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Colombia FTA Impact on Small Farmers

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Colombia FTA Impact on Small Farmers IMPACT OF THE US-COLOMBIA FTA ON THE SMALL FARM ECONOMY IN COLOMBIA By: LUIS JORGE GARAY SALAMANCA FERNANDO BARBERI GÓMEZ IVÁN CARDONA LANDÍNEZ Bogotá, September 2009 This paper was produced with funding from Oxfam International, although its contents do not necessarily reflect the views of Oxfam International. CONTENTS ABREVIATIONS ................................................................................................................................................ 7 GLOSSARY ........................................................................................................................................................ 9 INTRODUCTION ............................................................................................................................................. 11 EXECUTIVE SUMMARY ............................................................................................................................... 13 I. COLOMBIAN AGRICULTURE IN A CONTEXT OF FREE TRADE WITH THE UNITED STATES ............................................................................................................................................................ 24 A. THE PROTECTION OF COLOMBIAN AGRICULTURE AND THE FTA ................................. 24 B. ASYMMETRIES BETWEEN COLOMBIA AND THE UNITED STATES ................................. 26 C. SUBSIDIES TO AGRICULTURAL PRODUCTION ..................................................................... 27 D. RESULTS OF THE NEGOTIATION ............................................................................................. 28 1. Results of the Negotiation in Defensive Terms ................................................................................. 29 2. Results of the Negotiation regarding Colombia’s Offensive Interests ............................................. 35 3. Conclusions ....................................................................................................................................... 38 II. THE IMPACT OF THE FTA FROM A PERSPECTIVE OF COMPARATIVE STATICS ........... 40 A. AREA OF STUDY ........................................................................................................................... 40 1. Products that Compete with Imports ................................................................................................ 40 2. Products with Export Potential ........................................................................................................ 41 B. ESTIMATED IMPACT FOR GOODS COMPETING WITH IMPORTS ...................................... 42 1. Methodological Considerations ........................................................................................................ 42 2. Impact on the Paddy Rice Producing Sector .................................................................................... 45 3. Impact on the Yellow Corn (Maize) Producing Sector ..................................................................... 47 4. Impact on the White Corn (Maize) Producing Sector ...................................................................... 49 5. Impact on the Sorghum Producing Sector ........................................................................................ 50 6. Impact on the Wheat Producing Sector ............................................................................................ 51 7. Impact on the Bean Producing Sector .............................................................................................. 53 8. Impact on the Potato Producing Sector ............................................................................................ 55 9. Impact on the Poultry Producing Sector .......................................................................................... 56 10. Impact on the Pork Producing Sector ............................................................................................... 58 11. A Summary of the Results for Goods that Compete with Imports ..................................................... 60 C. CONSIDERATIONS ON GOODS WITH EXPORT POTENTIAL ............................................... 60 1. Beef ................................................................................................................................................... 60 2. Dairy Products .................................................................................................................................. 63 3. Promising Fruits and Vegetables ..................................................................................................... 64 4. Tobacco ............................................................................................................................................. 66 5. Summary of the Results for Goods with Export Potential ................................................................ 66 III. CHARACTERIZATION OF THE SMALL FARM ECONOMY IN COLOMBIA ..................... 68 2 A. DEFINITIONS OF SMALL FARM ECONOMY ........................................................................... 68 1. Theoretical Framework .................................................................................................................... 68 2. The Study of the Small Farm Economy in Colombia ........................................................................ 71 3. Measurement Criteria Used ............................................................................................................. 76 B. CHARACTERIZATION OF COLOMBIAN SMALL FARM HOUSEHOLDS ............................ 78 C. THE AGRICULTURAL ACTIVITY OF SMALL-SCALE PRODUCERS IN COLOMBIA ........ 84 1. Characterization of the Small-Scale Productive Units ..................................................................... 84 2. Participation of Small Farm Units in Agricultural Area and Production ........................................ 87 IV. IMPACT OF THE FTA ON THE SMALL FARM ECONOMY IN COLOMBIA ...................... 91 A. METHODOLOGICAL CONSIDERATIONS ................................................................................. 91 1. Measurement of the Effects on Producer Surplus and Net Income .................................................. 91 2. Measurement of the Effects on the Total Income of Small Farm Households .................................. 94 B. CATEGORIES OF IMPACT ........................................................................................................... 95 C. RESULTS OF THE IMPACT OF THE FTA ON THE SMALL FARM ECONOMY ................... 99 1. Effects on Net Income and Producer Surplus ................................................................................... 99 2. Total Effect on the Income of Small Farm Households .................................................................. 129 BIBLIOGRAPHY……………………………………………………………………………………………132 METHODOLOGICAL ANNEXES STATISTICAL ANNEXES 3 LIST OF TABLES Table 1. Quotas granted by Colombia in the US - Colombia FTA. .................................................................. 31 Table 2. Results of the Negotiation for the Principal Colombian Defensive Products ..................................... 33 Table 3. Results of the Negotiation for the Principal Offensive Colombian Products ...................................... 38 Table 4. Activities that Compete with Imports: National Production, Colombian Imports and United States Exports - Year 2007 ................................................................................................................................... 41 Table 5. Impact of the US - Colombia FTA on the Paddy Rice Producing Sector in Colombia - Summary of Price and Exchange Rate Scenarios ........................................................................................................... 47 Table 6. Impact of the FTA on the Yellow Corn (Maize) Producing Sector in Colombia (COP January 2009) - Price and Exchange Rate Scenarios Summary .......................................................................................... 48 Table 7. Impact of the FTA on the Colombian White Corn Producing Sector (COP January 2009) - Summary of Price and Exchange Rate Scenarios ...................................................................................................... 50 Table 8. Impact of the US - Colombia FTA on the Sorghum Producing Sector in Colombia (COP January 2009) - Summary of Price and Exchange Rate Scenarios ......................................................................... 51 Table 9. Impact of the FTA on the Colombian Wheat Producing Sector (COP January 2009)- Summary of Price and Exchange Rate Scenarios ........................................................................................................... 53 Table 10. Impact of the FTA on the Colombian Bean Producing Sector (COP January 2009)- Summary of Price and Exchange Rate Scenarios ........................................................................................................... 55 Table 11. Impact of the FTA on the Colombian Chicken Producing Sector (COP January 2009)- Summary of Price and Exchange Rate Scenarios ........................................................................................................... 58 Table 12. Impact of the FTA on the Colombian Pork Producing Sector (COP January 2009)- Summary of Price and Exchange Rate Scenarios ........................................................................................................... 59 Table 13. Summary of Impact on Sectors Producing Goods
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