[stop-imf] Playing Chicken: Ghana vs. the IMF

[robert weissman]

CorpWatch
http://www.corpwatch.org/article.php?id=3D12394

Playing Chicken: Ghana vs. the IMF
by Linus Atarah, Special to CorpWatch
June 14th, 2005


Francis Kumajor runs up and down a busy road in the center of the
Ghanaian capital Accra. The 17-year-old is trying to sell chickens to
commuters in the sweltering heat. The drivers, sealed in
air-conditioning, cast sullen glances as they drift by. Very few of them
stop.

"For the whole day I have not managed to sell enough to pay my rent,
less than ten chickens=85" Kumajor complains, stopping mid-sentence to
catch a rare stopped vehicle. He still has three cages full of birds
standing by the roadside.

The cause of Kumajor's plight is not difficult to locate. In fact, he
articulates the problem well. "Walk into any of the supermarkets and you
will find that they are bulging with imported frozen chicken," he says.
"People don't want to buy local chicken because the imported ones are
much cheaper," he adds, trying to force a smile.

For the last few years the Ghanaian market has been flooded with cheap
imported chicken from the European Union and the United States. These
are usually fatty chicken parts that come in packages without labels.
Nonetheless, demand for local poultry has collapsed, threatening the
livelihoods of over 400,000 poultry farmers in the small West African
nation. In 2002 alone, more than 26,000 tonnes (one tonne is roughly the
same measurement as a US ton) of chicken was imported into the country,
mostly from the European Union where farmers receive generous subsidies
for their products. In 2004, that figure was estimated to be as high as
40,000 tonnes.

Frozen Assets

Ships laden with frozen chicken sail regularly from the Dutch port of
Eemshaven to Ghana and Nigeria. Packed into the giant containers on
board are blue boxes with frozen chicken gizzards from Zevenhuizen in
south Holland, orange boxes with chicken legs from Nunspeet in
central Holland and yellow boxes full of chicken wings from Epe in
northeastern Holland.

"We ship more poultry than any other company in Holland," says Jakob van
Bek of Socar, a Dutch company in Lelystad which owns the Eemshaven
terminal. "Every week we send ten to twenty containers of poultry, beef
and pork, each weighing 28 tons. But 80 percent of the meat is
chicken."

Socar is just one of several traders that buy whole chickens and parts
from Dutch poultry producers to ship to West Africa. They started direct
shipments to Ghana a decade ago, simplifying the export chain for
producers like Gecombineerde Pluimvee Slachterijen (GPS), based in
Nunspeet. Today the bulk of the 150,000 chickens that GPS slaughters
every day, is exported to other European nations, while the cheaper cuts
are exported to Africa.

"European customers prefer the fillet to the chicken legs because of the
bones," says Patrick Lordet, a French salesman working at the
Rotterdam-based K=FChne + Heitz, another large chicken exporter to Ghana.
"I prefer the chicken legs myself but the fillet has a higher sales
price." Unlike Socar, K=FChne + Heitz raise their own chicken at five
locations around the country.

Poultry is a huge business in Holland - for every person in the country,
there are roughly five chickens. Although Holland is one of the smallest
countries on the European continent, it is also one of the most densely
populated nations in the world with about 500 people per square
kilometer. This adds up to a total of 16 million people and 80 million
chickens in the country.

Almost a third of European poultry exports come from the Holland,
according to statistics published by the Dutch Agricultural Economics
Research Institute (LEI) and Eurostat.

What may seem surprising is that, like Ghana, the number of farms and
farmers in the Netherlands are also declining rapidly. Over the last
half century the number of farms have declined from over 315,000 in 1950
to a quarter that number today, employing just over three percent of the
Dutch population.

The answer to the statistical puzzle is the fact that the chickens are
almost entirely raised by giant agri-businesses and then exported to the
rest of Europe and the world.

Nutreco, one of the world's largest agri-business companies,
headquartered in the tiny town of Boxmeer, with global sales of almost
3.85 billion Euro, is the biggest producer of chickens in the country.
Pingo, the company poultry division, employs just over 1,000 people.

These companies squeeze thousands of chickens into tiny production
facilities, which is the cause of rapid spread of diseases. The avian
flu outbreak in 2003 forced Nutreco alone to slaughter 30 million birds.

Chicken factories are on the way to Africa, however. Indeed, the only
poultry business in Ghana that is expanding is Darko farms, which has
set up a joint venture with Tyson Foods from the United States.

Today the company says it produces five million day-old-chicks, 30
million table eggs, 780,000 chicken units, and 30,000 tons of animal
feed, making it Ghana's largest fresh poultry producer.

Reverend Kwabena Darko, the principal shareholder in the family
enterprise, says the company has achieved this by introducing new
technology. "Previously we had about 600 staff but for now due to
automation, our staff strength has been reduced. At the moment we are
260," he told World Investment News recently.

This phenomenon is known as "dumping." Developed countries -- such as
the EU and the US -- will often take excess product, whose production
has been heavily subsidized and sell it to the developing world at
prices that are so low, they ruin local markets.

In 1992 domestic poultry farmers supplied 95 percent of the Ghanaian
market, but by 2001 their market share had shrunk to just 11 percent.
The imported chicken is available (wholesale) at a price that is only
slightly more than half of the wholesale price of local chicken.

The accompanying loss of jobs has also been remarkable. The industry has
lost 150 jobs in the past few months alone, say the Farmers
Associations. Commercial poultry farms -- which do not include small
rural producers -- employ up to 5,000 people. Any job loss has far
reaching implications for Ghana's 20 million people because each worker
often provides support for numerous others in their household.

Foreign producers currently pay a 20 percent tariff or tax on the
poultry they send to Ghana. Two years ago, the Ghanaian Parliament
passed a law allowing an additional 20 percent tariff to be imposed on
imported chicken, bringing the overall tariffs to 40 per cent.

In a dramatic move, just two months after the law was passed, the
Customs and Excise Preventive Services (CEPS), the body responsible for
implementing the tariffs, issued an order reversing the decision. The
new tariffs were said to be in conflict with regional tariffs. In other
words, the proposal have been blocked by the International Monetary Fund
(IMF), an institution in which the Ghanaian government has less than 0.5
per cent of the vote.

The National Association of Poultry Farmers, a body representing small
and medium-sized local poultry farmers, has cried foul and has taken the
CEPS to court, in order to force application of the law.

But Kumajor and his fellow poultry farmers in Ghana did not know the
power of the IMF. Although it is an unelected body, it can overrule
judicial processes in their country.

The Ghanaian government let go of the new tariffs because it had already
reached an agreement with the Fund to suspend the higher tariffs on
poultry during the government's Article 4 consultations - an annual
dialogue the IMF has with member countries.

The IMF made it clear that it was opposed to the higher tariffs on the
grounds that it will hurt Ghana's poverty reduction program. Alphecca
Muttardy, the IMF's current representative in Gahna claimed that Ghana
could only increase the tariffs under a special dispensation provided to
successful businesses only. Speaking to Olivia McDonald from the
non-governmental organization (NGO) Christian Aid in Ghana, Muttardy
said, "we pointed it out to government that this [raising of tariffs]
was not a good idea, they reflected on it and we agreed."

"The actions of the government show clearly the desperation with which
they seek to please the World Bank and the IMF," says Dominic Ayine, the
director of the Center for Public Interest Law (CEPIL) and a lawyer
representing the poultry farmers. "The opposition of the Bank and the
IMF to increased tariffs is based on pure ideological reasons and it has
little or no connection at all to the welfare of Ghanaian poultry
farmers or the consuming public," said Ayine.

Moreover, as Ayine argues, the action of the Ghanaian government, under
pressure from the IMF, has greatly undermined the tenets of good
governance and the rule of law, which are said to be promoted by world
financial institutions all over the world. "Overriding a judgment
obtained through normal judicial processes does nothing but undercut the
confidence with which citizens perceive the judicial process," he adds.

In its defense, the government argued that the decision to suspend the
increased tariffs stems from its obligation to adhere to international
treaties, referring to World Trade Organization (WTO) agreements on
agriculture which, the government says prevents it from proceeding with
the measure.

But trade experts say the increased tariffs do not breach official WTO
agreements. Under the organization's Agreement on Agriculture(AoA)
Ghana's tariffs on agriculture products can be as high as 90 percent.

The WTO agreement on Subsidies and Countervailing Measures also permits
member countries to impose increased custom duties on products that have
been subsidized in their countries of origin, if such subsidies have
caused or threatens injury to a domestic industry in the importing
country. The European Union, the source of most of the imported chicken
provides 43 billion euros to its farmers annually.

Ghana imports almost one third of the EU frozen chicken that goes to
Africa. Cameroon, Togo, Senegal and South Africa are among the other
nations receiving imported frozen chickens and chicken parts. As much as
87 percent of the poultry in Cameroon, comes from Belgium and Spain. In
the case of Senegal, the Netherlands and Belgium combined account for 60
percent.

In Cameroon, French activists, have taken up their case to lobby the EU
for a better protection of African farmers. And in Senegal, according to
reports by the Agence France Presse (AFP), 40 percent of the nation's
poultry farmers have gone out of business because they are unable to
compete with EU imports.
Level Playing Field

There is some question as to whether a 40 percent tariff on the chicken
would actually solve the problem. According "For Richer or Poorer" an
April 2004 report released by Christian AID, it was estimated that
"tariffs would need to be 80 percent, four times their current level" to
allow local producers and processors to compete fairly with EU imports,"
because "European producers gave enjoyed decades of subsidies, support
and protection from their government."

The world playing field, Domonin Ayine believes, is not even close to
level. "Cut-throat competition is not countenanced anywhere in the
world, not even in the so-called industrialized market economies," he
argues. "These countries have spurned a spider's web of elaborate
anti-competition laws to counteract the effects of anti-competitive
market behavior." Kenneth Quartey, President of the Poultry Farmers
Association and the owner of Sydal Farms, agrees. "You don't build your
local industries by opening the floodgates for cheap imported goods to
come and compete with locally produced goods that, through no fault of
the producers, are bound to be more expensive." Quartey says has 15,000
broilers in his cold store which he is unable to sell.

"It is through no fault of ours that our production costs are high," he
adds. "Just look at electricity and water tariffs, as well as the price
of petrol and diesel. So, in plain terms, our government is telling us
to fold up."

In fact, most members of the once thriving 400,000 member National
Association of Poultry Farmers have folded up. And Ghana's rice and
tomato industries are equally threatened.

All over the capital city, large billboards are advertising American
long-grained rice, which, thanks to huge subsidies from the US
government, has displaced local Ghanaian rice from the shelves. Most of
the subsidies are paid to big rice farmers in states such as Arkansas.
According to Oxfam, the British NGO, one company alone, Ricelands of
Arkansas, was the recipient of US federal government agricultural
subsidies totaling $490m between 1995 and 2003.

Ghana was on the way to becoming self-sufficient in rice production in
the 1970s and 1980s. But the IMF structural adjustment program halted
farm subsidies to rice farmers. Ghana now produces a mere 150,000 tonnes
of rice, or 35 percent of its domestic need.

No longer able to farm because of the high prices of agriculture inputs,
many young people are flocking to the urban centers searching for
non-existent jobs. More displaced people from the rice and poultry
sectors are bound to increase the numbers drifting to the urban centers,
causing social problems. Mr Ernest Debrah, Minister for Agriculture
admits the gravity of the situation and yet says he does not favor
increasing tariffs.

Sub-standard quality

Over-reliance on imported chicken also has its health hazards. The
poorly-resourced Ghanaian health service does not have the capacity to
detect and prevent an outbreak of salmonella which might accompany
imported chicken.

In Cameroon, which has been importing frozen poultry for a number of
years, two local associations have studied the quality of product,
itself. The Service of Assistance to Local and Developing Initiatives
(SAILD) and the Association for the Defense of Common Interests (ACDIC)
came together in 2004 in the city of Yaounde with ten participating
countries to study a grouping of 200 chicken samples. 15 percent of it
was infested with salmonellae

In a report called "Farming Dynamics," the Belgian NGO SOS Faim reported
on the impacts of the transit of the poultry, which tends to thaw out
between freezing several times from the EU to Africa. According to the
report, "Deep frozen chicken parts have no value with in the EU, as
there is no demand and no market for these products=85If traders sell the
product in Africa, it is because the price=85is higher than the price
offered by pet food producers."

Between a rock and a hard place

On March 18th, the Ghanaian Parliament officially overturned the
two-year-old act to raise tariffs on poultry and rice. Although the act
had never been put in effect, a Ghanaian judge had ruled, just one week
earlier, in favor of a group of farmers trying to force the government
to enforce the higher tariffs.

The farmers had brought a case against the government body in charge of
enacting the increase, and Judge Ivy N Ashing-Yakubu had ruled in their
favor. When the act on which it was based was overturned, however,
Ashing-yakuba's ruling was made irrelevant.

"Her ruling was a historic moment for Ghana," Dominic Ayine told
Christina AID, "because it was the first time that the government was
censured by the courts for not putting into practice what parliament had
approved. Her ruling means that the government has effectively defied
the constitution."

Indeed, the Ghanaian government is in a challenging position. By obeying
the dictates of the IMF, it has also drawn the anger of many citizen
groups around the country who have rallied to the cause of the poultry
farmers. A sign-on statement campaign sponsored by the Economic Justice
Coalition is trying to force a parliamentary hearing on the issue and
possibly oblige the government to follow through on its decision to
implement the tariff increase. According to the statement the government
should not abdicate its primary responsibility toward the people of
Ghana just to stay within the policy strictures and instructions of
foreign bodies like the World Bank and the IMF.

A number of activists in the EU and elsewhere are also rallying to
change policy. In April, 10 million people in 80 countries came together
for the Global Week of Action. Launched by trade activists world wide,
the week sought to highlight the plight of poor people in developing
countries affected by skewed trade rules.

Meanwhile, the poultry farmers and their lawyers have vowed to send the
matter to the Supreme Court, because the they believe the action
violates the nation's constitution.


Pratap Chatterjee and T. Eve Greenaway contributed to this article.