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Trade liberalisation, agriculture and land degradation in Fiji: implications for sustainable development policies
Project ID
ADP/2002/047
Project Country
Commissioned Organisation
University of Queensland, Australia
Project Leader
Dr John Asafu-Adjaye
j.asafu-adjaye@economics.uq.edu.au
Phone:
07 33656539
Fax:
07 33657299
Project Budget
$394,677.00
Start Date
01/10/2003
Finish Date
30/09/2006
Extension Start Date
01/10/2006
Extension Finish Date
31/12/2007
ACIAR Research Program Manager
Dr Simon Hearn
Overview Objectives
This project sought to empirically assess the economic and environmental impacts of agricultural trade liberalisation in Fiji, as well as the agricultural production and trade effects of environmental changes, and to propose measures to mitigate any adverse impacts. The specific objectives were to:
assess the impact of trade liberalisation policies on agricultural production, the economy and the environment, with particular emphasis on land degradation, biodiversity etc.
critically review the institutional framework required to make trade, environment and agricultural policies more effective as drivers of sustainable development
collaborate with and build USP and National Planning Office (NPO) staff capacity in economics research, with particular reference to trade policy analysis and environment-economy modelling;
communicate the findings to the stakeholders and the academic community through technical and non-technical publications
model the effects of climate change on agricultural output and the economy.
Project Background and Objectives
Export-oriented growth is a key to the sustainable long-term development of the Fijian economy. In the medium-term much of this growth is expected to come from agriculture, a sector where Fiji has comparative trade advantages. Agriculture has contributed the bulk of total exports and almost a fifth of GDP, but both these contributions are in decline.
Trade liberalisation is driving some agricultural growth and could become an important driver of sustainable development. But there is a danger that the impacts of increased production could harm Fiji's fragile ecosystem. Land degradation resulting from cultivation on steep slopes and marginal lands, combined with deforestation on these and other lands, are already causing problems. The availability and quality of freshwater is being affected and biodiversity is being lost. Land and sea-based pollution are also rising.
These areas of concern for the Government must be balanced against the potential for trade liberalisation to drive development. Policies are needed to strike this balance, ensuring benefits are gained from trade liberalisation while maintaining effective environmental resource conservation measures. But the key institutions in Fiji responsible for developing and implementing these policies have little experience in these areas.
Progress Reports (Year 1, 2, 3 etc)
Year 1:
The main aim of our project is to evaluate the environmental effects of agricultural trade liberalisation as well as the agricultural production and trade effects of environmental changes in Fiji in order to devise supportive policies to enhance the process of sustainable development. A secondary objective is to build partner country (PC) capacity to conduct environmental and economic research.
Project activities planned for 1/10/03 31/8/04 included updating the Fiji Input-Output (IO) table that will be used for the computable general equilibrium (CGE) of Fiji; collecting environment related data to be used for the CGE model, and conducting a workshop. Activities in the partner country did not commence until March 2004 due to the late signing of the MOU between the Government of Fiji and the Commissioned Organisation (The University of Queensland). The following activities have taken place since then:
1. The Modeller (Dr. Theo Levantis) visited UQ in November 2003 to confer with the local project team on ways of developing an environmental module for the proposed Fiji CGE model.
2. A 3-day stakeholder workshop was held in Suva from 15-16 April 2004. The main aim of the workshop (see Attachment 1) was to increase the understanding of the participants about the project objectives, methodology and the range of policy issues that to be analysed. A secondary objective was to involve the stakeholders at an early stage of the project (originally, one stakeholder workshop had been planned for the end of the project). The workshop was attended by 27 delegates representing government agencies, non-governmental organisations, landowner representatives, and tenant representatives. A record of the attendance is provided on Attachment 2. Feedback from the workshop indicates that it was a success. Among the recommendations, was the need to communicate the project's findings and recommendations to community groups, as well as government agencies and NGOs.
3. A pilot survey of sugar cane farmers was conducted from 10-14 April, followed by another pilot survey of non-sugar farmers from 7-9 July 2004 to obtain information to be used in planning a field survey to collect environmental data for the CGE model.
4. A field visit to Fiji was undertaken by the Project Leader and Economist from 7-22 July 200 during which we undertook the following activities. (i) We conferred with stakeholders in the sugar industry to seek their views on the impending changes in their industry, (ii) We met with a group of resettled farmers to learn more about alternative crops to replace sugar cane; (iii) We consulted with PC researchers on the update of the IO database for the Fiji CGE model; and (iii) we undertook planning the logistics for a full-scale field survey to be carried out in September 2004.
5. There was a delay in appointing a research officer in Fiji to carry out the update of the IO database because the person nominated was not available in the first half of the year. However, the research officer has now been appointed and he commenced work on July 7, 2004.
Year 2:
Assess the impact of trade liberalisation policies on agricultural production, the economy and the environment, with particular emphasis on land degradation, biodiversity, etc.
Model Critically review the institutional framework required to make trade, environment and agricultural policies more effective as drivers of sustainable development.
Collaborate with and build partner country staff capacity in economics research, with particular reference to economic analysis and environment-economy modelling.
Communicate the findings to the stakeholders and the academic community through technical and non-technical publications.
Year 3:
Project activities were delayed at the commencement date due to the late signing of the MOU the parties. Consequently, there has been a lag in project activities. Nevertheless, progress has been made towards achievement of the key objectives. Progress in the project's sub-projects are briefly summarised below for this reporting period. (i) Assess the impact of trade liberalisation on the economy and the environment, with particular emphasis on effects on land degradation, biodiversity. Work was completed in updating the Fiji CGE model to a 2002 base year. The activities included incorporating land as a factor of production and balancing the input-output tables. The model was tested and evaluated to ensure that it is consistent and reliable. Simulation experiments were conducted with the model and the results were analysed and documented. Data already collected for the environmental module were also analysed and written up. However, work on modifying the CGE model to account for environmental effects and testing of the environment-economy model are yet to be completed. (ii) Critically review the institutional framework required to make trade, environment, and agricultural policies more effective as drivers of sustainable development. The co-project leader earlier on produced a review paper on Fiji's WTO negotiations and implications for the environment. Consultations are yet to be held with the stakeholders, which is a necessary prerequisite to developing a set of policy guidelines to integrate environmental issues into Fiji's trade policies. (iii) Collaborate with and build Partner Country staff capacity in economics research. Scheduled training workshops for this year have been postponed to next year due to the delays alluded to earlier and also a job change for a key project staff member. The project's research officer, based in Fiji, registered for a PhD and is now spending one year of full-time studies at the University of Queensland under the supervision of the Queensland-based collaborators. He is funded by the University of the South Pacific. Another Fijian project collaborator won a John Allwright Fellowship and is now pursuing an M.Phil at the University of Queensland. (iv) Communicate the findings to the stakeholders and academic community through technical and non-technical publications. The project leader presented the results of analyses conducted so far at two international conferences: the 50th Australian Agricultural and Resource Economics Society conference held in February 2006 in Sydney, and the 61st International Atlantic Economic Society conference held in March 2006, in Berlin. The Project Working Papers presented at these conferences have been submitted to high impact factor journals and one of them is currently at the revise and resubmit stage. Plans are also afoot to establish a website to make publicly available these papers and other project publications.
Year 4:
The period 2006/7 is the final year of this project. Due to the disruption caused by to the December 2006 military coup, some activities could not be conducted in-country. Approval has been sought to extend the project conclusion date to December 2007. Progress made in the sub-projects for this reporting year are summarised below.
(i) Assess the impact of trade liberalisation on the economy and the environment, with particular emphasis on effects on land degradation, biodiversity:
The modelling work was completed during this period. The Fiji CGE model has been tested and evaluated and verified to be consistent with theoretical expectations. Various policy simulation experiments have been conducted with the model and the results have been written up in the form of working papers. Some of the papers have been presented at international conferences. One paper has been accepted and will appear in The World Economy, while others are in various stages of the journal submission process.
(ii) Critically review the institutional framework required to make trade, environment, and agricultural policies more effective as drivers of sustainable development:
A workshop has been planned in Suva for November 21-23, 2007 where stakeholders in the agricultural industry will gather to deliberate on the project's findings and to discuss institutional measures proposed to integrate environmental issues into Fiji's trade policies.
(iii) Collaborate with and build Partner Country staff capacity in economics research:
The project's research officer, based in Fiji, completed one year of full-time studies at the University of Queensland. He is scheduled to submit his PhD thesis by June 2008. Another Fijian project collaborator on a John Allwright Fellowship, who has been conducting research for his M.Phil degree at UQ, plans to submit his thesis for examination in June 2008.
(iv) Communicate the findings to the stakeholders and academic community through technical and non-technical publications:
Project Working Papers were presented at two international conferences - the 51st Australian Agricultural and Resource Economics Society conference held in February 2007 in Queenstown, New Zealand and the 82nd Annual Conference of the Western Economic Association International (WEAI) conference held on June 29-July 3, 2007 in Seattle, USA. Good feedback was received at these conferences and the papers have been submitted to high impact factor journals. A website has been created to allow public assess to these papers.
Project Outcomes
A computable general equilibrium (CGE) approach, supplemented with a series of partial equilibrium (econometric) studies, was adopted to investigate the impacts of agricultural trade liberalisation. The investigation of environmental effects in this study was limited to land degradation, in particular soil erosion. The main findings are as follows:
Land degradation A first attempt was made to quantify the economic cost of soil degradation to cane farmers and the sugar industry. The team estimated the cost of soil erosion to farmers at about US$8 million per annum, while the industry losses in sugar sales per annum were gauged at about US$12 million.
Despite the high economic cost of land degradation to farmers and the significant external costs it imposes on society in general, soil conservation rated very low on the government's policy agenda. At the institutional level, there is weakness in implementing and enforcing environmental legislation, while at the farm level there is lack of government support for education and extension services.
Sugar production is not the only area where land degradation is a problem; for example, soil erosion is also high in the cultivation of ginger. Therefore, there is a need to take a comprehensive look at the issue of land degradation and to institute policies to address the problem.
Trade liberalisation The project team analysed and compared various trade liberalisation scenarios beginning with unilateral trade liberalisation by Fiji and including different types of regional trade agreements (RTAs), global trade liberalisation, as well as various options for structural reform of the Fiji economy.
While various RTAs could yield some overall benefits, the best outcome for Fiji is global trade liberalisation involving removal of tariff and non-tariff barriers between the developed and developing countries. To successfully meet the impending challenges brought on by trade liberalisation, Fiji would need to restructure its agriculture sector (especially the sugar sector) and expand its export base. Targeting a particular sector for growth is likely to have adverse impacts on other sectors. Therefore, broad diversification of the economy would deliver the best outcomes for the economy. For this to be possible there is a need to address the institutional and structural constraints that inhibit producers' ability to react to favourable market conditions.
Key recommendations The project team advocates increased government expenditure to improve public education and awareness about land degradation. As well, there appears to be lack of awareness in the general community about the effects of trade liberalisation. Information put out in the local media by anti-trade organisations depicts trade liberalisation as having adverse effects on the economy. However, the project research indicated that the net benefits can be positive. There is therefore a need for more public education on this issue.
There is a need for the Government to harness both internal and external resources to address structural and institutional constraints such as poorly developed transport and telecommunications infrastructure, inadequate ports and handling facilities, tedious customs procedures, lack of marketing networks, lack of knowledge about standards, lack of microfinance programs, and poor functioning of markets for leasehold land. The Government also needs to invest in human capital development, with specific emphasis on low- and middle-level skills training.
Based on feedback received from workshop participants and on the team's own observations, the ability of government agencies to conduct policy analysis is vital to effective decision-making. However, this is one area where capacity is grossly lacking, even in a country like Fiji where educational levels are relatively high compared to other Pacific Island Countries. Therefore, there is a need for more initiatives such as this one to build capacity within government agencies.
The modelling approach used in this study could be extended to investigate the links between the economy, the environment and poverty, further enhancing understanding of these complex relationships and helping to propose more effective poverty alleviation programs.
Location
There are no project locations defined for this project.
