Agricultural trade liberalisation in Uganda: implications for the coffee industry

The paper reviev.'s the implications of agricultural trade liberalisation on performance of the coffee sector in Uganda. There has been considerable debate in the literature on the responsiveness of agriculture to price incentives in Africa. Proponents of lfberalisation believe that control and involvement in the marketing and pricing of export crops lJas been responsible for a considerable share of the deterioration of producer incentives and thus affect the growth of agriculture sector. The belief that government intervention in agriculture pricing and marketing affects agricultural growth partly holds for Uganda. Government policy can affect agriculture through: a) control over output and input prices, b) laxation or subsidies that affect those prices, c) institutional arrangements (e.g. access to credit. Inputs, information) and d) actions that affect productivity in other sectors. Direct government policies, including price fixing for products or inputs, or the taxation of their trade, affect profitability and productivity of farming directly, and result in the shifting of resources beMeen crops, or in moving resources out of agriculture into other sectors. Regarding the negative effects of government involvement in agriculture, there was therefore a strong case for the liberalisatiol1 of agricultural trade, more especially for coffee, the largest foreign exchange earner for the country. Reducing these negative effects was not the only reason for liberalization in Uganda. Other objectives included, improving on the quality of coffee, increasing the volume of exports and making the marketing system efficient by introducing more elements of competi ti on. The study on Uganda aimed at evaluating the impact of liberalisation on the coffee sector. There exist both positive and negative effects and these are reviewed in the paper. In a nutshell, coffee exports increased following liberalisation which hastened competition in both the internal and export markets, production as well as productivity has also improved due too provision of better incentives, producer prices have increased, crop finance is no longer a perennial problem owing to the waiving of the restriction on pre-finance facility which allo .... ed exporting traders to solicit finances from foreign sources as well as improvement in the quality of coffee. Compared to other rival export crops namely cotton and tea, the performance and response of coffee to these polic)' changes is far greater. all the other hand, the study also found oui ihai coffee productivity in Uganda is higher compared to other African countries i. e. Cote d'Ivoire and Cameroon, which also liberalised their coffee marketing and pricing policies. The period of liberalisatioll coincides with a period of commendable growth in Uganda. Other factors aside from liberalisatioll were also at play during the time of liberalisation. T1iese included liberalisation of trade and the exchange rate and financial liberalisation. Improved infrastructure (road networking) and a relatively stable political environment in the country have also contributed to agricultural sector growth in general and the coffee sector in particular. Conclusively, though agricultural liberalisation is necessary', it's far from being a sufficient polic), instrument for generating agricultural growth. Agricultural market liberalisation and privatisation should be accompanied by sound govemment policies for its success. Government control and regulation of agriculture needs to be reduced, but this should be replaced by an increased govemment role in the areas of support to counter the market failures, which may retard agricultural development.