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148 CHAPTER 6


of volatility in world markets, particularly in the case of wheat, cotton, and sugar. Furthermore, government-administered pricing commands a signifi- cant role in the rural economy because of its large-scale sequencing impact on resource allocations and farmer incomes down to the farm level (UNDP 2005b).


According to a recent study carried out by the Food and Agriculture Organization of the United Nations (FAO 2003), if farm incomes were not supported by government purchasing at official prices, farmers growing stra- tegic crops, because of their high costs of production, would take losses in a normal-rainfall year, and, in the case of irrigated wheat and sugar beets, the losses would be higher. These losses would induce farmers to switch to other crops until only the lowest-cost producers remained in the market. The generous subsidies paid to producers and received by consumers are at the expense of the huge losses incurred by state-owned enterprises that purchase and process wheat, seed cotton, and sugar beets.


It is important to note that the seven crops that the government considers strategic crops and on which it continues to set producer prices account for over half the total value of national crop production and occupy about three- quarters of the 4.6 million hectares that are under cultivation in Syria. Wheat and cotton are, by far, the most important of the strategic crops in terms of farmgate value and employment creation.


By comparing the equivalent import or export price at the farmgate, one may estimate the magnitude of support provided to farmers for strategic crops in Syria. This kind of analysis was carried out by Westlake (2003) using 1999 data on six of the seven strategic crops. For sugar beets, the producer price in the late 1990s was almost three times import parity, rendering beets much more protected than any other crop in the country. Soft wheat producer prices were 66 percent higher than import parity. Cotton producer prices exceeded export parity by 31 percent as result of a steady decline in international prices for cotton fiber from 1995 to 1999. For barley, official prices were roughly equal to import parity but well above export parity. In the case of lentils and chickpeas, official prices were below the estimated export parity price. The analysis also showed that, to the extent that farmers may switch among crops in response to relative profitability, government price intervention has artificially stimulated the production of wheat, cotton, and sugar beets at the expense of barley, lentil, and chickpea production (Table 6.5).


Trade Agreements


At the regional level, in February 1997 Syria signed the agreement leading to GAFTA. In 1998 and 1999 it signed bilateral FTAs with Lebanon and Jordan,


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