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Last Updated: Thursday, 4 September, 2003, 19:49 GMT 20:49 UK
Mozambique's lost cashew nut industry
By David Loyn
BBC developing world correspondent

sign reading OGM Non , part of anti-WTO protests in France
Rich countries heavily subsidise farmers
As world trade talks are set to begin in Cancun, Mexico, developing countries like Mozambique say it is unfair that they are forbidden by the World Bank to subsidise their agriculture while Western countries spend billions on their farmers.

Mozambique's cashew nut industry used to be one of the largest in the world.

And crucially for a country which is among the poorest, they could process the nuts as well, adding value and profits to the raw materials.

But the nut industry collapsed after the World Bank insisted that Mozambique end subsidies as part of a tough austerity package.

TRADE AND GLOBALISATION
Key issues at the trade talks

The new winds of economic reform were designed to enable Mozambique to enter the world economy, winning debt forgiveness and new international funding.

But the result instead was that 10,000 people who were directly employed by the industry lost their jobs, another million nut collectors lost an income, and Mozambique remains resolutely close to the bottom in league tables of world poverty.

Harmful subsidies?

The subsidies which operated in Mozambique were small compared to the guaranteed prices promised to farmers in the United States.

The government would provide consumer goods like clothing on credit to small traders, so that they could barter them for cashew nuts.

When they sold the cashew nuts to factories they had to pay back some of their takings to pay for the goods they had originally borrowed.

Some better traders might get government cars to move into the remote exterior to meet nut collectors.

In a predominantly rural society, with poor communications, still struggling to cope with the after-effects of colonialism and civil war, these small-scale schemes made sense.

But they offended the economic model brought by international economists to Mozambique.

Hitting the poor

The Mozambique country director of the British aid agency Action Aid criticised the World Bank.

"The impact of that small 'policy' on millions of people who were already not better off was significant," said Roberto Luis.

'Its very ironic that the World Bank and other international institutions do not allow any concessional credit for agriculture in developing countries, when at the same time they are allowing subsidies in the North. That's crazy. We just cannot understand it."

The issue of subsidies to farmers in the developed world, particularly Japan, the US and the EU, is expected to dominate next week's key summit of the World Trade Organisation in Cancun, Mexico.

Europe has promised to reduce direct subsidies to food production, instead paying farmers for things like land management.

But the new regime will still leave huge subsidies to the dairy industry.

Meanwhile the United States has recently passed a Farm Act which will increase subsidies to its farmers through until 2007, beyond the timetable of the present WTO negotiating round, leaving the rest of the world with little room to manoeuvre.

Mozambique's Vice Minister of Trade, Salvador Namburete, will be one of the eight-person team sent by Mozambique to Cancun to negotiate with the hundreds of specialists and officials who will be fielded by the developed world.

He is surprised by the gap between promise and delivery in what the developed world is offering.

"Is there any chance for us to take these proposals very seriously? Or is it just a way of entertaining us?" he told the BBC.




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