Free trade as a tool for development

Via VoxEU Kimberly Elliott suggests the United States should lower tariffs on imports from small, poor economies:

... the Doha Round, under the best of circumstances, will take some time to conclude, and the US and other rich countries should move as quickly as possible to further open their markets to the world’s poorest countries. The eighth of the Millennium Development Goals adopted at a UN summit in 2000 calls on the rich countries to provide duty-free-quota-free market access for the least-developed countries (LDCs). This goal was reiterated at the WTO’s 2005 Hong Kong ministerial meeting, but US negotiators would only commit to provide access for 97% of products and only in conjunction with the conclusion of the Doha Round.

Importantly, the pledge to provide duty-free-quota-free access is not part of the round’s “single undertaking,” and the LDCs are not being asked to undertake liberalisation commitments. So President Obama would lose nothing and could gain a great deal of good will, as well as providing an economic boost to struggling developing countries, by asking Congress to act now and provide access on 100%of products, as the European Union already does, rather than just 97% as promised in Hong Kong. Three percent may not sound like much, but such liberalisation would unblock a number of items that that are of the most interest to poor countries.

Providing full market access will not reverse the decline in trade flows, but it would open opportunities for some of the poorest countries in the world. It would also address a fundamental unfairness created by the fact that US trade policy, like that of other rich countries, discriminates against poor countries and poor people. The highest US tariffs fall on agricultural products and labour-intensive light manufactures, where many developing countries have a comparative advantage.

I have generally found such an argument to be quite compelling, and tend to agree with Ms. Elliott's assessment of the matter.

Chinese origins of the Napa wine industry

Long before the vineyards of California's wine country were tended to by Spanish-speaking farmhands, they were filled with Chinese workers. Napa evidently even had its own Chinatown at one point:

Old newspaper articles and other 19th-century accounts show hundreds of Chinese workers in both Napa and Sonoma counties.

Many were farmers who brought their agricultural skills to the industry, helping establish vines and working in cellars. "There's more to this story. There's this whole human side of how the valley was developed," says Fong, who has researched the region's history.

A 1967 paper by a Napa school official on file at the Napa County Historical Society records that when rains turned the 1887 grape harvest into a muddy mess, keeping wagons out, Chinese workers waded in barefoot and hauled out the grapes.

But 19th-century Chinese in California faced fierce discrimination, including laws banning them from owning property and campaigns urging farmers not to hire them. In 1882, Congress passed an immigration ban on Chinese. Populations dwindled and rural Chinatowns disappeared as workers headed to cities.

A curious tidbit to showcase at your next tasting excursion, and an interesting history to ponder the next time you take a sip of a brilliant Napa Valley wine (may I suggest the Joseph Phelps Insignia Napa Valley 2002. Simply amazing).

[HT: Vinography]

More on contemporary land grabs: the case of the DRC

A brief follow-up on my previous post, if I may.

While it is true that the vast majority of farmland investments in Africa are those of foreign entities, this is not always the case as an interesting piece in the WSJ makes clear:

[South African farmers] are scrambling to get on board an ambitious venture to reclaim farmland in Congo's interior and help relieve that country of a reliance on food imports. Already some 70 farmers have booked a Congo tour and more than 3,000 have expressed interest, said Agri-SA, the South African farming group organizing the venture.

... According to a draft memorandum of understanding, Congo is willing to sign long-term leases and provide tax breaks and waivers on duties of imported supplies for approved projects. The South Africans in turn would build infrastructure, employ locals and instruct them in modern farming techniques. People familiar with the matter say the initial focus will be on restarting state-owned farms abandoned in 1992.

... South African commercial farmers, mostly the descendants of Dutch and French pioneers who began settling the continent's southern tip centuries ago, are renowned for their ability to coax food out of African soil. Eager for their expertise and capital, African countries from Ghana to Nigeria have offered them incentives to set up shop. South African farmers have turned Mozambique into a banana powerhouse. Zambia became self-sufficient in maize after welcoming farmers from Zimbabwe and from South Africa.

As with foreign (i.e. non African) land investments/grabs, such programs are equally controversial, as they raise the very same issues of land tenure, colonialism, and eviction as do those by China, the United States, Saudi Arabia or any other countries. According to the contract governing the investment, South African farmers will enjoy a five-year holiday on corporate tax and the dismantling of taxes on the import of agricultural inputs such as seeds, fertilizer and machines. The farmers will be allowed to take all their profits out of the country and are under no obligation to sell their output on the domestic market. Oh dear.

[HT: The Meaningfulness of Little Things]

Land grabs in poor countries: blessing or curse?

Apologies for my recent absence: I dashed off to Nantucket for the Memorial Day weekend and - to be perfectly frank - postponed my return to the 'real world' (for me part of which entails blogging) for as long as humanly possible thereafter. It was such a lovely time! Alas, one can only put off the inevitable for so long, so here I am: back at long last.

While doing a bit of sunbathing on the beach over the weekend, I happened to stumble across an excellent overview of the issues surrounding present-day land grabs (or "outsourcing's third wave") in last week's Economist. I wrote about this matter earlier this month when a similar story appeared in Canada's Globe & Mail, though I feel the Economist does a much better job of teasing out the issues at stake.

As the Economist piece aptly observes, land grabs are particularly common among countries that export capital but import food (think the U.S. and China, for instance). Countries such as these outsource their farm production to countries that need capital but have land to spare; the vast majority of which are found in Africa (see map). And while investments in foreign farms are not a new phenomenon, there are several factors that differentiate today's 'land grabs' from those of the past, foremost among which is the scale (in Sudan, for instance, South Korea has signed deals for 690, 000 hectares! Before, a 'big' land deal use to be around 100,000 hectares) and the fact that the investors are no longer private entities alone: governments (and their state-run enterprises) have now likewise taken to investing in global farmland. China, for instance, has set up 11 research stations in Africa to boost yields of staple crops, and has secured several large deals across the African continent.

Duncan Green writes: 

The obvious motives for the deals are the spike in food prices and the subsequent decision of governments in several key producer countries to restrict their exports, threatening the food security of food importing countries such as the Gulf states, China and South Korea (the main participants in the deals). However, water shortages are another, hidden driver. Peter Brabeck-Letmathe, the chairman of Nestlé, claims: “The purchases weren’t about land, but water. For with the land comes the right to withdraw the water linked to it, in most countries essentially a freebie that increasingly could be the most valuable part of the deal.” He calls it “the great water grab”.

According to a newly released report by the International Fund for Agricultural Development and the Food and Agriculture Organization of the UN, farmland investments in the past five years total approximately 2.5m hectares - equal to about half the arable land of the UK. Other estimates posit the total farmland investments in Africa, Latin America and Asia at over 15m hectares, about half the size of Italy. While supporters of such deals argue that they are a tool for development, providing new seeds, techniques and money for agriculture, mounting evidence suggests they produce quite the opposite effect, driving out local farmers and in many cases depriving poor people of access to land, water and other resources.

Among the many underlying problems is that of the conflict between customary and statutory laws in the countries where the investments are transpiring. Writes the Economist:

Host governments usually claim that the land they are offering for sale or lease is vacant or owned by the state. That is not always true. “Empty” land often supports herders who graze animals on it. Land may be formally owned by the state but contain people who have farmed it for generations. Their customary rights are recognised locally, but often not accepted in law, or in the terms of a foreign-investment deal.

So the deals frequently set one group against another in host countries and the question is how those conflicts get resolved. “If you want people to invest in your country, you have to make concessions,” says the spokesman for Kenya’s president. (He was referring to a deal in which Qatar offered to build a new port in exchange for growing crops in the Tana river delta, something opposed by local farmers and conservationists.) The trouble is that the concessions are frequently one-sided. Customary owners are thrown off land they think of as theirs. Smallholders have their arms twisted to sign away their rights for a pittance.

The mechanisms for averting such losses would entail measures such as respect for customary laws, stable property rights, and increased transparency surrounding the land deals (among countless others, to be sure!). The trouble is that the majority of the countries which are party to today's land investments lack these very mechanisms and have been struggling with them for quite some time; in many cases decades. A potential solution might be the formulation of some international code, though I'm not quite sure as to what that would look like or what, exactly, it would entail. It would appear that our best option presently remains one of 'wait and see.'

P.S.  I doubt that this falls into the category of 'land grabs,' but the story does speak to the increased prevalence of the phenomenon of giving away land: touched by Biden's speech to the Bosnian parliament last week, a local farmer and war veteran offered Biden a piece of his land as a gift. Go figure.