostfoodaidhasbeensold

inaffected areasat reduced prices.The new

drafttextonlyallowsfoodaidtobemonetised

in exceptional circumstances. However,

monetisationofaidallowsabetterdistribution

ofaidbyavoidingpartisanbiaswhentheaidis

sharedout.

concLusion


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endnotes

1. http://farm.ewg.org/farm/region.php?ps=00000

2. http://www.rma.usda.gov/data/sob.html;

3. http://www.cotton.org/econ/world/detail.cfm?year=1999

4. http://www.gao.gov/new.items/d07944t.pdf;

5. http://www.oecd.org/document/55/0,2340,fr_2649_33775_36956855_1_1_1_1,00.html

6. http://www.ers.usda.gov/Publications/AgOutlook/AOTables/; http://www.nationalaglawcenter.org/assets/crs/RL33697.pdf.

7. BerthelothadpreviouslydefendedtheseideasinLAgriculture,talondAchilledela

mondialisation,LHarmattan,Paris,2001.

8. Dumping is dened in the General Agreement on Tariffs and Trade (GATT) of the WTO as

theexportofaproductatapricewhichislessthandomesticmarketprice,notproductioncost.

9. Option under Article 13 of the WTO Agreement on Agriculture which provides thatagriculturalsubsidiesappliedundertheagreementmaynotbecontestedunderanotherWTOagreement,inparticular,agreementsonsubsidiesandtheGeneralAgreementonTariffsandTrade.

10 Thisbookisbasedonthe reporttoCongressby theauthorsin2006(Randy Schnepf andJasperWomach,PotentialChallengestoU.S.FarmSubsidiesintheWTO,CRSReportforCongress,October25,2006,http://www.nationalaglawcenter.org/assets/crs/RL33697.pdf)

11. USsubsidiestoUplandcottonexporters

12. See: http://cottonusa.les.cms-plus.com/economicData/CWS-yearbook-12-10-2007.pdf

13. Sensitive products here are products excluded from liberalisation. This denition does

not correspond to the denition for sensitive products within the WTO framework.

14. For most agricultural products, the maximum bound rate of Cte dIvoire is around

15percent.

15. TherighttoapplytheSSMisreservedtothe38WTOMembers(22aredevelopingcountries)who have applied tarication (the process of converting non-tariff barriers into customs

dutiesduringtheUruguayRound)foralimitednumberofproducts.

16. A sudden increase is dened as an increase of 20 percent in imports (by volume) compared

to the ve-year rolling average.

17. Alocalchickencarcaseweighs0.9kg

18. TN/AG/W/4/Rev.3(ANNEXL,paragraph12)

19. TN/AG/W/4/Rev.3(ANNEXL,paragraph12)


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ICTSDsProgrammeonAgriculturalTradeandSustainableDevelopmentaimstopromotefoodsecurity,equity

andenvironmentalsustainabilityinagriculturaltrade.Publicationsinclude:

ImplicationsforBraziloftheJuly2008DraftAgriculturalModalities,byAndreNassar,CinthiaCabraldaCosta,LucianeChiodi,September2008

Implications for Japan of the July 2008 Draft Agricultural Modalities, by Kazuhito Yamashita,September2008

ImplicationsforMauritiusoftheJuly2008DraftAgriculturalModalities,byGowreeshankursingRajpati,September2008

Implications of the Agriculture Chairs Draft Modalities forthe Treatment of SpecialProducts, MariaDoloresBernabe,June2008

AnOverviewAssessmentoftheRevisedDraftWTOModalitiesforAgriculture.ByMikeGiffordandRaulMontemayor,June2008.

ImplicationsfortheEuropeanUnionoftheMay2008DraftAgriculturalModalities.BySbastienJean,TimJoslingandDavidLaborde,June2008

Implications for the United States oftheMay2008 DraftAgricultural Modalities By DavidBlandford,DavidLabordeandWillMartin,June2008

ImplicationsforIndiaoftheMay2008DraftAgriculturalModalities,MunisamyGopinathandDavidLaborde,June2008

Tropical and Diversication Products Strategic Options for Developing Countries.

IssuePaperNo.11bySantiagoPerry,2008.

Trade Effects of SPS and TBT Measures on Tropical and Diversication Products.

IssuePaperNo.12byAnne-CliaDisdier,BelayFekadu,CarlosMurilloandSaraA.Wong

HowWilltheMay 2008 Modalities TextAffectAccessto theSpecialSafeguardMechanism,and theEffectivenessofAdditionalSafeguardDuties,byRaulMontemayor,June2008.IssuePaperNo.15

Implications of the July 2008 Draft Agricultural Modalities for Sensitive Products. By Ariel Ibaez,MaraMartaRebizoandAgustnTejeda,ICTSDIssuePaperNo16

Forfurtherinformation,visitwww.ictsd.org.

ABOUTICTSD

Foundedin1996,theInternationalCentreforTradeandSustainableDevelopment(ICTSD)isanindependent

non-prot and non-governmental organization based in Geneva. By empowering stakeholders in trade policy

throughinformation,networking,dialogue,well-targetedresearchandcapacitybuilding,thecentreaimsto

inuence the international trade system such that it advances the goal of sustainable development.

the implications for burkina faso of the july 2008 draft agricultural modalities

Documents