Ottawa Seminar IHCO

1

Are Agricultural Cooperatives Gazelles or Lions
in the Battlefield of Global Trade? Jin-Kook
KIM Agricultural Advisor International
Cooperative Alliance IFAP/ICAO/ICA AP Joint
Workshop Impact of WTO Negotiations on
Agricultural Cooperatives and Family Farms in
Asia-Pacific Region Sheraton Walkerhill hotel,
Seoul, Korea, 16th May, 2006
2
Contents

• The State of Play in WTO/DDA
• The Impact of WTO on Agricultural Cooperatives
• Other Factors affecting Agricultural Cooperatives
• Agricultural Cooperatives Responses to Challenges

3
Every Morning in Africa

• Every morning in Africa, A gazelle wakes up.
• It knows it must run faster than the fastest
  lion
• or it will be killed.
• Every morning a lion wakes up.
• It knows it must run the slowest gazelle
• or it will starve to death.
• It does not matter whether you are a lion or
  gazelle
• when the sun comes up you had better start
  running

4
A State of playin Agricultural Trade Negotiations

• In the 1950s, agricultural was viewed as a
  special case, a sector that must be treated
  differently from manufacturing.
• The Uruguay Round attempted to put agricultural
  trade on a par with industrial trade.
• In the Doha Development Round, agricultural trade
  issues are now the centerpiece as the engine of
  the negotiation.
• But After the Hong Kong ministerial conference,
  there has been no progress in DDA negotiations
• - The DDA negotiators missed the April 30
  deadline for reaching full modalities by the end
  of April or even the end of year goal for
  completing the overall negotiations

5
(No Transcript)
6
Key issuesin Agricultural negotiations

• The fortnightly cycle of meetings are under
  progress from May 1st to June 9th
• The main conflicting points to be resolved in
  agriculture are
• - the formula for overall reductions in
  domestic support,
• - criteria for the blue box,
• - the approach to tariff cuts
• - the criteria and limits on sensitive
  products.
• - the terms for special products the
  Special Safeguard Mechanism (SSM).
• Other issues where agreement is closer include
• - new criteria for the green box
• - disciplines on state trading enterprises
  (STEs),
• - food aid,
• - export credits

7
Key factors

• Trade Promotion Authority in USA
• Elections
• - 2006 Mid-term election
• - Presidential Election (Brazil, France)
• Bilateral Free Trade Agreement
• World Cup(?)

8
Paradigms in the global political-economy of the
food chains

• The traditional dependent paradigm
• The neo-liberal competitive paradigm
• The multifunctional paradigm
• An emerging globalized production paradigm

(SotrceWilliam Coleman, Wyn Grant and Tim
Josling, Agriculture in the New Global Economy,
Edward Elgar, Cheltenham, UK, 2004)
9
Dependent Paradigm

• The nature of agricultural problem
• - low incomes chronic in agriculture
• - Not competitive with other sectors without
  assistance
• - Not competitive other countries without
  protection
• Policy Objective
• - Government needed to find markets
• - Supply control necessary to avoid surpluses
• Suggested policy instruments
• - Border protection, surplus buying, state
  trading, Export assistance
• Trade policy objectives Avoid restrictive Trade
  rules
• G10 Korea Japan Norway Switzerland

10
Competitive paradigm

• The nature of agricultural problem average or
  above average income levels in farming,
  competitive with other sectors for resources only
  if costs are kept under control, competitive in
  world markets only with level playing field
  achieved through reform of domestic border
  policies
• Policy Objective - move towards free market
• - relax supply
  control
• - provide safety
• - net in times of
  price weakness
• Suggested policy instruments Decupled payments
  in transition, Risk management, Low safety-net
• Trade policy objectives Market access, remove
  export subsidies, constrain domestic support
• G20, Cairns Group New Zealand, Chile

11
Multifunctional paradigm

• The nature of agricultural problem Incomes from
  farming inadequate for support of rural areas,
  production of public goods under rewarded
• Policy Objective reserve countryside for
  recreational value, keep family business viable,
  stimulate rural development to provide off-farm
  jobs
• Suggested policy instruments Environmental
  subsidies, cross-compliance to enforce
  environmental regulations, protection against
  mono-functional agriculture
• Trade policy objectives Moderate pressure on
  agriculture, allow subsidies under trade rules
• European Model of Agriculture, Friends of
  Multifunctionality

12
Globalised Production paradigm

• The nature of agricultural problem
  consumer-driven sector implies focus on market
  opportunities and product differentiation, which
  policy must encourage. Incomes depend on
  bargaining power within chain, not just costs
• Policy Objective establish quality and safety
  standards, promote fairness in contractual
  relationships
• Suggested policy instruments Harmonization of
  regulations and standards, competition
  enforcement, protection of intellectual property
• Trade policy objectives Strengthen intellectual
  property rules, Harmonize SPS and TBT rules,
  Ensure competitive conditions
• USA, Brazil, WTO

13
Battlefield of paradigms

• Participating nations 149
• USA
• EU (formerly friends of NTC, separated after
  Cancun)
• G20 (since 18 March 2005, 21 members)
• G10 (currently 9 members)
• G33 (Friends of Special Products, understood to
  comprise 42 countries)
• ACP (African, Caribbean and Pacific Groups of
  States, 56 WTO members out of a total of 79)
• G90 (the G90 are the African group, ACP and
  least-developed countries of 64 WTO members)
• G110 A meeting of the G90, G20 and G33 in Hong
  Kong
• Cairns group (17 members)
• Six recent new members speaks as group (Albania,
  Croatia, Georgia, Jordan, Moldova and Oman)
• Tropical Products Group( advocating greater
  liberalization in these products, currently 11
  countries)
• Cooperatives Paradigm

14
Potential dangers for the Agricultural
cooperative

• The special measures have provided to
  cooperatives on the condition that cooperatives
  perform a special service to the community.
• However WTO is moving toward harmonization in the
  trade rules, legislation, accounting standards
  and all based on the understanding that
  enterprises are capital centered companies
• Without a proper understanding of what
  cooperatives are, some of the support measures
  that cooperative enjoy today, could be put at
  risk especially if these are seen to be in some
  way trade distorting.

15
Potential dangers for the Agricultural
cooperative(2)

• Those are Tax benefits, Loans, Grants, Access to
  public works and programs, Special procurements
  provision.
• The discussions on state trading enterprises
  which are a way that farmers have used in a
  number of countries to organise the market, may
  be the precursors of questions on how people use
  co-operatives to organise markets.

16
Other Factors affecting Agricultural Cooperatives

• Consumer needs change
• Food safety
• Concentration of the food supply chain
• Industrialization
• Information Technology development

17
(source Terry N. Bar, 8th Annual farmer
Cooperative Conference Minneapolis, Minnesota,
USA Nov. 7-8, 2005)
18
Concentration of the Food Industry Chain

• 60 of terminal grain handling facilities by 4
  companies
• - Cargill, Cenex Harvest, ADM, General Mills
• 82 of corn exporting by 3 companies
• - Cargill, ADM, ZenNoh
• 81 of Beef packing by 4 companies
• - Tyson, ConAgra, Cargill, Farmland Nation
• 61 of Flour Milling
• - ADM, ConAgra, Cargill, General Mills

(Source William Heffeman, Mary Hendrickson and R
Gronski, Consolidation in the Food
and Agricultural System, Report to the National
Farmers Union, USA, 2002)
19
Top Ten 2001 ranked by total sales

• Retailers
• Wal-mart Stores(USA)
• Carrefour(France)
• Ahold(Netherlands)
• Kroger(USA)
• Metro AG(Germany)
• Albertsons(USA)
• Safeway (USA)
• Leclerc(France)
• Auchan(France)
• Intermache(France)

• Food service
• McDonalds
• Tricon
• Compass
• Burger King
• Sodexho Alliance
• Wendys
• Aramark
• Accor(Fr.)
• Sic Continents(UK)
• Whitbread(UK)

(source Elizabeth L. Hund, 8th Annual Farmer
Cooperative Conference
Minneapolis, Minnesota, USA Nov. 7-8, 2005)
20
Top 10 Exporters(2002)

• United States
• Netherlands
• France
• Germany
• Canada
• Belgium
• Spain
• Brazil
• Italy
• China

(source Elizabeth L. Hund, 8th Annual Farmer
Cooperative Conference
Minneapolis, Minnesota, USA Nov. 7-8, 2005)
21
If you cant beat them, join them

• why and how to run?

22
Major role in the Economy

• At present, there are 568,000 agricultural
  cooperatives and 408 million members in the
  world.
• - 800 million individual members and 100
  million employees in the whole cooperative sector
• Market share
• - EU 50 of supplying farm inputs
• and 60 of agricultural products
• - Canada Grain 64, Forest product 73
• - Uruguay Milk 90, Brazil Grain 43
• - Korea Agri- marketing 40
• - Burkina Faso Cotton 77
  (source www.copacgva.org)

23
Farmer cooperatives Business in
USA
(source Jean Mari Peltier, 60th Annual Meeting
of NCDC,Huston TX, USA, Jan. 29 Feb. 2, 2006)
24
US Cooperatives

• US cooperatives contributed more than 230 bill.
  US to US economy and more than 60 of adult
  population are members of cooperatives
• 21,637 cooperatives employ more than 500,000
  American, with aggregate payrolls of more than 15
  bill. US annually

25
Creating Coffee Cooperatives,and a New Future in
Rwanda

• Rwanda is best known for 1994 genocide in which
  800,000 people slaughtered during fighting
  between Hutu tribesman and their Tutsi rivals
• Since 2001, 11 cooperatives with 15000 members
  are created
• The coops income has jumped from 650,000US in
  2004 to 1.2million US in 2005 and is expected to
  reach 3million US in 2006.
• The coops are also helping
• drive reconciliation between
• Hutu and Tutsi farmers.
• (TIME, Sep.19,2005)

26
Corporate Social Responsibility

• The gradual withdrawal of the state from social
  responsibility and social services calls for
  greater involvement of citizens and organizations
  in our society.
• CSR is a management concept which enables
  cooperatives to practice social responsibility in
  a balanced manner and thus it ensure sustainable
  benefits for members and customers.
• The cooperative movement was the natural home for
  corporate social responsibility.
• (Sherron Watkins, the
  whistleblower from Enron
• speech in 2006 ICA congress
  in Cartagena)

27
Cooperative Model of Enterprise

• Coops Multifunctionality is more important than
  other forms of enterprise
• - Poverty reduction through cooperatives
• - Preservation of culture and history
• - Employment
• - Training School of Democracy, Cooperation,
• Economy and Organization
• Cooperative Model, like Democracy, is not
  perfect, but its better than others
• - Those who built the America are not
  individuals but cooperatives

28
Why to run?What do we mean by Coop. Value

• Building confidence in individuals and families
• Engaging with each other
• Maintaining a democratic system on egalitarian
  principles
• Putting people before profit
• Encouraging personal and community development
• Sustaining the voluntary spirit
• Retaining wealth for the mutual good for all
  members and the areas in which they live.
• (Jone Hume, 1998
  Nobel Peace Prize Winner
• 
  Speech in Glasgow University, 2005)

29
Are agricultural cooperative lions or gazelles?

• I dont know Agricultural cooperatives are
• lions or gazelles
• but I do know this it doesnt matter whether you
  are a lion or a gazelle in the battlefield of
  global trade war
• When the sun comes up, you better start running
  to survive in the global trade war
• - Running with gazelles, Eating with lions

30
How to run?Agricultural CooperativesResponses
to Challenges

• Human Resource Management
• Business innovation
• Opinion market management

31
Human Resource Management

• The greater investment is needed in the people of
  the cooperatives
• Leadership Board members, Managers
• - outside directors
• - reasonable compensation
• Education is urgently needed for members,
  employees, managers and directors

32
Business Innovation

• Branding
• Equity Capital
• Global sourcing
• Trans-national Cooperatives
• New Generation Cooperatives

33
Business Innovation(1)Branding

• Products
• - Sunkist
• - Yoplait
• - Yazoo etc.
• Images and Logo
• - UK cooperatives
• - JA Group

34
NCFC Member Brands
35
Old UK Cooperative retail fascias
36
New UK Cooperatives
37
Business Innovation(2)Equity Capital

• Subsidiary company
• - Bay Wa, Greenery
• Consolidation Acquisition
• Joint ventures
• - CHS

38
Business Innovation(3)

• Global sourcing
• - Sunkist, Greenery
• Trans-national Cooperatives
• - Arla Foods, Campina Melcunie
• New Generation Cooperatives

39
Opinion Market Management

• Participation in Policy Making Process
• - COPA/COGECA
• International Solidarity
• - IFAP, ICAO, Geneva Declaration in March
• Corporate Social Responsibility (CSR)
• - NACF

40
?????Thank you Merci

• kim_at_ica.coop
• 41 22 929 8812