1. UNEP Country Project on Trade Liberalization in the Agriculture Sector and the Environment Project Leader: Néstor Gutiérrez Economic Research Director The rice sector in Colombia 19 February 2003 Geneva

2. Background: semi-annual crops Trade liberalization in the Colombian rice sector

3. Background: semi-annual crops AGICULTURAL PRODUCTS TOTAL IMPORTS (TONS), 1991-2001 (Miles Tons) Crops19912001* Cotton0.661.0 Rice0.4321.8 Barley130.8212.8 Kidney Beans11.131.6 Corn8.11,759.7 Sorghum0.91.4 Soy Beans18.4353.0 Wheat646.31,245.1 * Preliminar Data Source: DNP-UDA. Rice Fedearroz TOTAL816.63,986.4 Trade liberalization in the Colombian rice sector

4. Background: semi-annual crops COMPARISON OF PLANTED AREA, BY PRODUCT, 19902001 SOURCE: SAC, CEGA,FEDEARROZ. 1990 = 100 Trade liberalization in the Colombian rice sector

5. Background: rice sector RICE HARVESTED AREA, COLOMBIA, 1990 - 2002 Source: FEDEARROZ Trade liberalization in the Colombian rice sector

6. 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Source: FEDEARROZ PADDY RICE REAL PRICE, COLOMBIA, 1989-2002 REAL 7.959 7.336 6.889 6.785 6.192 6.270 6.636 5.946 PRICES of 1978 / Ton 1989 9.290 2000 2001 2002 5,824 7.042 5.485 6.331 5.741 - 38 % Background: rice sector Trade liberalization in the Colombian rice sector

7. Background Trade liberalization in the colombian rice sector By the end of 1980’s, a unilateral openness process was held by Colombia before Uruguay Round. By the time, a free trade agreement was held with CAN countries The rice sector had enough protection since 1994 However, Colombian rice sector is a world price taker

8. Trade liberalization in the colombian rice sector WHITE RICE MONTHLY PRICE, 1996 - 2003

9. Project Approach and Process Trade liberalization in the Colombian rice sector RESPONSIBLE INSTITUTION RICE GROWERS ASSOCIATION-FEDEARROZ Steering Committee Néstor Gutiérrez, project leader, Fedearroz Edwin García – Researcher, Fedearroz José Levis Barón – Researcher, Fedearroz Jaime Jiménez – Int. Trade Director, Ministry of Agriculture Héctor Martínez – Economist, IICA Jairo Homez – Researcher, Ministry of Environment Diego Herrera – Economist, Universidad del Rosario Stakeholders Approach – Initial project presentation, first results discussion, final paper discussion. The acceptance of this initiative has been fantastic for most of the Stakeholder participants because of the subject opportunity when it is a broad discussion on agriculture trade topics (WTO, ALCA, ATPA, CAN).

10. Stakeholders Committee MINISTERIO DE AGRICULTURA JAIME JIMENEZ – Assesor DEPARTAMENTO NACIONAL DE PLANEACION OSCAR BALLESTEROS – Resource Department Chief UNIVERSIDAD DEL ROSARIO FERNANDO BARBERI – Graduate Course Dean - Expert in International Commerce - Trade Ministry Assesor DEPARTAMENTO ADMINISTRATIVO NACIONAL DE ESTADISTICAS (DANE) Alejandro Pelaez Director of Sistema de Información del Sector Agropecuario y Pesquero Colombiano (SISAC) Jaime Perez, SUBDIRECTOR BOLSA NACIONAL AGROPECUARIA NOHORA HELENA CRUZ – Technic Director MINISTERIO DEL MEDIO AMBIENTE JESUS E PEINADO – Environment Ministry Assesor MINISTERIO DE COMERCIO EXTERIOR ANA FABIOLA GUZMAN- Trade Ministry Assesor – Andean Integration CIVITAS DEI (ONG) ELIZABETH CALDERON Director MARTHA RODRIGUEZ – Assesor ASOCIACION DE USUARIOS DE LOS RIOS CHINA Y TOTARE (ONG) JUAN JOSE SIERRA – Principal member, Rice Producer COOPERATIVA DE SERVICIOS ESPECIALIZADOS PARA LOS ARROCEROS (SERVIARROZ) ALBERTO MEJIA – President, Rice Producer Trade liberalization in the Colombian rice sector

11. Stakeholders committee -2 CORPORACION COLOMBIANA DE INVESTIGACION AGROPECUARIA (CORPOICA) IRMA BAQUERO – Main Researcher from Programa Nacional de Estudios Socioeconómicos FRANCISCO ACEVEDO – Researcher Programa Nacional de Estudios Socioeconómicos FERNANDO CARDOZO FEDERACION NACIONAL DE ARROCEROS DE COLOMBIA (FEDEARROZ). RAFAEL HERNANDEZ LOZANO – CEO Fedearroz UNIVERSIDAD JAVERIANA LORENA PRIETO CRUZ Economics Faculty - Apprentice SOCIEDAD DE AGRICULTORES DE COLOMBIA (SAC) ALEJANDRO VELEZ – Trade Director DELSA MORENO – Agronomics Department Director ASOCIACION DE USUARIOS DEL RIO COELLO (USOCOELLO) (ONG) ESPINAL HENRY RAMIREZ – Management Assistant. YESID CASTRO – Andean Community Consultor – Trade FONDO LATINOAMERICANO DE ARROZ RIEGO - FLAR LUIS SANINT – Director INDUARROZ IVAN SOMBREDERO – Manager MOLIARROZ JORGE ENRIQUE CUBILLOS – Manager UNIVERSIDAD DE LOS LLANOS - UNILLANOS JORGE ENRIQUE MUÑOZ AGUILERA Researcher Trade liberalization in the Colombian rice sector

12. Project objectives Trade liberalization in the Colombian rice sector 1.Enhance country understanding of multilateral trade impact on agriculture by product 2.Develop in-country methodologies to assess the environmental, economic and social impact of trade liberalization 3.Carry out integrated assessments of trade liberalization for the rice sector 4.Enhance coordination and knowledge of people working around agricultural trade issues 5.Develop policies to correct identified negative impacts of liberalized trade and maximize positive ones

13. Development of In-country Methodology Within the steering committee discussion the specific methodology was selected, in each specific topic Ex-ante analysis, econometric models, and ex-post analysis were used Indicators in socio-economics and environmental topics were implemented Trade liberalization in the Colombian rice sector

14. Methodology: Steps Trade liberalization in the Colombian rice sector First step was an ex-post analysis about last 10 years performance of agricultural sector response to trade liberalization Second, analysis focused in the rice sector Third, study of Colombian trade agreements Fourth, socio-economic evaluation of their impact on rice sector, we used econometrics modeling (co integration, long term elasticities) Fifth, study of environmental issues related with rice production Sixth, evaluation of inputs and total factor productivity (Seemingly Unrelated Regressions and Törnqvist Indexes) Seventh, ex-ante analysis to evaluate 3 scenarios

15. Integrated Assessment of Impacts of Trade Liberalization and WTO AoA Trade liberalization had impact on rice socio- economic variables through the increase in imports, relative prices and developed countries subsidies. On the environment side, it affected in the use of low price inputs (seed) and more agrochemicals/ha Trade liberalization in the Colombian rice sector

16. Environmental Impacts Trade liberalization in the colombian rice sector It was necessary to increase mechanization and mono- culture to increase the planted rice area Low prices induced the use of low quality seed and more contamination of fields. The use of herbicides and fungicides/ha increased. Besides, agrochemical productivity decreased, and total use of these products increased per hectare Mono-culture means more fertilizer and herbicide/ha The extensive use of agrochemicals damages not only environment but also human health

17. Social and Economic Impacts Trade liberalization in the colombian rice sector Low agricultural prices induce decreases in agricultural income, planted area of semiannual crops, and production costs (total value/ha). They also increase unemployment and consumption of imported food

18. Valuation of the effects Cost of trade liberalization: Increase in Food Imports 388% (1990-2001) Decrease in Area in Semiannual Crops 29% (1990-2001) Rice real price decrease 38% (1989-2002) Colombia Switched from net exporter to net rice importer (1990-2002) Average imports of rice per year around 234,000 tn (1992-2002) Increase on national unemployment rate 80% (1990-2002) Trade liberalization in the colombian rice sector

19. Policies to mitigate/eliminate negative impacts of trade liberalization To mitigate the impact of relative prices (wheat) on rice price, it is necessary to implement the same protection scheme of rice and the substitute products To mitigate impact of developed countries subsidies it is necessary to implement a tariff system in function of production cost for the exporter countries It is necessary to improve concluded agreements for a cleaner production between growers and industry, Environment and Agriculture Ministries and Associations It is important to implement a “Rice Sector Environmental Issues Guide” under responsibility of Environment Ministry and Fedearroz. Some engagements relating sustainability exist inside of Efficiency Agreement of Rice Agro industrial Productive Chain, it is necessary to accomplish them. Agriculture Ministry, Associations Development of Policy Package Trade liberalization in the colombian rice sector

20. Development of a policy package 2 Trade liberalization in the colombian rice sector On the future irrigation projects the environmental component must be supervised by Environment Ministry It is urgent to promote a diversification program on irrigated land to avoid mono-culture. Agriculture Ministry It is mandatory to improve research in management practices to decrease the use of agrochemicals. Fedearroz It is necessary to improve agrochemicals management practices. Fedearroz must implement training courses, at every level.

21. Project Experience Trade liberalization in the colombian rice sector It was surprising to find in the substitute (wheat) prices the connection of the colombian rice sector with the world market It was interesting to set a project to show the environmental impact of the rice activity and to know that we have enough legislation to protect the environment, but we do not have the enforce power to implement it It was the first time economists, biologists, trade specialists, association´s leaders, producers and industry, meet together to discuss trade related issues on an specific crop. During the discussion process we found the high relevance of environment issues on the last development on trade

22. Steps Forward Evaluate three sceneries for the mean time: Build 30.000 ha of irrigated area for rice + CAN agreement (free trade: Ecuador, Venezuela, Peru) Build 30.000 ha of irrigated area for rice + 0 subsidies in the rice exporter countries Build 30.000 ha of irrigated area for rice + ALCA agreement Trade liberalization in the colombian rice sector