Syrian Agricultural Trade 2008-2009agriportal.gov.sy/public/dwnld-files/periodical_reports/en/sat_08... · Syrian Agricultural Trade 2008-2009 i ... GAFTA Great Arab Free Trade Area

Syrian Agricultural Trade 2008-2009

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Foreword

Syria is still in the process of economic development and modernization that aims at restructuring its economy and ensuring its integration into the world economy. Its main goal is to achieve overall socio-economic development, accelerate its growth and enhance its performance. The target of the ongoing restructuring and policy reform process is to ensure meeting the development requirements, while taking into account the Syria specific socioeconomic situation.

This issue of Syrian Agricultural Trade, SAT report, published by the National Agricultural Policy Center of the Ministry of Agriculture, reviews the current status of the Syrian and the world economic policy and its impact on the Syrian aggregate and agricultural trade. Moreover, it presents the progress made by the Syrian trade in terms of imports and exports by analyzing the most recent data and studying the indicators of the Syrian trade the context of the international market changes.

The report was produced by a team of researchers from the Trade Policy Division, composed of Mr. Bashir Al Hamwi, Mr. Mahmoud Babili, Mr. Mohammed Ali Mohammed, Ms. Hajar Baghasa, and Ms. Huda Abbas. The team was supervised by Mr. Haitham Al Ashkar, Deputy Director for Research and Atieh El Hindi, NAPC Director.

This report presents to its readers the aggregate and agricultural Syrian trade with all its aspects and familiarizes them with the changes taking place in the overall as well as the agricultural policies and their impact on agricultural trade.

NAPC wishes to acknowledge the support offered by all the ministries and institutions that supported the production of this report by providing the required information and data. Particular mention is due to the Ministry of Trade and Economy, Ministry of Finance, General Directorate of Customs, Central Bureau of Statistics, and the relevant MAAR directorates. The Agricultural Policy Division acknowledges the support of the Information and Communication Division, with particular reference to the database team, as well as the administrative and technical team of NAPC.

The Ministry of Agriculture and Agrarian Reform takes this opportunity to express its gratitude to the Arab Fund for Economic and Social Development for funding the activities of NAPC that enable researchers conduct a variety of research studies and produce periodical reports, most importantly SAT. NAPC welcomes any comments and proposals that would lead to the improvement of this report.


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Abbreviations AA Association Agreement

ACP African Caribbean Pacific Countries

AEC Asian Economic Community

AFTA Asian Free Trade area

AU African Union

AVE Ad Valorem Equivalent

AoA Agreement on Agriculture

ASEAN Association of Southeast Asian Nations

CAP Common Agricultural Policy of the EU

CBS Central Bureau of Statistics

CCP Countercyclical Payments of USA Farm Act

CMC Credit and Monetary Committee

CMO Cotton Ginning and Marketing Organization

CoBS Commercial Bank of Syria

CMOs Common Market Organizations of the EU

CRP Conservation Reserve Program of USA Farm Act

DD Doha Declaration

DDA Doha Development Agenda

DDs Developing Countries

DSB Dispute Settlement Body

EAFRD Agricultural Fund for Rural Development

EAGF European Agricultural Guarantee Fund

EBA Everything But Arms initiative

EC European Commission

EIB European Investment Bank

EMP Euro-Mediterranean Partnership

EPA Environmental Protection Agency of USA

EPA Economic Partnership Agreement

EQIP Environmental Quality Incentives Program

ESC Economic and Social Council of the Arab League

EU European Union

EU-15 European Union 15 Countries

EU-25 European Union 25 Countries

FAO Food and Agriculture Organization of the United Nations

Syrian Agriultural Trade 2008-2009

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FAOSTAT Food and Agriculture Organization of the United Nations statistics

FDA Food and Drug Administration in USA

FDI Foreign Direct Investment

FSRIA Farm Security and Rural Investment Act of 2002 in USA

FTA Free Trade Area

FY Fiscal Year

GAFTA Great Arab Free Trade Area

GATT General Agreement on Tariff and Trade

GC General Council of the WTO

GCM General Company for Mill

GDC General Department of Customs

GDP Gross Domestic Product

GEC General Establishment for Consumption

GECPT General Establishment for Cereal Processing and Trade

GEF General Establishment for Feed

GIs Geographical Indications

GM Genetically Modified

GMOs Genetically Modified Organisms

GOS General Organization for Sugar

GSSE General Services Support Estimate

G10 Group 10 countries in WTO


G33 Group consisting of 42 developing countries that support the concepts of SPs and a SSGs


HS Harmonized Commodity Description and Coding System

IBTF International Bank for Trade and Finance in Syria

IDB WTO Integrated Database

IMF International Monetary Fund

ISC Insurance Supervision Commission

KORUS South Korea USA Free trade agreement

LD Legislative Decree

LDCs Least Developed Countries

MA Market Access

MAAR Ministry of Agriculture and Agrarian Reform

MCs Mediterranean Countries


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ME Middle East

MEDA Program of Assistance to Countries in the Mediterranean and MiddleEast Regions

MET Ministry of Economy and Trade

MFN Most Favored Nations

MPCs Mediterranean Partner Countries

MPS Market Price Support

MTRs Mid-Term Review proposals of the CAP

NAFTA North American Free Trade Agreement

NAMA Non-Agricultural Market Access

NAPC National Agricultural Policy Center

NES Not Elsewhere Specified

NTBs Non-Tariff Barriers

NTCs Non-Trade Concerns

OECD Organization for Economic Co-operation and Development

OER Old Exchange Rate ( 11.25 SP/US$ for exports and 11.2 for imports)

OIE Office International des Epizooties

OPEC Organization of Petroleum Exporting Countries

PAP Processed Agricultural Products

PP Protection Period

PSE Producer Support Estimate

RAM Recent Acceding Countries

RCA Revealed Comparative Advantage

RTAs Regional Trade Agreements

RUV Relative Unit Value

SCM WTO Agreement on Subsidies and Countervailing Measures

SAC Supreme Agricultural Council

SARS Severe Acute Respiratory Syndrome

SA6 South Africa Six Countries Group

SAT 2003 Syrian Agricultural Trade 2003 Report

SAT 2004 Syrian Agricultural Trade 2004 Report

SEBC Syrian European Business Center

SFP Special Farm Payments in EU's CAP

SPs Special Products

SPS Sanitary and Phytosanitary

SSA Southern Shrimp Alliance


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SSG Special Safeguard

SSM Special Safeguard Mechanism

SP Syrian Pound (currency)

SPs Special Products

SSA Sub Saharan Africa

SVE Small and Vulnerable Economies

TRQ Tariff Rate Quota

TSE Total Support Estimate

UAE United Arab Emirates

UK United Kingdom

UN United Nations

UNCTAD United Nations Conference on Trade and Development

UNDP United Nations Development Program

URAA Uruguay Round Agreement on Agriculture

USA United States of America

USDA United States Department of Agriculture

USITC United States International Trade Commerce

WTO World Trade Organization


Table of Content

Foreword ................................................................................................................................ iAbbreviations ....................................................................................................................... iiiTable of Content .................................................................................................................. viiExecutive Summary ............................................................................................................. xiChapter 1- International Trade ........................................................................................... 1

1.1 General trends of the global economy .................................................................. 11.1.1 Exchange rates ....................................................................................................... 31.1.2 Oil prices ................................................................................................................ 4

1.2Trade evolution ............................................................................................................ 41.2.1 Main regions .......................................................................................................... 51.2.3 Main trading countries ........................................................................................... 5

1.3 Evolution of global agricultural trade ................................................................... 61.3.1 Agricultural trade by regions .................................................................................. 81.3.2 Main agricultural trading countries ...................................................................... 101.3.3 Agricultural trade in the Middle East ..................................................................... 12

Chapter 2- Overview of Syrian Trade ................................................................................ 252.1 Macroeconomic overview .................................................................................... 25

2.2 Syrian aggregate trade .......................................................................................... 252.2.1 Syrias total exports .............................................................................................. 272.2.2 Total Syrian imports ............................................................................................ 30

2.3 Syrian agricultural trade ...................................................................................... 322.3.1 Syrian agricultural exports ................................................................................... 332.3.2 Syrian agricultural imports .................................................................................. 36

Chapter 3- Syrian Agricultural Trade: Performance, Products, and Partners ............. 413.1 Trade performance ............................................................................................... 41

3.1.1 Revealed Comparative Advantage (RCA) ............................................................... 413.1.2 Relative Unit Value (RUV) .................................................................................... 423.1.3 Export performance ............................................................................................. 433.1.4 Market diversification .......................................................................................... 45

3.2 Remarks on Selected Products ............................................................................ 463.2.1 Market balances ................................................................................................... 463.2.2 The main agricultural exports ............................................................................... 473.2.3 Main agricultural imports .................................................................................... 53

3.3 Main agricultural trade partners ........................................................................ 573.3.1 Agricultural trade by groups of countries .............................................................. 573.3.2 Syrian agricultural trade balance ......................................................................... 593.3.3 Trade balance with major partners ....................................................................... 603.3.4 Main destinations ................................................................................................. 613.3.5 The main agricultural suppliers ............................................................................ 63

Chapter 4- International Agreements .............................................................................. 674.1 International policies ........................................................................................... 67


4.1.1 the international food crisis ................................................................................... 674.1.2 Protectionism emergence as a result of food price volatility .................................... 684.1.3 Increasing poverty incidence ................................................................................. 694.1.4 Advanced countries renounce their promises to offer aid for trade for developing countries ........................................................................................................................ 694.1.5 Multilateral negotiations evolution ........................................................................ 694.1.6 WTO news ............................................................................................................ 744.1.7 Issues related to WTO ........................................................................................... 764.1.8 Regional agreements development ........................................................................ 784.1.9 Trade disputes ..................................................................................................... 834.1.10 International economic conditions ......................................................................... 87

4.2 Agreements and developments related to Syria ................................................. 914.2. Agreements signed by Syria .................................................................................. 914.2.2 Agreements not directly singed by Syria ................................................................ 934.2.3 Gains of the Syrian trade ...................................................................................... 944.2.4 Legislation and rules ............................................................................................. 94

Chapter 5- Review of the Main Agricultural Policies in Developed and Developing Countries ............................................................................................................................. 97

5.1 Introduction ........................................................................................................... 97

5.2 Changes implemented in the PSE methodology in OECD countries ............... 98

5.3 Evolution of the agricultural support in OECD countries ................................ 99

5.4 Main changes in the World agricultural policy ................................................ 101

Chapter 6- Syrian Economic and Trade Policies ............................................................ 1116.1 Features of the economic reform in Syria ......................................................... 111

6.2 General economic policy .................................................................................... 1126.2.1 Fiscal policies ..................................................................................................... 1126.2.2 Stock market ...................................................................................................... 1146.2.3 Banks ................................................................................................................. 1156.2.4 Insurance policy ................................................................................................. 1176.2.5 Fiscal policy........................................................................................................ 118

6.3 Investment policy ................................................................................................ 119

6.4 Trade policy ......................................................................................................... 1256.4.1 Import policy ...................................................................................................... 1276.4.2 Export policy ...................................................................................................... 128

6.5 Agricultural policy ............................................................................................... 1306.5.1 General agricultural policy ................................................................................. 130

Chapter 7- Trade Facilititations and their Expected Impact on Arab and Syrian Trade ............................................................................................................................................ 139

7.1 Introduction ......................................................................................................... 139

7.2 The definition and concept of trade facilitation ............................................... 139

7.3 Trade facilitations negotiations in WTO .................................................................... 140

7.4 Emerging issues in trade facilitation: ............................................................... 1417.4.1 Trade facilitation and security ............................................................................. 1417.4.2 Single window .................................................................................................... 1427.4.3 Paperless trade ................................................................................................... 1427.4.4 Importance of trade facilitations ......................................................................... 142

7.5 Position of developing countries from trade facilitation ............................... 143


7.6 Trade facilitation in the Arab world .................................................................. 1437.6.1 Trade facilitation in Syria ................................................................................... 144

References ......................................................................................................................... 147 International Monetary Fund.......................................148www.imf.org ............................................................................................................. 148

Methodological annex ...................................................................................................... 149


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Executive Summary

The Syrian economy is passing through a transitional period characterized with an overall economic and trade reforms. The aim of this process is to support the Syrian economic competitiveness and overcome the obstacles constraining its development growth. The modernization and reform measures touch various areas including legislative modernization, administrative and institutional reforms, local and foreign direct investment promotion, trade barriers removal, export enhancement and social indicators promotion.

The Syrian Government has been keen at taking the required actions to activate the Syrian economy by means of trade facilitation; fiscal, economic, taxation and custom policies reform; banking sector development and financial services liberalization. These measures mainly aim at meeting the economic development needs, ensuring compliance with the international economic conditions, enhancing the private sector role and improving its contribution to the economic activities.

The current Syrian Agricultural Trade report presents the main features of the Syrian and international trade, in general, and the agricultural trade, in particular. Furthermore, it reviews the evolution of the Syrian and international aggregate and agricultural trade policies. The report also covers the trade data over the period 1999-2008, so as to ensure provision of the most recent statistical data and policy information. Accordingly, it includes the data of 2007 and 2008 as well as the Syrian policy changes up to 2009. Similarly to the last issues, this one is composed of seven chapters as follows:

Chapter one of the report presents the international and agricultural trade and the main affecting factors. It points out that the economic indicators have declined during the year 2008 and that the WTO reports anticipated a decline of exports volume by 9% during 2009. The developing countries, particularly the Least Developed Countries were subject to the impacts of the investment fallbacks and the decreased demand on their export products, which resulted in the proliferation of poverty problems. Oil prices declined severely during the second half of 2008, while the volume of commodity trade decreased by 17.6% in 2009 and that of commodities and services declined by 14.4%. The European trade grew by 12% in 2008, while the other regions registered all together a better trade growth. The Russian Federation countries achieved an impressive trade growth, which also applies to the Middle East (34% and 30% respectively). This remarkable achievement is due to the oil price increase in the first half of the year. On the other hand, the growth registered by South America was 25%.

The agricultural products prices peaked in mid 2008 to reach an unsurpassed level since 30 years. In the first half of 2008, the prices of food commodities went up by 40% compared to 2007 and by 76% compared to 2006. According to FAO, the


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volatility of food prices increased the undernourished and those suffering from chronic hunger to 115 million persons over the period 2007-2008. Various reasons were behind the agricultural commodities price increase mainly, the production of biofuel and the increased oil prices. However, the price increase did not benefit the poor farmers, who could have increased their production and gain additional profits, mainly due to: (i) the failure of the agricultural markets to provide relevant information and signals on the international market prices, (ii) limited access to inputs, (iii) low technical capacities, (iv) weak infrastructure and institutions and (v) lack of responsive policies that help farmers make more profits.

As for the agricultural trade, the financial crises that hit the world at the end of 2008 resulted in a short term drawback in the global agricultural trade value by 20%, and a decreased world agricultural trade in the aggregate terms.

Cereals trade witnessed a partial improvement in 2008 because of the production improvement and the steadily increasing prices. The global wheat production increased in 2008 by 6.8% compared to the previous year, but the international stock declined by 9% due to the big demand of the international markets.

The international stock of hoarse grains, including barley, decreased due to the fluctuating production and the big demand. Rice global production increased by 1.8% in 2008, while cotton production declined by 1.2% and while its consumption decreased by 0.6%. However, the global cotton trade grew by 10% during the same period, with Syria ranking second on the list of cotton producers. Olive oil trade recorded a modest improvement in the value of the global exports (1%), but Syria and Turkey disappeared from the list of big exporter. Global sugar exports grew by 9% in 2008.

Chapter two presents the current situation and evolution of the Syrian trade. It mainly focuses on the financial flows and trade with the main trade partners. Furthermore, it illustrates the main developments in the Syrian economy as well as the Syrian aggregate and trade agriculture and its contribution to the aggregate trade growth. The growth rate of the Syrian economy, measured by the GNP at 2000 fixed prices was 4.9% compareing the average of the period 1999-2001 to that of 2006-2008. The contribution of agriculture to the GNP, which was 24.5% in 2006 declined sharply to 17.2% only in 2008. This stagnant performance compared to the increasing contribution of the other sectors resulted from the drought waves that hit Syria during the last two years. The trade volume increased during the periods 1999-2001 and 2006-2008 by an annual average of 24.9%. The average trade value for the period 2006-2008 reached US$ 26408 million. In 2008, trade with various partners improved in the general terms, particularly with Germany that occupied the fourth rank with a trade balance inclined to the benefit of Syria (US$ 1262 million representing 6% of the aggregate trade). The annual growth rate of exports during the periods 1999-2001 and 2006-2008 was 23.7%. Food products and beverages exports recorded a considerable growth during the last two years (2007-2008). Their growth was faster than the of the other industrial commodities as they registered an export increase of 44% in 2007 compared to the previous year, while in 2008 the average growth was 11% compared to the previous year. The growth rate of exports to Arab countries was


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20.4% in 2007 and 70% in 2008. Exports to Asian countries increased by 62.6% in 2007 compared to the previous year, while the next year increase was 21% only. The value of exports to the American countries increased by 22% compared to 2007, while in the next year it increased by 21%. The comparison with the aggregate exports indicates that the ratio between agricultural exports and aggregate exports was 12% in 2006 and remained the same in 2007, while it declined in 2008 to 6.6% recording its lowest level during the last decade. The agricultural imports growth was faster than that of exports since 2004, resulting in agricultural trade balance deficit of US$ 1028 million in 2008, comprising 34% of the total trade agriculture.

Chapter three analyses the Syrian trade and evaluates the Syrian agricultural exports performance in terms of three indicators: Revealed Relative Advantage, Relative Unit Value and Syrian Agricultural Trade Map. It also reviews the status and the evolution of the main Syrian agricultural imports and exports during the period 1999-2008 and sheds light on the main agricultural trade partners of Syria.

The Syrian agricultural trade map for the period 2003-2007 indicates that among the champion winner commodities in the markets are aniseed, lentils, and wheat in addition to apples and olive oil.

The main agricultural products that achieved a relative export surplus in 2008 were lentils with a self sufficiency rate of 376.5%, non-oil sunflower seeds (257.8%) and apples (110.6%).

Sheep and wheat exports were affected by the drought1 of 2007/2008. Uncombed or carded cotton exports declined during the period 1999-2008, with an average contribution to the total agricultural export value of 2006-2008 of 7.2% compared to 32.2% during 1999-2001. This is because of the promotion of local processing of cotton to benefit from the value added as well as the production decrease due to the government policies that reduced the cotton cultivation area with the aim of water rationalization.

On the other hand, mineral and aerated water exports increased considerably during the period 2006-2008 resulting in an increase of their contribution to the total agricultural export value. Their average contribution during the period 1999-2001 was 1%, while in 2006-2008, it reached 6.1%. The average growth rate of 1999-2008 was 60.6% in terms of value and 83.6% in terms of quantity.

In 2007, Syria ranked fourth on the list of olive oil exporters with a share of 5.3% of the total global olive oil exports.

As for imports, barley production was affected by the drought of 2007/2008 to bring barley to the top of the agricultural imports list during 2006-2008. Maize ranked third after sugar with an average share of 11.8% of the total Syrian agricultural imports during 2004-2006. The average banana imports increased considerably from 65 thousand tons during 1999-2001 to 337.9 thousand tons during 2006-2008.

1 FAO data indicates that the drought wave of the season 2007/2008 was the worst since 40 years.


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The Syrian agricultural trade balance with individual Arab countries registered positive values in 2008 (Saudi Arabia, Egypt, Iraq and Jordan), with the exception of UAE and Lebanon. Furthermore, it registered negative values with the other main partners such as the EU and China.

Chapter four presents the international trade, the multilateral negotiations and economic agreements and illustrates their impact on the international trade evolution. It points out that the international financial crises influenced the international trade and that the agricultural sector could not meet the increasing demand on agricultural commodities. Moreover, many countries took special measures to mitigate the impact of the crises such as imposing some restrictions on exports and adopting price control policies. On the other hand, some countries, particularly net food importers, contributed to the increase on food demand in international markets by reducing the tariffs applied on food imports. Protection policies emerged as a reaction to the disturbance of the finance markets. According to the World Band report of March 2009, 78 trade protection measures were applied in various countries since the beginning of the financial crises. Custom tariff increase is a good example of these measures. The OECD report of 2009 indicates that the advanced countries did not fulfill their promises to provide trade assistance to developing countries. According to the report, despite the commitments of the advance countries to increase trade assistance by 50 billion US$ per year up to 2010 (compared to 2004), they could only offer 20 billion US$ per year up to the date of the report issuance.

As for the multilateral negotiations evolution, Pascal Lamy, the Secretary General of the WTO declared a modified paper as a basis for the negotiations in 10 July 2008, but during the negotiation process, it was agreed to reduce the agricultural subsidy. The following points have been agreed upon concerning agriculture, the trade distortion aggregate subsidy of the advance countries, the disagreements related to the blue box, tariff deduction formula, sensitive products (number and range), special products, the special safeguard mechanism and some issues related to cotton. The negotiations were resumed two months after their suspension after the collapses of the July 2008 package. But up to the end of 2008, the main controversial issues remained unsolved, such as the special safeguard mechanism and new tariff quotas. Additionally, the sensitive products emerged as a controversial issue, while tariff simplification was one of the highlighted technical issues. The green box constituted another controversial issue as the developing countries are calling for more control, whereas a lot of discussions revolve around the proposed criteria of sea fright to prevent transfer of contagious diseases. Proposals related to the geographical indications are still under negotiation in the context of WTO.

The small and sensitive economies have called for more protection for their farmers in the WTO negotiations, while the OECD indicated its desire to support export credits, which contradicts with the WTO and the Doha round orientations. The aim of that was pumping liquidity into the international trade after the consequences of the financial crises.


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The WB report of March 2009 concluded that 17 out of the group of 20, which includes the gigantic economies of the world, have adopted trade restriction measures.

As for the regional agreements, the Australian government called, in the mid of 2008, for creating a massive economic group to replace the ASEAN. 13 Caribbean countries signed a long term economic association agreement with the EU on 15 October 2008. The agreement package covers the sectors of commodities, services and investment. Moreover, the biggest three African economic unions agreed to establish a free trade area which is planned to be converted into a customs union similar to that of the EU. These three unions are East Africa Union, the Joint Eastern and Southern African Market and the South Africa Development Union. The blocs will cover the whole of Africa, starting from Egypt in the north down to South Africa in the south, comprising 26 countries. On its part, the ASEAN made an impressive stride in December 2008 towards the regional trade integration to build a trade union similar to that of the EU. The trade convention of the ASEAN countries has been activated and 3 trade packages were concluded (each of which is a set of agreements) concerning commodities, investment and services. The convention aims at establishing a united joint market for commodities, services, investments and skilled labor by 2015.

Regarding the Middle East countries, the prices decline by two thirds in 2009 anticipated the current accounts deficit of some countries. Moreover, Latin America was influenced considerably with the agricultural and food commodities price increase during 2007 and 2008.

Concerning Syria, a set of important trade and economic agreements has been signed such as the one signed on 14 December 2008 with the European Delegation that modified the originally singed Association Agreement. Moreover, the preferential trade agreement between Syria and Iran was put into implementation on 1 March 2009. The agreement provides for the custom tariff reduction on exchanged commodities.

Chapter five analyses the agricultural policies applied in big economic countries that influence the international markets such as the Economic Cooperation group countries, EU, USA and China. It touches upon issues related to the stagnant economic growth in the OECD countries in 2008.

In 2008, producer subsidies offered by the OECD countries were estimated at US$ 265 million as per the Producers Subsidies Estimates equaling 21% of the total bill. This subsidy declined from 22% in 2007 and 26% in 2006. Accordingly, the subsidies decline resulted from the agricultural commodities price increase in the whole world rather than the policies reforms adopted by the governments.

In 2008, the PSE was estimated at 21% in the OECD countries, indicating that subsidies account for one fifth of the farm bill of these countries farmers. The year 2008 marked the sixth year of decline with 31%.

The Nominal Protection Coefficient was 1.13 in 2008, meaning that the OECD farmers receive average prices above the international levels by 13% (over 15% in


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2007 and 20% in 2006). There is a big variation in the subsidies level among the OECD countries. It was noticed that the biggest decline in the monetary value of the PSEs in 2008 was registered in Canada, Iceland, South Korea and USA. On the other hand the nominal support increase was recorded in the EU, Japan and Mexico.

The annual budget of the Common Agricultural Policies (CAP) reached 55 billion Euros accounting for 40% of the total EU budget. The new regulation of 2008 known as the Health Check, protection and Energy Act of 2008, or the Farm Act of 2008, represents a new programme that addresses the risk of revenue decline by offering direct payments (the programme was implemented on maize, soybeans, wheat, cotton, sorghum, barley, rice, peanuts, flowering sern, kidney beans, lintels, chickpeas and some oil crops). This kind of subsidy had a distortion impact on trade as the coverage of the general risk encourages the American farmers to increase their production. Moreover, the use of the exceptional price increase as a reference price allowed the USA subsidy to increase in such a way that exceeded the levels of the previous year.

Chapter six reviews the recent changes in the Syrian agricultural and trade policies. The government has recently adopted the participatory approach between the public and private sectors as a tool to benefit from the private sector potentials in the area of investments. The impact of the economic reform was reflected in: (i) improvement of the Syrian Pound exchange rate against other foreign currencies, (ii) monetary and price stability, (iii) controlled inflation rates at an average ranging between 5% and 5.5% in 2005, (iv) improvement of the Syrian rank in the international competitiveness report as in 2008 it ranked 78 out of 134 countries. Furthermore, among the important changes underlined by chapter 6 is the establishment of the securities and treasury bonds market, where the issuance of treasury bonds will start in 2010. The other significant changes included: (i) the official inauguration of the Damascus Securities Exchange in March 2009 which comprises an important step towards the establishment of an advanced financial market and a supporting factor for economic development, (ii) the permission granted to banks to fund the private and public sector imports, deal with foreign exchange and open foreign exchange accounts, (iii) the establishment of Credit Guarantee Institution that offers the collaterals required by the banks for the provision of loans, (iv) elimination of the restriction and commissions imposed on all the imports to the benefit of some public establishments according to legislative decree no. 61 of 2009, (v) the elimination of fertilizers subsidies in 2009, (vi) the establishment of the Agricultural Subsidies Fund, which started its activities on 1 January 2009, to provide agricultural subsidies through one agency. The fund mainly subsidizes strategic crops namely: cotton seeds, wheat, sugar beet, maize, potatoes and tomatoes.

Despite the influence of the financial crises on the Syrian investments, unprecedented increases have been recorded in the area of foreign direct investment attraction over the year 2008. The number of projects established under the investment promotion law was 60, while it increased to 186 in 2007. The agricultural projects implemented under the same law were 29 in 2008 against 20 in 2007. According to a study conducted by the SPC in cooperation with the


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relevant authorities to analyze the situation of the Syrian foreign trade during the period 2000-2007, imports tripled while exports increased by two times and a half.

Chapter seven is usually dedicated to present one of the important policies. In this volume it speaks about trade facilitations and their projected impact on both Arab and Syrian trade. It is known that the trade facilitation concept covers a set of important issues related to the movement and clearance of commodities as well as customs management, trade support services, communications efficiency, and transport operations, inter alia. The trade facilitation negotiations in the WTO included a number of proposals including customs procedures simplification and modeling of the required documentation; non-discrimination between the two transit parties, individual transporters and consignment forms; and the implementation of the current international and regional transit mechanisms and arrangements.

Trade facilitation importance lays in the fact that procedures simplification and facilitation of goods entry and exit enables countries to liberalize their trade and enhance the flow of their products to the international markets and vice versa. The benefits of trade facilitations are excellent for advanced countries. However, they are much more for developing countries as the transport costs are higher and the transit times are longer, which affects the exports of developing countries, particularly the perishable ones. Some countries, particularly the African ones unable to benefit from the custom exemptions or from the liberalization of the OECD agricultural markets as per the WOT regulations, if the export procedures are not simplified.

Concerning Arab countries, their trade is suffering from various constraints such as the high tariffs that may reach 19%; security, regional and non tariff barriers; and bureaucratic barriers taking the form of transparency absence, multiple check points at the borders and excessive documentation. Syria, similarly to other Arab countries admits the potential benefits that the Arab world may reap from the trade facilitation measures in terms of competitiveness enhancement and increased intra-trade flow.

The following table presents the imported and exported commodities that will be presented in chapters two and three concerning the Syrian Agricultural Trade:


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Components according to HS Tariff Code Commodity Name as Mentioned in Chapter 3

Exported products

Sheep (0104.10.00)

Sheep Sheep male for breeding (0104.10.10)

Other sheep male (0104.10.20)

Cotton, not carded or combed (5201.00.00)Cotton

Other cotton, not carded or combed(5201.00.90)

Wheat and meslin (1001.00.00)

Soft and Durum Wheat

Durum wheat planting seed (1001.10.10)

Durum wheat, imported by the general establishment for trading and manufacturing cereals for the purpose internal supplying

(1001.10.20)

Other durum wheat (1001.10.90)

Soft ordinary wheat imported by the general establishment for trading and manufacturing Cereals for the purpose of internal supplying

(1001.90.12)

Other wheat and meslin (1001.90.90)

Olive oil virgin (1509.10.00)

Olive oil

Olive oil virgin suitable for human consumption in its present form (1509.10.10)

Olive oil (lampante) for use in the manufacture of soap (1509.10.21)

Other olive oil (lampante) (1509.10.29)

Other Ground-nut oil and its fractions, whether or not refined, but not chemically modified (1509.90.00)

Olive oil and its fractions, refined (1509.90.10)


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Other olive oil - fractions - Solid (stearin) (1509.90.21)

Other olive oil - fractions - Liquid (oleoin) (1509.90.22)

Other olive oil - fractions (1509.90.90)

Other oils and their fractions, obtained solely from olives, refined (1510.00.10)

Mineral waters and aerated waters, not containing added sugar or other sweetening matter nor flavored (2201.10.00)

Mineral and Aerated Water

Other waters, not containing added sugar or other sweetening matter nor flavored; ice and snow (2201.90.00)

Mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored (2202.10.00)

Other waters, containing added sugar or other sweetening matter or flavored, and other non-alcoholic beverages

(2202.90.00)

Tomatoes, fresh or chilled (0702.00.00)Tomatoes

Seeds of cumin(0909.30.00)Cumin Seeds

Apples (0808.10.00)

Selected Fruits

Pears(0808.20.10)

Apricots (0809.10.00)

Cherries(0809.20.00)

Peaches, including nectarines (0809.30.00)

Plums and sloes (0809.40.00)

Lentils (0713.40.00)

Lentils Lentils, for sowing (0713.40.10)

Other Lentils (0713.40.90)

Milk of a fat content, by weight, not exceeding 1% (0401.10.00)Lactic Cheese and Curd


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Milk and Cream, not concentrated nor containing added sugar or other sweetening matter, of a fat content, by weight, exceeding 6%

(0401.30.00)

Other Milk and Cream, not concentrated nor containing added sugar or other sweetening matter, of a fat content, by weight, exceeding 6%

(0401.30.90)

Milk in powder, in tins containing net weight more than 20 kg, for use by industry, of a fat content, by weight, exceeding 1.5%, not containing added sugar or other sweetening matt

(0402.21.20)

Other Milk and Cream, concentrated or containing added sugar or other sweetening matter (0402.99.90)

Cheese and curd (0406.10.00)

Lactic cheese (0406.10.10)

Grated or powdered cheese, of all kinds (0406.20.00)

Other cheese (0406.90.00)

Caciocavallo (0406.90.10)

Other cheeses (0406.90.90)

Other raw hides and skins, of goats or kids, primarily tanned, imported by another party (4103.10.95)

Leather

Tanned or skins of sheep, in the wet state (4105.10.00)

Tanned or skins of sheep, in the dry state(crust) (4105.30.00)

Other Tanned or skins of sheep, in the wet state (4105.10.90)

Other Tanned or skins of sheep, in the dry state (crust) (4105.30.90)

Other Leather further prepared after tanning or crusting of sheep or lamb, tanned, grained, stamped or printed et

(4112.00.99)

Cotton Linters(1404.20.00)Cotton Linters

Oranges(0805.10.00)Citrus


xxi

Mandarins (including tangerines and Satsuma); Clementine, walking and similar citrus hybrids (0805.20.00)

Grapefruit (0805.40.00)

Lemons (citrus lemon, citrus limonum) and limes (citrus aurantifolia, citrus latifolia) (0805.50.00)

Other citrus fruit, fresh or dried (0805.90.00)

Sweet lemons (0805.90.10)

Other citrus fruit, fresh or dried, other (0805.90.90)

Apricot paste and grape paste (Kemeradin)(2007.99.10)Apricot and grape paste

Chickpeas (garbanzos)(0713.20.00)Chickpeas (garbanzos)

Other seeds of anise, badian, fennel, coriander, cumin or caraway; juniper berries (0909.00.00)

Anise Seeds

Seeds of anise or badian (0909.10.00)

Grapes, fresh(0806.10.00)Fresh Grape

Pistachios, in shell (0802.50.10)Pistachios

Pistachios, shelled (0802.50.20)

Potatoes, fresh or chilled for seed (0701.10.00)

Potatoes (fresh or chilled, seed, frozen) Other potatoes, fresh or chilled (0701.90.00)

Potatoes, frozen (0710.10.00)

Imported Products

Raw cane sugar not containing added flavoring or coloring matter, for refining (1701.11.10)

Sugar Other Raw Cane sugar not containing added flavoring or coloring matter (1701.11.90)

Beet sugar for refining (1701.12.10)


xxii

Chemically pure sucrose, in solid form, containing added flavoring or coloring matter (1701.91.00)

Cane or beet sugar and chemically pure sucrose, in solid form, other, other, refined (1701.99.00)

Candy sugar, Refined (1701.99.11)

Other chemically pure sucrose, in solid form, refined (1701.99.19)

Other chemically pure sucrose, in solid form (1701.99.90)

Maize (corn), for sowing (1005.10.00)

Maize

Maize (Corn) for not sowing (1005.90.00)

Maize (corn) (1005.90.10)

Maize (Corn) for not sowing, for industrial establishment (1005.90.11)

Maize (corn) prepared as fodder satisfying the conditions of the ministry of agriculture (1005.90.12)

Other Maize (Corn) for not sowing (1005.90.19)

Other maize (corn) (1005.90.90)

Barley(1003.00.00)Barley

Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of soya-bean oil

(2304.00.00)

Cakes and Residues from other oil

Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils, other than those of heading 2304 or 2305

(2306.00.00)

Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils, of cotton seeds

(2306.10.00)

Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils, of sunflower seeds

(2306.30.00)


xxiii

Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils, of coconut or copra

(2306.50.00)

Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils, of maize (corn) germ

(2306.70.00)

Pulp and other solid material resulting from olive oil extraction(2306.90.10)

Other oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils

(2306.90.90)

Rice in the husk (paddy or rough) for sowing (1006.10.10)

Rice

Other Rice in the husk (paddy or rough) (1006.10.90)

Husked (brown) rice (1006.20.00)

Semi-milled or wholly milled rice, whether or not polished or glazed (1006.30.00)

Tea, whither on not flavored (0902.00.00)

Tea

Green tea (not fermented) in immediate packing of content not exceeding 3 kg (0902.10.00)

Other green tea (not fermented) (0902.20.00)

Black tea (fermented) and partly fermented tea, in immediate packing of a content not exceeding 3 kg (0902.30.00)

Other black tea (fermented) and other partly fermented tea in packing (0902.40.00)

Milk in powder, granules or other solid forms, for children, in airtight tins containing not more than 2,500 g

(0402.10.10)

Milk Powder Other Milk and Cream, not concentrated nor containing added sugar or other sweetening matter, In powder, granules or other solid forms, of a fat content, by weight, not exceeding 1.5%

(0402.10.90)

Milk , In powder, granules or other solid forms, of a fat (0402.21.10)


xxiv

content, by weight, exceeding 1.5%,Not containing added sugar or other sweetening matter, For children, in airtight tins containing not more than 2,500 g

Other Milk , In powder, granules or other solid forms, of a fat content, by weight, exceeding 1.5%,Not containing added sugar or other sweetening matter

(0402.21.90)

Other Milk , In powder, granules or other solid forms, of a fat content, by weight, exceeding 1.5%,other, For children, in airtight tins containing not more than 2,500 g

(0402.29.10)

Other Milk , In powder, granules or other solid forms, of a fat content, by weight, exceeding 1.5% (0402.29.90)

Soya beans, whether or not broken(1201.00.00)Soya beans

Sunflower seeds, whether or not broken (1206.00.00)Sesame and Sunflower Seeds

Sesame seeds (1207.40.00)

Bananas, including plantains, fresh or dried(0803.00.00)Banana

Butter (0405.10.00)Butter and Ghee

Ghee(0405.90.10)

Mate, prepared and ready for consumption (0903.00.10)Mate

Mate, raw, in stalk form, whether or not ground (0903.00.20)

Coffee, not roasted, not decaffeinated (0901.11.00)

Coffee

Coffee, not roasted, decaffeinated (0901.12.00)

Coffee, roasted, Not decaffeinated (0901.21.00)

Coffee, roasted, decaffeinated (0901.22.00)

Other coffee, coffee husks and skins; coffee substitutes containing coffee in any proportion (0901.90.00)

Broken coffee beans and coffee husks and skins, whether or not roasted or ground (0901.90.10)

Other coffee, coffee husks and skins; coffee substitutes (0901.90.90)


xxv

containing coffee in any proportion

Prepared or preserved fish; caviar and caviar substitutes prepared from fish eggs (1604.00.00)

Canned Fish

Salmon (1604.11.00)

Sardines, sardinella and brisling or sprats (1604.13.00)

Tunas, skipjack and bonito (Sarda spp.) (1604.14.00)

Other prepared or preserved fish (1604.20.00)

Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants

(2302.00.00)

Bran, Sharps and Other Residues

Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants of maize (corn)

(2302.10.00)

Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants of rice

(2302.20.00)

Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants of wheat

(2302.30.00)

Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants of other cereals

(2302.40.00)

Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working or of leguminous plants

(2302.50.00)


1

Chapter 1- International Trade

1.1 General trends of the global economy

The year 2008 was characterized for significant challenges that imposed themselves on the global economy; most importantly, the international financial crisis, the climate changes and the significant increase of the international prices of oil. In the beginning, the financial crisis hit the USA markets, which are considered as the main engine of the global economic activities, and then this effect spread to the EU and the other countries around the world.

The economic trends witnessed a declining direction during the year 2008. According to WTO reports, it is expected that exports volume will fall by 9% in the year 2009, representing the largest fall since the World War II. Similarly, the IMF expected a decline of 1% for the GDP in the same year, after 6 decades of steady increase. Emerging developing countries are witnessing a steady economic growth, but with a half of the expected rate. These countries, particularly the LDCs, were subject to the effects of investments fallback as well as the demand decline on their export commodities, which added up to their poverty problems. According to the ILO estimates, around 50 million persons will lose their jobs and become unemployed in 2009, mostly in the developing countries2. On the other hand, the international financial crisis impacts, the increased tendency to protectionism and agricultural subsidies offered by the developed countries have further escalated problems facing the developing countries. According to the Food and Agriculture Organization of the United Nations (FAO), 67 countries including the EU have applied measures to restrict the agricultural trade in the end of 2008, with the aim of minimizing the impacts of food prices volatility crisis. In the first months of 2009, the EU increased its subsidy to the dairy sector, while India and China increased their subsidy to the producer prices of a number of strategic crops.3

On the other hand, despite the decrease of agricultural prices after the significant surge during the past few years, people in several developing countries did not benefit from this price decline. This is mainly due to the lack of linkages between these countries and the international markets. Furthermore, the prices in some countries, such as the sub-Saharan countries, remained high despite their international decline. Economic observers consider that the exceptionally high food prices during the last years constituted a main reason for the reduced international stocks of these commodities, which will be in 2009 even lower than 2008 according to FAO estimates. This is mainly due to the fact that the drought that hit Australia and Canada as well as other regions, described as world bakery, resulted in price surge during the year 2008, leading to an international food

2 For more information see Bridges website http://ictsd.org/i/news/bridges/44278/3 Same source http://ictsd.org/i/news/bridgesweekly/43831/


2

crisis. However, the expected high production of rice, which is a locally consumed commodity rather than a trade commodity, played an important role in reducing food price fluctuation in 2008.

The export reduction impacts mostly affected the export sectors concentrated in cities, mines and in manufactured products. The losses were also substantial in East Asian countries. The crisis will have future impacts on the developing countries, where the economic stagnation would result in more people living under the the poverty line. It is worth mentioning that out of 116 developing countries, 94 faced difficulties in their economic growth in year 2008.

Concerns about inflation have fallen in the first months of 2009. However, its threats still persist, as the market supply imbalance or the supply shortage may result in a commodity price increase that is even more severe than the past one. Undoubtedly, the developed economies weakness, the economic crisis and lastly the prices draw back will have a tough impact on emerging economies, as some of them run the risk of financial problems incidence. It is taken for granted that after the considerable expansion of the Chinese and Indian economies, both of them will be moving into a state of modest growth. In china, the distortion of the financial sector resulted in exaggerated investments, particularly in the area of major commodities. This, in turn, raised the number of unproductive credits, leading to negative impacts on investments. India is suffering from the downfall in the real estates sector, in addition to a considerable decline in its stocks. Briefly, if the international growth results in an unanticipated commodity price decline, the economies depending on these commodities will be subject to serious damages.

On the multilateral front, the international negotiations reached a blind end after the failure of the July 2008 Package. This is mainly due to the ambiguous future resulting from the unclear orientations of the new US administration concerning the WTO, as well as the Indian parliamentary elections. Bascal Lamy declared in September 2008 that it was not possible to finalize the Doha Round in 2008. He considered this to be the second failure in less than 6 months. According to him, achieving a final agreement is the main focus in 2009, but this will be within the broader framework of the WTO activities4.

Disagreement is still persisting concerning the sectoral initiatives related to non agricultural negotiations and the Special Safeguard Mechanism (SSM) pertaining to the agricultural negotiations. Lamy considers that there was no real political desire to intervene with the aim of concluding the Doha Round of 2008. Concerning the non agricultural negotiations, despite the fact that the negotiations agenda indicates that the sectoral initiatives are voluntary, the USA declared explicitly that it wants to involve Brazil and India in 2 initiatives at least. Developing countries consider this statement as an upsetting escalation in the terminal stage of the negotiations, while Pascal Lamy connects such sectoral initiatives to the overall package of the final agreements. He describes them as a cake-decoration-cherry. As for the agricultural negotiations, the main explicit

4 See the full text of the declaration in the Bridge website http://ictsd.org/i/news/bridgesweekly/36562


3

disagreement is related to SSM, while the issue of cotton subsidy seems to be resolvable5.

On another front, the World Bank published a study that warns from the increasing protectionism policies in the context of the recent financial crisis. The protectionism tendency started during the recent economic drawback. It raised increasing concern for economists, particularly in terms of the measures taken against exporting countries incapable to compete in the context of such measures. However, according to a report presented by the General Director of the WTO, Lamy confirmed the availability of only limited evidences on the increased protection measures, though the report warned from further application of these measures6.

Later on, in the course of the year 2010, the international economy has passed the toughest part of the financial crisis and stepped into a recovery stage, though the recovery is still fragile. This particularly refers to the second half of 2010, after which it is expected to slow down. While economists expect an international economic growth of 2.7% in 2010, the international economy is stagnant due to the fact that economies of the developed countries shrunk by 3.3% in 2009. For instance, the Japanese economy shrank by 5.4% in the mentioned year. The USA economy is expected to grow by 2.5% in 2010, while the high-income economies, not affiliating to the Organization for Economic Cooperation and Development (OECD), are expected to grow by 2.9%. The crisis has strongly hit the developing countries economies due to the suspension of the investment programmes, and the declined demand on their products. This resulted in reduced exports and, thus, caused and economic contraction by 1.2% in 2009 and 5.6% in 2008. Central Asia suffered from the crisis more than any other region, as its GDP shrunk by 6.2% and that of Russia shrunk by 8.7%.

1.1.1 Exchange rates

Contrary to the situation before 2008, the US Dollar and Euro exchange rates were relatively stable. The Euro maintained its rate against the US$ during the first half of 2008, ranging between 1.47 and 1.57/US$. However, the Euro rate depreciated against that of the US$ in the second half of the year, in the context of the political developments related to the new US administration. It reached 1.32/US$ at the end of 2008. In 2009, the Euro value increased to reach 1.46/US$ by the end of 2009 as a result of increased liquidity in the USA state treasury, which also exacerbated the inflation rate by the end of the year. In 2010, the Euro reached its lowest rate of 1.2/US$ in June 2010. The following figure illustrates the exchange rates of Euro vis--vis the US$ during 2008 and 2009.

5 Chapter 4 will address in details the reasons for the July 2008 Package failure. 6 See the issue of protection measures in the Bridge website http://ictsd.org/i/news/bridgesweekly/40499/

Syrian A

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5

international financial crisis had not been felt yet and international trade was recording rapid growth. In aggregate terms, the growth rate of international trade was 15%, with a value of US$ 28260 billion in 2007 that rose to US$ 32492 billion in 2008.

1.2.1 Main regions

The European trade growth rate was 12% in the year 2008, which is a modest figure compared to other regions. This situation reflects the relative stagnation experience by the European trade during the recent years. It also reflects the great impact of the financial crisis on Europe in the last quarter of the year. In this respect, European trade volume slumped by 16% in the last 4 months of 2008, compared to the last 4 months of 2007. Other regions registered better trade growth, most significantly in the Former Soviet Union countries as well as the Middle East (34% and 30% respectively). This was mainly due to the increase in oil prices in the first half of that year, as indicated above. Latin America, which includes important agricultural producer/exporter countries recorded a growth of 25%, though the volume of its volume declined by 7% as a result of the financial crisis. It is noticeable that the crisis caused a decline in the intra-regions trade flow rather than inter-regions trade. This basically resulted from the attempt to explore new remote markets due to the economic bottlenecks in specific regions (North America, Europe).

1.2.3 Main trading countries

Before the financial crisis, several countries were still suffering from trade imbalances, which at least contributed to the exacerbation of the international economic tension, if not to the emergence of the crisis. This particularly applies to the countries which mainly export oil. Generally speaking, the EU is still ranking first among international exporters, despite the decline of its share to US$ 1924 billion in 2008, comprising less than 16% of the international exports. The international share of the USA also decreased to US$ 1287 billion (about 10.6% of the international exports). Contrary to that, the share of Russia increased by about 13%, thanks to its oil exports. The following figure illustrates the share of international exports of the major exporters in 2007 and 2008.


6

Figure 1.3 Share of major exporter countries of the international trade, 2007 and 2008.

Source: WTO website, table 1.5.

Concerning imports, the EU maintained its first rank as a main importer despite the decline of its share, while the share of Korea, Japan and China increased due to the increase of their oil imports to operate their factories. The USA, which showed considerable openness to imports, almost maintained its international share. The following figure presents share of the major importers in 2007-2008.

Figure1.4 share of major importer countries, 2007 and 2008.


1.3 Evolution of global agricultural trade

Despite the critical stagnation of the agricultural trade during the last quarter of 2008, the registered growth of agricultural trade was 18.9% compared to 19.8% in 2007. In general terms, the agricultural commodities prices peaked in mid 2008, and reached an unprecedented level over a period of 30 years. However, the trend started to decline due to the impact of the financial crisis and the international recession that started to emerge at that time, in addition to the oil price decline and the US$ movements. Nonetheless, in general terms, some commodities prices are still exceptionally high. Several factors contributed to the volatility of agricultural products prices, including the biofuel production, according to some

0

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EU_Extra China USA Japan Russia Canada Korea Hong Kong

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studies, as well as the rise in oil prices. These indications pushed some economists to talk about breaking the equation of energy-food related to the historical declining trend of agricultural prices7. However, the developing countries did not reap any benefit from the high agricultural prices, as poor farmers could have increased their production and made, which didnt happen due to various reasons, mainly: (i) failiure of the agricultural market to timely transfer price increase information, (ii) limited access to inputs, (iii) weak infrastructure and related institutions, (iv) lack of responsive policies that help taking advantage of the agricultural prices increase in such a way that brings in more profits (promotional policies for instance).

In the first half of 2008, the world was facing the highest food price levels in 30 years and a global food insecurity crisis. Food prices were up as much as 40 percent from their 2007 level and 76 percent from 2006. The sharpness of the price increases and their persistence, which left many developing countries struggling to cope with the consequences, make this episode different from past events of food price increases.

Social and political stability was challenged around the world, as rising food prices and falling purchasing power sparked riots and civil disturbance. One should imagine the impact on the poor in developing countries who were already spending, in some cases, up to 80 percent of their meager incomes on food. FAO estimates that soaring food prices pushed another 115 million people into chronic hunger in 2007 and 2008. This means that today the world has nearly one billion hungry people. Malnutrition worsens when the poor are unable to afford higher-quality foods. They eat less in quantity and less well in terms of quality. Low-income food-importing countries are especially vulnerable owing to a high incidence of chronic hunger and poverty. The food import bill of these countries was estimated at about US$170 billion for 2008 40 percent more than in 2007. The impact is most severe in Africa, where many countries are highly dependent on imported cereals (in some cases for up to 80 percent of their dietary energy supplies) and undernourishment is already rife. International food prices have fallen back towards their 2007 levels as the financial crisis and world recession have taken hold. However, prices are still significantly above the levels we have seen in recent years and are likely to remain high by historical standards. In many developing countries, food prices are still at unprecedented high levels. In fact, high food prices have not gone away, nor have the underlying causes of the food crisis they created. Soaring food prices and the food crisis highlighted the threats to global food security and the urgent need to strengthen the international food system. The negative impact of high food prices on the food security of poor consumers around the world is clear. However, one would have expected the impact on producers to be positive and to encourage them to invest more and increase production. This did not happen. Years of low agricultural prices understandably gave farmers little incentive to invest in means of production, but why did the highest food prices in 30 years fail to provide that incentive? In principle, high food prices represent an opportunity to reverse that decades-long decline in investment in agriculture and secure a sustainable future for world food

7 FAO, 2009


8

supplies. In principle because high food prices alone are not sufficient. Some of the incentive to produce more has been eroded by increasing input costs fertilizer prices have risen much faster than producer prices. Smallholders in developing countries need to overcome many supply-side constraints if a significant supply response in the medium to longer term is to materialize. Lack of rural infrastructure, limited access to modern inputs and irrigation, poor roads and storage facilities, rudimentary technology, limited knowledge of modern farming techniques and limited access to credit all led to low productivity, limited participation in markets and lack of investment. These constraints need to be overcome to allow a significant supply response, and proper policy interventions are needed to break out of this vicious circle that has trapped small producers in poverty and left many developing countries heavily dependent on imported food and more vulnerable to price hikes.

Quoted from a FAO study: The State of Agricultural Commodity Markets

1.3.1 Agricultural trade by regions Region-wise, Europe is still ranking first, far from the other agricultural exporting regions, though its share declined by 2% in 2008. At the same time, Asias share increased slightly, while Africa, which maintained the fifth rank among agricultural exporter regions 8 up to 2006, stepped down to the 6th rank. Furthermore, its share is decreasing, as a result of the drought that is seriously threatening the agricultural sector in the whole continent.

Figure1.5 Regional shares of agricultural exports, 2007 -2008, %.


Concerning the share of agricultural exports of the aggregate exports on the regional level, the share of South and Central Americas, which have been occupying the first position in terms of ratio between agricultural exports and aggregate exports for a long time, has been maintaining its increasing trend. The reason behind that is the tendency to agricultural intensification and reliance of most of the regions countries on agriculture as a strategic sector. This particularly applies to the strong economies like Brazil and Argentina, as well as Caribbean

8 See SAT 2007.

0.05.010.015.020.025.030.035.040.045.050.0

Europe Asia NorthAmerica

Southand

CentralAmerica

CIS Africa MiddleEast

2007

2008


9

countries, which count almost completely on agriculture for their people livelihood and economic structure.

Figure1.6 Regional shares of agricultural exports, 2007 -2008, %.


As for imports, Europe controls around a half of the international agricultural imports. Its share increased during the recent years, despite the slight decline witnessed in 2008. The share of South and Central America of the international agricultural imports, that used to occupy the fourth position on the list in 20069,witnessed a considerable decline that brought it down to the bottom of the list. The Middle East, that used to be the last, rose to rank number four as indicated by the following figure.

Figure 1.7 Regional shares of agricultural imports, 2007 -2008, %.


Concerning the share of agriculture of the regions total imports, Africa maintained its first rank with an increasing share that exceeded 14% in 2008. On the other hand, the Middle East and CIS exchanged ranks; as the Middle East ranked second in terms of ratio of agricultural imports to total imports, while the CIS became the third. Moreover, the share of agricultural imports of total Middle East imports

9 See SAT 2007.

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increased by more than 1% in 2008. The following figure represents the share of agricultural imports of the regions total imports.

Figure1.8 Share of agriculture in imports of each region, 2007 -2008, %.


1.3.2 Main agricultural trading countries

The USA, EU (particularly France, Germany, Netherlands, UK, Italy and Spain), Canada and Australia, in addition to some Latin American countries, are considered as the main agricultural trading countries. Due to the financial crisis of late 2008, the volume of the global agricultural trade was subject to a short-term regression estimated at about 20%10. However, the depreciation of the US$ due to the consequences of the crisis on exchange rates, led to a surge in the USA agricultural exports both in in terms of volume and value. This, in turn, resulted in a production promotion at a later stage. The EU, however, had a contrary trend as its agricultural exports shrank due to of the crisis that hindered agricultural exports. Brazil, on the other hand, benefited from the 2008 conditions by increasing the value of its agricultural exports. India remained on the safe side and maintained its trade even during the peak of the recession. China was not lucky enough to keep its share of the aggregate agricultural trade that declined in 2008. The following figure illustrates the shares of the main agricultural exporting countries of the global markets in 2007 and 2008.

10 USDA, 2009.

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CIS WesternEurope

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Figure 1.9 Shares of main agricultural exporting countries of the global markets, 2007- 2008, %.


Global agricultural imports were subject to a declining trend in general terms. The agricultural imports of China increased, moving it to the first rank instead of USA (the first agricultural exporter). At the same time, the agricultural imports of USA decreased reflecting the positive shift in its agricultural trade balance. Japans faced a decline in its share of the global agricultural imports, mainly composed of maize, soybean, cereals, pork and beef. Mexico, which is a major importer of the USA products, particularly maize, maintained its share of the global agricultural imports. Chinas share of global agricultural imports increased considerably as a result of the drastic decline of its domestic production in 2008, while the demand remained at high level. This in turn, led to further pressure on the international market. It is worth mentioning that during the recent years, China became a net importer of many agricultural products. The following figure indicates the shares of the main importing countries of the global markets.

Figure 1.10 Shares of the main agricultural importing countries of the global markets, 2007- 2008, %.

Source: WTO website, table 1.10

0.00

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12

1.3.3 Agricultural trade in the Middle East

The severe drought accompanied with temperature increase, soil degradation and floods that hit the Middle East in 2007 and 2008 resulted in considerable agricultural losses to the extent that food security was seriously threatened. However, the impact was offset by the agricultural prices surge that increased the value of the agricultural exports. The intra-trade of the Middle East accounts for the major part of its agricultural trade, followed by exports to Europe. While the ME intra-exports increased significantly between 2006 and 2008, there was a slight increase in the exports to Europe, while the share of Africa that used to account for 7% only increased substantially by 65% during the last three years. The following figure illustrates the ME agricultural exports to various regions of the world during 2006-2008.

Figure 1.11 Middle East Agricultural exports to various regions in the world, US$ billion.


Concerning the share of agriculture in total ME exports to different regions, the CIS share jumped from 9% in 2006 to 13% in 2008 at the expense of other exporting sectors. However, this jump is not resulting from the volume of exports in as much as the surge of agricultural prices and fluctuation of oil prices. Intra- agricultural trade of ME had a similar trend in terms of exports structure, while the ratio to agricultural exports remained the same. Figure 1.12 illustrates the percentage of ME agricultural exports of its total exports to various regions.

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2008


13

Figure 1.12 agricultural exports share of total Middle East exports to each region, %.


Concerning imports, the value of the ME agricultural imports increased significantly over the last three years in such a way that exceeded its exports. The value of imports increased by 57% between 2006 and 2008 to reach US$ 69 billion (figure 1.12). The major part of this increase resulted from the increase of the intra-imports of the ME and imports from Asia and CIS as well. Furthermore, the ME agricultural imports from North and South America witnessed an increase, whereas no remarkable change was recorded by imports from Europe and Africa as illustrated in the following figure.

Figure 1.13 Middle East agricultural imports from various regions in the world, US$ billion.


Agriculture accounts for a considerable share of the ME imports from Central and South America, which account for about 70% of the ME imports. The ME imports are mainly comprised of banana, sugar and cereals. On the other hand, the share of the ME agricultural imports is similar to that of the total exports, with the exception of Europe which accounts for a small proportion of the ME agricultural imports. The following figure illustrates the share of ME agricultural imports of the aggregate imports from various regions.

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2006

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14

Figure 1.14 Share of ME agricultural imports of the aggregate imports from various regions, 2006-2008, %.


1.3.4 Review of selected products trade

Cereals Cereals trade recovered partially during 2008 thanks to the production increase, while their prices maintained their increasing trend throughout the whole year. This resulted in a considerable increase in the value of the food bill of many food net importing countries. According to FAO estimates, the international production of cereals increased by 2.6% in 2008, mostly achieved by wheat. On the other hand, food consumption increased by 3% in 2008 compared to 2007, leading to a sustainable price increase, particularly due to the weak US$ position as well as the strong import demand. Human food consumption increased by 1%, while that of animal feed increased by 2%. In terms of trade, exports did not match with imports needs, which rarely happens. Hoarse grains trade increased by 9% in comparison with the previous season, as described in details below. Wheat The international production of wheat increased in 2008 by 6.8% compared to 2007, though the international wheat stock declined by 9%, according to FAO statistics. This particularly applies to main exporting countries. The major reason behind the drawback of international stock was the strong demand of importing countries on wheat in the international markets, coupled with an international weak production in 2007. USA, followed by EU, was on the top of the list of countries suffering from a considerable stock shortfall. The international wheat exports increased by 47% in 2008 compared with 2007. The main exporters list was topped by USA, with a share exceeding 25% of the international wheat exports in 2008, compared to 24% in 2006. The following figure presents the main international wheat exporters in 2008.

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Figure 1.17 Main exporters of barley, 2008, US$ billion.

Source: UNCOMTRADE, table 1.17.

On the import side, Saudi Arabia maintained its position as a first barley importer of barley in the world, while China came fourth, falling from the second position. The EU which was the third international importer, was replaced by Belgium (no data is available about the EU as one group), as illustrated in the following figure.

Figure 1.18 Main international importers of barley, 2008, US$ million.

Source: UNCOMTRADE, table 1.18.

RiceAs indicated by FAO estimates11, the international production of rice increased by 1.8% in 2008. In terms of trade; Thailand, India, Pakistan, Vietnam and the USA were the main international exporters. It is evident that the increase in the Asian production of rice in 2008 was reflected on exports. Contrary to the past, the top four exporters were Asian countries. The following figure shows the major rice exporters in the world.

11 FAO, 2009. Previous source.

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Syrian Agricultural Trade 2008-2009agriportal.gov.sy/public/dwnld-files/periodical_reports/en/sat_08... · Syrian Agricultural Trade 2008-2009 i ... GAFTA Great Arab Free Trade Area