UNEP Country Project on Trade Liberalization in the Agriculture Sector and the Environment

UNEP Country Project on Trade Liberalization in the Agriculture Sector and

the Environment

Project Leader: Néstor Gutiérrez

Economic Research Director

The rice sector in Colombia

19 February 2003Geneva

MOST IMPORTANT HARVESTED AREAS IN SEMESTRAL CROPS, COLOMBIA, 2001.

0

100,000

200,000

300,000

400,000

500,000

600,000

Source: SAC, CEGA, FEDEARROZ.

Ha

Background: semi-annual crops

Trade liberalization in the Colombian rice sector


AGICULTURAL PRODUCTS TOTAL IMPORTS (TONS), 1991-2001 AGICULTURAL PRODUCTS TOTAL IMPORTS (TONS), 1991-2001

(Miles Tons)

Crops 1991 2001*

Cotton 0.6 61.0Rice 0.4 321.8Barley 130.8 212.8Kidney Beans 11.1 31.6Corn 8.1 1,759.7Sorghum 0.9 1.4Soy Beans 18.4 353.0Wheat 646.3 1,245.1

* Preliminar Data

Source: DNP-UDA. Rice Fedearroz

TOTAL 816.6 3,986.4



COMPARISON OF PLANTED AREA, BY PRODUCT,

1990 2001

SOURCE: SAC, CEGA,FEDEARROZ.

0

20

40

60

80

100

120

140

Cotto

n

Barley

Soy B

eans

Sorgh

um

Whe

at

Benne

í

Corn

Kidney

Bea

ns

Cassa

va

Potta

tos

Veget

ables

Mec

haniz

ed R

ice

% 1990 = 100


Background: rice sector

250,000

300,000

350,000

400,000

450,000

500,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

RICE HARVESTED AREA, COLOMBIA, 1990 - 2002

Source: FEDEARROZ


1990199119921993199419951996199719981999

Source: FEDEARROZ

PADDY RICE REAL PRICE, COLOMBIA, 1989-2002PADDY RICE REAL PRICE, COLOMBIA, 1989-2002

REAL

7.9597.3366.889

6.7856.1926.2706.636

5.946

PRICES of 1978 / Ton

1989 9.290

200020012002

5,824

7.042

5.4856.3315.741

- 38 %

Background: rice sector


Background

Trade liberalization in the colombian rice sector

• By the end of 1980’s, a unilateral openness process was held by Colombia before Uruguay Round. By the time, a free trade agreement was held with CAN countries

• The rice sector had enough protection since 1994

• However, Colombian rice sector is a world price taker


WHITE RICE MONTHLY PRICE, 1996 - 2003

THAILAND

COLOMBIA

UNITED STATES

VIETNAM

Project Approach and Process


RESPONSIBLE INSTITUTION

• RICE GROWERS ASSOCIATION-FEDEARROZ

Steering Committee

Néstor Gutiérrez, project leader, Fedearroz

Edwin García – Researcher, Fedearroz

José Levis Barón – Researcher, Fedearroz

Jaime Jiménez – Int. Trade Director, Ministry of Agriculture

Héctor Martínez – Economist, IICA

Jairo Homez – Researcher, Ministry of Environment

Diego Herrera – Economist, Universidad del Rosario

• Stakeholders Approach – Initial project presentation, first results discussion, final paper discussion.

• The acceptance of this initiative has been fantastic for most of the Stakeholder participants because of the subject opportunity when it is a broad discussion on agriculture trade topics (WTO, ALCA, ATPA, CAN).

Stakeholders CommitteeMINISTERIO DE AGRICULTURAJAIME JIMENEZ – Assesor

DEPARTAMENTO NACIONAL DE PLANEACION OSCAR BALLESTEROS – Resource Department Chief

UNIVERSIDAD DEL ROSARIO FERNANDO BARBERI – Graduate Course Dean - Expert in International Commerce - Trade Ministry Assesor

DEPARTAMENTO ADMINISTRATIVO NACIONAL DE ESTADISTICAS (DANE)Alejandro Pelaez Director of Sistema de Información del Sector Agropecuario y Pesquero Colombiano (SISAC)Jaime Perez, SUBDIRECTOR

BOLSA NACIONAL AGROPECUARIANOHORA HELENA CRUZ – Technic Director

MINISTERIO DEL MEDIO AMBIENTEJESUS E PEINADO – Environment Ministry Assesor

MINISTERIO DE COMERCIO EXTERIORANA FABIOLA GUZMAN- Trade Ministry Assesor – Andean Integration

CIVITAS DEI (ONG)ELIZABETH CALDERON DirectorMARTHA RODRIGUEZ – Assesor

ASOCIACION DE USUARIOS DE LOS RIOS CHINA Y TOTARE (ONG)JUAN JOSE SIERRA – Principal member, Rice Producer

COOPERATIVA DE SERVICIOS ESPECIALIZADOS PARA LOS ARROCEROS (SERVIARROZ)ALBERTO MEJIA – President, Rice Producer


Stakeholders committee -2CORPORACION COLOMBIANA DE INVESTIGACION AGROPECUARIA (CORPOICA)IRMA BAQUERO – Main Researcher from Programa Nacional de Estudios Socioeconómicos FRANCISCO ACEVEDO – Researcher Programa Nacional de Estudios Socioeconómicos FERNANDO CARDOZO

FEDERACION NACIONAL DE ARROCEROS DE COLOMBIA (FEDEARROZ).RAFAEL HERNANDEZ LOZANO – CEO Fedearroz

UNIVERSIDAD JAVERIANALORENA PRIETO CRUZ Economics Faculty - Apprentice

SOCIEDAD DE AGRICULTORES DE COLOMBIA (SAC)ALEJANDRO VELEZ – Trade DirectorDELSA MORENO – Agronomics Department Director

ASOCIACION DE USUARIOS DEL RIO COELLO (USOCOELLO) (ONG) ESPINALHENRY RAMIREZ – Management Assistant.

YESID CASTRO – Andean Community Consultor – Trade

FONDO LATINOAMERICANO DE ARROZ RIEGO - FLARLUIS SANINT – Director

INDUARROZIVAN SOMBREDERO – Manager

MOLIARROZJORGE ENRIQUE CUBILLOS – Manager

UNIVERSIDAD DE LOS LLANOS - UNILLANOSJORGE ENRIQUE MUÑOZ AGUILERA Researcher


Project objectives


1. Enhance country understanding of multilateral trade impact on agriculture by product

2. Develop in-country methodologies to assess the environmental, economic and social impact of trade liberalization

3. Carry out integrated assessments of trade liberalization for the rice sector

4. Enhance coordination and knowledge of people working around agricultural trade issues

5. Develop policies to correct identified negative impacts of liberalized trade and maximize positive ones

Development of In-country Methodology

• Within the steering committee discussion the specific methodology was selected, in each specific topic

• Ex-ante analysis, econometric models, and ex-post analysis were used

• Indicators in socio-economics and environmental topics were implemented


Methodology: Steps


• First step was an ex-post analysis about last 10 years performance of agricultural sector response to trade liberalization

• Second, analysis focused in the rice sector

• Third, study of Colombian trade agreements

• Fourth, socio-economic evaluation of their impact on rice sector, we used econometrics modeling (co integration, long term elasticities)

• Fifth, study of environmental issues related with rice production

• Sixth, evaluation of inputs and total factor productivity (Seemingly Unrelated Regressions and Törnqvist Indexes)

• Seventh, ex-ante analysis to evaluate 3 scenarios

Integrated Assessment of Impacts of Trade Liberalization and WTO AoA

Trade liberalization had impact on rice socio-economic variables through the increase in imports, relative prices and developed countries subsidies. On the environment side, it affected in the use of low price inputs (seed) and more agrochemicals/ha


Environmental Impacts


• It was necessary to increase mechanization and mono-culture to increase the planted rice area

• Low prices induced the use of low quality seed and more contamination of fields. The use of herbicides and fungicides/ha increased. Besides, agrochemical productivity decreased, and total use of these products increased per hectare

• Mono-culture means more fertilizer and herbicide/ha

• The extensive use of agrochemicals damages not only environment but also human health

Social and Economic Impacts


• Low agricultural prices induce decreases in agricultural income, planted area of semiannual crops, and production costs (total value/ha). They also increase unemployment and consumption of imported food

Valuation of the effects

Cost of trade liberalization:• Increase in Food Imports 388% (1990-2001)

• Decrease in Area in Semiannual Crops 29% (1990-2001)

• Rice real price decrease 38% (1989-2002)

• Colombia Switched from net exporter to net rice importer (1990-2002)

• Average imports of rice per year around 234,000 tn (1992-2002)

• Increase on national unemployment rate 80% (1990-2002)


Policies to mitigate/eliminate negative impacts of trade liberalization

•To mitigate the impact of relative prices (wheat) on rice price, it is necessary to implement the same protection scheme of rice and the substitute products•To mitigate impact of developed countries subsidies it is necessary to implement a tariff system in function of production cost for the exporter countries•It is necessary to improve concluded agreements for a cleaner production between growers and industry, Environment and Agriculture Ministries and Associations•It is important to implement a “Rice Sector Environmental Issues Guide” under responsibility of Environment Ministry and Fedearroz. •Some engagements relating sustainability exist inside of Efficiency Agreement of Rice Agro industrial Productive Chain, it is necessary to accomplish them. Agriculture Ministry, Associations

Development of Policy Package


Development of a policy package 2


• On the future irrigation projects the environmental component must be supervised by Environment Ministry

• It is urgent to promote a diversification program on irrigated land to avoid mono-culture. Agriculture Ministry

• It is mandatory to improve research in management practices to decrease the use of agrochemicals. Fedearroz

• It is necessary to improve agrochemicals management practices. Fedearroz must implement training courses, at every level.

Project Experience


• It was surprising to find in the substitute (wheat) prices the connection of the colombian rice sector with the world market

• It was interesting to set a project to show the environmental impact of the rice activity and to know that we have enough legislation to protect the environment, but we do not have the enforce power to implement it

• It was the first time economists, biologists, trade specialists, association´s leaders, producers and industry, meet together to discuss trade related issues on an specific crop.

• During the discussion process we found the high relevance of environment issues on the last development on trade

Steps Forward

Evaluate three sceneries for the mean time:

• Build 30.000 ha of irrigated area for rice + CAN agreement (free trade: Ecuador, Venezuela, Peru)

• Build 30.000 ha of irrigated area for rice + 0 subsidies in the rice exporter countries

• Build 30.000 ha of irrigated area for rice + ALCA agreement


Documents

UNEP Country Project on Trade Liberalization in the Agriculture Sector and the Environment