22145 UNDP-WORLD BANK May 1994 TRADE EXPANSION PROGRAM OCCASIONAL PAPER 10 IMPORT BARRIERS FOR AGRICULTURAL INPUTS David Gisseiquist This occasional paper is a product of the joint UNDP/World Bank Trade Expansion Program which provides technical and policy advice to countries intending to reform their trade regimes. The views contained herein are those of the authors and do not necessarily reflect those of the United Nations Development Program or the World Bank. FILE COPY  Import Barriers for Agricultural Inputs David Gisselquist May 1994 Trade Policy Division The World Bank Washington, DC This report was prepared under the Trade Expansion Program of the United Nations Development Program and The World Bank. Support and advice by John Nash is gratefully acknowledged. The report benefitted from criticism of earlier drafts by Wendy Takacs, Mike Conlon, Suri Sehgal, Carl Pray, Tjaart W. Schillhorn-Van Veen, Dina Umali, Cornelis de Haan, Ruben Echeverria, and many others. Minerva Patefia and Jeff Hayden ably assisted in preparing the paper for publication. The views and recommendations of the report are those of the author and do not necessarily reflect those of the United Nations Development Program or of the World Bank. Table of Contents Page No. 1. Introduction 1 Technology transfer and research 1 Import reform issues: an overview 3 2. Restraints on Seed Trade 7 Changes in seed trade with development 8 Seed trade controls: variety restrictions 9 Other features of seed trade controls 15 Aspects of donor aid and advice 19 Recommendations 22 3. Restraints on Fertilizer Trade 25 Changes in fertilizer trade use with development 26 Patterns for fertilizer trade 27 Aspects of donor aid and advice 30 Recommendation 31 4. Recommendations for Reform 33 List of Tables Table 1.1 Imports of agricultural inputs, 1990 4 Table 4.1 Regulating Agricultural Inputs: Reasons, Practices, and Reform Options 36 Table 4.2 -Proposed Import Reforms for Agricultural Inputs 40  1 Introduction M odern agriculture, like other industries, depends heavily on tradable inputs. One of the greatest challenges in agricultural development is getting technology and new products that will boost yields into the hands of farmers. This paper describes tariff and non-tariff import barriers on seeds and fertilizers in World Bank client countries'; shows that such barriers block private introduction of new agricultural technology and slow agricultural growth; and proposes reforms for governments and donors to promote private technology transfer. Technology transfer and research Each farmer moves along the continuum from traditional to modem agriculture by changing his or her technology, which almost 1 always entails change in inputs. Even in misleadingly suggests that technology transfer traditional settings, farmers are aware of many and research are competing activities. A technological options - crops, varieties, pest recent study of Indian industry reports: control measures, etc. - learning and ... most of the empirical literature directly choosing among options while they farm. But contradicts the presumption that technology often the options for farmers in developing imports and indigenously generated countries are limited, not allowing them to technology are substitutes. If anything, the achieve yields and incomes that farmers in relationship that is observed is one of developed countries are able to achieve with complementarity (Deolalikar and Evenson, better technology. 1990, p 251). Some of the difference in average yields Complementarity applies for agricultural as could be reduced by making available to well as industrial technology. Research in farmers in developing countries technology agriculture in developing countries is largely that is already available in other countries adaptive, feeding on imported technology. around the world. Much agricultural Returns to research depend in part on the technology is internationally applicable, speed with which new technology is including fertilizers, pesticides, some animal disseminated to farmers in the form of new breeds, and agricultural machinery. Many inputs and information and also on the number improved plant varieties have been successfully of farmers to whom the technology is introduced into multiple countries. distributed. Improving technology transfer But not all yield differentials between raises returns to research. For example, other countries can be closed through technology things equal, gains from research that are transfer. Specific conditions in one country distributed to 500 million farmers in five years may require modifications or even new give higher returns than the same gains technologies, for example, new plant varieties. distributed to 100 million farmers in 10 years. Many studies show high returns to money Government policies limiting technology spent on agricultural research. Given the transfer across international boundaries inhibit public goods nature of some agricultural investment in regional research. For example, technology, strong arguments can be made for private seed companies may lose interest ir public as well as private spending for investing in research for regions of Latin agricultural research. America or Africa if new varieties cannot be sold across national boundaries - for Technology transfer and research: example, from Zimbabwe to Tanzania. complementary processes Similarly, benefits to farmers and consumers from research in international agricultural Experts in agricultural development have at research centers (IARCs) are also constrained times debated the relative importance of by trade barriers blocking private sector technology transfer and research for today's import and introduction of inputs embodying developing countries. The argument IARC technology. 2 Choosing both: more technology transfer and During 1982 to 1984, for example, aggregate more research pesticide use (tons of active ingredients) in Burundi, the Gambia, and Uganda was less As discussed in this paper, many than 10 percent pesticide use in Kenya, governments go out of their way to obstruct Uruguay, and Tunisia, which was less than 10 private imports of agricultural inputs that percent pesticide use in Algeria, Thailand, and embody new technologies. It costs Colombia, which was less than half pesticide governments nothing to relax non-tariff import use in India, China, -or Brazil (World barriers on agricultural inputs. Furthermore, Resources Institute 1992, p 274). Similar insofar as removing trade barriers promotes statistics on relative size of national markets private trade, governments may cut back could be presented for seeds, fertilizers, and expensive public sector programs to distribute other inputs. agricultural inputs, leaving more money for Public and private investments in research other program options. The recommendation in any developing country depend on market that governments "open the door and get out size and government budget, both of which of the way" leaves funding for other policy vary tremendously across countries. A recent and program options, such as public sector World Bank report comments: "Most African research and extension, to be debated on their countries are too small to afford the own merits. agricultural research they need." (World Bank Removing non-tariff barriers on private 1989, p 99) While some of the larger imports of agricultural inputs may be expected, developing countries have hundreds of PhD in time, to lead to more public and private scientists in public sector agricultural research sector agricultural research. As argued above, and offer large markets that attract private improving technology transfer boosts returns research, smaller countries depend more to agricultural research, encouraging private heavily on trade and technology transfer. companies to pay for more research in developing countries and justifying larger Import reform issues: an overview budgets for IARCs. Also, as private sector technology transfer raises the level of Many cross-country studies find technological sophistication among farmers and correlations between openness and growth. traders in developing countries, public sector Recent theoretical and statistical analyses by scientists may find more demand for their Romer propose a causal link: "Increases in services to advise farmers, traders, and openness to international trade do seem to government officials. cause increases in the rate of technological change" as potential investors gain access to Technology for larger and smaller countries "the broad range of highly developed producer inputs available world wide" (Romer 1989, pp The size of national markets for agricultural 2, 34). Romer's work suggests that inputs varies tremendously by country. agricultural growth may be more effectively 3 Table 1.1: Imports of agricultural Inputs, 1990 (millions of U S. dollars, unless otherwise noted) agricultural crude manufactured agricultural . Inputs as a Region and Country fertilizers fertilizers pesticides machinery seeds total Inputs percentage of a imports Africa Angola 6.9 1.8 9.5 18.0 1.0 Burkina Faso 0.0 6.2 7.5 1.7 15.0 2.8 Burundi 2.1 4.2 0.3 6.6 3.5 Cameroon 0.5 2.2 30.0 13.0 45.0 3.3 Chad 0.0 1.4 6.0 3.8 11.0 2.3 Cote D'Ivoire 0.2 11.0 10.0 6.7 28.0 1.7 Ethiopia 0.1 32.0 11.0 14.0 57.0 5.3 Ghana 0.1 6.9 9.0 45.0 61.0 4.9 Guinea 0.3 0.2 0.4 0.9 0.2 Kenya 0.0 38.0 45.0 34.0 120.0 5.0 Madagascar 0.0 3.3 5.5 6.4 15.0 3.1 Malawi 0.3 5.6 2.5 3.9 12.0 2.1 Mali 0.0 . 3.8 6.5 4.5 15.0 3.1 Mozambique 0.8 4.0 4.0 8.8 1.0 Niger 1.0 2.2 3.0 6.2 1.5 Nigeria 0.0 58.0 14.0 73.0 140.0 2.5 Rwanda 2.1 3.4 2.5 8.0 2.8 Senegal 0.0 4.0 3.0 5.2 12.0 0.9 Somalia 0.0 1.0 0.5 4.4 5.9 1.6 South Africa 6.1 39.0 56.0 130.0 240.0 1.4 Sudan 0.0 15.0 42.0 46.0 100.0 8.0 Tanzania 0.0 16.0 18.0 15.0 49.0 3.6 Uganda 0.0 0.2 3.3 7.8 11.0 1.8 Zaire 0.0 2.4 5.4 150 23.0 2.9 Zambia 0.1 28.0 5.0 9.8 42.0 4.0 Zimbabwe 0.3 14.0 28.0 16.0 58.0 4.5 Middle East and North Africa Algeria 00 27.0 5.0 87.0 120.0 1.2 Egypt 0.0 160.0 180.0 69.0 410.0 4.4 Iran 8.0 290.0 90.0 38.0 430.0 2.7 Iraq 0.0 2.5 5.0 0.4 7.9 0.1 Morocco 0.2 53.0 30.0 49.0 130.0 1.9 Syria 0.0 46.0 14.0 26.0 86.0 3.4 Tunisia 0.0 3.6 6.0 15.0 25.0 0.4 Yemen South Asia Afghanistan 32.0 0.1 0.8 33.0 2.1 Bangladesh 7.0 86.0 10.0 4.7 110.0 3.4 India 130.0 980.0 22.0 12.0 11000 47 e2.0 05 0.3 21.0 3.1 Pakistan 12.0 200.0 90.0 70.0 370.0 5.3 Sri Lanka 1.5 65.0 13.0 8.9 88.0 3.3 East Asia and the Pacific Cambodia 0.1 0.2 0.3 0.6 China 440.0 2700.0 290.0 39.0 3500.0 5,6 Indonesia 79.0 96.0 10.0 48.0 230.0 1.1 Republic of Korea 94.0 110.0 16.0 140.0 350.0 0.5 Malaysia 20.0 190.0 38.0 24.0 270.0 1.1 Myanmar 0.0 5.1 2.5 3.1 11.0 0.9 Phlilipines 42.0 120.0 31.0 9.9 200.0 1.7 Thailand 0.4 430.0 130.0 270.0 830.0 2.6 Viet Nam 140.0 1.4 2.8 150.0 14.0 Latin American and the Caribbean Argentina 0.6 27.0 65.0 18.0 110.0 2.7 Bolivia 0.0 1.4 4.5 14.0 20.0 2.8 Brazil 5.0 270.0 30.0 4.7 310.0 1.5 Chile 1.7 110.0 51.0 35.0 210.0 2.8 Colombia 2.0 130.0 40.0 35.0 210.0 3.7 Cuba 0.3 88.0 75.0 100.0 270.0 3.4 Dominican Republic 0.0 23.0 10.0 * 7.3 41.0 * 2.3 Ecuador 1.7 37.0 38.0 24.0 100.0 5.4 El Salvador 0 5 45.0 15.0 4.0 65.0 5.1 Guatemala 0.5 41.0 25.0 12.0 79.0 4.8 Haiti 0.0 1.1 2.1 1.5 4.7 1.7 Honduras 0.5 23.0 30.0 13.0 67.0 6.0 Mexico 63.0 38.0 30.0 130.0 261.0 0.8 Peru 0.1 41.0 20.0 33.0 94.0 2.7 Venezuela 3.8 47.0 7.4 29.0 88.0 1.3 Europe and Central Asia Azerbajan Belarus Bulgaria 30.0 62.0 65.0 160.0 4.2 Czech Republic Georgia Hungary 9.2 50.0 120.0 170.0 340.0 3.9 Kazakhstan Poland 170.0 63.0 150.0 160.0 540.0 6.5 Portugal 9.1 53.0 73.0 210.0 340.0 1.4 Romania 130.0 60.0 38.0 230.0 2.5 Russian Federation Slovak Republic Tajikstan Turkey 33.0 250.0 61.0 6.2 350.0 1.6 Ukraine Uzbekistan former Czechoslovakia 16.0 120.0 100.0 160.0 390.0 . 3.0 former USSR 0.0 7.0 600.0 1700.0 2300.0 1.1 * Total inputs and inputs as share of all imports are calculated for data available. Some data Is for years other than 1990 Comparable data on seed Imports are not readily available Seeds are a relatively minor Import. Sources: FAO. Trade Yearbook 1990 (Rome FAO, 1991); IMF, Direction of Trade Statistics Yearbook 1992 (Washington, D C.: IMF, 1992); Technical Center for Agricultural and Rural Development (CTA), Seed Progammes In ACP Countries (Wageningen CTA, 1991). promoted with trade reform programs that foreign exchange are in a strong position to address barriers to inputs trade as well as encourage import liberalization for inputs, output trade. Some agricultural inputs - fertilizers, farm Across World Bank client countries, the machinery, and vitamins and minerals for value of agricultural inputs as a share of the livestock feed - require no special trade value of all merchandise imports seldom controls to limit negative externalities or to exceeds five percent (see table 1.1). protect public health. Trade in these items Therefore, the aggregate value of imports is may be liberalized with techniques for general not an obstacle to reform. Even a very trade reforms - for example, taking them off successful trade liberalization that brings large import control lists and cutting tariffs. percentage increases in imports of agricultural For those agricultural inputs - seeds, inputs does not pose a macroeconomic threat, pesticides, cattle and chicks for breeding, such as major increases in aggregate demand veterinary medicines - that threaten for foreign exchange. Furthermore, faster externalities and public health impacts, special agricultural growth with more inputs can be controls can be maintained. Even countries expected to boost export earnings and cut with liberal import regimes control imports of imports of agricultural products. If access to these items. For such inputs, trade foreign exchange is nevertheless considered to liberalization involves redesigning import be an issue, donors granting and lending controls to focus on externalities. 6 2 Restraints on Seed Trade N on-tariff barriers severely restrain seed trade in many developing countries.3 A 1987 study of the seed industry reported: Obstacles to trade are pervasive in seed markets by comparison with manufactured goods and other agricultural inputs and products... The exclusionary effect of trade barriers and market distortions is strongest in the developing countries (McMullen 1987, p 242-43). Seed imports may threaten negative externalities, justifying special import controls. Import liberalization for seeds cannot, therefore, be accomplished by removing seeds from import control lists. Reform involves redesigning trade restrictions to focus on externalities. This means: a relaxing limits on varieties of seed allowed for import and trade, accepting restrictions only for varieties which threaten negative externalities; and 7 a drafting and enforcing plant quarantine resistance, insect resistance, stress tolerance rules that interfere with seed trade no more ... can be of immense importance in than necessary to protect against realistic meeting the food needs of the Third World pest and disease threats. (Sehgal 1992, p 24). Changes in seed trade with development Competing explanations for low adoption qf improved varieties Accelerating the flow of new varieties to farmers The share of cultivated area planted wit improved varieties is low in many developing For farmers in any country, speed of access countries. Standard explanations for limited to the continuous stream of new plant varieties adoption of improved varieties include: being turned out by public and private research a Due to agroecological peculiarities, throughout the world is a major factor varieties imported from other countries explaining their level of agricultural perform no better than traditional varieties. development. Moving from traditional to According to this argument, specific agro- modern agriculture does not mean a one-time ecological zones - and other factors such shift from one set of traditional cultivars to as tastes - require made-to-order breeding another set of improved cultivars, but rather a for multiple agro-ecological zones within reduction in the time it takes farmers to gain each country. access to the latest generation of new a Seeds of varieties available for import are technology. In developed agricultural too expensive or come with input packages communities, new varieties steadily push out that are too expensive for poor farmers. old varieties; seed industry specialists estimate These explanations are misleading. the normal market life for a variety at under Agroecological differences obviously affect 10 years. In contrast, farmers in developing variety performance, but emphasizing the countries typically have access to no more than importance of different varieties for different a handful of improved varieties for major and agro-ecological zones is at least as strong a. minor crops, and many of those varieties are argument for variety import as for in-country relatively old. breeding. Considering the dozens of major For developing farming communities to and minor crops grown in multiple agro- grow, improving the channels for introduction ecological zones in an average developing of new varieties is crucial. Notably, varieties country with its limited agricultural research developed with some of the latest technology capacity, heavy reliance on direct adoption of may be most immediately useful in developing foreign varieties is the only strategy that countries; promises to deliver varieties fast enough to ... a great deal of biotechnology is give farmers effective access to the flow of immediately applicable to Third World modern agricultural technology. As for seed agriculture... Traits such as disease costs, rate of return to investment is the crucial 8 issue. While low labor costs may encourage Seed trade controls: variety restrictions poor farmers in developing countries to pass over tractors, herbicides, and sprinkler systems Negative or positive variety lists in favor of labor intensive alternatives, improved seeds are not so easily replaced by In many World Bank client countries, more labor. Investments in improved seeds government controls on varieties of seeds are divisible, so that even very expensive seeds allowed for trade severely constrain private purchased in small quantities may be good sector ability to introduce new varieties, investments within reach of poor farmers. whether through imports or in-country The story that technology transfer has been breeding and seed production. The following tried and failed is not generally true. More paragraphs describe several patterns for often than not, farmers have not had a chance control. to decide whether varieties are agro- No prior government approval. Some ecologically suitable, and whether imported or governments allow private traders to sell seeds hybrid seeds are too expensive. One expert on of new varieties without any government seeds in Africa observes: agency testing and approving the variety. This A range of improved varieties exist which approach allows traders and farmers to decide today are not multiplied and distributed to whether new varieties have any value. Chile, peasant societies, despite an obvious need Thailand, the United States, Zimbabwe and for them (Friis-Hansen 1992, p 7). some other countries follow this practice. Most farmers have never had a chance to Some governments allow private traders to see more than a handful of the improved introduce new varieties without-performance varieties available in world markets. This tests for some crops but not for others. handful has been selected by public sector Through seed trade reforms in 1990, scientists, who may not appreciate farmer Bangladesh removed comprehensive controls priorities, so that the varieties that scientists on varieties allowed for import and sale and offer to farmers, selected from thousands of now allows private traders to make their own varieties and after years of in-country breeding decisions to import and to sell seeds of new and testing, may not be the ones that farmers varieties for all but five major crops - rice, would have chosen "off the shelf" if given the wheat, potatoes, jute, and sugar cane. chance. Lack of farmer adoption of improved No sale without pyior government approval. varieties may say more about public sector In this pattern, the government does not allow scientists blocking farmer choice than the private traders to sell seeds of a new variety adaptability of varieties available in world until some government agency has tested the markets. variety and declared that it has some economic value for farmers. Two sub-patterns can be identified with this practice. 9 * Single-country-variety lists. Many EU government has approved a new governments maintain their own lists of variety, it enters the common catalogue of varieties allowed for import or trade. This field or vegetables crops, which means that pattern, which is very common in seeds of the variety can be imported and developing countries, can make it so sold in all EU countries. difficult for private companies to introduce Positive lists of allowed varieties - for new varieties that they do not even try. example, the EU Common Catalogues - are Some countries with single-country variety inherently more restrictive than negative hsts. lists have detailed seed legislation setting The United States, for example, lists weeds, the framework within which government seeds of which are not allowed. But, multi- agencies test varieties and limit seed import country positive lists, such as the EU lists. are and trade - for example, Indonesia, Egypt, in general much less restrictive than the single- Kenya, Malawi, Sri Lanka, Uganda, and country positive lists found in many Zaire. Other governments accomplish the developing countries. The EU Common same thing through executive decrees, Catalogues, for example, include thousands of ministerial orders, and other bureaucratic varieties and have multiple points of entry. In decisions setting up committees, general, any variety that sells well in the U.S. establishing variety lists, and restricting is able to gain entry into EU Common seed imports - for example, Burkina Faso, Catalogues, though the approval process Burundi, Cameroon, Madagascar, and delays marketing in EU countries for several Niger. In non-market countries, for years after a variety enters U.S. markets. example, North Korea, governments Many single-country variety lists are short, monopolize commercial seed trade so that severely limiting farmer choice. In 1985, introduction of new varieties - from local Egypt (with government approval of varieties public sector research or seed import - required by law) listed only three improved depends on administrative decisions within varieties of maize, the grain crop covering the government agencies. largest area. Improved varieties were planted a Multi-country variety lists. Governments of in only 20 percent of the total maize area. many developed countries cooperate to (Food and Agriculture Organization [FAO] maintain joint lists of approved varieties. 1987, p 48, 50). Although Senegal in 1985 For example, the European Union had no seed law requiring the government to maintains a Common Catalogue of Varieties approve new varieties, FAO in 1987 reported of Agricultural Plant Species (ie, field that six major crops "are subject to seed crops) and another Common Catalogue of control" and listed only 19 approved varieties Varieties of Vegetable Species. Traders for these six crops (Food and Agriculture intending to sell a new variety in EU Organization 1987, p 110-111). countries submit seeds for testing to the In other cases, single-country variety lists government of at least one EU country. may be longer, at least for some crops. For Normally, one to three years after any one example, Morocco in 1984 listed 62 varieties 10 wheat, including some old ones (Food and continuing government controls. By the end Agriculture Organization 1987, p 97). of the 1980s, new private varieties covered almost 50 percent of cotton area and had The case against regulating varieties: boosted aggregate cotton production in the six Foregone farm benefits counties by 10 to 15 percent (Constantine, Alston, and Smith 1993, p 16). A recent These restrictions could be depriving study estimated that annual producer and farmers of seeds that would boost output and consumer surplus increased US$170-180 farm income. Several recent studies suggest million (equivalent to about 12 percent of total that foregone benefits can be very large. cotton sales from the six counties) with Canadian wheat. The Canadian introduction of new varieties during the 1980s government regulates varieties of wheat that (Constantine, Alston, and Smith, p 19). farmers can grow and sell. In 1974, scientists These two studies demonstrate for tested HY320, a new variety of wheat with developed countries, where farmers and some different properties (similar to some of private seed companies have some power to the wheat grown in the U.S.). Though HY320 protect their interests, that: produced yields 15 to 32 percent higher than Agricultural legislation and the resultant competing varieties, the Canadian government regulation that usually ensues can often blocked farmers from planting the variety for change, redirect, or even stop the adoption more than a decade. A study in 1987 of yield-increasing technologies that have estimated that had farmers been allowed to the potential to generate substantial switch to the new variety, annual net farm economic rents (Ulrich, Furtan, and income for wheat-growing farmers could have Schmitz, p 160). increased an average of 15 to 25 percent, While similar estimates of foregone income equivalent to Cnd$200-400 million across associated with variety limits are not available Canada (Ulrich, Furtan and Schmitz 1987, p for developing countries, a recent cross- 175). country study of maize yields suggests that Cahfornian cotton. From 1929 to 1979, restrictions on maize seed imports slow the State of California through the California technology transfer. Pray and Echeverria's One Variety Cotton Law restricted cotton statistical regression of maize yields from 1961 growers in six counties to a particular type of to 1986 in 50 countries, most of which are cotton - acala cotton - and to varieties developing countries, against maize seed produced by one breeder, a local USDA imports, public research, private research, experiment station. In 1979, after some education, fertilizer use, and other variables farmers complained about the station's found that: monopoly on allowed varieties to the U.S. seed imports and multinational research are Department of Justice, the California the only technology transfer variables that legislature amended the law to permit private are statistically significant... Public-sector breeders to introduce new varieties, with some 11 research was not significant..." (Pray and To be accepted for the catalogue a va .Iety Echeverria 1988, p 372-373). must show a clear improvement over The study concluded that: varieties already available either in the seed imports and private research can be characteristics which enhance its value for important sources of improved technology cultivation or for the use that can be made and also that the two are closely related. of the crops grown from it or of the ...countries which restrict the import of products harvested from them (Kelly 1989, corn seed are losing out on an important p 105). source of growth in corn productivity (Pray In short, the standard argument for and Echeverria 1988, p 372). governments to regulate varieties of seeds While Pray and Echeverria show foregone allowed for sale is to protect farmers from the yield increases associated with trade limits, consequences of their own decisions. their study does not estimate foregone Fears that a product might be widely production or farm income. No other studies adopted before its poor performance are have been found that estimate losses in terms appreciated and that traders might try to dump of foregone yield increases, production, or bad products are not peculiar to seeds. Risk farm income associated with limits on private of widespread adoption before poor sector introduction of new varieties in performance can be recognized may be less of developing countries. an issue for new varieties, for which farmers can determine performance from neighboring Critique of common arguments for regulating fields or in small plots with little risk, than for varieties many other products. Consider some other products: consumers are not experts in metal Those who argue that governments should alloys crucial to the durability of internal test and approve varieties as a condition for combustion engines or electric appliances, yet sale propose several scenarios for risk without governments allow traders to import makes regulation. One author, for example, and models without prior approval and without hypothesizes that "a disastrous effect on food warranties. For these and other products, supplies.. .could result from the extensive use standard practice is to allow new goods to of a poor-yielding variety," and asserts that enter the market, leaving buyers to evaluate "the farmer should be given some protection options and to discipline unscrupulous traders against exploitation by those who might try to by withdrawing patronage; governments market an unsatisfactory variety simply to intervene to ensure truth in labelling, to limit recoup breeding costs" (Kelly 1989, p 43). externalities and protect public health, but not The EU asks member governments to consider to protect buyers from the economic "value for cultivation" in deciding whether to consequences of their own potential mistakes allow a seed company to introduce a new in judgement. variety: 12 Externalities that might justify variety Spread of disease to neighboring fields. A restrictions variety for a major crop may be so susceptible to a disease and so consistently infected that it Microeconomic theory asks and accepts that spreads the disease to neighboring fields. governments intervene in markets when IR5Q rice, for example, acts as a nursery for negative externalities threaten. Although there rice blast. is no general consensus among seed experts Damage to wild races or ecology in about externalities that might justify limits on Vavilovian centers. New varieties for varieties of seeds allowed for sale, externalities cultivated crops that are introduced into considered in the literature include the regions with wild races of the same crops following: could transfer genes into wild races. This Spread of weed seeds. Weed seeds may be could affect genetic variability of wild races, mixed with crop seeds for sale. A farmer and could also affect other organisms, such as buying and planting such seeds may damage plant-eating insects. neighboring plots, creating an externality. As illustrated, there may be some situations Also, introduced plants could become weeds; in which externalities are present as farmers water hyacinth, reportedly introduced into choose varieties, and in some cases blocking South Asia as an ornamental, is an example. access to specific varieties may be an Risk of sudden fall in production for a appropriate response. When externalities are major crop. A variety being introduced to a an issue, governments may arguably deal with country could have serious but not readily concerns through short negative lists of apparent susceptibility to pests or disease. varieties or genes not allowed, focusing This could be a problem if the variety is for a attention on weeds, major crops, and crops in major crop and is so attractive that farmers their Vavilovian centers. Concern over might commit a large area to the crop, externalities should not lead to positive variety jeopardizing regional food supplies and lists for all crops, as it so often does in economic stability. The Irish potato famine developing countries. demonstrates this risk. But government restrictions on private sector introduction of Impact of variety controls on private sector new varieties arguably leave farmers with seed trade fewer varieties, enhancing pest and disease risks associated with genetic uniformity. For seed company personnel weighing Furthermore, governments could initially deal whether to invest in trade or research to with the risk associated with a susceptible introduce a new variety into a developing variety by monitoring its adoption and telling country, government approval of each variety farmers about its susceptibility; action to limit may mean standard delays counted in years to access to the variety or to limit area planted to test each new variety with no assurance that it the variety could be taken after some time. will be approved; steep fees for testing each variety, as well as limits on numbers of 13 varieties that a company can submit for testing advantage in importing and marketing seed, in one year; and fears that testing will not be field-testing and test-marketing new varieties, fair or objective, bribes will be demanded, and and producing seed for self and open- varieties pirated. pollinated varieties. Large national and With few exceptions, in developing international seed companies may have the countries with the largest private seed sectors advantage in all kinds of breeding and also in (measured in terms of share of cropped area producing hybrid seed for major crops, for which private companies supply local or including maize, sorghum, and sunflower imported seed), governments allow private Some recent seed company moves in and companies to introduce new varieties without out of developing countries suggest that government tests and approvals. For example, governments that regulate varieties discourage private seed companies in Zimbabwe supply private companies as competitors but may seed for about 40 percent of planted area. The encourage private companies as monopolists. FAO Seed Review 1984-85 (1987, p 151) As Nigeria adopted World Bank-endorsed seed reports for Zimbabwe that: "Varieties legislation mandating government variety developed by private companies can be sold testing in the early 1990s, two out of three without prior government approval unless the international seed companies active in Nigeria seed is to be sold as certified seed." left the country. The Indonesian government Private seed companies in Thailand, which regulates varieties; in 1990, Cargill left does not limit varieties allowed for trade, Indonesia, leaving behind two other multi- provide seed for about 25 percent of planted nationals. But multi-nationals also have area. In India, private seed companies supply bought into several African countries where seed for about 7 percent of planted area; governments regulate varieties allowed for although India restricts sale of imported seed trade. In 1990, Pioneer entered into a joint according to varieties, majority locally owned venture with the parastatal Ethiopian Seed companies are able to sell locally produced Corporation, an arrangement that reportedly seed of varieties that the government has not has run into some difficulties. In Malawi, tested and approved. In Chile, private seed Cargill has become majority share-holder ir companies supply seed for more than 50 the National Seed Corporation, a former percent of planted area; private companies are parastatal. When a private company buys allowed to introduce locally bred varieties and part-ownership in a parastatal, governments also varieties registered in foreign countries may regulate varieties to protect public-private without prior government variety testing and joint ventures as monopolies, though other approval. outcomes are possible. When variety lists are not binding, When governments remove variety companies of all sizes can be expected to take restrictions and other barriers to seed import, part in importing, testing, and producing seed some increase in imported seed can be for new varieties. Small-to-medium size local expected. For most seeds, however, transport companies with low overhead may have an costs (including cost to satisfy phytosanitary 14 regulations) are significant relative to profits. commercially-motivated export or import These cost considerations push companies to restrictions can be found. import parent stock and to produce seed in- country. In Thailand and Chile, two countries Non-tartiff barriers: phytosanitary controls with multinational seed companies and liberal seed import policies, imported seed serves an As obstacles to seed trade, the two most estimated 1 to 2 percent of planted area only. important non-tariff barriers are variety lists The share of seed provided through imports (already discussed) and plant quarantine would tend to be higher the smaller the regulations. Pests and diseases coming in on country. seeds may spread far beyond fields planted with imported seeds, causing large negative Other features of seed trade controls externalities. The threat of such externalities justifies phytosanitary controls. Tarif Designing phytosanitary restrictions involves making trade-offs between loss to the With some exceptions, tariffs are not a economy when seeds are not given entry, and major barrier or an issue for seed imports for loss when pests and diseases are introduced. developing countries (McMullen 1987, p 229- These trade-offs create opportunities for honest 231). Non-tariff barriers constitute the biggest disagreement, with some experts more alert to obstacle to imports. potential gains from seed imports arguing that restrictions are too tight, and those more aware Non-tariff barriers: commercial protection of pest and disease threats arguing for current or even tighter import restrictions. Seed Some countries ban seed imports or exports company representatives consider over-tight for selected crops based on various commercial phytosanitary restrictions to be a major concerns. India, for example, has in the past obstacle for seed import into developing banned imports of seed for rice, wheat, and countries.' other crops, presumably to preserve self- Phytosanitary restrictions take various sufficiency in seed supply, and has banned forms, including: exports of hybrid cotton seeds to protect local a Bans on imports of all seeds for specific cotton producers. Kenya restricts seed imports crops; for "crops for which the country has a E Bans on imports of seeds for specific crops production capacity for its national needs" from specific countries on the grounds that (Riugu 1988, p 91), and allows seed exports certain pests or diseases are present in those "provided domestic self-sufficiency is assured" countries; (Food and Agriculture Organization 1987, p a Requirements that imports of seeds of 78). Thailand has limited exports of specific crops be treated in specified ways mangosteen cuttings to protect local fruit to kill particular pests and diseases; and growers. Many other examples of 15 w Requirements that imports of seeds of trade as well as through legal imports of non- specific crops be grown for testing or seed plant products. Considering how open multiplied in quarantine through one or many countries are to plant pests and diseases more generations to ensure that diseases or through channels other than legal seed imports, pests are not coming in with the seeds. phytosanitary restrictions obstructing seecT The scientific bases for phytosanitary import may warrant another look. regulations are sophisticated and complex. Design of regulations builds on an immense Variety Registration amount of detailed information about crops, countries of origin, pests, and diseases. Most governments have an organization that Various international fora coordinate registers varieties, which at the minimum phytosanitary regulations among member means identifying, describing, and naming the governments. More than forty countries variety. Identifying and describing a variety established the International Plant Protection involves growing out seeds for several Convention in 1951 in collaboration with the generations to see that plants are distinct and Food and Agriculture Organization; uniform and that characteristics are stable over membership more than doubled through 1987. several generations (DUS criteria). When a Regional organizations include, for example, variety has been registered, seeds of the the Asia and Pacific Plant Protection variety can be certified - or identified as true Commission and the European and to the variety. Mediterranean Plant Protection Organization. In many developed and developing Developing countries take assistance from countries with modern private seed industries, international organizations in designing such as Argentina, Chile, United States, and phytosanitary restrictions. Zimbabwe, registration is available but Private seed companies work with voluntary. With voluntary registration, international government organizations and company motives for registration include also work through private international facilitating seed export - importing countries organizations such as the Federation of may demand certified seed, which requires International Seedsmen. To facilitate variety registration - and preparing to register international seed trade, companies ask ownership, which may involve additional governments to set standard procedures for paperwork. With voluntary registration, performing a pest risk analysis. During 1993, companies can be expected not to register North American governments, through the many varieties. North American Plant Protection Organization, In some countries, registration is agreed on standard procedures for pest risk compulsory. Compulsory variety registration analyses. is common in World Bank client countries, In many developing countries, governments though in practice traditional varieties are have little ability to stop introduction of pests often ignored and only improved varieties are and diseases through uncontrolled cross-border registered. Governments with compulsory 16 variety registration often require in-country seed for most crops passes through market testing for several years, charge companies channels where it is subject to government thousands of dollars for each variety entered in regulations. Compulsory variety registration the testing process, and test for performance as forces breeders to remove genetic variability to well as DUS criteria. Compulsory registration meet uniformity criteria, allowing a variety to is often the administrative instrument through be registered, which in turn allows seed to be which governments implement restrictions on sold. Seed of land races not meeting DUS varieties of seed allowed for import and trade. criteria and not presented for registration by Compulsory registration may be less any company is not allowed for sale. In the onerous when the registering agency accepts EU, compulsory variety registration tends to all varieties (seeds meeting DUS criteria) drive out genetic variability and land races. without attention to variety performance, This process is not very far along in accepts information from other governments developing countries with compulsory that have registered the variety, and provides registration. registration as a free service. Chile and Turkey, for example, allow seed imports for Seed certification varieties registered in the exporting country. EU governments accepting varieties listed in Seed certification is an assertion by some EU Common Catalogues in effect accept organization, which could be private but is registration in other countries. often public, that a particular lot of seeds is of Compulsory registration, which requires the stated variety and meets other quality handing over seed samples to government standards. Developed countries follow agencies, may discourage private companies different systems; those with voluntary from importing valuable germplasm (breeding certification - including the United States - lines or parent lines for hybrids). Companies deliver quality seed to farmers at least as may fear that governments will divert seeds to dependably as those with compulsory public sector breeding programs or to certification. competing companies. By some accounts, Insofar as the development of a moder government demands to test seed samples have private seed industry in developing countries is in recent years been an obstacle for concerned, the major issue with respect to multinationals interested in expanding seed certification is whether it is voluntary or research and production in India and China.. compulsory. Seed certification is voluntary in Compulsory registration is not a benign many of the developing countries where policy. Aside from allowing government private seed companies are most active, such agencies to harass private traders, compulsory as Zimbabwe, Chile, and India. For seed sold registration threatens bio-diversity.1 While domestically, large companies much seed in developing countries is farmer- characteristically opt to sell seed without retained seed or is traded farm-to-farm and certification, relying on customer confidence in avoids government controls, in EU countries brand name; voluntary certification may be of 17 more interest for small and new firms without such a complicated law suit being heard in reputations for quality linked to well-known our very busy Thai courts... brand names. In practice, trade secrecy is used by private Compulsory certification forces seed companies to protect their research. Most producers to deal with another government private companies in Thailand as well as office, which could be a nuisance or an other countries are investing in hybrid seed insurmountable obstruction. In place of (Setboonsarng and others 1988, p 55). compulsory certification, governments could The potential gain to countries that promote seed quality control through "truth-in- strengthen intellectual property rights is labelling, with the seed firm attaching quality measured in terms of additional technology control labels" (Grobman 1992, p 140-141). that seed companies will be encouraged to import or to develop in-country. Suri Sehgal Intellectual property rights and Jan Van Rompaey of Plant Genetic Systems, a Belgian biotech company, argue Whether and how to protect intellectual that at the present time, trade liberalization property rights in varieties is a matter for may be a more important stimulus for current debate even for developed countries. technology transfer than steps to strengthen In the U.S. and other countries with the most plant breeders' rights: advanced seed science, opportunities for [In most developing countries] the seed intellectual property rights in varieties, genes, industry itself is in the early stage of and breeding processes expand with legal development. Adoption of [intellectual changes and technical progress. Modern legal property right] laws in such countries cai and technical infrastructures are essential to stifle growth rather than accelerate enforce evolving intellectual property rights. development... Many developing countries with relatively ... Their seed business will be able to advanced private seed industries offer plant develop only if there is appropriate transfer breeders' rights - Zimbabwe, Argentina, and and absorption of technology from the Chile - covering some of the ownership industrialized countries. Consequently, issues dealt with in current legislation in legislation should promote such transfer developed countries. rather than promulgating sophisticated Experts disagree on how much and how property rights which are ill-adapted to the fast to press for plant breeders' rights in technology level of these countries (Sehgad developing countries. A 1988 study of the and Rompaey 1992, p 12-14). Thai seed industry asserts, for example: With hybrids, seed legislation is largely There is no plant variety protection in unnecessary to protect intellectual property Thailand and, in its current stage of rights. Private seed companies are able to development, the private sector does not maintain ownership of hybrids through think that such industry protection is physical control of in-bred parent lines. In feasible. Indeed, it is difficult to imagine developing countries, large research-oriented 18 multinational seed companies focus much of more than 10 percent), and even that share is their effort on hybrids. only possible with subsidies. Governments With self or open-pollinated varieties, on that restrict private seed trade and try to fill the other hand, private seed companies lose the gap with public sector seed supply inflict profits when farmers and competing companies heavy costs on farmers in terms of foregone multiply and sell seed. But laws formally production increases: protecting ownership of self or open-pollinated It has been amply documented that the varieties would be of little value in those public systems have failed to produce developing countries where governments are sufficient high quality seed for the potential unable to control seed sales by farmers and country or region demand, especially of the small-scale merchants. For developing - more difficult to produce seed categories: countries with small seed markets, in-country hybrids of maize, sorghum, sunflower, seed research on self and open-pollinated vegetable, and potato seeds. As to seeds varieties may be slow to develop in any case. with low propagation coefficients (ratio of Countries may be served by imported harvested to seed quantity planted), such as varieties, with relatively small local companies the cereals, ... results have been less than importing seeds, testing varieties, and satisfactory almost everywhere, both as to multiplying seeds to serve local markets. Such quantity of certified seed produced and as research does not involve large investments to its quality (Grobman 1993, p 139). and overheads provided compulsory variety Most government agencies focus on self or registration, government variety testing, or open-pollinated varieties for major grain crops, other government restrictions are not in the competing with farmers who multiply seed for way. own use, whereas an emerging private seed When establishing procedures to protect industry focuses, characteristically, on hybrid plant breeders' rights in new varieties, care is seeds and other relatively high value products. in order to prevent private companies from claiming ownership of common varieties and Aspects of donor aid and advice varieties developed by -International Agriculture Research Centers. Such claims Supporting governments to regulate varieties would constitute a restraint on trade. Through advice and conditions attached to Public sector seed companies projects, the World Bank and the Food and Agriculture Organization have often accepted In many developing countries, one or more and even advocated government limits on public sector agencies, including parastatals, varieties of seed allowed for import and trade. produce foundation and commercial seed and Less often these organizations have encouraged sell to wholesale or retail levels. Government countries to leave variety choice-to market agencies in most countries provide seed for mechanisms. only a small share of planted area (seldom 19 In several countries, the World Bank has The World Bank supports Nigeria's 1990 over the years been associated with successful National Seed and Quarantine Project, advising seed trade reforms. During the early 1980s, the government to draft and implement new Turkey issued decrees allowing private firms seed legislation and to establish new' to import and sell seeds of new varieties government agencies to supervise seed trade. without prior government testing and With new arrangements, governments test all approval.' With seed reforms in place, the new varieties, including those proposed by World Bank prepared an Agricultural Sector private companies; the National Variety Adjustment Loan for Turkey, endorsing Registration and Release Committee decidles reforms and offering money for private seed whether to release any variety, which for a imports. Mexico is another country in which private company is equivalent to deciding the World Bank has supported significant seed whether the company is allowed to sell seeds trade liberalization. of the variety. Through the project, the World While the World Bank has at times Bank encourages the government to allow the promoted seed trade liberalization, it has often private sector to import seeds for breeding supported imposition or continuation of programs and for multiplication, but does not restrictions on varieties allowed for trade. In object to government controls on import of Bangladesh, another country with successful seed for commercial sale. seed trade liberalization, the Ministry of A recent World Bank paper on "Seed Agriculture in 1990 ordered that seeds of all System Development: The Appropriate Roles varieties for all but five crops be allowed for of the Private and Public Sectors," raises the import and sale. Conditions attached to a spectre of "moral hazard" when private World Bank loan in 1991 retreated and asked companies import seed to introduce new that the government allow-private companies to varieties. The paper proposes that import seeds for testing, implicitly accepting governments be responsible for local that government agencies continue to test adaptation tests (Jaffe and Srivastava 1992, p varieties and to control whether private 25). Another recent World Bank volume companies sell seeds of new varieties to cautions "New varieties must be widely tested farmers. Bangladesh appears to have on farms to make sure that they perform at succeeded with seed trade liberalization in least as well as traditional varieties" without spite of some confusing World Bank advice. addressing the crucial question of whether or In conjunction with a 1992 Second not private seed traders may be left to test new Agricultural Extension Project for Sri Lanka, varieties on their own without public sector the World Bank encouraged the government to oversight (World Bank 1989, p 95). revise seed institutions and policies. Proposed In 1984, a Food and Agriculture reforms include establishment of a National Organization expert committee on seeds Seed Board, which would take over recommended that governments responsibility to approve varieties for sale ... enact legislation prohibiting the sale or based on variety performance tests. offer for sale of seed below prescribed 20 quality standards. These standards may Donor association with government seed cover all or only some of the quality factors agencies of seeds (Food and Agriculture Organization 1984, p 2). For many years, donors promoted seed The aspects of seed quality listed by the production through government agencies, committee include genetic quality - variety including parastatals. More recently, donor performance. The committee further attention to government seed producing and ... agreed that in setting up such a system it trading agencies has focused on reforms, such would be necessary to establish means of as shifting commercial seed production or listing and describing crop varieties which retail seed trade to the private sector.- might be included... (FAQ 1984, p 2). Nevertheless, donors including the World An annex to the report suggests that countries Bank continue to pay for seed production might begin by regulating analytic quality and through government organizations. For germination only, which would leave choice of example, a portion of World Bank aid for the variety to private traders and farmers (FAO National Seeds and Quarantine Project in 1984, p 30-31). Nigeria supports production of foundation seed While donors urge governments to regulate in federal and state agencies. seed quality, an alternate approach to In countries with relatively large improving seed supply at the farm level is to government seed agencies, reform efforts that promote quality through competition. Suri focus on commercializing or privatizing seed Sehgal, a seed company executive, asks donors agencies, rather than on liberalizing seed trade, to focus on seed trade liberalization as crucial carry major risks. Project aid might be to private sector development: accepted to continue government activities, Development agencies can encourage while reforms such as cuts in seed subsidies national governments to create the are not sustained. And government agencies conditions for private seed sector could be privatized to monopolies, bringing development. Liberalization of seed and little change in seed market behavior. germplasm imports and exports is crucial in Furthermore, pay-offs to farmers from this regard. (Sehgal 1992, p 25) reforming government seed agencies may be In a strategy of quality through competition, insignificant without concurrent trade reform, "legislation should focus on how to attract since farmers may be left with higher prices serious companies, rather than becoming a -for the same poor choice of varieties. watch-dog for a few bad ones." Markets When a competitive private seed industry is discipline private companies that sell unreliable allowed free access to seeds and germplasm seeds: "to stay in business in the long term, available on the world market, government high quality products will have to be provided agencies offering relatively unattractive to the customers" (Sehgal and Sindhu 1992, p varieties and poor quality seed can be expected 77). to lose sales, even with subsidies. Popular support for subsidies to government seed 21 agencies can be expected to erode as private all but five crops would be allowed for import companies demonstrate their ability to supply and trade. better seed at no cost to the government. Opposition to seed trade liberalizatior, can Privatization through withering away of be expected from public sector agricultural government seed production and trade can be a research agencies. In most developing relatively painless by-product of seed trade countries, government research agencies have liberalization. had a monopoly for many years on importing, testing, and breeding new varieties. As long Recommendations as government committees regulate introduction of new varieties, government The primary objectives of the following scientists have a channel to block private recommendations are to improve farmer access company efforts to introduce new varieties to the flow of new seed technology from through seed imports and in-country breeding. laboratories and research plots throughout the These scientists may feel that their funding and world and to accelerate agricultural growth. career goals through the government research Secondary objectives include promoting private agencies are threatened by successful research in developing countries, promoting technology transfer through private seed trade. private seed trade, and saving government To reduce opposition from government money by cutting subsidies to government seed scientists, it may be useful to clarify that agencies. reforms promoting private technology transfer can be consistent with maintaining or even Recommuendation for governments: Open increasing allocations for government doors for the private sector to introduce new agriculture research, which can focus on issues varieties by removing restrictions on seed trade not served through the private sector. that do not address externalities or plant The argument is sometimes made with breeders' rights, including variety performance respect to seeds that foreign companies are not tests, compulsory variety registration, willing to introduce their latest technology into compulsory seed certification, and developing countries that do not have laws unreasonable phytosanitary restrictions. establishing intellectual property rights. Th is argument bears some examination. In most if not all cases, governments could Seed companies in developed countries have implement this recommendation without no mechanisms to stop someone from a changing seed laws. In countries with seed developing country from buying and importing legislation mandating government agencies to their goods. Barriers to introduction of nev evaluate and release varieties, agencies are technology are not created by companies but often empowered to set their own policies. In rather by governments of importing countries. Bangladesh, for example, the Ministry of Countries that ease import barriers gain access Agriculture implemented seed liberalization in to inputs and technology with or without 1990 by declaring that seeds of all varieties for intellectual property rights. 22 Advocates for intellectual property rights government agencies in developing countries and those who fear impact of intellectual have had "preferential access to new varieties property rights on developing country access developed by the International Agricultural to technology may be able to agree on trade Research Centers." In most developing liberalization as an interim win-win solution, countries, private import of lines from any of allowing countries to import more technology, the IARCs or selling seeds from such lines is increasing company sales, and increasing the not allowed without prior government testing, technological sophistication and wealth of which in practice has meant that only developing countries. government research system scientists get Over time, as private companies offer more access to IARC lines, except for the few lines varieties for more crops, the private seed that are eventually allowed through for seed industry expands. Depending on the size of multiplication. In donor circles this generally the country, seed companies will sooner or goes unremarked. later begin in-country research and breeding Taxpayers and foundations in programs. As in-country private seed research developed countries fund IARCs to aid the grows, legislation to protect plant breeders' peoples of the developing countries. With rights becomes more important. At the same current arrangements, these centers' ability to time, the technological and legal framework deliver technology to farmers is limited by for enforcing legislation matures. policies of many member governments, which allow government research systems to Recommendation for International monopolize testing and introduction of IARC Agriculture Research Centers: Insist that technology. This reduces returns to IARC member governments place no restrictions on research, which may also undermine their private import of lines or on sale of seed from ability to raise funds. More to the point, it multiplying lines. blocks potential welfare gains for farmers and consumers in developing countries, whom As Neil McMullen notes in Seeds and IARCs have been established to help. World Agricultural Progress (p 179), 23  3 Restraints on Fertilizer Trade N on-tariff barriers on fertilizers limit farmer access to micro as well as macronutrients. The contribution of macronutrients (nitrogen, phosphorus, and potassium) to higher yields is well-known. But policymakers often underestimate the role of micronutrients: farmers' lack of access to fertilizer products with sulphur, boron, manganese, zinc, and other micronutrients may lead to declines in soil fertility, low marginal returns to investments in macronutrients, and low ceilings on yields. Trade liberalization for fertilizers can be accomplished by removing all fertilizers from import control lists, allowing private importers to decide volumes and types. In developing countries, externalities with fertilizers are rare. Externalities may be expected to emerge in specific locations - for example, fertilizer run-off into a lake - where they can be 25 addressed through local use guidelines rather The rate of fertilizer application consistent than controls on trade. Accordingly, for with best practice varies according to many fertilizers there is no need to preserve any factors: agricultural population per hectare of trade restrictions to deal with externalities, as cropland, climate, particularly rainfall, and is the case for seeds. percent of cropland irrigated, to name a few. Among all agricultural inputs, fertilizers In Asian irrigated agriculture and in Western account for the largest share of import trade by Europe, rates of application near 400 kgs per value in most World Bank client countries. hectare appear to be consistent with best Even so, the value of fertilizer imports as a practice. In Central Europe and North and share of all merchandise imports is low: in South America, with typically more land per 1990, for all Bank clients with a population of farmer, often with low rainfall and without more than five million, fertilizer imports irrigation, rates of application just over 100 accounted for less than 1 percent of kgs per hectare appear consistent with best merchandise imports in more than half of the practice. In Africa and the Middle East, rates countries and more than 4 percent of of fertilizer application consistent with best merchandise imports in only four countries - practice would presumably fall somewhere in Vietnam, 14 percent; China, 5 percent; India, between these two levels. 4.6 percent, and Bulgaria, 4.2 percent. Farmers in developing countries who gan Considering these overall figures, countries access to fertilizers and other inputs that carry can eliminate tariff and non-tariff barriers modem technology can be expected to increase blocking private fertilizer imports without fertilizer use over time. Instant increases tc affecting macroeconomic variables, such as world best practice rates of application are not volume of merchandise imports or exchange realistic in most situations because rates of rates. application depend on farmers' ability to adopt a wide range of modem agricultural inputs and Changes in fertilizer use with development practices. This time lag would not disappea-r even if all import barriers were removed. A country's average level of fertilizer use In any specific region of a developing per hectare is one of the clearest indicators of country, farmers rich and poor will tend to modem agricultural practices. Fertilizer use in follow the same standard input package for developed countries defines international best each crop,' applying, for example, x kgs of practice. In some of the developed countries nitrogen per hectare. Since rich and poor with heavy use of fertilizer, application rates farmers tend to apply roughly the same have been growing very slowly or even number of kgs per hectare, lack of money dces declining over the last several decades. not explain why farmers do not apply 2x or 3x Developing countries, however, are still kgs. Farmers presumably act on experience driving toward rates of application that are that in their specific situation, marginal returns consistent with current best practice. for incremental applications up to x kgs of nitrogen are good enough, and that if they 26 apply more than x kgs of nitrogen per hectare, Patterns for fertilizer trade they run into problems - such as lack of response due to micronutrient deficiencies that Developing countries have followed several the farmer does not yet understand or have an standard patterns for fertilizer trade, including: ability to control. As farmers in an area learn government monopoly, controlled private more about micronutrients and other inputs trade, and free private trade. The defining and techniques to manage soil fertility and to feature for these patterns is the nature and achieve higher yields, they can be expected to degree of government control over private shift to higher levels of fertilizer use. This fertilizer imports. process continues as farmers move toward current international best practice. Government monopoly From the early 1960s -to the late 1980s, aggregate fertilizer use in Bangladesh, Brazil, Governments of many developing countries China, India, and Indonesia increased at assign fertilizer production and trade to compound annual rates of 11.0 to 13.3 government agencies, including parastatals, percent.' These five countries achieved such and prohibit private fertilizer import. While large increases over time despite sometimes government production and trade may waste binding government controls on volumes and money, prohibition of private imports arguably types of fertilizer allowed for trade. At times, causes the most damage. government mismanagement of fertilizer Barring private imports of fertilizer supplies forced declines in total fertilizer use magnifies any mistakes by bureaucrats who over several years - for example, fertilizer control fertilizer availability and use. For use in China fell by more than a quarter from example, misjudgment or tight budgets might 1966 to 1968 and did not regain 1966 levels lead a government to produce or import less until 1970. fertilizer than what the market would bear. During the period, nitrogen fertilizer prices Also, if a government, perhaps taking advice in Brazil and India have tended to be above from public sector scientists, decides not to world market levels, while prices in offer certain types of fertilizers, then farmers Bangladesh and Indonesia were above about as do not have choices. These decisions can lead often as they were below world market levels to serious problems if farmers cannot buy (International Rice Research Institute 1991, p inputs to repair micronutrient deficiencies. 259-62). The record of these five countries For example, Bangladesh Agricultural suggests that for many developing countries, Development Corporation (BADC) decided realistically achievable annual increases in some years ago to deliver nitrogen exclusively fertilizer use are at least the 11 to 13 percent in the form of urea, withdrawing farmer access compound annual increases that these five to ammonium sulfate, a decision that countries achieved over time with less than contributed to serious sulphur deficiencies; ideal policies. public sector scientists and the BADC staff did 27 not adequately address sulfur deficiencies for access to micronutrients for efficient fertility many years. management are evident. In short, the pattern When governments monopolize fertilizer has worked to some extent in some countries. trade, competing demands for local and But government import monopolies for foreign currencies often restrain imports.' As fertilizer can be found in many poor countries noted in the World Bank's long-term with low rates of increase in fertilizer use over perspective study on sub-Saharan Africa decades. (1989, p 95): "Fertilizer arrived only when governments had both the necessary foreign Controlledprivate trade exchange and the inclination to spend it accordingly." In many countries, a government agency In addition, when governments subsidize controls fertilizer imports, approving each fertilizers, the budget constraint becomes shipment, while some or all of the actual binding more quickly; as Mcintire (1986, p importing and trade may be left to one or 55) notes: more private companies. This pattern reta ins If the total subsidy is fixed, then a larger the major weaknesses of the public sector subsidy per unit implies a smaller total monopoly pattern previously described: quantity of imported fertilizer because of government may not allow import of as much the government's financial constraint. fertilizer as farmers would buy and may not In recent years, many countries have allow import of the types of fertilizers that abandoned government import monopolies. farmers could use to maintain soil fertility. The BADC's monopoly on fertilizer imports On top of these weaknesses, the arrangement was broken in 1990 and 1991 as private allows private traders to profit from restraints dealers gained the right to import any amount on trade. of any fertilizer. The Tanzanian Fertilizer Many developing countries have followed Company lost its monopoly on fertilizer import this pattern. In Kenya, "Because the in 1992. Empresa Nacional de Government policy is to encourage the Comercializacion de Insumos in Peru lost its development of an active private sector, all monopoly on fertilizer imports with reforms fertilizer importation, other than that with under Fujimori in the early 1990s. Recently donor aid, is undertaken by private firms and China's central government ended its fertilizer cooperative unions." However, "limitations import monopoly, allowing provincial are set on types and quantities to be imported governments to use their own foreign exchange by each private firm. Maximum retail selling to import fertilizer. prices are also set by the Government" Some countries with government (Amukoa 1990, p 49-50). In the Philippines monopolies on fertilizer imports have in the during the early 1980s, the government's past achieved rapid growth in fertilizer use - Fertilizer and Pesticide Authority determined for example, Bangladesh, China, and Indonesia types and quantities of fertilizer to be - though year-to-year fluctuations and lack of imported, managed tenders for private firms, 28 and limited imports to five firms only. With and a market rate - may undermine reforms in the mid-1980s, the Fertilizer and competitive private trade by offering some Pesticide Authority lost control of imports so traders access to a more favorable rate. Since that the five favored private firms lost their fertilizers, compared to other agricultural import oligopoly. World Bank sources report inputs, are relatively standard bulk products that as many as twenty-four private firms with low profit margins, even very small imported fertilizer by 1987, and the difference differences in exchange rates can have a between farm level and world fertilizer prices serious impact on profit margins. fell significantly. Countries with government-controlled Mixed patterns private fertilizer monopolies or oligopolies often show poor growth in fertilizer imports Countries may display mixtures of the three and use, unstable supply, and transparent patterns. Indonesia, for example, maintains a arrangements to extract short-term profits from government trading monopoly for most major fertilizer trade. fertilizers while allowing the private sector to import other fertilizers. In India, the Free private trade government "canalizes" trade in most major fertilizers, giving an import monopoly to the Countries following this pattern allow parastatal Minerals and Metals Trading anyone to import any amount of any fertilizer. Corporation, setting wholesale prices, and Across developing countries, this pattern has enforcing a cost-plus pricing system for been rare, but it is gaining adherents. fertilizer plants. For rock phosphate, sulphur, Bangladesh in 1991 adopted this pattern, di-ammonium phosphate, and some other taking all fertilizers off the import control list. fertilizers, India allows uncontrolled import Turkey liberalized fertilizer imports in 1986. and trade (Pursell and Gulati 1993, p 16). With reforms, World Bank sources report Domestic public or private production of increased competition, improved farmer access fertilizers appears to favor government to fertilizers, and introduction of new interference in trade. This is not a decisive products. South Korea, Brazil, and some consideration, however. In Bangladesh, for other countries in East and Southeast Asia and example, private traders gained permission to Latin America currently follow this pattern. import urea, a major parastatal product, one Free private fertilizer trade is less common in year after they gained permission to import Africa and South Asia. triple super phosphate, a minor product, and Liberalizing fertilizer imports entails muriate of potash, which is not produced assuring dealers equal and unrestricted access domestically. In the 1970s and 1980s, Brazil to foreign exchange at reasonable rates as well levied high duties on fertilizer imports to favor as withdrawing specific controls on fertilizer domestic producers; reforms in the 1980s imports. Governments that maintain multiple lowered duties and farm-level prices. In Chile exchange rates - for example, an official rate during the 1960s and into the 1970s, 29 protection for the domestic nitrogen fertilizer should be estimated realistically, to avoid industry raised prices to farmers, while for unnecessary imports. phosphate fertilizers, "the absence of a large Forecasts of fertilizer requirements are domestic industry caused price intervention to needed in discussions ... with the Central provide low or even negative protection"; Bank for the release of foreign exchange reforms in the 1970s lowered duties on (Food and Agriculture Organization 191, p nitrogen and eliminated subsidies (Hurtado, 21-22). Valdes, and Muchnik 1990, p 66). Accepting government controls Aspects of donor aid and advice on fertilizer types Over the last decade, donor aid and advice Recent fertilizer reform programs for has been shifting away from support for Ghana and Bangladesh, endorsed and government fertilizer monopolies to favor supported by the World Bank and other major competition and private trade, including donors, accepted continuing government private imports. This reorientation is clear, restrictions on types of fertilizers allowed for for example, in the World Bank's 1989 long- import. Such limits obstruct technology term perspective study for sub-Saharan Africa: transfer through the private sector. Chemical fertilizers will be in demand... Plans to privatize fertilizer trade in Ghana The key is to ensure that reliable supplies during 1988-91 focused on domestic trade, are readily available at full cost... To leaving the government's import monopoly in reduce supply bottlenecks, private traders place until the fourth and final year of reform. and enterprises should be allowed to Even then, the reform program proposed that import, produce, and distribute it the government continue to limit types of themselves... Finally, foreign exchange fertilizers allowed for import: should be available to pay for fertilizer In the fourth year (1991), MOA will imports as demanded... (World Bank 1989, relinquish its importation role. ...it will p 96). make a public announcement that the Despite a fairly clear shift in donor rhetoric private sector will be permitted to impor: and overall intention to favor competitive fertilizers that appear on an MOA-approved private trade, donors have often cooperated list [emphasis added], which will be with continued limits on private. fertilizer published... With this, the transfer of imports. For example, a 1991 Food and fertilizer procurement and distribution to Agriculture Organization document advises the private sector will have been completed governments to estimate fertilizer requirements (Dapaah and Otinkorang 1988, p 44). as an input into decisions to release foreign In Bangladesh, the World Bank and Asian exchange for fertilizer imports: Development Bank (ADB) agreed on ... it is extremely important that the conditions for input trade reform, conditions [fertilizer] consumption requirements ... that they attached to multiple loans in 1990-91. 30 Among the many conditions dealing with wholesale and retail trade, leaving reforms to fertilizer trade, only one dealt with imports - allow private fertilizer imports to 1989. a request that the government allow private Meanwhile, the loan offered more than $150 unregulated imports of triple super phosphate million for parastatal fertilizer imports. As and muriate of potash and allow private import events unfolded, Turkey freed imports in of urea as required. Consistent with this 1986,,more than two years early. By 1990, condition, the government removed triple the two parastatals that formerly imported and super phosphate and muriate of potash only distributed all fertilizers remained with only 21 from the import control list in.1990. percent of fertilizer sales. Fortunately, through general trade reforms, the In other cases, reform programs failed as government drastically cut the number of items government agencies continued their control on the control list, so that all fertilizers came over fertilizer supplies. In Nigeria, for off the list in July 1991. example, the World Bank attempted through a 1983 fertilizer loan to press the government to Delaying import liberalization cut subsidies and to shift its monopoly on while funding parastatals fertilizer import and distribution from one government agency to another (from Fertilizer During the last decade, donor-endorsed Procurement and Distribution Department to fertilizer reform programs have focused, National Fertilizer Company of Nigeria, a characteristically, on shifting domestic retail parastatal). The World Bank's $250 million and wholesale trade from government agencies fertilizer loan paid for a substantial share of to the private sector and on cutting fertilizer the fertilizer that the government imported and subsidies. In Bangladesh and Ghana, for sold with subsidies during 1984-87. As of example, reform programs began with retail 1991, years after the end of the project, World trade, then moved upstream over a matter of Bank sources report that the government years to wholesale trade, leaving import maintains its monopoly on fertilizer imports, reforms to the end. As a consequeice, some and that subsidies continue at high levels. program and project loans associated with Project efforts to shift the monopoly from one fertilizer reforms continued to support government organization to another also failed. fertilizer imports by government agencies - a practice transparently inconsistent with reform. Recommendation In some cases, such as in Bangladesh, governments eventually removed restrictions The primary objectives of the following on fertilizer imports, completing reforms. In recommendation are to improve farmer access Turkey, another success story, import reforms to fertilizer technologies and to promote faster ran ahead of World Bank recommendations. agricultural growth. Saving government The World Bank's 1985 Agricultural Sector money is a secondary objective. Adjustment Loan for Turkey proposed to end retail subsidies and to expand private 31 Recommendation for governments: Remove Complete liberalization of fertilizer imports tariff and non-tariff barriers on all fertilizer entails not only eliminating quantitative imports to give farmers unrestricted access to controls but also giving all traders unlimted the fidl range of fertilizers available on world access to foreign exchange through the same markets at near world market prices. foreign exchange market or -window. A good rule of thumb for a fertilizer reform Access to new products through imports program is that it be farmer-friendly. Import allows private traders to compete through trade liberalization as proposed delivers technical advice and product differentiation. benefits to farmers in the form of improved Competition leads to faster technology technology and convenient and reliable supply transfer. In Turkey and Bangladesh, import at near world market prices. To the farmer reforms resulted in private introduction of new these benefits often far outweigh the negative fertilizer products. impact that subsidy cuts might have on prices. 32 4 Recommendations for Reform E asing restrictions on the import of agricultural inputs allows farmers to choose technology through markets. As described in previous chapters, donor advice in recent years has not always improved farmer access to new technology embodied in seeds and fertilizers available in world markets. Much advice offered in the name of reform has missed major issues, and some has even encouraged governments to tighten trade restrictions not related to externalities, taking choices away from farmers. This is not to say that everything donors have done with respect to agricultural inputs trade has been wrong, but only that some aspects of project design and advice have been flawed. Donors must change their approach if they are to have a more positive impact on trade of agricultural inputs. This chapter recommends measures for donors to improve 33 their aid and advice for technology transfer and, realistically, will not be a neat and and agricultural development. decisive process. Recommendation 1. Review and revise Recommendation 2. Add policy reforms for advice for regulating agricultural inputs to technology transfer through trade to all focus on externalities. research and extension projects. Donor advice concerning non-tariff barriers Accelerating technological change is central on trade of inputs has been inconsistent, to donor strategies for agricultural growth in Donors characteristically endorse general developing countries. With few exceptions, principles that trade barriers be removed when donor advice and projects for technological externalities are not an issue. But as change in agriculture focus on research and illustrated in previous chapters, donor advice extension without addressing trade barriers on specific aspects of trade regulation for through which governments actively block inputs often encourages trade restrictions for private sector introduction of new technolcgy. reasons that have nothing to do with If technological change is the objective, more externalities. Table 4.1 presents a framework could be achieved by improving multiple for analyzing common and donor- channels for introduction of new technology. recommended trade regulations in terms of Research and extension projects designed to their focus on controlling externalities. Table improve multiple channels for introduction of 4.1 also proposes minimal regulations to new technology would include: control externalities. N discussion of government restrictions on Bringing donor advice on seed, pesticide, private imports of all classes of agricultural fertilizer, and other inputs trade into line with inputs; and general principles may not be an easy task. N conditions asking for removal of trade Confusion and disagreement have lasted for barriers that do not address externalities years: for example, during the mid-1980s Other aspects of standard research and World Bank advice to Turkey assisted seed extension projects would not have to be trade liberalization, while years later World affected by these conditions, since little or no Bank advice to some other countries endorsed money is involved. seed trade restrictions. Given the number of Projects for agricultural research and staff within major donor organizations, extension are incomplete and unbalanced if including World Bank, Food and Agriculture they do not take a holistic approach to the Organization, and International Agriculture topic of technological change. A holistic Research Centers, the community of people approach would mean that project documents that contribute to policy advice is large and deal with all major channels for introduction of disparate. Policy reform within the donor new technology, including private trade. With community may take some time and effort this approach, agricultural research and 34 extension projects may be more descriptively levels, etc. Whatever the outcome of such framed as agricultural technology projects. arguments over in-country trade, continuance of government import monopolies increases the Recommendation 3. Use aid to support likelihood that domestic trade will be private rather than public sector imports of privatized to monopolies or oligopolies inputs. controlled by governments. Designing projects to support competitive Donors could support competitive private private sector imports of inputs may lead imports of agricultural inputs by designing donor staff to pay more attention to private projects that (a) release foreign exchange to inputs trade. Such projects present an option developing country governments to replenish to maintain aid flows for inputs after the foreign exchange which these governments government trade disappears, which might sell to private traders to import inputs; and (b) encourage both donor and government staff to set conditions that governments remove let go of government trading activities more barriers to competitive private imports of quickly. With the demise of government inputs. (Donors providing tied or in-kind aid trade, projects supporting private imports could make arrangements for recipient would give donor staff channels to remain governments to auction ownership of tied or involved in policy discussions concerning in-kind aid to private importers before tied aid inputs trade. Issues that might be expected to is spent in the donor country or in-kind aid arise from time to time include: non-tariff leaves the donor country.) barriers, emergence of oligopolies, and level When donors design aid to support private of domestic protection. imports only, governments continuing to subsidize sales of inputs by government Recommendation 4. Revise procurement agencies not only do so with their own money rules for private imports of agricultural inputs. but also lose aid. This approach creates pressure against subsidies that reinforces any During the last decade, in multiple credits conditionality. and loans promoting import trade liberalization During the last decade, many donor for fertilizers, seeds and other agricultural projects professing to promote liberalization inputs, donor procurement guidelines have and privatization of inputs trade have paid for blocked use of funds for private imports. continued imports by government agencies For example, the World Bank's 1984 without even insisting on elimination of Agricultural Sector/Inputs Project for the government import monopolies. In giving Philippines provided $149 million to finance government agencies more inputs to sell, these imports of agricultural inputs, including projects set up unnecessary confrontations fertilizer, animal feed, and other products. between donors and government staff over Standard World Bank procurement rules sales policies - prices and subsidies, whether attached to the loan required international government agencies sell to retail or wholesale competitive bidding (ICB) for large purchases, 35 Table 4.1: Regulating Agricultural Inputs: Reasons, Practices, and Reform Options 1. Inputs which 2. Extemalities and 3. Minimal regulatory 4. Common regulatory 5. Common donor adve 6. Refbm options to embody new public health concerns options to meet concerns practices In WB client. faciltate private Introduction technology for externalities and public countries of new technologies health seeds and other (a) Imported seeds may (a) phytosanitary (a) phytosanitary (a) FAO Is the leading (a) review and rewrite planting materials carry pests or diseases, restrictions block restrictions are often too donor organization phytosanitary restrictions to which could spread introduction of pests and strict, needlessly advising countries on focus on realistic disease diseases interfering with private design of phytosantary and pest threats seed trade regulations; some private traders question FAO advice as too restrictive (b) widespread adoption (b) alowing private firms to (b and c) many (b and c) donors, Including (b and c) some options are of a new variety for a import end Introduce new governments maintain the WB, commonly advise as follows: major crop could threaten varieties without short lists of varieties client governments to (9) governments allow seed regional stability if genetic government testing could allowed for Import or sale; Introduce or to continue Import and sale for any diversity falls and/or the be expected to Increase governments test new with single-country positive variety registered In'the seed variety Is susceptible to genetic diversity and varieties with attention to lists of allowed varieties as exporting country; disease regional stability and to mutipie criteria, Including described In the column to (b) governments allow drive susceptible varieties performance, which Is not the left companies producing seed out of the market an externality In-country to sell seed of varieties that government has not tested or registered; (Ili) governments list genes (c) plants with blo- (c) governments could or varieties not allowed, with engineered genes could maintain negative lists of no limit on other varieties present new problems genes or varieties not allowed NOTE: some NOTE: donors, Including NOTE: make seed governments enforce the WB, advise and assist certification optional compulsory seed governments to establish certification; seed seed certification agencies certification does not without clear advice that address externalities or certific iation be optional public health concerns fertilizers: (a) run-off into surface (a and b) governments (a and b) governments (a and b) donors advise (a and b) see column 3 chemical water promotes growth of monitor quality of surface monitor quality of surface governments to monitor water plants and alters and groundwater; with low and groundwater quality of surface and fish habitat rates of fertilizer use in groundwater most WB client countries, (b) seepage into problems are unlikely; groundwater could make problems may be due to it dangerous to drink human and animal waste more than to fertilizers; where problems pre found, governments (especially local governments) may consider specific steps to reduce run-off'and seepage from all sources NOTE: unrelated to any NOTE: major donors, NOTE: deregulating fertilizer concerns about Including the WB, Imports and trade gives environmental sometimes accept that farmers more options to externalities, many governments limit types of balance macro and governments limit fertilizer allowed for Import micronutrients, which can fertilizer imports by types according to advice of reduce run-off and seepage and/or quantities public sector scientists Into groundwater fertilizers: Inoculants and (c) biological products (c) quarantine restrictions (c)? (c) see note above (c) ikme as 3 other biological could carry plant pests on Imports products and diseases whether by private or public importers. Recommendation 5. Study private sector Requiring ICB forces private traders seeking technology transfer. access to project foreign exchange to submit their procurement negotiations to oversight and Preparation of this paper revealed areas in approval by some government agency. In the which little seems to-be known about what mid-1980s, private traders in the Philippines might be important issues for agricultural had access to sufficient foreign exchange development. Some areas for further study through functioning foreign exchange markets; that could enhance policy advice include: accordingly, use of project funds lagged. Not a Government controls on agricultural until the World Bank relaxed its procurement technology: This paper covers too many rules to more liberally allow procurement by countries to do more than identify broad standard commercial practices did funds areas of concern. Further studies might be disburse smoothly against private sector designed as cross-country studies of trade imports. barriers for specific inputs, national or Similar difficulties were experienced in the regional studies of trade barriers for all 1985 Agricultural Sector Adjustment Loan for inputs. Turkey. Private traders having access to a Response to trade liberalization for foreign exchange through the market had no agricultural inputs: Over the last several incentive to do paperwork, such as collection decades, a number of countries have of three price quotations, to satisfy World liberalized imports of agricultural inputs Bank procurement rules. With few exceptions, the consequences of Rules requiring competitive bidding or reform for these countries are not yet wdl collection of three price quotations are reported and analyzed. One of the appropriate for government procurement but exceptions is Lowell Jarvis' recent papei are inconsistent with the philosophy and intent (1991) on Chilean fruit exports. Other of trade liberalization. Donors promoting reforms that could be studied include seed trade reform ask governments to sell their and fertilizer reforms in Turkey in the early foreign exchange to all comers without 1980s, fairly comprehensive inputs reform reviewing or approving import orders. When in Bangladesh during 1988-90, and seed donors wish to make project foreign exchange reforms in Mexico. Relevant measures of available for private imports of agricultural impact might include changes in private inputs, it would be consistent for donors to inputs trade, farm income, agricultural take their own advice, allowing private growth, consumer welfare, and exports. importers to use project foreign exchange on a Impact of intellectual property rights presentation of standard import documents legislation: The impact of intellectual acceptable to central banks or even customs property rights on agriculture in developing records. countries is a contentious issue, which may be taken as evidence that it is not yet well understood. Company and industry studies 38 could explore impact of various factors restrictions, size of country markets, and level including presence or absence of legislation of development on private investments in allowing intellectual property rights, import agricultural research in developing countries. 39 Table 4.2: Proposed Import Reforms for Agricultural Inputs inputs common trade barers suggested reim strategies seeds many governments prohibit seed import and eliminate controls on varieties of seeds allowed trade except for seeds of varieties which for import and trade except to deal with some government agency has tested and extemalities; short negative lists of varieties not approved allowed may be sufficient many governments enforce over-tight review phytosanitary restrictions and rewrite phytosanitary restrictions those which interfere with seed trade more than necessary to control realistic pest and disease threats fertilizers many governments ban or regulate private remove fertilizers from import control lists (or fertilizer imports; some governments limit add to lists of goods allowed for unregulated types of fertilizers allowed for private import private import) agricultural some governments limit private imports to remove agricultural machinery from import machinery makes and models tested and approved by control lists (or add to lists of goods allowed for government agencies; some govemnments unregulated private import), ie, allow private protect local industry with high duties traders to import any make and model without testing and approval by some government agency; reduce high duties livestock feed some governments monopolize imports or remove livestock feed, major feed components, and feed control private trade in livestock feed or major and some feed additives from import control additives feed components; most governments regulate lists (or add to lists of goods allowed for some feed additives, including antibiotics unregulated private import); limit import restrictions to additives such as antibiotics and hormones which threaten externalities pesticides in many developing countries, time- simplify registration procedures by focusing on consuming and expensive registration externalities (toxicology data): leave efficacy processes block introduction of new products for famers and markets to decide, especially including: products with low externalities; for products with low externalities; rely more on products which could replace other pesticides data and risk assessment from other countries; with significant externalities; and products move toward automatic entry for products with already widely used in developed and low externalities that are registered in major regional countries developed or regional countries veteenary many governments monopolize production focus trade controls on exteralities consider medicines and trade in some or all veterinary medicines automatic approval for new medicines traded in including vaccines; most countries list specified other countries om establish objective veterinary medicines allowed for private criteria for identifying those allowed to import import, and many list persons or companies and sell (restricted) medicines allowed to import some veterinary medicines livestock, fish, some governments restrict private import for remove barriers on private imports of livestock, and breeding reasons not connected with quarantine or fish, and breeding materials except for materials environmental impact standard quarantine and environmental precautions justified by externalities Endnotes 1. Tables providing additional information on trade and trade barriers for seeds, fertilizers, pesticides, and other inputs for all Bank client countries with population over five million in 1990 are available from the author. 2. High tariffs are less often an obstacle. When high tariffs choke off trade in agricultural inputs, governments lose little and could even gain revenue from lower tariffs that allow more trade. 3. The term "seeds" is used in this paper to represent all planting materials, including cuttings, tree seedlings, bulbs, etc.. 4. The position taken in this paper is that variety controls are more serious obstructions than phytosanitary restrictions and that for an equal amount of effort more trade liberalization can be achieved through attention to variety controls. Also, seed import is not the only channel for getting seeds of new varieties into a market. Companies can often get around phytosanitary restrictions by producing seed in-country. However, they cannot thereby get around government limits on varieties allowed for sale. 5. The environmental argument is presented in: Mooney 1979, p 77. 6. One World Bank staff member associated with Turkey's 1985 Agricultural Sector Adjustment Loan describes post-reform arrangements for seed imports as follows: firms are issued temporary permits with no expiration date to import and sell seeds of a new variety; if on testing the government seed agency can demonstrate that seeds are harmful, they can ask for an injunction banning sale; if the company appeals, the injunction is waived pending a court decision. 7. Taking three year averages from 1961-93 through 1986-88: Bangladesh fertilizer use increased by 13.1 percent per year from 33,000 tons to 713,000 tons; Brazilian fertilizer use increased by 11.0 percent per year from 275,000 tons to 3,760,000 tons; Chinese fertilizer use increased over the same period by 13.3 percent per year from 988,000 tons to 21,788,000 tons; Indian fertilizer use increased by 13.0 percent per year from 334,000 tons to 9,520,000 tons; and Indonesian fertilizer use increased by 11.8 percent from 138,000 tons to 2,213,000 tons. See: International Rice Research Institute 1991, p 250. 8. A recent study of fertilizer use in sub-Saharan countries presents evidence that foreign exchange constraints limit fertilizer imports: "some countries with severe foreign exchange shortages had significantly negative country dummy coefficients" in a regression looking at factors affecting level of fertilizer imports. See: Mcintire 1988, p 55. 9. 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