Achieving Effective Domestic and Trade Policy Reforms

OECD Committee for Agriculture _ Consultations with Civil Society Organisations

Paris, 26 April 2004

Views of the International Federation of Agricultural Producers (IFAP)

IFAP’s position on domestic and trade policy reform can be summarised into four main demands of farmers, as follows:

1. Measures to ensure that the agricultural markets function competitively

Trade liberalisation in a context of markets that do not function competitively will not bring the expected benefits. Concentration of market power in the hands of a few large multinational companies causes market distortions, lack of choice and leads to most of the risks in the food chain being borne by farmers and consumers. Transparency and competition are therefore fundamental issues for the success of the policy reform process, and the multilateral trading system.

OECD should study the question of price formation in agriculture, especially the effects of concentration of market power in relation to prices received by primary producers, and the margins obtained along the food chain by intermediaries before the end product reaches the consumer.

OECD should also examine competition legislation to see why farmers are not allowed to collude, organise delivery boycotts, etc. while corporate oligopolies are allowed to be formed in the market.

2. Measures to stabilize the farm economy

As farmers become more exposed to the volatility of world market prices, it is important that they have access to suitable income safety-net programs, and other risk management tools. The instruments used should be cost-effective in helping to stabilize farmers’ incomes, while at the same time not distorting production or trade.

OECD is asked to examine options for policy makers in this area. This could include insurance type programs, or measures to help farmers to become more organised in the market through joint business ventures, cooperatives or producer commodity marketing schemes. Consideration also needs to be given to ways to take account of the destabilizing effects on agricultural trade of large swings in currency exchange rates.

3. Measures to address non-trade concerns

In addition to food production, agriculture has an important role in environmental protection, in food security, in preserving rural traditions and culture, and in contributing to the socio-economic viability of the rural areas.

In today’s environment of more open global markets and increased competition, market forces will not be able to deliver the multiple functions expected by society from agriculture. Non-trade distorting government programs need to be developed to reward farmers the provision of benefits to society that appear concurrently with agricultural production, but which cannot be traded economically.

4. Measures to promote poverty reduction and food security in developing countries

In order to address problems of poverty and food insecurity, especially in low-income countries, resources provided by overseas development assistance need to be increased to meet the international target of 0.7 per cent of GDP. Also the World Bank needs to increase the share of its loans that go to agriculture from the current low level of 8 per cent of the total.

Farmers in developing countries need more than aid. They need market opportunities, and they need to be able to exploit these opportunities.

In terms of domestic and trade policy in OECD countries, this means increased market access to OECD country markets. Farmers' organisations in IFAP consider that trade preferences are not trade privileges, but rather a way of ensuring that certain developing countries are able to participate in international trade along with stronger industrialised economies.

However, it is important that benefits from trade preferences reach down to the farmer.

At the same time as agricultural markets are opened to developing countries, technical assistance programs must be put in place by OECD countries to build the capacity of developing countries to meet the food safety and traceability standards for international trade.