SUMMARY The major impact of the trade reforms implemented by the Cameroon Government in the framework of its Structural

l Adjustment Polices (SAP), after the devaluation of the CFA franc in 1994 was a significant simplification of the fiscal system. Average taxation rates for various commodities witnessed a 25 to 44 percent drop, with declines ranging from 41 to 88 percent in 1994 to 31 to 51 percent since June 2000. The imports of several commodities, in particular those of poultry meat, rice and vegetable oils, have trended upwards and have been increasing steadily since then. The rise in imports has been sustained and exacerbated by structural factors including consumer preference, appreciation of the CFA franc, urban population growth, the competitiveness of the sectors, etc. While several injury factors have been identified, mostly through stakeholders interviews, establishing causation remains difficult. Empirical results show no evidence of the negative impact of the import surges on the price of domestic products. For poultry meat, for example, the data showed that the prices of both imported frozen chicken and live birds remained mostly stable from 1999 to 2004, suggesting that farmers were affected not through a drop in price but through a decrease in sales due to consumer preference for imported chicken parts which are cheaper. The Cameroon government took various measures as responses to the surges and injuries. It increased tariffs and taxes, ordered a partial ban on imports, instituted reference prices, created an ad hoc committee to determine the level of production shortages and import quotas, and established regular meetings with stakeholders. However, the Governments institutional capacity to develop and strengthen trade surveillance systems is insufficient for the effective implementation of trade remedy options and therefore needs to be seriously improved upon.

FAO Briefs on Import Surges

- Countries
No. 4 Cameroon: poultry, rice and vegetable oils 1

Introduction The phenomenon of food import surges in Cameroon has become a very sensitive economic policy and political issue, attracting considerable attention as evidenced by increasing and controversial national NGO and newspaper reports. The Cameroon government and industry stakeholders through their monthly meetings, (notably the quarterly meetings between local poultry farmers and other poultry stakeholders with the Ministry of Livestock (MINEPIA) and the monthly meetings of palm oil producers/processors with the ministries of trade, agriculture, and finance) have also expressed continuing concern about the impact of these rising food imports on the local industries and rural communities. Moreover, according to data analysis by the Food and Agriculture Organization of the United Nations (FAO), regarding food import surges into some developing countries for the period 1999 to 2003, Cameroon was one of the countries which witnessed the most prevalent and frequent surges. It was for these reasons that Cameroon was selected as one of the 12 country case studies on the impact of food import surges in developing countries. Poultry meat, rice, and vegetable oils were identified as the most affected commodities and were selected for evaluation. Identification of import surges The country has been experiencing prolonged and persistent surges for the three commodities. From 1999 to 2004, poultry meat imports to Cameroon increased nearly 300 percent. This is despite a drop in 2001 due to the ban by MINEPIA on meat import from Europe because of dioxin contamination. For the same period, the importation of rice doubled from 152 000 to 301 000 tonnes while domestic rice production remained fairly stable. Vegetable oils imports increased from 7 280 to 33 944 tonnes. The occurrence of import surges, confirmed through data analysis, was reviewed through an informal survey of various stakeholders. While the officials of MINEPIA and the traders do not see recent poultry meat import trends as negative for the country, the poultry farmers and their association consider the recent poultry meat import trends as the root cause of their production and marketing problems, especially declining sales and profits. For vegetable oils, there is also general concern among stakeholders that import surge is harming the domestic sector. Rice producers are concerned but attributed the current problems facing rice production and marketing in the country to total lack of government policy in the sector. Rice productivity has been on the decline since the liberalization of the sector, due mainly to a lack of access to inputs.

November 2006

Case studies prepared by national experts.

Figure 1: Poultry imports

Figure 2: Rice imports and production

400 000

40 000 30,000 20 000 10 000 0 1999 2000 2001 2002 2003 2004 Year

Imports/domestic production (tonnes)

300 000 200 000 100 000 0 1999 2000 2001 Years production (tonnes) Local
Year

tonnes (MT)

Poultry meat imports, 1999-2004 Three year average

2002

2003

2004

Volume of imports (tonnes)

Reasons for surges As mentioned above, the country has been experiencing prolonged and persistent surges for the three commodities and a variety of domestic and international factors have potentially contributed to the phenomenon. Import surges in developing countries are often attributed to external factors, including export subsidies and highly concessional export credits from high income countries, disruptive surplus disposal in the form of food aid shipments, price supports leading to the accumulation of surpluses that weigh on world market prices and unfair trade practices. The most important challenge of this study is how to identify the real causes of the surges. To do that, the study tried to identify the relationship between movements in imports and major domestic and international shocks, including important changes in trade and fiscal policies. It emerges from the analysis that the major factors triggering the surges stem back to the trade reforms implemented by the Cameroon Government in the framework of its Structural Adjustment Polices (SAP), after the devaluation of the CFA franc in 1994. According to a previous FAO study (Bamou and Mkouonga, 2003), the major impact of the reforms which have significantly simplified the fiscal system was a reduction of the average taxation rates from 41 to 88 percent in 1994 to 31 to 51 percent since June 2000 (Table 1).
Table 1: Applied tariffs for poultry meat, rice, and vegetable oils in Cameroon, 1998 2006
1998 & 1999 2000 2001 2002 2003 2004 2005 2006

The imports of several commodities have trended upwards and have been increasing steadily. This rise in imports has been sustained and exacerbated by an appreciating exchange rate and structural factors including urban population growth, consumer preferences, the competitiveness of the sector, etc. As regards the individual commodities: About 99 percent of the poultry meat imported into Cameroon from 1999 2004 was low priced chicken cuts. This makes it difficult for the local sector to compete, because consumers prefer the cheap cuts, while the domestic sector produces only live birds. In spite of the increase in rice prices on the international market, the strong appreciation of the CFA franc vis--vis the dollar meant that the import prices in CFA franc terms remained relatively stable and low. There is also large unmet domestic demand for rice due to limited production.

For vegetable oil other potential factors include discriminatory and non rigorous issuing of import authorisation and misuse of import licences (import for reexportation). Moreover, most consumers prefer refined oils, but little of that was being produced domestically. Most of the oils imported were refined oils, and crude oils were imported by industries mostly as inputs in the production of other products e.g. refined oils. Short term external factors have also played a role. For example, after the significant devaluation of the Brazilian Real in 2001 and 2002, poultry meat imports to Cameroon from Brazil increased by 885 percent and 117 percent respectively; however, this rise represented only a limited displacement of other suppliers.

Poultry meat Rice Vegetable oils

n/a 38.7 38.7 38.7 40.5 42.0 42.0 43.75 n/a 37.5 37.5 37.5 37.5 39.0 39.0 40.75 n/a 48.7 48.7 48.7 48.7 49.0 49.0 50.75

Table 2: Cameroon - Pre- and post-January 1994 agricultural product tariff structure
Pre-1994 Taxes and duties Exit tax Custom duties Entry tax Turnover tax Value added tax Complementary tax Sanitary and veterinary tax Packaging tax Loading tax Preferential tax Unloading tax Computer dues CNCC tax Minimum tax Pre-account Council tax Phytosanitary tax Credit distribution tax Cattle tax Veterinary inspection tax Tree cutting tax Reforestation tax Total 25 5 6 CFAF/hectare/year 41.4 87.9 + 875 CFAF/tonne 5.4 + 527 - 869 CFAF/tonne 31.4 - 51.4 + 3.4 + 0.1 595.1 CFAF 1.5 0.3 5.0 2.0 180 CFAF/tonne 50 CFAF/tonne 1.0 150-200 CFAF/head 180 CFAF/tonne 50 CFAF/tonne 1.0 150-200 CFAF/head 0,95 25 180 CFAF/tonne 50 CFAF/tonne 1.0 180 CFAF/tonne 50 CFAF/tonne 1.0 1.5 0.3 1.5 0.3 1.5 0.3 5.0 - 20.0 50 CFAF/tonne 50 CFAF/tonne 0.5 247 - 588 CFAF 0.1 0.1 50 CFAF/tonne 50 CFAF/tonne 0.5 247 - 588 CFAF 0.1 5.0 - 7.5 10.0 - 30.0 11.5 - 20.5 18.5 Import (% CIF value) Export (% FOB value) 2.0 10.0 - 30.0 Import (% CIF value) Since June2000 Export (% FOB value)

280 CFAF/tonne 527 869 CFAF/tonne

CFAF = CFA franc

Source: Bamou, E. and Mkouonga, H. 2003. Impact of Economic and Trade Policy Reforms on Food Security in Cameroon. FAO Rome.

Evidence of injury Several injury factors have been identified, mostly through stakeholders interview and data analysis, but establishing causation remains difficult. The injury factors mentioned by stakeholders include: Poultry: lower production and profits, under-utilized equipment and infrastructure, 110 000 rural jobs lost each year (ACDIC ) Rice: reduction in cultivated land area, decrease in household income, reduced sales and profits, etc. Vegetable oils: 10 to 15 percent drop in annual turnover for major industries; reduction in staff number, sometimes by 25 percent, 40 percent drop in sales volume, under-utilization of human and material resources, lower returns over investments. Among the arguments raised against imported food products is that they depress domestic market prices and hence create a disincentive for increased domestic production and growth of infant food processing industries. For Cameroon, however, empirical results show no evidence of the negative impact of the import surges on the price of domestic products. For poultry meat, for example, the data showed that the prices of both imported frozen chicken and live birds remained mostly stable from 1999 to 2004, suggesting that farmers were adversely affected not through a drop in price but through a decrease in sales due to consumer preference for imported chicken parts which are cheaper.

Policy response by government and trade surveillance The ultimate goal of this project is to provide a broader understanding of the capacity of Cameroon to use enhanced trade surveillance and trade remedy measures to identify, analyse, and respond to import surges. Critical to this effort is the institutional capacity of the government to develop and strengthen trade surveillance systems. The Cameroon Government took various measures in response to the surges and injuries. It increased tariffs and taxes, ordered a partial ban on imports, instituted reference prices, created an ad hoc committee to determine the level of production shortages and quotas to be imported, and established regular meetings with stakeholders. MINEPIA restricted the importation of frozen chicken to 5 000 tonnes per year with effect from September 2005. The government signed a ministerial decision asking rice importers to buy a certain quantity of locally produced rice before importing. This was around the early 1990s, but has never been respected by the importers. An ad hoc committee was established for vegetable oils to determine the level of production shortages and decide on production and demand targets for palm oil. Regular meetings were held with stakeholders. The institutions involved in trade monitoring are the ministries of livestock, agriculture and environment, the customs, the police, the Port Authority, and an established company for surveillance. However, the institutions are not properly organized and coordinated for trade surveillance which requires good coordination, strong databases, trained and sufficient staff, analytical facilities and capabilities. It is clear that the Cameroon government institutional capacity to develop and strengthen trade surveillance systems is insufficient for the effective implementation of trade remedy options and therefore needs to be seriously improved upon. Concluding remarks Analytical results show that import surges occurred for poultry meat, rice and vegetable oils in Cameroon. It emerges from the study that the major factor that triggered the surges was the trade reform implemented by the Cameroon Government in the framework of its Structural Adjustment Polices (SAP), after the devaluation of the CFA franc in 1994. Since then the rise in imports has be sustained and exacerbated by structural factors including consumer preferences, appreciation of the CFA franc, urban population growth, the lagging competitiveness of the domestic sectors, etc.

Commodities and Trade Division, Food and Agriculture Organization of the United Nations (FAO) viale delle Terme di Caracalla, 00153 Rome, Italy. Telephone (+39) 06 57053773. Fax: (+39) 06 57054495. http://www.fao.org/es/esc/en/20953/22218/highlight_108226en.html; and http://www.fao.org/es/esc/en/41470/110301/index.html