Cause of Haiti's Problems/ Recommendations A

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Looking ahead:Trade liberalisation in Haiti was both misconceived and mismanaged.

It has devastated the
livelihoods of poor families, who can never be adequately compensated.

However, the bigger question for Haiti is: `What now?' While the World Bank does sometimes talk about why some
countries might not benefit from trade liberalisation, there is still no serious discussion about what to do after the damage is done, nor any support or alternative strategies.

This is a pressing debate for Haiti (and other countries) which needs some serious thought.

What is the way forward for a developing country's agriculture sector?

Can it ever recover in an open arket without various measures of targeted state subsidies, support and/or protection?

The international financial institutions are currently re-engaging with Haiti through the development of the Interim Cooperation Framework and, with a poverty reduction strategy paper (PRSP) process anticipated in the country, this is an appropriate time to be having this debate.

As close to four-fifths of Haiti's extremely poor still live in rural areas,
106 it is essential to look at rural poverty and agricultural development.

While some trade liberalisation advocates in Haiti feel that agriculture is a doomed sector, it is clearly one that cannot be ignored.

Instead of a real debate on the position of the small farmer, the standard mantra of supporting agribusiness and creating low-wage manufacturing jobs has generally been repeated.

It has been proposed that Haiti should focus on low-wage, low-skill manufacturing in free trade zones.

However, the number of jobs in this sector has been declining since liberalisation: the Ministry of Economy and Finance's last industry survey found that the number of jobs provided by the sector in 1999 was 18,927 ­ hardly an impressive total.

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The ministry also describes it as the sector with the least value added and the lowest annual wage, compared with other industries in the country.

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Current discussions by the major donors involved in the Interim Cooperation Framework do not give agriculture the attention it deserves, prioritising instead tourism and free trade zones.

Given their lacklustre performance, low value added and low wages, it is already clear that free trade zones are not going to provide Haiti with the answer to its problems.

In addition,
Haiti's deficient infrastructure means that any strategy to address tourism will need huge capital investment and is unlikely to be pro-poor in any significant way. It will instead have much more in common with the industry in the free trade zones, relying on significant amounts of foreign investment to provide a small number of poorly paid, low-skilled jobs.
At the same time profits will be transferred out of the country and the sector will rely to a large extent on imported inputs (luxury foods, interior fittings and equipment, construction machinery etc), with
few links to the local economy.

It is right to be extremely skeptical of a strategy which highlights free trade zones and tourism
over agriculture, the domain of the majority of Haiti's poor.
It ignores the fundamentals of poverty in Haiti and means that a real commitment to much-needed agricultural development will be side-stepped once again.

Serious investment in agriculture is needed to right the
wrongs of the past, raise the productivity of small farmers and reduce the alarmingly high levels of poverty in the country.

Ideas abound in Haiti on how the agricultural sector could be effectively supported.

The following is a summary of Christian Aid's recommendations which have been informed by interviews with a range of public, private and non governmental actors:
1. Serious investment is needed to implement a coherent agricultural development policy.

Donors involved in the Interim Cooperation Framework and any subsequent PRSP must give agriculture a much higher priority.

It is regrettable that Haiti, like many other
developing countries, suffers the same diversion of aid resources away from productive programmes, towards activities such as auditing public enterprises to prepare them for privatization or making the country more attractive to foreign investors to invest in free background image 37trade zones.

If poverty reduction were a real priority, raising the productivity and incomes
of small farmers would be much higher on the donor agenda.

2. A coherent agricultural development policy should address problems related to credit provision, technical assistance to small farmers, investment in infrastructure and transport, support for marketing and the provision of necessary inputs, including irrigation systems.

Many of these needs could be addressed through public infrastructure projects, without even entering into the subsidy debate.

However, it is also worth noting that Haiti has considerable space to manoeuvre under WTO rules.

Like all developing countries it can provide up to 10 per cent of the total value of its agricultural production in agricultural subsidies.

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Therefore, Haiti could increase domestic support for small farmers without
breaking any international commitments.

As with many developing countries, the problem
comes down to limited resources and the choices which are made in resource allocation.

Donors and the Haitian government would have to make a real commitment to revitalizing the agriculture sector ­ something which has not been seriously discussed to date.
3. Restructuring Haitian agriculture should include the development of regional
specializations in areas where Haiti has natural advantages of climate, terrain and soil (eg organic products), and can access particular niche markets.

This will often imply accessing export markets, but may also include creating pockets of competitiveness where farmers supply the local market.

(In many such cases, and generally depending on
the altitude, import competition may not be a problem for these farmers).

There are currently various donor programmes which are looking at such niche sectors ­ for example
the USAID Hillside Agricultural Programme is looking at yam, malanga, pumpkin, peppers and the creation of export supply chains;
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the IDB is looking at vegetables, fruits and
coffee.

Needless to say, to ensure the pro-poor focus is maintained, one of the key criteria for the development of regional specialisations should be that small farmers benefit directly.

The development of agro-businesses should complement such strategies, not
replace them.
4. Given Haiti's increasing trade deficit and the fact that over 80 per cent of export earnings
are used to import food, it is highly advisable, purely from a balance of payments perspective, that the Haitian government pursue an explicit strategy to reduce food imports and replace them with national production.

Currently the balance of payments is supported by remittances and aid flows, so it does not appear to be a serious problem.

However, the problem is more subtle: Haiti's current viable balance of payments is only
consistent with miserable incomes.

A strategy to increase incomes will lead to a rise in
imports and will worsen the balance of payments, making the situation unsustainable.

Addressing this issue will become necessary at some point: it would therefore be advisable to implement a long-term strategy to reduce the trade deficit by replacing food imports with national production.

5. With regard to regional specialisations, some work is already underway, with the potential to be successful within the current macroeconomic structure.

But there are, of course, also geographic areas where the potential for production is more limited.

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It is therefore unavoidably the case that in some areas of Haiti farmers will have to produce crops for the local market which will inevitably compete with imports.

It is indispensable that such poor producers are not penalised by the fact that they have few production choices and have to compete with imports.

Alternative development strategies are needed for these
producers, and the Haitian government needs to be able to apply more flexible policy options.

Haiti has room for manoeuvre within its commitments to the WTO, as its
agricultural bound tariffs are much higher than the tariff levels which are current applied ­up to 50 per cent on certain products.

While Haiti has some leeway to change its
agricultural tariffs in theory, such action would in fact contravene the simplified tariff headings agreed under IMF mandated reforms.

It is unclear what response this would
provoke from the IMF.
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However, the flexibility to use tariffs as a part of its agricultural
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development policy is a necessity, with regard to certain products where rural livelihoods are at stake.

Lionne

Reposted By Claude, April 25 2008, 3:00 AM

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