North American Agrifood Market Integration - CAFTA-DR Agrifood

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					                                                          Transition to CAFTA-DR - Executive Summary




                               CAMIC 2007:
                            Transition to CAFTA-DR
                              Executive Summary




                                                Ronald D. Knutson
                                                   Luis A. Ribera
                                       Agricultural and Food Policy Center
                                               Texas A&M University

                                                January 25, 2008




AFPC
Agricultural and Food Policy Center
Department of Agricultural Economics
Texas A&M University
College Station, Texas 77843-2124
Telephone: (979) 845-5913
Fax: (979) 845-3140
http://www.afpc.tamu.edu

                                                                                                  1
CAFTA-DR Market Integration Consortium




CAMIC 2007 Sponsors:
     Sponsors of the CAMIC workshop series include: the U.S. Department of Agriculture (USDA) agencies, Foreign Agricultural Service
(FAS) Emerging Markets Program and Agricultural Marketing Service (AMS); the Economic Commission for Latin America and the Carib-
bean (ECLAC/CEPAL); the Farm Foundation, a catalyst foundation supporting agricultural education; Texas A&M University’s Agricultural
and Food Policy Center (AFPC) and Center for North American Studies (CNAS); the Costa Rica Exporters Chamber (CADEXCO); and the
Inter-American Institute for Cooperation on Agriculture (IICA). These organizations provide the financial support for CAMIC, its work-
shops, the CAMIC Internet website, and its Executive Summary publication.
     Arrangements for the Forum are coordinated by Drs. Ron Knutson and Luis Ribera, who are faculty of the Agriculture and Food
Policy Center (AFPC), in the Department of Agricultural Economics at Texas A&M University. Dr. Knutson has previously coordinated
highly successful workshops of this type for the NAFTA bloc.

CAMIC 2007 Planning Committee:
     The following program, authors, and discussants were developed by the CAMIC Planning Committee, which included the following
distinguished regional leaders from government, industry, and the research community:
•    Sergio Navas – Executive Vice-president, Exporters Association CADEXCO, Costa Rica.
•    Luis R. Rodríguez – Undersecretary for Planning, Ministry of Agriculture, Dominican Republic.
•    Bernardo López – Minister of Agriculture, Ministry of Agriculture, Guatemala.
•    Medardo Galindo – General Manager, Agro-exporters Federation, Honduras.
•    Jorge Brenes – General Manager, APEN, Nicaragua.
•    Amy Angel – Natural Resources Manager, FUSADES, El Salvador.
•    James G. Butler – General Sub-Director, IICA
•    Stephanie Murphy – FAS, USDA, U.S.




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                                                                    Transition to CAFTA-DR - Executive Summary

      CAFTA-DR Agrifood Market Integration Consortium 2007


                              Transition to CAFTA-DR
                                Executive Summary
In November 2007, approximately 70           costs from point of production to the            among these six regional countries
leaders from the CAFTA-DR countries          consumer.                                        with the Dominican Republic being
met in Costa Rica to identify public-                                                         the smallest trading partner.
and private-sector initiatives needed        Market integration occurs either by fre-    •	   North-south	 integration	 between	
                                             er trade or by direct foreign investment         the six regional countries and the
to foster regional agricultural economic
                                             (DFI). In a market economy, firms and            United States. In 2006, there was
development and market integration.
                                             individuals trade and invest based upon          about $3,300 million in exports
The agenda was set a year earlier by
                                             where they realize the lowest costs and          from the six regional countries and
a Planning Committee of eminent pri-         the highest profits. Therefore, trade and        $2,300 million in imports. The largest
vate- and public- sector leaders rep-        investment lead countries to specialize          of these trading partners with the
resenting each country, who also had         in producing those products for which            United States was the Dominican
workshop wrap-up responsibilities. In this   they have the greatest comparative               Republic with about $600 million in
initial workshop, the Planning Commit-       advantage in the utilization of the re-          agri-food exports and imports.
tee decided to commission a series of        sources available to them. This special-
papers on topics that cover the scope        ization process is the most apparent        With a base for comparison of 1994-1996,
                                             in the initial stages of achieving freer    the following general market integra-
of issues confronting the agricultural
                                             trade but also continuously evolves as      tion and specialization trends are ap-
economies of the CAFTA-DR region. Fol-
                                             markets become more fully integrated.       parent:
lowing a summary presentation of each
                                                                                         •	 Costa	 Rica:	 Total	 agri-food	 imports	
paper, there was extensive interaction       Market integration is facilitated by pol-       reached an annual average value
and discussion that often continued in-      icy integration, which occurs as trade          of $748 million in 2004-06 – 192 per-
formally through breaks, meals, and into     and investment policies and regulations         cent larger than in 1994-96. During
the evening. This executive summary is       become more uniform and in greater              2004-06, exports reached an annual
designed to capture the content of the       harmony across countries. The forma-            average value of $2,311 million – 28
commissioned papers, the discussion,         tion of CAFTA-DR was the first step in          percent more than in 1994-96. Re-
                                             the direction of policy integration, but        gionally, its largest trading partners
and the major conclusions.
                                             many more steps are required as indi-           are the United States (exports and
                                             vidual countries harmonize their laws           imports), Dominican Republic, and
Market Integration in CAFTA-DR: Steven
                                             and regulations. The faster policy inte-        Nicaragua. In exports, it appears to
Zahniser, ERS/USDA; Noe Hernández,           gration occurs, the faster market inte-         be becoming more specialized in
Ministry of Agriculture, SV; and Megan       gration will occur, and the more total          deciduous fruits, food preparations,
Romberg, ERS/USDA                            benefits will be realized from the forma-       live plants, and horticultural crops
                                             tion of CAFTA-DR.                               and legumes.
Market integration refers to the forma-                                                  •	 Dominican	 Republic:	 Total	 agri-
tion of one market by combining two          The process of CAFTA-DR market inte-            food imports reached an annual
or more markets, normally as a result        gration can be viewed from two per-             average value of $1,000 million in
                                             spectives:                                      2004-06 – 162 percent larger than
of the elimination of barriers to trade
                                             •	 South-south	 regional	 integration	          in 1994-96. During 2004-06, exports
among previously separated markets.
                                                 among Costa Rica, Dominican                 reached an annual average value
From an economic perspective, when
                                                 Republic, El Salvador, Guatemala,           of $876 million – 138 percent more
markets are integrated, product prices           Honduras, and Nicaragua, here-              than in 1994-96. Regionally, its larg-
become more uniform and differ only              inafter referred to as regional inte-       est trading partners are the United
by consumer perceptions of differenc-            gration. In 2006, there was about           States (exports and imports), Hon-
es in product quality and by transaction         $1,500 million in agri-food trade           duras, and Costa Rica. In exports,
                                                                                                                                 3
CAFTA-DR Market Integration Consortium



Future growth in trade and direct foreign investment will
depend heavily on progress in harmonizing sanitary and phy-
tosanitary regulations and inspection procedures.


     it appears to be becoming more                   cent larger than in 1994-96. During      training and organization of many small
     specialized in fruits and tobacco.               2004-06, exports reached an an-          farmers.
•	   El	 Salvador:	 Total	 agri-food	 imports	        nual average value of $700 million
     reached an annual average value                  – 199 percent more than in 1994-96.      Menendez indicated that future growth
     of $1,036 million in 2004-06 – 259               Regionally, its largest trading part-    in trade and DFI will depend heavily on
     percent larger than in 1994-96. Dur-             ners are the United States (exports      progress in harmonizing sanitary and
     ing 2004-06, exports reached an an-              and imports), El Salvador, and           phytosanitary (SPS) regulations and in-
     nual average value of $645 million                                                        spection procedures. There is need for
                                                      Costa Rica. In exports, it appears to
     – 126 percent more than in 1994-96.                                                       a procedure by which laboratories can
                                                      be becoming more specialized in
     Regionally, its largest trading part-                                                     be certified, preferably initiated by the
                                                      meat, dairy products, and live ani-
     ners are the United States (exports                                                       United States. This process could be
                                                      mals.
     and imports), Guatemala, and                                                              aided by setting up one or more joint
                                                 •	   United	 States:	 Total	 agri-food	 im-
     Honduras. In exports, more empha-                                                         CAFTA-DR laboratories. SPS training pro-
                                                      ports reached an annual average
     sis is being placed on cereal-based                                                       grams are very important, and positive
                                                      value of $3,501 million in 2004-06 –
     preparations, alcoholic beverages,                                                        results have been experienced where
     and meat and fish preparations.                  147 percent larger than in 1994-96.      participants take action to apply con-
•	   Guatemala:	Total	agri-food	imports	              During 2004-06, exports reached          cepts learned and pursue remedies.
     reached an annual average value                  an annual average value of $1,840        Likewise, securing and sharing labora-
     of $765 million in 2004-06 – 292 per-            million – 182 percent more than in       tory results is very important.
     cent larger than in 1994-96. During              1994-96. Regionally, its largest trad-
     2004-06, exports reached an annu-                ing partners are Costa Rica, Guate-      In the discussion it was noted that while
     al average value of $1,016 million –             mala, and Dominican Republic. In         good work is being done to facilitate
     131 percent more than in 1994-96.                exports, the United States appears       trade, not much is being done to liber-
     Regionally, its largest trading part-            to be becoming more specialized          alize the ability for foreigners to invest in
     ners are the United States (exports              in meats.                                agriculture. While Honduras has had a
     and imports), El Salvador, and Hon-                                                       proactive campaign to encourage DFI
     duras. In exports, more emphasis is         Reaction Panel and Open Discussion:           by reducing the time required to set up
     being placed on deciduous fruits.           Lucho Florencio, Rice Growers Asso-           a business to 28 days, this is not generally
•	   Honduras:	 Total	 agri-food	 imports	       ciation, DR and Francisco Menendez,           the case throughout the region. There is
     reached an annual average value                                                           need for a more favorable business cli-
                                                 AGEXPORT, GT
     of $750 million in 2004-06 – 162 per-                                                     mate including increased security and
     cent larger than in 1994-96. During                                                       training of the labor force for those skills
                                                 Florencio indicated that there are fewer
     2004-06, exports reached an an-                                                           that are in the greatest need. Such a fa-
                                                 U.S. barriers than for the other CAFTA-
     nual average value of $876 million                                                        vorable climate will not only attract DFI
                                                 DR countries, perhaps because the U.S.
     – 138 percent more than in 1994-96.                                                       but will also attract more local invest-
                                                 regulatory requirements are more trans-
     Regionally, its largest trading part-                                                     ment and financing.
                                                 parent. It is much more difficult to get
     ners are the United States (exports
     and imports), Honduras, and Costa           products into the six regional countries      Many public institutions were character-
     Rica. In exports, it appears to be          than into the U.S. From a trading per-        ized as being dinosaurs. While most min-
     becoming more specialized in to-            spective, there is a need for the regional    istries have improved their information
     bacco and edible oils.                      countries to start seeing themselves as a     and communication systems as portals
•	   Nicaragua:	 Total	 agri-food	 imports	      bloc rather than as individual countries.     for trade, these and other systems need
     reached an annual average value             This requires strategies for aggressively     to be integrated for the whole bloc. In-
     of $357 million in 2004-06 – 196 per-       integrating more rapidly, including the       cluded is the need to be able to access
4
                                                                                             Transition to CAFTA-DR - Executive Summary



An important goal for farmers is not to compete against each
other but to produce what foreign markets demand accord-
ing to the principle of comparative advantage.


research results on a regional basis and    Figure 1: Agricultural Trade Among NAFTA Members
for increased regional transportation in-
                                            (Billion Dollars).
frastructure.
                                                              50


Lessons Learned from Other Blocs: Rene
Ochoa, SAGARPA, MX; Pablo Sherwell,                           40

SAGARPA, MX; and Gloria Abraham,
IICA
                                            Billion Dollars




                                                              30

Under NAFTA, agricultural trade among
NAFTA members has grown at an ex-                             20
traordinary compound annual rate of
7.8 percent from 1994 to 2004 and ac-
counted for more than 39 billion dollars                      10

at the end of 2004. This trade growth
has allowed the NAFTA countries to
                                                              0
achieve a more dynamic and a faster                                1990    1991   1992     1993    1994   1995    1996    1997     1998   1999   2000    2001     2002    2003   2004


economic growth. While NAFTA agricul-                                Mexican exports to the U.S.   Mexican imports from the U.S.    U.S.imports from Canada     U.S.exports to Canada

tural trade supports around 270,000 jobs      Source: USDA; United Nations FAO.

in the United States, Mexico’s global ex-   similar to that faced by the CAFTA-DR                                         to products that would otherwise be
ports would be 25 percent lower, and        bloc vis-à-vis the United States.                                             impossible due to climate or economic
DFI would be 40 percent lower without                                                                                     constraints.
NAFTA. In addition, Mexico’s techno-        Also like CAFTA-DR, there are comple-
logical innovation has increased twice      mentarities in the agricultural products                                      Mexico’s macroeconomy has stabilized
as fast after the implementation of the     traded. That is, domestic demand for                                          under NAFTA, but it has a higher level
                                            each country is complemented by the                                           of dependence with the U.S. and Ca-
agreement.
                                            production of other NAFTA members.                                            nadian economic cycles. The result has
                                            For example, Mexico has been able                                             been reduced risk and increased invest-
North American agriculture is character-
                                            to maximize fresh produce exports to                                          ment. On the other hand, one of the
ized by a great dichotomy between the       the United States and Canada where                                            major disadvantages of NAFTA is that
highly commercialized economies of          climate does not allow year-round pro-                                        small producers are not able to achieve
progressive state-of-the-art production     duction. On the other hand, Mexico                                            the economies of scale leading to rural
systems such as those found in Canada,      has fulfilled its domestic grain demand                                       farmer displacement. Being competi-
the United States, and some regions of      through imports from the United States                                        tive requires that Mexican farmers find
Mexico and many small, often subsis-        and Canada. Therefore, an important                                           their comparative advantages either in
                                            goal for NAFTA farmers is not to com-                                         cost or product quality.
tence, non-commercial farmers who
                                            pete against each other but to produce
struggle to meet their families´ needs.
                                            what foreign markets demand accord-                                           NAFTA is more an agreement to trade,
This diversity presents a major challenge   ing to principles of comparative advan-                                       than a policy agreement. A shortcom-
for achieving uniform regional econom-      tage. NAFTA countries have benefited                                          ing of NAFTA is that there is no suprana-
ic development and a uniform distribu-      from trading not only in economic terms                                       tional authority or secretariat that advo-
tion of NAFTA benefits. This challenge is   but also by providing consumers access                                        cates uniform policies and that seeks to
                                                                                                                                                                                   5
CAFTA-DR Market Integration Consortium



Animal health, plant health and food safety control and dis-
ease diagnosis must be addressed and treated as a regional
CAFTA-DR bloc.


solve disputes among members outside              food producers, manufacturer, and            regional educational programs de-
the formal dispute settlement process.            distributor.                                 veloped according to the needs of
Therefore, conflicts often fester, may be                                                      the bloc.
dealt with bilaterally, or may end up in     •	   In	order	to	improve	animal	and	food	
a WTO dispute settlement process. As a            trade regionally, private interests     •	   It	is	essential	to	establish	and	closely	
                                                  and governments should be work-              follow an agri-food sector adjust-
result, for example, agricultural policies
                                                  ing to develop regional programs             ment program. This program should
have not been able to be harmonized
                                                  at a regional level. Health and food         provide technical adjustment assis-
among NAFTA members. Having differ-
                                                  safety issues for one country are a          tance to subsectors that are going
ent policies, programs, and regulations
                                                  concern for the rest of the partners.        to be able to compete in a more
make trade relations more complex.                Likewise, regional SPS issues are of         open environment. In these areas,
Policy and regulatory convergence is              direct concern to Mexico.                    small farmers must be provided as-
a condition for efficiently solving trade                                                      sistance in production techniques
disputes and to enhancing market inte-       •	   Common	 regulatory	 programs	                and in how to access modern sup-
gration. However, policy convergence              such as inspection and traceability          ply chains. Signing the trade agree-
requires close and constant communi-              should be implemented through-               ment is a first step; the next step is to
cation among policy makers in order for           out the bloc. Traceability systems           determine where CAFTA-DR’s com-
them to understand their counterparts´            are not only a key to disease and            parative advantages lie; and then
policy goals and impacts and to assess            pest control but also to finding the         to take steps to effectively exploit
                                                  most efficient ways to produce, as-          them. Do not wait for 10 years to
their own policy goals and impacts.
                                                  semble, warehouse, and distribute            begin thinking about needed ad-
                                                  products in domestic and interna-            justments.
Mexico’s experience with NAFTA sug-
                                                  tional markets.
gests that CAFTA-DR needs to focus its
                                                                                          •	   Members	 of	 the	 bloc	 must	 find	
attention in the following areas:
                                             •	   Bloc-wide	 risk	 assessment	 labora-         means for dealing with differences
•	   Protecting	 against	 animal	 and	            tories should be of common inter-            in agricultural subsidies. The lack of
     plant diseases should be of great            est for the member countries. The            a policy harmonization mechanism
     concern because an ounce of                  region’s security must be seen as a          is a major NAFTA weakness.
     prevention is worth a ton of cure.           common interest and priority. Do-
     Even after an SPS issue has been re-         mestic security cannot be accom-        •	   Members	need	to	seek	areas	where	
     solved, it has been very difficult to        plished without regional security.           positions for the bloc as a whole
     restore trade to the original levels.        Animal health, plant health, and             can be agreed upon, such as in in-
     Since SPS issues are science based,          food safety control and disease              ternational negotiations.
     they can be avoided by following             diagnosis must be addressed and
                                                  treated as a regional bloc.             Reaction Panel and Open Discussion:
     science-based procedures and by
                                                                                          Jorge Tello, Andean Bloc and Daniela
     following instructions for the use of
                                             •	   Investment	 in	 education	 and	 out-    Alfaro, MERCOSUR Bloc
     chemicals.
                                                  reach must be a priority. Assuring
                                                  the next generation of science          The private sector must develop mech-
•	   The	science-based	Hazard	Analysis	           power and the knowledge required        anisms for providing technical and eco-
     and Critical Control Points (HACCP)          for regional agricultural develop-      nomic inputs to the government deci-
     system should be widely adopted.             ment and security will be achieved      sion makers. This involves the public and
     It appropriately places responsibil-         only by investing in education. This    private sector working together to im-
     ity for ensuring food safety on the          effort must be carried out through      prove the decision process, to increase
6
                                                                         Transition to CAFTA-DR - Executive Summary



The survival of individual farmers and their associations is
determined by their capacity to participate in value-added
supply chains.


analytical capabilities, to institutionalize   tary policies to generate maximum pos-           on cost competitiveness and conflict-
transparent meetings, and to internalize       itive social impacts.                            ing relations between players.
the benefits of trade
                                               Throughout Latin America, traditional            The key requirements to develop suc-
Developing Successful Supply Chains in                                                          cessful small farmer value chains in the
                                               supply chains exist as they have for cen-
CAFTA-DR: Mark Lundy, CGIAR, CO and                                                             CAFTA-DR countries include:
                                               turies to move products from farm to
Tom Reardon, Michigan State University                                                          •	   Skills	 for	 effective	 and	 profitable	
                                               market. These traditional supply chains
                                                                                                     business partnering must be devel-
                                               suffer from the following limitations:                oped. Profitable businesses must be
Changes in the agri-food system are
                                               •	   They	 are	 inefficient	 with	 an	 inordi-        developed before they can invest
transmitted along integrated supply
chains managed by increasingly pow-                 nate number of traders buying and                in long-term community develop-
erful food retailers. The survival of indi-         selling products but adding little               ment projects.
vidual farmers and their associations is            value, while experiencing high lev-         •	   Organizational	and	business	models	
determined by their capacity to par-                els of post-harvest losses.                      must be lightweight and scaleable
                                                                                                     to large numbers of farmers. Initial
ticipate in these supply chains. While         •	   They	are	not	well	connected	to	or-
                                                                                                     efforts should upgrade traditional
the rate and depth of change varies                 ganized markets. This contributes
                                                                                                     organizational forms by creating
across continents and nations, some                 to a low-level of trust among chain
                                                                                                     trader networks, as a low-cost way
key aspects hold true in all developing             actors often resulting in opportunis-            of linking large number of farmers
successful supply chains. These include
                                                    tic, short-term behavior to the detri-           to specific markets.
a focus on consistent volumes of prod-
                                                    ment of the overall competitiveness         •	   Benefit-sharing	 options	 must	 be	
ucts that meet quality and food safety
                                                    of the system.                                   developed that allow farmers and
standards as well as a commitment
                                               •	   They	produce	highly	variable	qual-               other marginal chain actors to ac-
to consistently develop new products
                                                    ity as diverse actors seek individual,           cumulate an additional share of
that meet retailer needs. The CAFTA-DR
                                                    short-term gains at the expense of               the overall resources over time.
countries must conform with these de-
                                                                                                •	   Training	 must	 focus	 on	 problem	
mands if they are to be successful in de-           other actors.
                                                                                                     solving. This requires participation
veloping export markets and even in ef-        •	   They	are	unable	to	guarantee	prod-
                                                                                                     of private sector partners for the
ficiently serving their domestic markets.           uct traceability and food safety.
                                                                                                     adequate evaluation of risk and
                                               •	   They	lack	the	capacity	to	upgrade	               development of business decision-
If CAFTA-DR signatories are serious about           and innovate.                                    making skills.
trade as a means of wealth creation in                                                          •	   Governance	 structure	 must	 be	
rural communities, certain key elements        Despite these shortcomings, traditional               based on a long-term, trust-based
must be addressed. These include iden-                                                               set of relationships, nurtured by
                                               supply chains are typical across much
tifying the critical aspects of a value                                                              transparent information and knowl-
                                               of Latin America and are particularly
chain approach that make it friendly to                                                              edge management. It must include
                                               common among resource-poor farmers
the needs of small farmers; working in a                                                             effective methods of risk sharing
                                               and their families. The move from tradi-
more integrated fashion across philo-                                                                that benefit the overall health of
sophical, political, and country divides;      tional supply chains to value chains in
                                                                                                     the chain and not just the bottom
learning together about what works             the CAFTA-DR region is at best spotty.                line of one of the participants.
and does not work; utilizing market link-      Notable successes exist, but the vast            •	   A	 continuous	 stream	 of	 products	
ages as tools for poverty reduction; and       majority of commercial relationships re-              and process innovation accompa-
developing the necessary complemen-            main locked in traditional models based               nied by technological change is
                                                                                                                                          7
CAFTA-DR Market Integration Consortium




Quality and safety are rapidly becoming the de facto ticket
to entry into supply chains and regional trade flows.


     required by dynamic supply chain              research, and rural populations         further marginalization of smaller and/
     markets.                                      themselves.                             or poorer countries, including their typi-
•	   Key	financial	services	must	be	pro-                                                   cally small-scale producers and micro
     vided for successful value chains.        The Impact of Food Safety Standards on      enterprises, will occur.
                                               an Export-Oriented Supply Chain: Case
     These services include savings, risk
                                               of the Horticultural Sector in Guatema-     From a more optimistic perspective,
     management (particularly climate
                                               la: Spencer Henson, and Jose Blandon,       public and private food safety standards
     and market-linked insurance), sys-
                                               University of Guelph, CAN                   can be viewed as a necessary bridge
     tems for prompt payment, venture                                                      between increasingly demanding con-
     capital, and credit.                      Food safety standards have become a         sumer requirements and as an entrée to
•	   Product	 quality	 must	 be	 consistent	   more prominent issue for global trade in    international markets. Many food safe-
     and comply with food safety stan-         agricultural and food products. Of par-     ty standards provide a common lan-
     dards. Quality and safety are rap-        ticular concern is the potential impact     guage through the supply chain, with
     idly becoming the de facto ticket         of food safety standards, whether pro-      the effect of reducing transaction costs
     to entry into supply chains and re-       mulgated by governments or private          and promoting consumer confidence
                                               sector buyers, on the ability of develop-   in food product safety, without which
     gional trade flows.
                                               ing countries to gain and/or maintain       the market for these products cannot
                                               access to export markets for agricul-       be maintained and enhanced. Indeed,
In addition the following key collab-
                                               tural and food products. This not only      there is increasing evidence that devel-
orative implementation steps must be           reflects the growing preponderance          oping countries have benefited from
taken to develop successful CAFTA-DR           of these standards but also the weaker      food safety standards through access
supply chains:                                 compliance capacity of developing           to new export markets.
•	   Effective	public	policy	must	be	de-       countries.
     veloped in combination with effec-                                                    The costs of complying with food safety
     tive development policy, effective        International competitiveness is no lon-    standards may also provide a power-
                                               ger driven by price and quality grades.     ful incentive for the modernization of
     research policy, and effective pri-
                                               Rather, safety concerns have come to        export supply chains in developing
     vate sector policies. Government
                                               the fore and are the dominant means         countries. Compliance with stricter food
     policies alone are insufficient no
                                               of competing in many agricultural and       safety standards can also stimulate ca-
     matter how well intentioned. Rath-        food markets. There is greater scrutiny     pacity-building within the public sector
     er, all actors must work together in a    of the production or processing tech-       and give greater clarity to the appro-
     much more coherent fashion than           niques employed along the supply            priate facilitation functions of govern-
     in the past. Barring such collabo-        chains. Increased emphasis is being         ment. Further, through increased at-
     ration, the chances for successful        placed on product traceability from         tention to the spread and adoption of
     value chains in CAFTA-DR are slim.        farm to table, and increased resources      Good Agricultural Practices (GAP) and
•	   Innovation	 systems	 must	 be	 devel-     are going into border inspections. There    Good Handling Practices (GHP) in the
                                               is also concern that many developing        production and post-harvest marketing
     oped in a collaborative fashion to
                                               countries lack the administrative, tech-    of agricultural and food products, there
     resolve key problems and bottle-
                                               nical, and scientific capacities to com-    may be spillovers into domestic food
     necks that limit the development of
                                               ply with strict food safety standards,      safety systems, to the benefit of the lo-
     a sector or value chain. Such a sys-      presenting potentially insurmountable       cal population and domestic market
     tem is based on increased linkages        barriers in the short and medium-term.      producers. Through the adoption of
     between relevant actors – govern-         Unless these institutional weaknesses       GAP and GHP, developing countries
     ments, donors, NGOs, private firms,       and compliance costs are overcome,          can enhance their capacity to meet
8
                                                                     Transition to CAFTA-DR - Executive Summary



By enhancing their capacity to meet stricter food safety stan-
dards, CAFTA-DR countries can create new forms of compara-
tive advantage over other exporting countries.


stricter food safety standards, which        the fragmented nature of the supply          and promotion of third-party certifiers in
can create new forms of comparative          chain. While many exporters have their       which they have confidence.
advantages.                                  own production facilities and organized
                                             supply arrangements, around 60 per-          Government’s Role in Food Quality and
As a case example, Guatemala’s ex-           cent of supply continues to be sourced       Safety Certification: Lloyd Day, AMS/
ports of fresh fruits and vegetables have    through traditional markets that are         USDA
increased dramatically since the late        controlled by traders. These traditional
1990s, as the government and industry
                                             markets lack the ability to trace supplies
strategy has evolved from one of com-                                                     The U.S. Department of Agriculture’s
                                             back to their production sources to en-
placency and only being reactive to                                                       Agricultural Marketing Service (AMS)
                                             sure that appropriate practices are fol-
increased food safety demands to one                                                      administers several public-sector servic-
                                             lowed. Further, given the tendency for
on being proactive and collectively                                                       es that assist producers and their orga-
                                             exporters to mingle their supplies, there
seeking and negotiating public and                                                        nizations in production and marketing
                                             is limited ability to ensure that any ex-
private sector solutions to problems. In                                                  to facilitate compliance with SPS regu-
                                             port consignments conform to GAP and
the 1990s, Guatemala lost its raspberry                                                   latory requirements and to increase
market due to bacterial contamination        meet regulatory pesticides limits.
                                                                                          market transparency. These include es-
resulting from poor water quality and a
                                             Exporters continue to make efforts to-       tablishing and improving market news
lack of attention to human hygiene.
                                             ward integration of the export sup-          information systems; facilitating prompt
Guatemala also was in danger of losing       ply chain for snow peas by increasing        payment in the marketing of perishable
its dominant position in the fresh snow      their own production and by contract-        products; promoting the harmonization
pea market due to persistent pesticide       ing with small-scale farmers to achieve      of payment terms and conditions within
contamination. In order to address this      traceability and to control production       and across countries; establishing and
pesticide residue problem, a series of       practices. Indeed, there is a strong eco-    harmonizing grade standards; assisting
interventions has been undertaken with       nomic incentive to do so. Exporters pay      in the development of GAPs and GHP;
collaborative support of public, private,    a lower price for snow peas in tradition-    certifying products for conforming with
and international agencies. Exporters        al markets, and the cost of procuring        GAPs, GHP, and other forms of process
of snow peas, through the Guatema-           export quality peas is greater than for      verification; providing technical assis-
lan Exporters’ Association (AGEXPORT),       own or for contract production due to
established the Snow Pea Committee                                                        tance; and identifying funding sources
                                             the high rate of out-grading traditional
as a conduit for interaction with gov-                                                    for new fresh produce inspection pro-
                                             market peas. At the same time, U.S. buy-
ernment, international donors, and U.S.                                                   grams.
                                             ers are making efforts to integrate their
regulatory authorities. Thus, rather than
                                             supply chains back to Guatemalan ex-
relying on the government to take re-                                                     In carrying out these market services,
                                             porters. Currently, around 80 percent of
medial actions, the private sector be-                                                    AMS has helped to organize, provide
                                             snow peas are exported to U.S. brokers,
came active in promoting solutions and                                                    leadership for, and participate in the
                                             and only 20 percent were exported
in promoting industry-wide adoption of
                                             direct to supermarkets. Increasing the       Market Information Organization of the
GAP and GHP.
                                             proportion of supply through direct          Americas (MIOA), which is available
                                             sourcing by supermarkets is seen as a        to CAFTA-DR governments and its pro-
Despite the success of this public-private
partnership in retaining the U.S. mar-       mechanism for ensuring that GAP and          ducer organizations. The greatest need
ket for snow peas, the sector still faces    GHP are employed and for securing            in reducing barriers to trade is to har-
on-going challenges with the manage-         traceability. This is supported through      monize SPS regulations across countries
ment of pesticides that largely reflect      the provision of technical assistance        and to assist producers in understand-
                                                                                                                                  9
CAFTA-DR Market Integration Consortium



There must be the ability to source products from through-
out the CAFTA-DR region to satisfy market demand in the
quantities and qualities demanded.


ing and adopting GAPs and GHPs that        supply chain gives producers a sense of       tegrating CAFTA-DR markets is working
conform to international standards.        ownership and pride.                          together to encourage adjustment and
                                                                                         solve common problems in a transpar-
Supply Chain Innovation Reaction Pan-      Tulio Garcia emphasized the need to           ent manner.
                                           become export oriented. AGEXPORT
el and Open Discussion: Jorge Cordero,
                                           has accomplished this by moving from          Tubino explained why Peru has been
Wal-Mart, U.S.; Tulio Garcia, AGEXPORT,
                                           30 percent nontraditional crops in 1986       successful in capturing a dominant po-
GT; Ernesto Baron, Poultry & Egg Export
                                           to 70 percent in 2006. The creation of        sition in the U.S. fresh asparagus market.
Council, U.S.; Beatriz Tubino, Peru        value chains requires social responsibil-     In addition to Peru’s natural asparagus
                                           ity that considers, trains, and rewards all   growing climate, emphasis has been
This reaction panel and related discus-    participants in a transparent manner.         placed on consistent training, innova-
sion brought substantial experience        There is need to evaluate all potential       tion, and problem solving. Marketing
and applied expertise to making supply     markets within CAFTA-DR and outside.          plans are developed with production
chains operational.                        Maximizing trade requires compatible          and packaging being coordinated
                                           policies across the CAFTA-DR countries        with market needs. Guidebooks have
                                           to foster increased competitiveness           been developed that are consistent
Cordero explained that the Wal-Mart
                                           internally and externally. There must         with GAP and GHP certification require-
concept as applied to the CAFTA-DR
                                           be the ability to source products from        ments. Risk has been reduced by diver-
region emphasizes the setting of stan-
                                           throughout the region to satisfy market       sification into other vegetable crops.
dards based on the expectations of         demands in the quantities and qualities       Cold chains have been developed,
their stores and customers, establish-     desired. Achieving competitiveness also       although there is need to develop sur-
ment and certification of GAP and GHP      requires that governments work with the       face shipping and irradiation systems to
that are consistent with achieving those   private sector to improve infrastructure,     increase cost competitiveness. Social
standards, training small- and medium-     reduce utility costs, and provide secu-       responsibility is provided by developing
size producers to utilize the specified    rity.                                         day care centers for women who work
                                                                                         within the value chains.
GAP and GMP, arranging for financing,
                                           Baron provided a U.S. exporter’s per-
and assuring that producers are reward-
                                           spective on the need for CAFTA-DR             The discussion indicated the need for
ed consistent with their performance.
                                           countries to work together in harmoniz-       private- and public-sector programs
Local producers are given priority, and    ing regulations to create a freer trading     that encourage the transition to nontra-
operations are scaled to the expecta-      environment that utilizes the compara-        ditional crops and the development of
tions of the stores. Transparency with     tive advantages of each country. If we        value chains for marketing them. It em-
producers in discussing market needs is    do not harmonize SPS regulations, cost        phasized that successful value chains
very important. Training includes tech-    advantages accrue to particular firms         require training and producer commit-
nical assistance and technology trans-     and countries. Harmonizing regulations        ment.
fer in diversifying to produce the most    requires that work be done to educate
                                           policy makers across CAFTA-DR. Being          Transition Policies: Amy Angel, FUSADES,
profitable combination of crops for the
                                           competitive requires the development          SV
supply chain. The emphasis in techni-
                                           of value chains that cut across coun-
cal assistance is on problem solving
                                           tries and that recognize differences in       Concerns about the effects of the
including the responsible use of chemi-    consumer preferences. It also requires        CAFTA-DR on the region’s agricultural
cals. Producers are assured payment at     that systems be developed to reduce           sector are well founded. Production
competitive prices and are rewarded        and share the risks of diseases such as       of traditional products in the region is
for quality. Being part of a profitable    avian influenza. The key to success in in-    mostly produced by small farms that
10
                                                                      Transition to CAFTA-DR - Executive Summary

The regional governments must coordinate policies to encour-
age transition from traditional crops for which U.S. farmers
have a comparative advantage to nontraditional crops offer-
ing substantial opportunities for production by small farm-
ers and for export.
characteristically have excessive man-        not guarantee that there will be enough           sure the sustainability of production
power and a lower level of education.         willpower or resources for the farm sec-          and exports.
These characteristics make it difficult for   tor to reorganize and diversify, or that it
non-competitive displaced farmers to          will be carried out effectively.              The Central American countries have
be integrated into the qualified labor                                                      instituted a series of programs and proj-
market. It also represents a big part of                                                    ects to increase the competitiveness of
                                              The fiscal realities of the Central Ameri-
the extreme poverty, which still has a                                                      the agricultural sector. These programs
                                              can countries and the Dominican Re-
great presence in the rural areas. How-                                                     and projects focus on technology inno-
                                              public limit their capacities to imple-
ever, there are substantial opportunities                                                   vation, market information, compliance
                                              ment bigger programs to facilitate the
for exports of nontraditional products if                                                   with SPS standards, investments in irriga-
smaller farmers are successfully integrat-    transition of the traditional agricultural    tion, and funds for productive invest-
ed into value chains. As a result, there is   sectors. While CAFTA-DR increases the         ments and associations. It is critically im-
an urgent need to plan for the future of      opportunities for export, it does not         portant that these efforts be translated
traditional products and for transitional     guarantee that the countries will have        into concrete changes for the small
policies that encourage adjustment to         exportable products to supply or that         producers and other micro firms in the
nontraditional production and market-         they can fulfill the sanitary, technical,     agricultural sector.
ing.                                          and food safety admission require-
                                              ments.                                        While CAFTA-DR provides a period for
At the same time, the American agri-                                                        adjustment through long-term tariff re-
cultural sector is formidable competi-                                                      duction for the most traditional subsec-
                                              Effective transitional policy reform re-
tion. U.S. agricultural policies allow the                                                  tors, the Central American countries
                                              quires programs to avoid losses and to
grains and cotton exports to be priced                                                      and the Dominican Republic should
                                              maximize profits for small producers and
favorably relative to costs. Although it                                                    not feel comfortable. Structural change
                                              rural households. To accomplish this
is possible that U.S. subsidies can be-                                                     in the small-scale agriculture is not an
                                              goal, the emphasis of transition policy
come less price and production distort-                                                     easy or fast process, not to mention the
ing in the future, it is probable that U.S.   will need to be placed on the following       fiscal constraints that exist to finance
supports will continue in the mid-term,       areas:                                        transition policies. The key to success
which consolidates their competitive-         •	   Provide	 a	 combination	 of	 support	    is the consistency of the message; the
ness in these crops. Also, the American            to small farmers’ incomes during         existence of complementary supports,
sector enjoys scale economies not pres-            the liberalization period, along with    like information, infrastructure, educa-
ent in small countries like many subsec-           technical assistance for the produc-     tion, and technology; and reasonable
tors of Central America and Dominican              tion of nontraditional export crops.     expectations. It is also important that
Republic.                                     •	   Provide	 assistance	 to	 access	 ex-     the countries start a communication
                                                   port markets, especially in meeting      process with the potentially affected
The CAFTA-DR allows the partial free                                                        sectors, so all can be conscious of the
                                                   sanitary and phytosanitary require-
trade exemption for the most sensitive                                                      changes to come.
                                                   ments
traditional products in each country,
                                              •	   Create	 a	 stable	 and	 competitive	
but it does not change the lack of com-                                                     Another key implication is that the re-
                                                   macro environment.
petitiveness of the entries that produce                                                    gional governments must coordinate
and market them. This is a challenge          •	   Facilitate	 rural	 economic	 growth	     transition policies to encourage adjust-
that sooner or later, the countries will           through investments in rural infra-      ment, conversion, and diversification of
have to face. The agreement provides               structure.                               enterprises that are not directly com-
long-term tariff and quota reductions         •	   Give	priority	to	the	management	of	      petitive with the current primary basic
for the sensitive products, but it does            valuable natural resources to en-        U.S. crops such as corn and sorghum.
                                                                                                                                    11
CAFTA-DR Market Integration Consortium



The most productive rural development strategy for the re-
gion involves increased investment in telecommunications,
electricity, and roads.


While there have been some steps in          and technical assistance programs that         liberalization, and many rural develop-
this direction, they are not well coordi-    include disease protection strategies.         ment projects and programs.
nated, are not sufficiently widespread,
and still often continue to encourage        Rodas indicated that it is important to        The main reason the rural poverty rates
the production of traditional sensitive      have interaction of the public sector          remain high is the low profitability of tra-
crops for which the region’s agriculture     and the private sector in developing
                                                                                            ditional agriculture. On a country and
cannot be sustainably competitive in         transition policies. This includes invest-
                                                                                            commodity basis, the greatest Central
the new freer trade economic environ-        ments in laboratories and programs to
                                                                                            American       competitive     opportunities
ment. In other words, there is too much      eradicate animal diseases. In addition,
                                                                                            were found to be in the following ar-
tendency for the region’s countries to       there must be a provision for expanded
                                             credit required by producers in the tran-      eas:
continue their programs as individual
                                             sition.                                        •	     Costa	 Rica	 –	 horticultural	 crops,	
countries
                                                                                                   particularly Red Edge Dracaenas
                                             Open      discussion   emphasized       the           and African Palm (ornamentals),
Reaction Panel and Open Discussion:
                                             need for more uniform policies across                 milk, and poultry.
Mario Amador, NI, Sugar Association;
                                             the CAFTA-DR countries. Most Central           •	     El	Salvador	–	pork,	beans,	and	sugar	
Bernardo Vargas, CR, Ornamentals;
                                             American countries and the Domini-                    cane, particularly sugar cane can-
Ana Cristina Rodas, GT, Ministry of Ag-
                                             can Republic currently depend on pro-                 dy manufactured by small produc-
riculture
                                             tective tariffs that do not encourage
                                                                                                   ers.
                                             adjustment. DFI must be encouraged.
Amador emphasized the need to sup-                                                          •	     Nicaragua	 –	 beans,	 pork,	 and	
                                             There is need to ensure that agricultur-
port those sectors that are doing well                                                             beef.
                                             al interests are included in all general
and to encourage the establishment of                                                       •	     Guatemala	–	mangos,	flowers,	yel-
                                             economic initiatives. Pest eradication is
open markets.                                                                                      low corn, and potatoes.
                                             a major concern. The role of agriculture
                                             in infrastructure development, including       •	     Honduras	 –	 beef,	 melons,	 water-
Vargas indicated that transition policies                                                          melons, and palm oil.
                                             irrigation, is very important. It was point-
must recognize the diversity and com-                                                       For all of these countries, the most seri-
                                             ed out that 80 percent of the barriers to
parative advantages within CAFTA-DR.                                                        ous problems in realizing these opportu-
                                             trade are SPS barriers. As a result, there
Nontraditional products are the star
                                             is need to harmonize SPS regulations           nities are disease control and market-
products from the perspective of their       across all CAFTA-DR countries.                 ing.
potential for production, value added,
and export expansion. Transition poli-       Rural Development in CAFTA-DR: Hans            The most productive rural develop-
cies must focus on these products by         Jansen, IFPRI, CR and Maximo Torero,
                                                                                            ment strategy for the region involves
encouraging their production and by          IFPRI, Peru
                                                                                            the need for increased investments in
adding value to them. These govern-
mental policies must be long term, not                                                      infrastructure. Except for Costa Rica,
                                             An unsolved challenge for the modern-
just for the term of a minister. They need                                                  the highest payoff was determined to
                                             ization of small agricultural producers in
to involve the development of public-        the CAFTA-DR countries is a very high ru-      be from investments in telecommuni-
private partnerships such as the certi-      ral poverty rate. The majority of the poor     cation, electricity, and roads received.
fication of laboratories, the establish-     rural population consists of small farm-       In Costa Rica the greatest return was
ment of laboratories that cover more         ers. High rates of rural poverty persist       from electrical network improvements.
than one country, and related research       despite the structural reforms, market’s       Specific agricultural enterprise related
12
                                                                       Transition to CAFTA-DR - Executive Summary




There is need to invest more in rural education because higher
returns are obtained from rural than from urban education.


infrastructure investment priorities with           of new enterprises, practices, and       increased in favor of the rural sector in
high payoffs included:                              conservation measures.                   the 1990s. In both sectors it was found,
•	 Honduras	–	pork	production,                 •	   Public	investment	in	training	for	the	   contrary to what happened in the first
•	 Guatemala	–	chicken	production,                  development of managerial skills,        half of the 1990s, the rates returns are
•	 Costa	Rica	–	beef	production,                    technical assistance, and incuba-        greater with higher educational levels.
•	 El	Salvador	–	beef	production.                   tors to stimulate the transformation     This suggests that the labor market is re-
In other words, while export opportuni-             from traditional agriculture to a        warding more qualified workers.
ties in the areas on fruits, vegetables,            portfolio of more diversified eco-
ornamentals, and coffee justifiably re-             nomic activities.                        When separating by gender, it was
ceive attention, it is important not to                                                      found that women in the rural sector ob-
forget about animal agriculture.               Mexico: Human Capital and Income:             tain higher education returns than the
                                               Returns to Education, 1994-2005: Juan         urban sector. Similar results were found
Aside from infrastructure policy, the ma-      Luis Ordaz – MX                               for men. It was also found that women
jor needs to jump start rural develop-                                                       tend to self-select not to participate in
ment policy and to attract DFI include:        Since public sector capital is scarce         the labor market more than men do.
 •	 Marketing	 –	 small	 farmers	 need	 to	    throughout the region, one of the key         In the rural sector, the basic education
     get organized to compete, to ob-          issues involves the comparative returns       levels for women tend to obtain higher
     tain the necessary volumes, to add        to education versus infrastructure. This      returns. As years of education rise, men
     value, and to make links to supply        study provides insight into the levels of     obtain higher education returns than
     chains.                                   returns from education and in particular      women. In the urban sector, education
 •	 Public	 sector	 research	 needs	 to	       the comparative returns between edu-          of men has higher returns in the most
     be rejuvenated, and private sec-          cation investment in the rural and ur-        basic level (elementary) and in college,
     tor development needs to place            ban areas and by gender. As a general         but in the levels in between, women ob-
     emphasis on materially increasing         rule, the rural sector’s education quality    tain higher return.
     manpower productivity, to focus           and educational levels are much lower
     on products with high aggregated          than the urban sector. For example,           The results of this study suggest the
     value, and to give more attention         Mexico’s, rural educational levels were       need to invest more in rural education
     to disease prevention.                    found to be inferior to the levels that ex-   because it is economically efficient in
 •	 Education	 increases	 the	 impact	 of	     isted in the urban sectors more than 10       that higher returns to education are ob-
     other investments in the agricultural     years ago. The greatest rural-urban ed-       tained. It is important to increase the ed-
     sector such as research and devel-        ucation gap is in rural women. Not sur-       ucation levels of the rural women since
     opment, managerial skills at the lo-      prisingly, it was found that higher levels    they have less education, on average,
     cal level, and the ability to perform     of education are associated with lower        and they obtain the highest returns from
     both agricultural and nonagricul-         levels of poverty in both urban and rural     basic education. In addition, the edu-
     tural jobs.                               areas.                                        cation of women is essential to improv-
 •	 Rural	financing	involving	the	evolu-                                                     ing the standard of living, including the
     tion of financial institutions with in-   It was found that investing in Mexican        health and nutrition of their children.
     novative programs that value cred-        education is profitable. Even with the
     it as much as savings.                    big differences in terms of educational       Many questions are not answered by
 •	 Risk	reduction	through	means	such	         quality between the rural and urban           this study, For example, a central issue
     as production by contracts.               sectors, higher rates of return were          involves whether these results are trans-
 •	 Land	security,	including	establishing	     found in rural areas for all education        ferable to the Central American coun-
     efficient land markets, is indispens-     levels. Over time, the rates of return        tries and to the Dominican Republic.
     able for encouraging the adoption         from education were found to have             Also the study does not provide insight
                                                                                                                                    13
CAFTA-DR Market Integration Consortium




There is need for the CAFTA-DR countries to jointly set prior-
ities and to develop an action plan for future development.


into the comparative returns for various      for the CAFTA-DR countries to set priori-   Tulio Garcia, Guatemala
infrastructure investments, which help        ties and develop an action plan for fu-     •	 Priority	policy	changes
to develop rural areas and create jobs,       ture development.                                o Actions to diversify production
versus investments in education.                                                                  in areas of comparative ad-
                                              Conclusions                                         vantage
Reaction Panel and Open Discussion:                                                            o Unify CAFTA-DR SPS regulations
Dennis Lesnick, SV, FINTRAC; Guiller-         In the concluding session of the work-              for crops and livestock
mo Alvarado, HN, MILLELIUM; Norberto          shop, the members of the Planning                o Provide competitiveness in
Quezada, DR, Consultant                       Committee were asked to present their               transportation and energy
                                              conclusions regarding the greatest               o Closer private sector and gov-
Lesnick indicated that an important           needs for changes in public policy and              ernment collaboration
education and technical assistance            the most important topics for discus-       •	 Priority	topics
function includes training in HACCP to        sion at the second workshop. The results         o SPS inspection procedures
improve the food safety including the         are presented in outline form and then           o Status of bloc-wide transitional
implementation of GAP and GMP. Such           briefly summarized.                                 agricultural policies to expand
training needs to identify the chemicals                                                          trade
approved for use by the U.S. Food and         Luis R. Rodríguez, Dominican Republic            o Forming effective lobbying
Drug Administration and the basics of         •	 Priority	policy	changes                          teams
Integrated Pest Management strate-                 o Reform of existing public institu-        o Bioenergy
gies. An integral part of this training in-            tions                              Sergio Navas, Costa Rica
volves setting up traceback systems to             o Adoption of tools to promote         •	 Priority	policy	changes
know the origins of products.                          exports and bring about uni-            o Adoption of quality seals for
                                                       form SPS measures                          products produced by CAFTA-
Alvarado indicated that since CAFTA-          •	 Priority	topics	for	future	discussion            DR countries
DR reinforces the customs union that               o Needed institutional reform               o Adoption of a uniform SPS net-
was already in place, there should be              o Policies to support market inte-             work
more market and economic integration                   gration                                 o Development of a CAFTA-DR
than is evident. This lag was attributed           o Credit to finance conversion to              secretariat
to the continued existence of SPS bar-                 nontraditional crops                    o Place agricultural trade issues
riers. In addition, the lack of clearly de-   Amy Angel, El Salvador                              in the agriculture ministries
fined property rights discourages devel-      •	 Priority	policy	changes                  •	 Topics
opment and market integration.                     o Adoption of bloc-wide SPS poli-           o Status, meaning, and role of a
                                                       cies                                       regional agricultural policy
Quezada agreed that substantial re-                o Adoption of policies that en-             o Creating uniform SPS measures
gional SPS and quota barriers are the                  courage diversification                 o Bioenergy
major problem. The public costs associ-            o Establishment of a regional               o Financing agricultural enterprises
ated with facilitating the transition will             technical animal health center
be high, and the lack of priority setting          o Establishment of a small pro-        Medardo Galindo, Honduras
across the countries is a major problem.               ducers’ safety net                 •	 Priority	policy	changes
Policies to stimulate local rural develop-    •	 Topics                                      o Need long-term government
ment are very important.                           o Assessment of needed bloc-                   policies
                                                       wide policies                         o Develop capacities for tech-
Open discussion picked up on the                   o Case studies of where trade                  nological development and
Quezeda point that there was a need                    barriers have been overcome                change
14
                                                                        Transition to CAFTA-DR - Executive Summary



The workshop participants want to see regional agricultural
policies adopted that result in expanded trade, the starting
point for which is uniform SPS regulation.


     o    Encourage crop diversification      •	   Priority	topics                            Summary
     o    Encourage DFI                            o    Promoting long-term institution
•	   Priority	topics                                    building                              The participants in the workshop want
     o    How each country is dealing              o    Presentation by individual U.S.       to see the adoption of regional agricul-
          with integration issues                       regulators on SPS requirements
                                                                                              tural policies that yield results in terms of
     o    Potential for CAFTA-DR col-              o    Steps in U.S. regulatory rulemak-
                                                                                              expanded trade. The starting point for
          laboration with IDB to deal with              ing process
                                                                                              regionalization lies in uniform SPS regu-
          transition issues                   Open discussion
                                                                                              lations. There is a desire to know more
Jorge Brenes, Nicaragua                       •	   Policies
•	   Priority	policy	changes                       o    Adoption of regional policies         about U.S. SPS regulatory procedures,
     o    Need CAFTA-DR secretariat                     that are complimentary                which may be a logical starting point.
     o    Adopt uniform SPS policies               o    Public spending geared to pro-        However, this must rapidly transition to
•	   Priority	topics                                    ductive activities                    the need for policy and regulatory uni-
     o    Invite decision makers to react          o    Developing an institutional frame-    formity among the Central American
          to workshop conclusions                       work for implementing CAFTA-DR        and Dominican Republic countries. It
     o    Development of regional poli-       •	   Topic                                      was recognized that accomplishing
          cies                                     o    Sustainability of policies
                                                                                              this requires discussion of the potential
Robert Hoff, United States                         o    Regionalizing    production     of
                                                                                              for strengthening the existing regional
•	   Priority	policy	changes                            high quality products
                                                                                              institutions to provide more leadership
     o    Harmonization of policies to             o    U.S. policies and institutions that
                                                                                              in initiating change and developing
          streamline trade                              could be adopted by the region
     o    Higher profile for CAFTA-DR as an        o    Developing a bloc-wide ap-            longer-term policies. Any action that
          institution to bring about reform             proach                                is taken must consider the impacts on
     o    More financing for training pro-         o    Accounting for what has been          small producers and be developed as
          grams                                         accomplished from year to year        a public-private partnership.




                                                                                                                                       15
CAFTA-DR Market Integration Consortium




                      CAMIC WEBSITE
               http://www.camic.tamu.edu/




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