WTO Food Politics: Food Security through Liberalised Trade or the Nurturing of Domestic Production?

By Aileen Kwa
Developing Countries’ Silence in the AIE Process

Developing countries (not including those of the Cairns Group) have jointly managed to produce a paltry number of 4 papers out of a the 45 (as of December 1998) submitted by member countries for the WTO’s Analysis and Information Exchange on the Agreement on Agriculture (AoA). This seeming lack of interest is alarming. Has the WTO served their needs so completely that there is no need for their comment? Certainly, the answer is a resounding No! Instead, there seems to be (as it has been for a long time), an institutionalised powerlessness which one way or another silences the countries of the South.

The 4 papers came from the following countries: Pakistan, Peru and the Dominican Republic jointly submitted a paper, Cuba submitted a paper and India authored two papers.

The US submitted the highest number of papers - 11 in total. This is of course not surprising since it intends to maintain a stronghold on the agricultural negotiations. And the Cairns Group as a whole made 19 submissions. Of these 8 were by Australia, 5 by New Zealand, with Brazil, Argentina, Uruguay and South Africa making up the rest.

The other papers submitted were by European Community - 3; Canada - 3; 1 each by Norway, Korea , Japan, Iceland and 1 paper jointly by Bulgaria, Czech Republic, Hungary, Poland, the Slovak Republic and Slovenia (post transition economies).

Food Insecurity on the Increase Exacerbated by Agricultural Liberalisation

Apart from South Africa, therefore, not a single African country made a submission, yet projections up to 2020 are that the number of malnourished children in sub-Saharan Africa and South Asia will actually increase. Similarly, there has been silence from Southeast Asia, where millions are experiencing severe food shortages.

The direction the present Agreement on Agriculture is pushing countries is worsening their food security position rather than improving it. This is further exacerbated by structural adjustment programmes and IMF prescriptions when countries take loans.

What has been the effect of agricultural liberalisation and the flooding of cheap imports into developing countries? What will be the effects of further liberalisation?

Briefly, the consequences can be summed as follows:

1) Firstly, cheap food imports destroy the agricultural production base of developing countries since these countries are not able to compete with subsidised imports. Imported food is available but the assumption made is that countries will have the foreign exchange to purchase food, and also that individuals in these countries will have the money on hand to purchase what they need. For many developing countries, this is often not the case. As India pointed out in its AIE paper (AIE/44), even when countries do have some available funds, there are usually cross-sectoral pressures which limit their capacity to procure internationally. The problem is further compounded by unforeseen variations in international prices.

2) Many developing countries will then find themselves in the position whereby they have to borrow money in order to pay for food. That is, ensuring their food supply means incurring debt and aggravating balance of payment problems.

3) In large agrarian economies, farmers that are squeezed out due to imported food products are not likely to easily find new jobs. Hence importation of food will most likely also mean the importation of unemployment.

The argument that is often cited in favour of agricultural liberalisation and cheap subsidised imports is that it serves the needs of net-food-importing developing countries (NFIDCs). It meets their food security needs at relatively low costs. This is true in the short term. However, in the long run, it runs the risk of all the problems cited above - balance of payments, unemployment etc. It also leaves countries in a more vulnerable position, with little autonomy and control. Indonesia is a case in point.

Indonesia Today: The Reality of the Worst-case Scenario

Indonesia as it is today, is an example of a country which had become highly dependent on imports even of its staple, rice. At the time of the economic crisis which hit it hard starting October 1997, Indonesia found that the financial and industrial sector it had been depending on melted away as quickly and easily as its currency had plunged.

With its agricultural sector in disarray due to years of governmental neglect, the encroachment of industries, as well as poor weather conditions, the Indonesians today find themselves with insufficient locally produced food to meet their needs, and only a valueless Rupiah to purchase imported food.

According to a United Nations report released late last year, more than 100 million Indonesians will fall below the poverty level in 1999. One journalist comments that this is a human catastrophe that equals, in magnitude, the great famine that drove

millions of Irish and Scots from their homelands to America in the last century.

Social unrest, has been on the rise, and is unlikely to abate. In all likelihood, it will intensify in the coming months. The ethnic and politically-motivated violence has been increasing as hunger pangs plague millions. In only the recent few months, some 48 churches and mosques have been torched or damaged, significantly more than in the past 15 years.

Today in Southeast Asia, large numbers have returned to farming and there has been a general reawakening of the importance of food self-sufficiency. There is a new realisation of vulnerability as a result of over-dependence on imported foods and a realisation of the fragility of the financial and industrial sectors. The Indonesian government, for example, has made food self-sufficiency a policy. The Malaysian government too, is actively encouraging the conversion of idle industrial land for agricultural use.

The US / Cairns Group Export Agenda

This idea of food security which entails a minimum level of food self-sufficiency is unfortunately antithetical to the rhetoric of the agricultural exporting nations. These are of course the very countries which have dominated the discourse on agriculture and food security at the WTO.

The US’ own policy on agricultural production in fact, can be summed in single word ‘Export’. Their aim is to ‘Increase the value of US agricultural exports each year at a faster rate than the rate of increase in the overall world export trade in agricultural products’.

In fact, US Special Trade Ambassador for Agriculture Peter Scher has revealed that US’ farmers and ranchers are twice as reliant on foreign trade as the US economy as a whole, with exports accounting for an estimated 30 per cent of gross cash receipts. Exports are critical to nearly every sector of US agriculture. Overall, one of out of every 3 acres of America’s farms is dedicated to exports.

Indeed, US’ trade representatives have said that US’ goal is to target its market to the new middle class in the world. Americans now comprise only 4 per cent of the world’s population and the world’s population is growing faster than that in the US. So the markets the US is looking at, for example, are the 115 million new members of the middle class in India by 2005, and the growing 196 million in China also by 2005.

The other strong lobby at the WTO is the Cairns Group of exporting countries, led by Australia and also New Zealand. These countries provide very low levels of subsidies to their farmers and want agriculture to be liberalised so that they get better access to markets which at present the EC and the US dominate.

Together with the US, their tune sung at the WTO, which is also the loudest in town, is that agricultural production should be based on the principle of ‘comparative advantage’. When countries produce what they can most cheaply for local and foreign consumption, then food will be available at very low prices for all. Adequate food or food security is measured by food availability at the global level.

We know from experience that the equation is more complex. There is enough food today in the world, but about a billion people are experiencing food shortage and famine.

Norway, South Korea, India: Food Security through Self-sufficiency

Already, developed and developing countries have criticised the extent of liberalisation in the present AoA, particularly as it does not give adequate support to the food security needs of Members. ‘Non-trade concerns’ has been one of the most frequent topics addressed in the AIE process, with food security cited as the most important non-trade concern.

Norway (AIE/22) in its paper has said that food security is a public good for which subsidies are necessary and justified. They state that subsidies per se are neither good nor bad, but must be evaluated according to their corresponding benefits. It is therefore difficult to compare the level of support between different countries without taking into account the overall benefits that result from such support.

Interestingly, Norway even highlights the importance of ‘national food production’ and ‘self-sufficiency’. It reveals that Norwegian self-sufficiency in agricultural products is around 57% (including fish products), and states that it considers this an ‘absolute minimum from a food security perspective’.

South Korea (AIE/39) submitted a very strong paper emphasising in no uncertain terms, the importance of food self-sufficiency.

Korea states that even though the preamble of the AoA says that non-trade concerns (NTCs) should be taken into account in the reform process, only a few articles in the AoA actually embrace non-trade concerns. In this respect, the AoA is ‘somewhat unbalanced and biased’.

Korea points out that while developed countries argue that NTCs are incorporated in the Green Box, the specificity of the requirements do not in fact fit the needs of other member (developing) countries and so prevent them from effectively addressing their non-trade concerns.

Emphasising the critical importance of food security and self-sufficiency in rice, its staple crop, Korea recounts that when hit by the financial crisis in late 1997, Korea’s banks lost credit, and this completely stalled their agricultural imports. The country was able to avoid digressing into severe social unrest only because of the government’s assiduous pursuit of self-sufficiency in rice, so that Korea had enough rice stocks through the crisis.

Korea makes the case that relying on global supplies is risky - since world demand is projected to increase by 40% by 2020, and arable land area to decrease. Also weather anomalies threaten food security. ‘Considering the possibility of sudden adverse changes and the pessimistic outlook in global supply and demand, free trade alone may not always be an optimal solution. Thus it would be essential for each member country to secure a reasonable level of domestic production under any circumstances’.

In its paper, ‘Food Security - An Important Non-Trade Concern’ (AIE/44), India said that agricultural liberalisation will not address the food security needs of agrarian developing countries. Instead, ‘agricultural self-reliance forms a vital underpinning for the growth of the GDP of agrarian developing economies since good agricultural production provides purchasing power to a large majority of a population, which in turn spurts industrial growth.’ In arguing its case, India makes the following points:

1) Attention must be given to food security especially to developing countries with a large population dependent on the agricultural sector not only for its livelihood, but who are also surviving just around the ‘poverty line’. The agricultural sector maintains the livelihood of the agrarian peasantry and also ensures that sufficient food is available for domestic needs.

2) A basic objective of governments in agrarian countries is to ensure food security, ie. the access of the population to sufficient food to meet its nutritional requirements. Food security issues cover availability and stability of food supplies, but importantly, also issues of access to this supply. That is, resources may be needed to procure the required quantity of food.

3) Because of these important concerns - countries need a certain flexibility and autonomy in determining their domestic agricultural policies. They need to be allowed to provide domestic support in the agricultural sector to meet the challenges of food security and be able to preserve the viability of rural employment.

4) Policies that need to be in place include:

- improving productivity

- enhancing income levels

- reducing vulnerability to market fluctuations

- ensuring stability of prices etc.

5) The majority of farmers in large agrarian developing countries are small-scale farmers producing for their own subsistence or for simple barter. They have few resources, are vulnerable to weather conditions, and are at risk of loosing their land to the encroachment of industries. Farmers in agrarian developing countries therefore need support in withstanding the pressures they are facing.

6) Governments need to ensure that a minimum level of their annual food requirement is produced domestically, if not immediately, at least in the time to come. In order to achieve this, government subsidies would be necessary especially in providing inputs - irrigation, electricity, fertilisers, pesticides, technical know-how, high yielding varieties, infrastructural development, market support etc.

Japan and the EC also stressed the importance of agriculture as multifunctional. Japan submitted a paper on the ‘Non-trade Concerns on Agriculture’ (AIE/25), highlighting the areas in the AoA which spell out the importance of issues such as food security.

It also cites parts of the FAO/World Food Summit ‘Rome Declaration’ that reinforces the primacy of food security. Food security.. ‘necessitates concerted national action, and effective international efforts to supplement and reinforce national action...’ (Rome Declaration paragraph 10).

The EU’s paper (AIE/40) ‘The Multifunctional Character of Agriculture’ states that ‘the role of agriculture is not only to produce agricultural goods at the lowest possible cost.’ Instead, the role of agriculture is also to ‘ensure safe and high quality goods, protect the environment, save finite resources, preserve rural landscapes and contribute to the socio-economic development of rural areas including the generation of employment opportunities’.

The EU’s point is that ‘public intervention’ (read government subsidies) are necessary if these public goods are to be a reality.

Developing countries should therefore ride on this tide of resistance and also put forward their concerns. They should form alliances both with developed and other developing countries in order to strengthen their position.

Fundamental Difference Between Exporting and Importing Countries’ Concept of Agricultural Support

It has to be said, however, that there is a fundamental difference between a net-food importing developing country’s position and that of an exporting developed country in the area of agricultural support for food security and sufficiency.

While all governments should have the autonomy to provide the types of domestic supports they need to encourage the growth of their agricultural sector, differentiation must be made between domestic support measures which are presently being used to carve out a niche in the international trade and between those measures which allow developing countries to be self-sufficient and alleviate rural poverty.

Food Security Through Domestic Production: Is it possible for All?

Even many net-food importing developing countries, which up to now have kept silent in the AIE process, may scoff at the idea of being food self-sufficient. The structure of their economies -- industrial and agricultural -- may not allow them to pursue such a policy.

In answer to these doubts, they should keep in mind that

1) Countries need not be totally self-sufficient, but should aim to have a minimal level of self-sufficiency.

2) Trade will certainly be necessary. If the demand for food cannot be met domestically, trade will be necessary, regionally or internationally. However, the emphasis should be on domestic and regional self-reliance.

3) It is not realistic to expect NFIDCs to be self-sufficient overnight. But it can be a policy that is implemented over a period of time.

4) To make this all possible, it will be necessary to phase out export dumping - or what is euphemistically termed ‘subsidised exports’. Countries may be subsidising their exports either through ‘export subsidies’, or through measures which are legalised in the ‘Green Box’ - what is usually seen as non or minimally trade distorting subsidies. Countries should have the autonomy to subsidise their agricultural sector to whatever extent they wish, as long as they do not export these subsidised products.

Conclusion

The international community is standing at crossroads: it can choose to lay the foundations of food security or food scarcity for the next millennium. 1 billion people today face severe food shortage. It is in our power to decide if this number is reduced or multiplied.

To make a prudent decision, it will require the commitment of all governments at the WTO to speak up on their experience, a commitment that has to come from sincere concern over the welfare of their people. If developing countries choose to speak up against the tide of liberalisation that is presently sweeping them off their feet, and which could potentially turn into a tidal wave, they will find themselves in a powerful position since they make up the majority, rather then what seems to be the present minority.

* Aileen Kwa is a research associate with Focus on the Global South