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Thanks to Muhammed Lameen Abdul-Malik, Vinay Chand, Shaun Ferris, Markku Lahtinen, John Madeley, Andrew Parnell and Peter Robbins, for this week's contributions. It is encouraging that the number of contributions is rising steadily. As we enter the last two weeks of the consultation, I would encourage all those participants who have yet to write to do so now, so that we have time to think about and discuss their ideas. In terms of content, I think it's also time to start focussing down on what DFID should do more/less of. There are already some good ideas coming in, and I have included some further thoughts on this. Commodities and Supply Management: This has been the most thoroughly explored of our themes to date. Peter helpfully explained the impact of futures traders on market prices, and went on to make some general points in favour of supply management, as well as rebutting some of the counterarguments. His conclusion was that the opponents' criticisms boil down to 'SM failed in the past' and 'they would be difficult to establish'. He finds these unconvincing and thus declares victory for the pro-SM camp! I am sitting assiduously on the fence on this (always an uncomfortable position), but I don't find the counter-arguments that feeble. The onus on the pro-SM camp must be to explain why the previous collapse of the ICAs would not be repeated in short order * i.e. either identify changes in the way Commodities are produced and traded which alter the potential costs and benefits of SM, or come up with new solutions to the old problems. I think Peter only goes part way towards that, and then falls back on 'every other solution eventually leads to a glut'. I don't find his dismissal of some of the counter-arguments, such as what to do about new entrants and free riders, very convincing, either. It seems to me that systemic solutions to these kinds of problems fall into two categories * those that require universal participation by all players for them to be viable, and those that can be pursued by a subset of market actors and still work. My fear is that SM falls into the former category * all it takes is for one large consumer country (naming no names) to object, and it can break almost any attempt at SM simply by encouraging cash-strapped producers to cheat. Similar arguments apply if a single large producer country decides to break ranks. Moving the Discussion Forward: To what extent have participants found the arguments on supply management convincing, and if they have, which aspects? Peter Robbins argues that DFID needs a greater understanding of the workings of commodity markets and DFID is currently considering joining the World Bank-led international task force on commodities, which is working with traders and financial services companies to expand the use of market-based ways of managing price volatility (e.g. by helping cooperatives and processors hedge their risk). Is that the right way forward? It is also funding work to increase the attention given to commodity issues within the WTO. What other areas of research or policy work should DFID be considering? The Great Vanilla Debate Interesting one, this. For Shaun, Vanilla provides a typical example of donor 'herding': vanilla prices rise because of cyclone problems in Madagascar, a donor feeding frenzy (or should I say, funding frenzy) ensues. Everyone plants vanilla. Glut. Price collapse. Back to square one. Markku, however, is a vanilla optimist. Farmers grow vanilla as one among many cash and subsistence crops, and he sees it as a pretty much cost-free investment which is worth having wherever prices go. One thing, I'm not clear on though, which is that he says vanilla requires '5-6 months work every year' to pollinate and process the pods. That sounds like a very large investment of time, and hence a large opportunity cost if prices fall. Can someone explain? Smallholders and Trade Jhn Madeley is pessimistic on the poverty impact of trade, both in traditional and non-traditional agriculture, and thinks fair trade is likely to have more direct benefits for smallholders than supply management. He argues that, if coffee changes hands up to 150 times between farmer and consumer, it is far from certain that higher prices will 'trickle down' to the farmer, even if SM achieves them. Vinay Chand points out that the differences between domestic and export markets are becoming somewhat blurred by the spread of supermarkets and northern-style quality standards in the more affluent sectors of developing country economies (e.g. middle class urban sectors and tourism). He argues that although such 'modern' sectors are still very small in the poorest countries, their growth potential is great. The smallholders best placed to benefit are often, Vinay believes, those involved in 'interlocking' contracting arrangements, whereby an MNC or local processor provides farmers with inputs, credit and technical assistance. Such arrangements cover the spectrum from beneficial to highly exploitative, and Vinay thinks DFID needs to take a system-wide (or value chain) approach before it can fully grasp where small farmer benefits, and therefore suitable interventions, lie. Moving the discussion forward: The vanilla debate shows the value of real-life examples in clarifying our understanding of trade-smallholder-poverty links. Let's have some more, please! Then, what kind of interventions in policy or research could DFID consider to strengthen the benefits or decrease potential costs for smallholders? Fair Trade Andrew Parnell takes up the challenge on how government procurement can be used to promote fair trade. He suggests government become in essence a fair trade buyer, stipulating what percentage of the final retail price should go to farmers. Alas, this would entail some pretty radical overhauls of European procurement directives as well as government procurement policy, both of which currently say that specifications cannot be framed in terms of fair-trade requirements. More generally, Andrew sees a case for the government setting targets for the market share of fair trade products (as a means to meet its MDG obligations) as it currently does on renewable energy sources (to meet the Kyoto requirements). Environmental Impact John Madeley points out that this has been missing from our discussion so far, and argues that issues such as sustainable development and food miles increases the burden of proof on those who argue that increased international trade, especially air freight, is the way forward. Vinay Chand responds to John by arguing that developing countries that start supplying regional markets (he gives the example of India supplying apples to Signapore and Middle East) can actually reduce environmental impact by replacing even longer distance freight from e.g. US or New Zealand. Advice for DFID Shaun lays the blame for encouraging over production squarely at the door of the development agencies and the Washington Consensus. He also has some excellent, if challenging advice on long-termism, pointing out that development agency time horizons are typically a few years (at best) when real changes to agriculture systems require decades to take root, and typically will show few results for at least 5 years. Any views on the implications of this for the way DFID approaches agriculture? More generally, I am struck by the lack of traffic on the agriculture and trade policy issues where DFID actually works, namely WTO, regional trade agreements, including the Cotonou negotiations, CAP reform and the impact of northern agricultural policies on developing countries. (Thankfully, there is slightly more overlap with our work on standards, both formal and informal, and our work on commodities.) Is this disparity because everyone is entirely happy with the focus of our work on WTO, CAP etc, or do you think we have got our priorities seriously wrong? With two weeks to go, we need to get moving on this part of the discussion. Over to you. Duncan Green Moderator Trade and Agriculture theme ________________________________________________________________________ This e-mail has been scanned for all viruses by Star Internet. The service is powered by MessageLabs. For more information on a proactive anti-virus service working around the clock, around the globe, visit: http://www.star.net.uk ________________________________________________________________________
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