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Tuesday, June 21, 2005

Free Trade in 2005: Subsidies for the Richest, Tariffs for the Poorest

African sugar workers may be happy with their lot, but the idustry is one of many endangered by Western protectionism

Times Online -- SWEAT trickles down Paulo Zunguze’s face, cutting channels through a cover of charcoal dust. The sugar cane cutter is tired but eager to press on. “It’s good to have a job,” he says with a broad smile. “I came here a year ago because things were not good at my place — no work, no food, only fish to eat sometimes.”

It is early in the day but already the sugar cane fields of the Maragra plantation — the country’s largest — are hot and sultry. Black clouds of smoke from fires burning unwanted foliage drift over the fields as workers move through tall, swaying swaths of ripe green sugar cane, swinging long, wooden-handled metal cutters.

To earn £1.60 a day each, Paulo and five members of his team must clear at least six tonnes. It is seasonal and irregular work but quickly translates into food, basic education and health for families in a country ranked among the five poorest in the world.

“It is hard work but worth it,” Paulo, 24, who used to be a river fisherman, said. “Sugar has changed my life. Now I can pay for many things (which) before I only dreamt of.”

With the support of Western governments, Mozambique rehabilitated its sugar industry at the end of the civil war in 1992. About £190 million was invested in new plants, production and infrastructure.

Today it produces some of the cheapest sugar — between £60 and £80 a tonne. By comparison it costs Europe about £320 to produce one tonne.

Yet Mozambique’s sugar industry is in danger. The reason is the European Union’s highly protectionist Common Agricultural Policy, which hits the country’s sugar producers from three directions simultaneously. The CAP subsidises European producers of the much more costly sugar beet by £550 million a year. Much of this goes to companies such as Tate & Lyle in Britain, which alone is estimated to receive £120 million a year. The CAP places import tariffs of more than 200 per cent on cane products from non-EU countries, making it even more difficult for dirt-poor producers such as Ethiopia, Malawi, Zambia and Mozambique to take advantage of low wage costs.

And the CAP’s price-support system leads to over-production. As a result roughly five million tonnes of European sugar are dumped on the world market annually, driving prices downwards.

“Because of dumping, the weighted average price per tonne on the world market is now below even our cost of production. No one can compete with those prices,” says Tony Currie, a South African manager of the Maragra estate, a joint government-private sector venture of exactly the sort that is recommended by modern development gurus.

The situation may be about to get worse. To head off criticism of the subsidy system, which had gone unreformed for four decades, the EU agreed in 2001 to buy a tiny amount of sugar from the world’s poorest countries at preferential rates.

It said that the system would be reviewed in 2009. The total amount represented only four days of EU consumption but it gave Mozambique and other countries some price security.

Now, under mounting external and internal pressure to cut the costs of the system, the EU wants to slash those prices by about 40 per cent, meaning that countries such as Mozambique will receive even less income from their sugar. Luke Simbane, a team manager at Maragra, said: “They want to change rules which we had no say in making. They want to cut our throats again and make us pay hardest for their reforms. But we are still poor, they are rich.”

Next month’s G8 summit at Gleneagles will discuss ways of helping Africa. It will agree a debt-relief package worth £22 billion, and a new aid package, but one of the biggest obstacles to economic progress in Africa is the protectionism that prevents its farmers selling their products to the West. The United States, which pays millions of dollars to its cotton farmers each year, is as much a culprit as the EU. Rich countries are believed to spend as much as £560 million a day on agricultural subsidies — a huge barrier preventing even the most free-market-orientated developing country from trading its way out of poverty. Across Africa, from Zambia to Mali, it is the same story whether the produce is cotton or rice, tomatoes or fruit.

In Ghana, dumped American rice has had a devastating effect on producers. In markets outside the capital, Accra, local traders sit behind piles of unsold rice, unable to compete with subsidies that give the American farmer back 72 cents for every dollar laid out.

Cotton producers fare even worse across West Africa. Small family farms in Benin, Mali, Burkina Faso, Chad and Togo are unable to compete with $3.2 billion (£1.8 billion) in annual subsidies to American growers, a vast proportion of which goes to 27 plantations in the southern states.

Overall, the charity Oxfam calculates direct losses to West Africa as a result of combined EU and US cotton subsidies at £140 million a year, and accuses industrialised nations that preach free trade of lacking the stomach to take on farm lobbies and the vested interests of the agri-business world.

Amy Barry, of Oxfam, said: “Protectionism is the problem. Aid and debt relief are fine if they are part of a concerted policy with trade reform, otherwise it risks being wasted money. Aid and debt relief can be used to help countries like Mozambique put in the infrastructure to be able to take advantage of improved trade. If you do not manage the world trading system better, you jeopardise all that at a stroke.”

Oxfam estimates that if Africa could boost its share of world trade by 1 per cent it would result in extra funds of about £40 billion annually.

“It is a classic case of the left hand and right hand not working together. What we need is trade not aid,” Mr Currie, of the Maragra estate, said.

For Rabeca Avore Mandleia, 47, a mother of four who lost her husband in the civil war that followed Mozambique’s independence in 1975, life without her job scattering fertiliser on newly planted sugar cane is unimaginable.

“We had nothing for the family before we came here. I am alone now, but all my children go to the school,” she said.

“If sugar goes, we will return to poverty.”

Another day, another dollar

  • The World Trade Organisation has declared EU sugar subsidies and US cotton subsidies illegal
  • EU subsidies give each European cow $3 (£1.80) a day. More than half of Africa’s population live on less than $1 (60p) a day
  • For every dollar given to poor countries in aid, two are effectively taken back because of “unfair trading”
  • Rich countries spend $1 billion (£560 million) a day on agricultural subsidies. Surplus production is dumped in Africa, driving down prices and production
  • The EU gives £28 billion a year in farmers’ subsidies. Grants double that amount

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