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A true reform in agriculture is only possible when the global community accepts the guiding principle that food for all is an international obligation. It can only be achieved when the need for national food self-sufficiency becomes the priority. Developing countries therefore cannot afford to be silent spectators and should protect their agriculture as vigorously as the rich nations do, argues Devinder Sharma.

February 2006, Devinder Sharma ~ STWR

The loss of momentum in food production growth rate, specifically the decline in the compound growth rate in food grains from 1990-91 onwards falling below that of the population, and the alarming decline in the ratio of the world cereal stocks to annual global consumption, reaching the lowest level in the past twenty years, is perhaps the most depressing economic trend in the world today.

Added to this agonizing scenario is the underlying objective of the free trade regime to remove the safeguards that developed countries have had for providing food to the poor and the needy. The reliance on imports for basic food does not take into account the impact on people and their development, to the losses of jobs and food security. The distress signals are too disturbing.

And yet, at the 1996 World Food Summit, the focus of the detailed Plan of Action is disproportionately weighted towards believing that international trade is a key element in achieving food security. In reality, only ten per cent of the food produced globally is internationally traded. Rest of the 90 per cent production is consumed domestically. The world refuses to look at the sustainability and viability of the 90 per cent food production base.

What is not being accepted is that free trade in food products and agricultural commodities does not help the survival of farming in Third World countries, where it forms the basis of the economy. A developing economy needs a food security system that looks much beyond management of scarce supplies and critical situations. And in any case, food security systems are evolved as an integral part of a development strategy bringing about a striking technological change in food crops, providing effective price and market support to farmers and deploying a wide range of measures to generate employment and income for the rural poor with a view to improve their level of well-being, including better physical and economic access to food grains.

Growing Inequalities

It certainly is an unequal world, and perhaps the most debasing and demeaning of all the world’s inequalities is the manner in which the cattle in the rich countries are pampered at the cost of several hundred million farmers in the developing world. When I first compared the life of the western cow with that of the Third World farmer, I didn’t realize that this would hit the sensibilities of at least some of the economists and policy makers. It has now been worked out that the EU provides a daily subsidy of US $ 2.7 per cow, and Japan provides three times more at US $ 8, whereas half of India’s 1000 million people live on less than $ 2 a day.

Through a variety of instruments, the rich countries have ensured complete protectionism. Trade policies therefore have remained highly discriminatory against the developing country farmers. Such is the extent of protection that the benevolence OECD exhibits through development aid to all countries – totalling US $ 52 billion – dwarfs before the monumental agricultural subsidies of US $ 311 billion that these countries provided to its own agriculture in 2001. In reality, you don’t even give by one hand to take back with the other. Rich countries effectively use development aid to convince the domestic audiences of their generosity towards human suffering, in essence using aid as the human face for ‘ambitious’ one-way trade – from the OECD to the rest of the world.

The colourful band of boxes – green box, blue box and amber box – have come in handy for the rich countries to protect its subsidies to agriculture, and at the same time dump the surpluses all over the world. Considering that the world commodity prices are far from adequate anywhere to provide them with a living, these subsidies are actually the cause of excessive supplies in the world markets, and thus resulting in low prevailing world markets. Still further, US is permitted under the WTO Agreement on Agriculture (AoA) to provide $ 363 million in export subsidies for wheat and wheat flour, and the EU can limit it to $ 1.4 billion a year. At the same time, the US incurs annually $ 478 million under its Export Enhancement Programme (EEP), which is not being subject to any reduction commitments.

With the availability of all such subsidies, agribusiness companies find it much easier and economical to export. Export credits, used primarily by the US, and not counted as export subsidies, doubled in just one year to reach US $ 5.9 billion in 1998. The export subsidies and credits are therefore cornered by the food exporting companies. In the US, for instance, more than 80 per cent of the corn exports is handled by three firms: Cargill, ADM and Zen Noh. The level of dumping by the US alone hovers around 40 per cent for wheat, 30 per cent for soybeans, 25 to 30 per cent for corn and 57 per cent for cotton. Further, each ton of wheat and sugar that the United Kingdom sells on international market is priced 40 to 60 per cent lower than the cost of production.

On the other hand, ‘green box’ and ‘blue box’ subsidies categorise the farm support that only the rich countries were providing, and which the developing countries are not in a position to afford. Subsequently, in July 2002, the US proposed significant cuts in ‘trade distorting’ domestic support for all products and trade partners, with a ceiling of five per cent of the value of agricultural production for industrial countries and 10 per cent for developing countries. This however does not mean that the US will make any major cuts in its farm subsidy support, despite the US Farm Security and Rural Investment Act 2002, which provides for US $ 180 billion in subsidies to agriculture for the next ten years, with more than a third coming in the first three years.

New EU Common Agricultural Policy reform proposals that have been announced prior to the Cancun WTO Ministerial have also made no attempt to make radical changes in reduction commitments. Moving on US lines, it has shifted most of the ‘blue box’ subsidies to ‘green box’. European agriculture will continue to be subsidised to the tune of Euro 43 billion for another decade, and that amount will increase further when the new members join in. Like a magician, both the US and EU have managed to juggle the farm support from one box to another without making any significant commitments. The magical trick is now being used to create an illusion of sincerity of the rich towards ‘free’ trade.

Irrespective of the stark inequalities, the ongoing negotiations at the World Trade Organisation (WTO) throws a stronger protective ring around the domestic producers in the richest trading block – Organisation for Economic Cooperation and Development (OECD). Unmindful of the negative consequences inflicted with impunity, the highway robbers are getting ready once again.

The hypocrisy of the developed countries has been echoed by the World Bank Chief Economist Nicholas Stern, while travelling through India recently, denounced subsidies paid by rich countries to their farmers as "sin ...on a very big scale" but warned India against any attempts to resist opening its markets. “Developing countries must remove their trade barriers regardless of what is happening in the developed countries.â€Â� No wonder, while the negotiation continues and the developing countries are kept busy with diversionary tactics like ‘special products’, agricultural exports from the OECD countries continue to rise. Between 1970 and 2000, France increased its share from 5.7 per cent to 8.1 per cent, Germany from 2.6 per cent to 5.9 per cent and United Kingdom from 2.7 per cent to 4.1 per cent.

The Impact

But first, let us get a glimpse of the extent of exploitation that the WTO has already inflicted – through the first phase of trade robbery -- on the poor and vulnerable ever since the Magna Carta for hunger, food insecurity and destitution was unleashed in January 1995. In the Philippines, agricultural export earnings were expected to increase by billions of pesos a year after 1994, generating 500,000 additional jobs a year in the Philippines. Instead, traditional exports such as coconut, abaca and sugar have lost markets. Corn production suffered significant negative growth between 1994-2000, partly because of cheaper subsidised grains. With incomes falling, the agricultural sector had lost an estimated 710,000 jobs, and another 2 million by the year 2000.

Trade liberalization has already exposed developing country farmers to ruinous competition, driving down prices, undermining rural wages and exacerbating unemployment. In the Philippines, opening up of corn market in 1997 reduced corn prices by one-third. At that time, US corn growers were receiving US $ 20,000 a year on average in subsidies, while Filipino farmers in Mindanao had average income levels of US $ 365. Between 1993-2000, cheap corn imports from US into Mexico increased eighteen times, leading to accelerated migration from rural areas to urban centres.

In Central America -- Colombia, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua – the price of coffee beans have fallen to just 25 per cent of its level in 1960, and the region lost an estimated US $ 713 million in coffee revenues in 2001. In these countries, traditionally dependent upon coffee exports, over 170,000 jobs were lost the same year with the loss in wages computed at US $ 140 million. The negative impact was also felt in sub-Saharan Africa, where Ethiopia and Uganda reported huge losses in export revenues. In 2000-01, Uganda exported roughly the same volume, but it earned the country $ 110 million, a steep drop from $ 433 million that it notched five years earlier in 1994-95. Ethiopia reported the export revenues dropping from US $ 257 million to US $ 149 million between 1999-2000. Ironically, in January 2002, the EU and USAID warned of increased poverty and food insecurity in Ethiopia not realizing that much of the fault rests with their own policies.

In Vietnam’s Dak Lak province, farmers who were solely dependent upon coffee are now categorized as ‘pre-starvation’. In India, coffee plantations have laid off over 25 per cent of the workers in the southern provinces of Karnataka and Tamil Nadu. In Brazil, low coffee returns have resulted in increased unemployment and hunger. In Honduras, such has been the terrible impact that the World Food Programme reported in March 2002 that the coffee crisis, coupled with prevailing drought, had left some 30,000 farmers in the hunger trap, with hundreds of children so malnourished that they needed to be hospitalised.

In 2001, the 25,000 US cotton growers received roughly $3.9 billion in subsidy payments, for producing a cotton crop that was worth only US$ 3 billion at world market prices (One Arkansas cotton grower received US$ 6 million, equal to the combined annual earnings of 25,000 cotton farmers in Mali). It's also more than the gross domestic product of several African countries and three times the amount the US spends on aid to half a billion Africans living in poverty. In 2002, direct financial assistance by a number of exporting countries, including China, European Union and the US, to the tune of 73 per cent of the world cotton production, destroyed millions of livelihoods in West African countries (Benin, Burkina Faso, Mali, and Chad). India and Pakistan too have been forced to lower import duties, allowing a surge of cotton imports thereby pushing farmers out.

In the dairy sector, the EU subsidized exports have hit the dairy industry in Brazil, Jamaica and India. While the Jamaican dairy producers have time and again split milk onto the streets, the Indian dairy industry too complains of export dumping. In 1999-2000, India imported over 130,000 tons of the EU’s highly subsidized skimmed milk powder. This was the result of Euro 5 million export subsidies that were provided, approximately 10,000 times the annual income of a small-scale milk producer. Butter export subsidy paid by the EU, for instance, is currently at a five-year high and butter export refunds have risen to an equivalent of 60 per cent of the EU market price. Consequently, butter oil import into India has grown at an average rate of 7.7 per cent annually. This trend has already had a dampening effect on prices of ghee in the domestic market. Ironically, India is the biggest producer of milk in the world, and does not provide any subsidy for the dairy sector.

Indonesia was rated among the top ten exporters of rice before the WTO came into effect. Three years later, in 1998, Indonesia had emerged as the world’s largest importer of rice. In India, the biggest producer of vegetables in the world, the import of vegetables has almost doubled in just one year – from Rs 92.8 million in 2001-02 to Rs 171 million in 2002-03. Far away in Peru, food imports increased dramatically in the wake of liberalization. Food imports now account for 40 per cent of the total national food consumption. Wheat imports doubled in the 1990s, imports of maize overtook domestic production, and milk imports rose three times in the first half of the previous decade, playing havoc with Peruvian farmers

Looks shocking, but this is merely a peep into the destruction wrought by the ‘disagreement’ on agriculture. Everyday, thousands of farmers and the rural people in the majority world – without land and adequate livelihoods – constituting a reservoir of frustration and disaffection, trudge to the cities, their abject poverty contrasting vividly with the affluence of the urban centres. These are the victims – in fact, the first generation of the affected -- of the great trade robbery. These are the hapless sufferers, who are being fed a daily dose of promises – increase in poverty in the short-run is a price that has to be paid for long-term economic growth.

The complete impact on human lives – women and children in particular – and the resulting loss in livelihood security and thereby the accelerated march towards hunger and destitution cannot be easily quantified. Surging food imports have hit farm incomes and had severe employment effects in many developing countries. Unable to compete with cheap food imports, and in the absence of any adequate protection measures, income and livelihood losses have hurt women and poor farmers the most.

Farmers in the developing world have suddenly become the children of a lesser god. They are the neo-poor.

The shocking levels of food dumping and its little understood but horrendous impact on the farming sector in the developing countries is the result of clever manipulations at the WTO. The US and EU were successful in ensuring that some subsidies –and that included direct payments -- have little or no impact on production levels and so have little or no impact on trade. Using sophisticated models and taking advantage of the un-preparedness of the developing country negotiators, they devised a complicated set of rules that termed only ‘amber box’ subsidies as ‘trade distorting’ that needs to be cut. As it turned out, these were the type of subsidies that the poor countries were also using.

The lesson for the rest of the world is crystal clear. The developing world should stop growing crops that are being negatively impacted by monumental subsidies that the rich and industrialised countries provide. And this is exactly what I have been warning all these years. The process to shift the production of staple foods and major commercial commodities to the OECD had in fact begun much earlier. WTO is merely legitimising the new farming system approach.

World Bank/IMF have under the Structural Adjustment Programmes (SAP) very clearly tied up credit with crop diversification. It continues to force developing countries to shift from staple foods (crucial for food security needs) to cash crops that meet the luxury requirement of the western countries. It has therefore been forcing developing countries to dismantle state support to food procurement, withdraw price support to farmers, dismantle food procurement, and relax land ceiling laws enabling corporates to move into agriculture. Farmers need to be left at the mercy of the market forces. Since they are ‘inefficient’ producers, they need to be replaced by the industry.

The same prescription for farming has never been suggested for the rich and industrialised countries. Let us be very clear, one part of the world that needs to go in for immediate crop diversification is the industrial world. These are the countries that produce mounting surpluses of wheat, rice, corn, soybean, sugar beat, cotton, and that too under environmentally unsound conditions leading to an ecological catastrophe. These are the countries that inflict double the damage – first destroy the land by highly intensive crop practices, pollute ground water, contaminate the environment, and then receive massive subsidies to keep these unsustainable practices artificially viable. These are the countries that are faced with the tragic consequences of massive farm displacements, and are in the grip of food calamities arising from industrial farming.

If the WTO has its ways, and the developing countries fail to understand the prevailing politics that drives the agriculture trade agenda, the world will soon have two kinds of agriculture systems – the rich countries will produce staple foods for the world’s 6 billion plus people, and developing countries will grow cash crops like tomato, cut flowers, peas, sunflower, strawberries and vegetables. The dollars that developing countries earn from exporting these crops will eventually be used to buy foodgrains from the developed nations – in reality, back to the days of ‘ship-to-mouth’ existence.

Take the case of Central America. The debt crisis that inflicted the Central American countries in the 1980s, was very conveniently used as the right opportunity to shift the cropping pattern to non-traditional exports. Aided and abetted by the United States Agency for International Development (USAID), farmers were lured to the illusion of greener pastures in the developed world. They shifted to crops like melons, strawberries, cauliflower, broccoli and squash that were shipped to the supermarkets, mainly in America. In turn, these Central American countries disbanded cultivation of staple crops like corn and bean, and have now become major importers and that too from the United States.

In India, which has only three decades back emerged from the shadows of massive food imports, the strategy is the same. World Bank/IMF have forced successive governments to adopt policies that forces farmers to abandon staple crops like wheat, rice and coarse cereals, and diversify to cash crops. Punjab, the country’s food bowl, is presently engaged in a desperate effort to shift from wheat-rice cropping pattern to cultivating cut flowers and the likes. Andhra Pradesh, in south India, has already embarked on a misplaced rural development vision that aims at industrial agriculture at the cost of its millions of small and marginal farmers. As if this alone is not enough, biotechnology companies are being doled out with State largesse and prime real estate so as to encourage corporate farming.

Tragically, the suicide by the Korean farmer Lee Kyung-Hae amplifies the devastation that WTO has wrought on the farming communities all over the world. Not listening to the voice of the marginalized and the poor, a majority of them actively involved with farming, will not only be suicidal but can be catastrophic for the powers that be. The message from Lee’s sacrifice is loud and clear. Not listening to the growing discontent and frustration that prevails on the farm front, exacerbated through the trade reforms, will only globalise anger.

Reforming Agriculture

A true reform in agriculture is only possible when the global community accepts the guiding principle that food for all is an international obligation. It can only be achieved when the need for national food self-sufficiency becomes the cornerstone of the AoA. It can only be put into practice when the developed and the developing countries refrain from a battle of food supremacy to reorient efforts to bring equality, justice and human compassion in addressing the mankind’s biggest scourge – chronic hunger and acute malnutrition.

Developing countries therefore cannot afford to be a silent spectator. If the rich industrialized countries can protect their agriculture, and take an aggressive approach, developing countries should not feel shy in doing the same. Easing the transition to more open global markets has to begun by a radical restructuring of the agriculture in the North America and the European Union. Till then, a collective stand based on the following planks is the only route for developing countries to protect agriculture and share the fruits of food security:

• Under the rule-based system of growth, all countries should be directed to limit its surplus production of agricultural commodities to not more than 20 per cent of its domestic demand. This would mean that the shortfall in production from these food-exporting countries enables food-deficit countries to reorient their policies to improve domestic production. With the threat of highly subsidised food grains and products being dumped onto the poor countries no longer looming large, small and marginal farmers can rebuild the lost confidence in farming.
•  WTO should phase out the environment-unfriendly agricultural practices under a given time frame. For instance, the EU should be directed to drastically reduce and phase out the cultivation and production of sugarbeet. Such a measure would not only be an economic relief but also a step in the right direction towards the oft-touted ‘multifunctioanality’ concept. In turn, it would also mean the restoration of millions of lost jobs and livelihoods in the developing countries, which were earlier producing sugar from sugarcane and meeting the world’s demand.
• Food security, based on domestic food self-sufficiency, should in future be the guiding principle for all international negotiations on agriculture. Food security cannot be left to the mercy of the market forces. Developing countries should be in a position to restore measures that protects the livelihood security of its farming communities.
• Developing countries should demand restoration of quantitative restrictions (and special safeguard measures for those countries which did not follow the QR route). In fact, the removal of subsidies should be linked with the removal of quantitative restrictions. That alone will provide the necessary safeguard for developing country’s agriculture and food security.
• Among the new issues to be introduced at Cancun, the developing countries need to strive for the inclusion of a Multilateral Agreement Against Hunger. This should be based on the guiding principle of the right to food and should form the basis for all future negotiations. Such a multilateral agreement would ensure that countries will have the right to take adequate safeguard measures if their commitment towards the WTO obligations leads to more hunger and poverty.

Devinder Sharma is an award-winning food and agriculture policy analyst and a regular contributor to STWR. His writings focus on the links between biotechnology, intellectual property rights, food trade and poverty.

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