Zimbabwe: Product Specific Support to Maize Under WTO Regime

Chapter 15: Zimbabwe: Product Specific Support to Maize Under WTO Regime The chapter examines food security policy and product specific support to maize in Zimbabwe for the periods 2008–2009 to 2014–2015. The Grain Marketing Board (GMB) ensures national food security through production, procurement and management of Strategic Grain Reserve (SGR). Analysis this chapter shows that there is little or no policy space for Zimbabwe to implement its food security policy through procurement of maize at administered price. This erosion of policy space for Zimbabwe will hamper the interest of millions of people who are suffering from worst form of hunger, undernourishment, poverty and is likely to worsen the situation. Keywords: Zimbabwe. Grain marketing board. Maize. WTO. Food security. Amber box. Domestic support Note: This Chapter is an earlier version of Manuscript. Later version is published in a book “The WTO and Food Security: Implications for developing countries” by Springer, Singapore Pages in Book: 191-202 Cite this chapter as: Sharma S.K. (2016) Zimbabwe: Product Specific Support to Maize Under WTO Regime. In: The WTO and Food Security. Springer, Singapore 1 The WTO and Food Security: Implications for Developing Countries About the Book Exam ines the various provisions of Agreem ent on Agriculture (AoA) related to food security and highlights the progress in n egotiation s on public stockholding under Doha Round • • Provides a com prehen sive analysis of food security policies in China, Egypt, India, Indonesia, J ordan, Kenya, Morocco, Pakistan, Tunisia, Turkey, Zam bia and Zim babwe from the perspective of the WTO rules • Highlights the problem s faced by developin g countries in im plem enting food security policies due to existing provisions of the AoA Published in 2016 • • • DOI 10.1007/978-981-10-2179-4 Print ISBN 978-981-10-2178-7 Online ISBN 978-981-10-2179-4 2 Chapter 15 Zimbabwe: Product specific Support to Maize under WTO Regime Abstract The chapter examines food security policy and calculated product specific support to maize in Zimbabwe for the period 2008–2009 to 2014–2015. The Grain Marketing Board (GMB) ensures national food security through production, procurement and management of Strategic Grain Reserve (SGR). Result of this chapter shows that there is little or no policy space for Zimbabwe to implement its food security policy through procurement of maize at administered price. This erosion of policy space for Zimbabwe will hamper the interest of millions of people who are suffering from worst form of hunger, undernourishment and poverty. Keyword: Zimbabwe. Grain Marketing Board. Maize. WTO. Food security. Amber box. Domestic support. 15.1 Introduction Zimbabwe had a flourishing agriculture sector and was called the breadbasket of the Southern African Development Community (SADC). Agriculture currently accounts for 12.38% of the GDP and 64.8% of total employment in 2013 and 2004, respectively (Table 15.1). Since 2000, the agriculture sector has faced constant decline in both production and productivity. The decline affected almost all agricultural products pushing Zimbabwe, formerly the largest net food exporter within the region, to import food. It happened due to, inter alia, the Fast Track Land Reform Programme, erratic weather, limited access to finance, energy problems, producer and food price controls, and large-scale underutilisation of land (WTO 2011). The growth of agricultural sector is also constrained by poor infrastructure for marketing and movement of produce, lack of efficient support to agriculture, lack of a relevant and well-defined policy and institutional framework (Anseeuw et al. 2012). Table 15.1: Contribution of agriculture sector in Zimbabwe Year Agriculture, value added (% of GDP) 3 Employment in agriculture (% of total employment) 2000 18.26 -2001 17.30 -2002 14.02 -2003 16.59 -2004 19.57 64.80 2005 18.57 -2006 20.28 -2007 21.59 -2008 19.39 -2009 15.07 -2010 14.50 -2011 13.20 -2012 13.15 -2013 12.38 -Source: World Development Indicators, World Bank ( http://data.worldbank.org/data-catalog/worlddevelopment-indicators accessed 30 December 2014) Due to the above-mentioned challenges, Zimbabwe now suffers from chronic food insecurity and has become a net food importer. As a result of falling production, cereal import dependency ratio has been increasing. It increased from 30.6% in 1990– 1992 to 48.7% in 2009–2011 (Table 15.3). To address the issue of food security, Zimbabwe has resorted to high food imports and low rates of applied tariffs on both agricultural and non-agricultural products. Applied duties for all agricultural products are much lower than the final bound duties (Table 15.2). Table 15.2: Tariffs profile of agricultural goods in Zimbabwe Products All goods Agricultural products Non-agricultural products Final bound duties 88.0 141.1 10.9 150.0 150.0 139.9 139.6 148.4 146.0 150.0 150.0 105.0 124.7 Applied duties 16.8 23.4 15.8 Animal products 31.8 Dairy products 27.8 Fruit, vegetables, plants 28.8 Coffee, tea 32.7 Cereals and preparations 23.2 Oilseeds, fats and oils 8.4 Sugars and confectionery 12.8 Beverages and tobacco 47.5 Cotton 4.0 Other agricultural products 8.9 Source: WTO, http://stat.wto.org/TariffProfile/WSDBtariffPFExport.aspx?Language=E&Country=ZW, accessed 2 January 2015. About the food security indicators, the prevalence of undernourishment and depth of food deficit has declined during past two decades. However, the percentage of people suffering 4 from undernourishment is still very high (31.8%). In absolute numbers, 4.5 million people are still facing undernourishment (Table 15.3). According to the Global Hunger report, Zimbabwe is ranked 47th out of 76 countries in 2014, with a GHI score of 16.5 (IFPRI 2014). Food insecurity is aggravated by high level of poverty in Zimbabwe. According to the Multidimensional Poverty Index (MPI), an alarming 41% of the population are poor in Zimbabwe (UNDP 2014). Table 15.3: Food security indicators of Zimbabwe Prevalence of undernourishment (%) Number of people undernourished (millions) Depth of food deficit (kcal/caput/day) 1990–1992 43.0 4.6 329 Cereal import dependency ratio (%) 30.6 1991–1993 44.6 4.9 346 33.6 1992–1994 45.3 5.1 354 34.3 1993–1995 46.3 5.3 365 16.2 1994–1996 46.6 5.4 369 12.3 1995–1997 46.0 5.4 365 12.5 1996–1998 44.8 5.4 356 14.2 1997–1999 44.0 5.4 349 15.0 1998–2000 43.7 5.4 348 13.5 1999–2001 43.7 5.5 349 8.8 2000–2002 43.4 5.5 346 16.8 2001–2003 42.9 5.4 342 27.9 2002–2004 42.3 5.4 337 32.8 2003–2005 42.0 5.3 334 24.9 2004–2006 41.1 5.2 326 26.5 2005–2007 39.8 5.1 314 30.5 2006–2008 38.2 4.9 299 39.7 2007–2009 37.0 4.7 288 52.5 2008–2010 35.9 4.6 277 53.3 2009–2011 34.5 4.5 265 48.7 2010–2012 33.2 4.4 254 -- 2011–2013 32.2 4.4 246 -- 2012–2014 31.8 4.5 244 Source: FAOSTAT (http://faostat3.fao.org/home/E, accessed 30 December 2014) -- Year High prevalence of food insecurity has an adverse impact on human development in Zimbabwe. HDI value for Zimbabwe’ was 0.492 in 2013, positioning the country at 156 out of 187 countries and territories (Table 15.4). The indicator has shown a slight improvement over the past three decades. The HDI value for Zimbabwe is lower than the average of Sub-Saharan African countries and also lower than the average of countries in low level of human development group (UNDP 2014) 5 Table 15.4: Zimbabwe’s HDI based on consistent time series data and new goalposts Year 1980 1985 Life expectancy at birth 59.4 61.4 Expected years of schooling 6.5 11.4 Mean years of schooling 3.2 4.0 GNI per capita (2011 PPP$) 2334 2439 HDI value 0.437 0.517 1990 59.2 9.8 4.5 2042 0.488 1995 51.4 9.8 5.5 1919 0.462 2000 44.0 9.9 5.9 1984 0.428 2005 44.0 9.3 6.7 1343 0.412 2010 53.7 9.3 7.2 1183 0.459 2011 56.0 9.3 7.2 1261 0.473 2012 58.1 9.3 7.2 1284 0.484 2013 59.9 9.3 7.2 1307 0.492 Source: Human Development Report 2014, Explanatory note on the 2014 Human Development Report Composite Indices: Zimbabwe Since agriculture employs the majority of workforce, addressing the above-mentioned challenges and developing the agricultural sector is important for providing food security to poor people on long-term basis. 15.2 Price Support Mechanism for Maize in Zimbabwe Food and nutrition security policy was launched in 2013, to address the food security challenges in Zimbabwe. It aims at harmonising sectoral plans and programmes which impact food and nutrition security. Maize is a staple crop in Zimbabwe. Except for a few years, Zimbabwe was self-sufficient in the production of maize during 1960–2000. Zimbabwe was a net exporter of maize during the same period (Figure 15.1). However, the production of maize steeply declined 2000 onwards, due to the policy of Fast Track Land Reform programme launched in 2000. Due to this Zimbabwe became a net importer of maize as the domestic demand was much higher than production of maize during 2000–2014 (Figure 15.2) Figure 15.1: Trend in production and consumption of maize in Zimbabwe (000 tonnes) 6 3,000 2,500 2,000 1,500 1,000 500 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1990 1988 1987 1986 1980 1970 1960 PRODUCTION CONSUMPTION Source: Index Mundi (http://www.indexmundi.com/, accessed 24 December 2014) Figure 15.2: Trend in export and import of maize in Zimbabwe (000 tonnes) 1,500 1,000 500 0 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1990 1988 1987 1986 1980 1970 1960 -500 -1,000 -1,500 TRADE BALANCE EXPORT IMPORT Source: Index Mundi (http://www.indexmundi.com/, accessed 24 December 2014) The Grain Marketing Board (GMB) under the Ministry of Agriculture carries out commodity trading in cereals and oilseeds. The GMB was established in 1931 as the Maize Control Board. It promotes transparency in market, ensuring fair prices for both producers and consumers. Its main objective is to ensure national food security through production, procurement and management of strategic grain reserve (SGR). SGR is a buffer stock of grains to meet unforeseen climate changes and consequent shortfall in production. It helps the government to intervene in times of disaster. The GMB is currently trading in all the grains produced in the country as it is the buyer of last resort (GMB 2015). 15.3 AoA and Domestic Support to Agriculture Sector 7 In the schedule related to commitments on agricultural products, Zimbabwe mentioned that the major support to agriculture sector was in the form of research, extension, veterinary services and subsidised agricultural loans. There is no information about the calculation of AMS, but Zimbabwe pointed out that the calculations of the AMS indicated negative results of all major agricultural commodities (WTO 1995). Given the fact that the AMS was below the de minimis limit during the base period, the maximum limit to provide the AMS for Zimbabwe is 10% of value of production of a specific crop for product specific support and 10% of total value of agriculture production for non-product specific support. 15.3.1 Notified Domestic Support to Agriculture Sector Zimbabwe has notified domestic support to the agriculture sector in domestic currency (Zimbabwe dollar Z$) for the period 1995–1996 (Table 15.5). In these notifications, Zimbabwe has not given any Amber Box support to the agriculture sector. Domestic support to agriculture sector is mainly through the Green Box support. Zimbabwe has given domestic support to the agriculture sector in the form of general services and direct payments under the Green Box support (Table 15.6). Table 15.5: Notifications related to domestic support submitted by Zimbabwe to WTO Symbol G/AG/N/ZWE/1 Implementation year 1995, 1996, 1997 G/AG/N/ZWE/2 1998, 1999 Source: Zimbabwe’s domestic support notifications to Committee on Agriculture Issue date 26/01/1999 20/09/2000 Table 15.6: Trend in domestic support to agriculture sector in Zimbabwe (000 Z$) Category/product 1995 1996 1997 1998 Green Box 11,8400 126,870 137,627 270,865 General services 92,741 11,6227 117,406 205,555 Research, including general research 43,220 55,481 66,385 -Pest and disease control 47,509 58,784 48,334 5100 Training services 360 490 486 929 Extension and advisory services 260 290 290 511 Inspection services 832 926 1196 -Infrastructural services 560 256 715 3580 Other general services ---- 195,435 Direct payments 25,659 10,643 20,221 65,310 Payments for relief from natural disasters 189 758 1421 -Investment aids 25,470 9885 18,800 65,310 Source: Zimbabwe’s domestic support notifications to Committee on Agriculture 15.3.2 Calculated Product specific Support to Maize in Zimbabwe 8 1999 404,172 233,051 -5550 1632 600 -4000 221,269 171,121 -171,121 Given the fact that Zimbabwe did not provide any detailed information about Amber Box support to the agriculture sector during the base period 1986–1988, therefore no information is available about the external reference price (ERP) of maize during the same period. In the notifications submitted for the years 1995–1999, there is also no information about the ERP or price support to maize in Zimbabwe. Under the AoA, the ERP shall be based on the years 1986–1988 and shall generally be the average f.o.b. unit value for the basic agricultural product concerned in a net exporting country and the average c.i.f. unit value for the basic agricultural product concerned in a net importing country. As shown in Table 15.7, Zimbabwe was a net exporter of maize during the base period and therefore, ERP for maize should be the average f.o.b. unit value during 1986–1988. The average f.o.b. unit value of maize was 136.66 US$/Ton or 235.06 Z$/Ton during 1986–1988 (Table 15.9). Table 15.7: Calculation of external reference for maize during 1986–1988 Value Year Import Quantity 1000US$ Ton Value Export Quantity f.o.b. 1000 US$ Ton US/Ton 1986 10 15 54,832 436,252 125.68 1987 13 39 45,393 400,222 113.41 1988 0 0 67,001 392,102 170.87 Three-year average (1986–1988) of f.o.b.: US$/Ton 136.66 Exchange rate during 1986–1988 (Z$/US$) 1.72 Three-year average (1986–1988) of f.o.b.: Z$/Ton Source: FAOSTAT, accessed 22 August 2014 235.06 It is to be noted that Zimbabwe is facing hyperinflation during past two decades. For example, the inflation rate was 30.2% in 1991 which increased to 231158889% in 2008 (Table 15.8). Hyperinflation has implications for domestic support commitments under AoA. To calculate product specific support to maize in Zimbabwe, administered price is compared with ERP based on 1986–1988 f.o.b. price of maize. Due to excessive inflation, it would be difficult for a member country to continue with price support to the agriculture sector without breaching its commitments under the provisions of AoA. Hyperinflation in Zimbabwe has resulted in the steep fall in the value of Z$ vis-à-vis US$ (Tables 15.9 and 15.10). Since 1978, Zimbabwe has devalued its currency four times (1978, 2006, 2008 and 2009). Table 15.8: Trend of inflation in Zimbabwe Year End of period Average Year End of period Average 1991 30.2 23.1 2000 55.2 55.7 1992 46.4 41.8 2001 112.1 74.5 1993 18.6 28.4 2002 198.9 133.2 9 1994 21.1 22.3 2003 598.7 359.6 1995 25.8 22.5 2004 132.8 339.3 1996 16.4 21.7 2005 585.8 237.8 1997 20.1 18.9 2006 1281.1 1016.7 1998 46.6 31.5 2007 66,212.3 6723.7 1999 56.9 58.2 2008 231,158,889 Source: Annual report (2008) Reserve bank of Zimbabwe, http://www.rbz.co.zw/publications.html, accessed on 18th June 2015. -- Table 15.9: Trend in exchange rate (Z$/US$) Year Z$/US$ Year Z$/US$ 1992 5.4815 1999 38.1388 1993 6.935 2000 55.06608 1994 8.3872 2001 55.0357 1995 9.3109 2002 55.0357 1996 10.8389 2003 826.4462 1997 18.6081 2004 5696.03 1998 37.3692 2005 85,158.02 Source: Annual report (2005), Reserve bank of Zimbabwe, http://www.rbz.co.zw/publications.html, accessed on 18th June 2015. Table 15.10: Depreciation of Zimbabwe dollar Month Z$ per USD Sep 2008 1000 Oct 2008 90,000 Nov 2008 1,200,000 Mid-Dec 2008 60,000,000 End Dec 2008 2,000,000,000 Mid-Jan 2009 1,000,000,000,000 02 Feb 2009 300,000,000,000,000 Source: Zimbabwean dollar, http://en.wikipedia.org/wiki/Zimbabwean_dollar, accessed on 18th June 2015 The GMB under the Ministry of Agriculture purchases maize from farmers at administered price. Information about the procurement price and quantity was collected from newspapers as well as other documents related to maize market in Zimbabwe (Table 15.11) Table 15.11: Information about procurement quantity and price Year Procuremen t quantity (Ton) Source (2) Procurement price (US$/ per Ton) Source (3) 2008–2009 35,000 220 http://www.fao.org/docrep/010/ai469e/a i469e00.HTM 2009–2010 http://www.gmbdura.co.zw/ docs/AnnualReport2013.pd 63,459 f 265 http://www.irinnews.org/report/85092/zi mbabwe-no-winds-of-change-at-thegrain-marketing-board 2010–2011 249,792 NA 10 2011–2012 212,622 2012–2013 81,190 295 http://www.herald.co.zw/2012-mixedfortunes-for-agric-sector/ 2013–2014 2014–2015 265 http://bulawayo24.com/index-id-newssc-national-byo-34107-article378.86 Maize+price+unattractive+and+below+f armers'+expectations.html 33,273 40,060 till 14 :http://bulawayo24.com/ind ex-id-news-sc-national-byoJuly 2014 50528.html 390 :http://bulawayo24.com/index-id-newssc-national-byo-50528.html Source: Based on weblink given in Table 15.11 Table 15.12: Product specific support to maize in Zimbabwe (in Z$) Year Administere d price ERP Procurement Production VoP Million Z$ 115,500 172,250 NA 427,750 255,725 302,400 507,000 Product specific support (PSS) Million Z$ 7692 16,802 NA 62,674 21,496 12,569 15,614 PSS as a % of VoP Z$ Z$ Ton 000 Ton % 2008–2009 220,000 235.06 35,000 525 6.66 2009–2010 265,000 235.06 63,459 650 9.75 2010–2011 NA 235.06 249,792 1000 NA 2011–2012 295,000 235.06 212,622 1450 14.65 2012–2013 265,000 235.06 81,190 965 8.41 2013–2014 378,000 235.06 33,273 800 4.16 2014–2015 390,000 235.06 40,060 1300 3.08 Source: (1) Procurement price and quantity from Table 15.11 (2) Value of production is calculated by multiplying total production of maize with administered price. (3) Production of maize based on Index Mundi (http://www.indexmundi.com/, accessed 24 December 2014) (4) To convert procurement price in Z$, exchange rate is assumed Z$/US$ 1000 as given in Table 15.10 Product specific support to maize is calculated in Z$ (Table 15.12). It is clear that there is a huge gap between the administered price and the ERP of maize during 2008–2009 to 2014–2015. Product specific support to maize has increased from Z$ 7692 million in 2008–2009 to Z$ 62674 million in 2011–2012. However, it has declined due to low level of procurement, though the gap between ERP and administered price of maize increased during 2013–2014 and 2014–2015. As a percentage of value of production, product specific support to maize was higher than the de minimis limit during 2011–2012. This percentage was close to de minimis limit during 2009–2010 and 2011–2012. In case of product specific support in US$, the price support to maize was below the de minimis limit during 2008–2009 to 2014–2015. It happened because depreciation of currency (Z$) vis-à-vis US$ has been considered while calculating product specific support (Table 15.13). However, 11 as the gap between the ERP and the procurement price is widening sharply over the years, Zimbabwe is likely to exceed the de minimis limit in terms of US$ within the next few years. Table 15.13: Product specific support to maize in Zimbabwe (in US$) Administered price ERP Procurement Production VoP Product specific support (PSS) US$ US$ Ton 000 Ton Million US$ Million US$ % 2008–2009 220 136.67 35000 525 115.5 2.92 2.53 2009–2010 265 136.67 63459 650 172.3 8.14 4.73 2010–2011 NA 136.67 249792 1000 NA NA NA 2011–2012 295 136.67 212622 1450 427.8 33.66 7.87 2012–2013 265 136.67 81190 965 255.7 10.42 4.07 2013–2014 378 136.67 33273 800 302.4 19.59 6.48 Year PSS as a % of VoP 2014–2015 390 136.67 40060 1300 507.0 8.43 1.66 Source: (1) Procurement price and quantity from Table 15.11 (2) Value of production is calculated by multiplying total production of maize with administered price. (3) Production of maize based on Index Mundi (http://www.indexmundi.com/, accessed 24 December 2014) Overall, given the upward trend of gap between administered price and ERP, it would be difficult for Zimbabwe to implement price support policy without breaching the de minimis limit for maize in near future if procurement of maize also increases. This could compromise government efforts aimed at fighting hunger and reducing the undernourishment, which continues to affect 30% of Zimbabwean population. References Anseeuw W, Kapuya T, Saruchera D (2012) Zimbabwe’s agricultural reconstruction: Present state, ongoing projects and prospects for reinvestment, Development Bank of Southern Africa, Development Planning Division, Working Paper Series No. 32 WTO (2011) Trade Policy Review of Zimbabwe: Report by Secretariat. WTO document no. WT/TPR/S/252/Rev.1. http://www.wto.org/. Accessed 12 March 2015 IFPRI (2014) Global Hunger Index: the challenge of hidden hunger, IFPRI Report, www.ifpri.org/sites/default/files/publications/ghi14.pdf. Accessed 31 Jan 2015 UNDP (2014) Explanatory note on the 2014 Human Development Report composite indices: Zimbabwe. 12 http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/ZWE.pdf . Accessed 6 December 2014 GMB (2015) About Grain Marketing Board. http://gmbdura.com/About. Accessed 6 June 2015 WTO (1995) Supporting tables relating to commitments on agricultural products in part IV of the schedules. Document number G/AG/AGST/ZWE. 13