Public Agenda (Accra)
Jonathan Adabre
21 November 2005
Accra — Cotton farmers in the country are in for their last gasp of breath following the declaration by the Finance and Economic Planning Minister, Hon. Kwadwo Baa-Wiredu that from next year lint cotton imports would be duty free. The minister made the announcement when he presented the 2006 budget statement to parliament in Accra.
"This is the last blow the minister has delivered to cotton farmers. All along, we have been hoping that government would come to our aid by extending the President's Special Initiative (PSI) to cotton. Least did we expect government to do what it has done. We are finished," Mr. Adam Nasiru, a cotton farmer and President of Peasant Farmers Association of Ghana said in an interview with Public Agenda last week.
Mr. Nasiru argues that the abolition of the remaining 5% import tariff on lint cotton on the face of cheap imports from the EU meant that "all textile companies would use only imported lint cotton for production and that local cotton companies would have no opportunity to sell their produce.
In his view, Ghanaian cotton companies were already collapsing and the coming into effect of such a policy would eventually wipe out the rest. He recalled that from 11 cotton companies in the 90s, only three are currently operating. According to Mr. Nasiru, if the remaining three fold up, "the cotton farmer would have no place to sell his produce and would have to go out of business."
He notes that despite lint cotton fetching a record low price of 50 cents on the world market, Ghanaian cotton companies have agreed to pay ¢300,000.00 per kilogram of seed cotton, which he said was good price for the farmer. "So we were encouraged by this gesture of the cotton companies and were expecting that government would support us with inputs and tractor services to produce enough to meet their demand. We did not know government had a different agenda."
According to Nasiru, about 100,000 farmers in the three northern regions are into cotton farming with the cotton companies employing about 35% of the working population of the area. "What else could be a better support to the poor people of the regions than this?" he queried, in an apparent reference to the Ghana Living Standard round 4 Survey (GLSS4), which identified the three northern regions as the hardest hit by poverty and upon which findings, Ghana adopted the Poverty Reduction Strategy document. The year 2006 would see the implementation of the second phase of the document.
But the Minister for Food and Agriculture, Mr. Ernest Debra disagrees. To him, the Ghanaian cotton farmer has been operating inefficiently and that what his government wants to do is improve the farmers' productive capacity so that they can compete globally. In the 2006 Budget statement, the ministry of Agriculture says it will establish 100,000 hectares of cotton in the north in addition to the 40,000 hectares being supported by the Agricultural Development Bank.
Nasiru disagrees with the minister, stating that the Ghanaian cotton is as efficient as any other efficient cotton farmer in the world. He said that "imported lint cotton is cheaper not because the farmers there are more efficient, but because their governments subsidize them and their cotton is actually sold below their cost of production."
Mr. Nasiru's assertion is supported by Oxfam GB Ghana. According to Oxfam GB, West African cotton farmers produce at the lowest costs in the world. It cites Burkina Faso, where it costs only 21 cents to produce a pound of cotton compared to the US where a pound of cotton is produced at 72 cents to buttress its points. Oxfam points out that despite the fact that West African farmers are the most efficient in the world, they are still struggling to compete in the world markets with the US producers.
Oxfam notes that US cotton exports are cheaper because the price is offset by subsidies, which totaled $16.8 billion between 1997 and 2004. Oxfam further argues that, "indeed in years when prices are low, the US exports at a net loss to the US economy."
Oxfam's observation is contained in a briefing paper on Africa and the Doha Development, which was recently launched in Accra by the country Manager, Mr. Sam Danse.
While there is substantial evidence, that the developed world is protecting its producers through subsidies, tariffs and quotas, the Deputy Minister for Finance and Economic Planning, Mr. Agyemang Manu, thinks the calls for protectionist policies are archaic. "That is for the old days. In this era, you produce only what you can produce at a cheaper cost than any one else. These talks of protection, protection are archaic," he concluded.
But Mr. Cornelius Adedze of the Third World Network thinks it is rather the Minister's thinking which is archaic. "He may be a pro-liberalist, but to say that pro-protectionists thinking is archaic is far fetched. Those developed countries started off with protectionism and it was only after they had built enough capacity to compete that they opened the gates, but even then, they are still protecting their firms in one way or the other," Adedze argues.
The decision to abolish the 5% import duty on lint cotton and other imports, according to the minister, is to enhance the competitiveness of the local textile industry by lessening their costs of production. This comes against the backdrop of the fact that many textile companies in the country are folding up as a result of the incursion of cheap textile products from China and other developed countries, which enjoy government subsidies and cheap labour.
But giving a breather to the textile companies in this form also means emptying the bowl of the Ghanaian cotton farmer. Demand for locally produced cotton is certain to fall with the lifting of the 5 percent import duty on lint cotton as argued by Mr. Nasiru.
Giving meaning to the government's medium term policy objectives as contained in phase two of the Growth and Poverty Reduction Strategy (GPRS II) document, would have required that government encouraged a backward linkage between the textile industry and that of agriculture and particularly of the cotton sub sector.
It would have therefore required that government supported cotton farmers to produce enough cotton to meet the raw material needs of cotton companies and by that textile companies.
Cotton, together with sheanut holds the highest potential and cashew as a tool for fighting poverty in the three regions which are the largest producers of cotton but which are the hardest hit by poverty.
Indeed, a study conducted by Oxfam GB confirmed that the three regions have a comparative advantage in the production of cotton. The Centre for Policy Analysis (CEPA) in a recent study, recommended the development of cotton in northern Ghana as a cash crop and a foreign exchange earner to ensure the economic take of the region.
The CEPA study recognized that Northern Ghana could "increasingly contribute to exports and foreign exchange - a key resource for Ghana's development if sheanut and mango exports are intensified. Now that cotton has been dealt a deadly blow, what else?
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