7.2.2 Policy challenges and tradeoffs

scale producers. For example, from 1980 to 2001, the price of robusta coffee fell from 411.7 to 63.3 cents kg-1; cotton fell from 261.7 to 110.3 cents kg-1 and rice (Thai) dropped from $521.40 to 180.20 per tonne. (Ong'wen and Wright, 2007). Even the best performing agricultural subsector (horticultural products) saw an annual 1.35% price decline over 1961-2001 (FAO, 2005a). Although the increase in the volume of exports over the past two decades has resulted in a 30% aggregate trade revenue increase for developing countries as a whole, this volume-driven increase accrued to a small number of net exporting developing countries. Export earnings of the least developed countries (LDCs) fell by 30% during that time, with countries in SSA suffering most from the fall in prices and incomes (FAO, 2005a).

      Although most aggregate agricultural production is not traded internationally, and most primary producers do not supply global commodity chains, national agricultural planning is increasingly oriented towards exports. Intergovernmental institutions are advising governments how to integrate small scale producers into these supply chains, with the goal of reducing poverty, particularly in developing countries dependent on commodity exports for the majority of their hard currency revenues (UNCTAD, 2005). This export focus has left small scale producers, the majority of the rural poor, ever more vulnerable to international market factors (Figure 7-2). For example, as a result of a supermarket price war in the United Kingdom, Costa Rican banana plantation workers wages fell from US$12-15 a day in 2000 to $7-8 in 2003 (Vorley and Fox, 2004).

      The increase in absolute numbers of agriculturally dependent populations during the past two decades, together with the inability of primary producers to capture more than a small fraction of those increased trade incomes, has meant that growth in agricultural trade flows have had on aggregate a very modest effect on poverty reduction. This implies that policy options are needed to provide greater opportunities for small-scale producers to increase their profitability in such an international context. Failure to do so will result in missed opportunities to promote sustainable development.

7.2.3.1 Special products, special safeguard mechanisms and deeper preferences

There is broad agreement that the rules of the international trading system should recognize the food security and development needs and priorities of developing countries (FAO, 2006c). Flexibility and differentiation in trade policy frameworks (i.e., "special and differential treatment") can enhance developing countries' ability to benefit from agricultural trade; pursue food security, poverty reduction and development goals; and minimize negative impacts of trade liberalization. This includes the principle of nonreciprocal access, i.e., that the developed countries and wealthier developing countries should grant nonreciprocal access to less developed countries has a significant history and role to play in trade relations to foster development. Preferential market access for poorer developing countries, least developed countries and small island economies will be important.

      At the household level depressed prices can mean inability to purchase AKST, the need to sell productive assets,

Figure 7-1.Trends in real commodity prices. Source: FAO, 2006c