The Great Trade Robbery

The new framework - a "common vision" rather than a detailed plan - is aimed at furtherdestroying whatever remains of the strong foundations of food self-sufficiency in some of the developingcountries already wilting under the compound impact of the Agreement on Agriculture (AoA). For the smallfarmers and giant agribusiness in North America, Europe and the Pacific, it will however be business as usual.Rich countries subsidise agribusiness by allowing them to buy very cheap, with the government then making upsome of the differences with direct payment to farmers.

So much so that the recipients of the US agricultural subsidies in 2001 also included Ted Turner and DavidRockefeller - no wonder, the CNN continues to stifle the voice of the developing countries farmers. Therichest man in the United Kingdom, the Duke of Westminster, who owns about 55,000 hectares of farm estates,receives an average subsidy of 300,000 pound sterlings as direct payments, and in addition gets 350,000 poundsa year for the 1,200 dairy cows he owns.

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

Irrespective of the stark inequalities, the new agreement throws a stronger protective ring around thedomestic 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 onceagain. Cancun provides them a perfect playground to arm-twist the developing countries into submission.

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

Trade liberalization has already exposed developing country farmers to ruinous competition, driving downprices, undermining rural wages and exacerbating unemployment. In the Philippines, opening up of corn marketin 1997 reduced corn prices by one-third. At that time, US corn growers were receiving US $ 20,000 a year onaverage in subsidies, while Filipino farmers in Mindanao had average income levels of US $ 365. Between1993-2000, cheap corn imports from US into Mexico increased eighteen times, leading to accelerated migrationfrom rural areas to urban centres.

In Central America -- Colombia, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua - the price ofcoffee beans have fallen to just 25 per cent of its level in 1960, and the region lost an estimated US $ 713million in coffee revenues in 2001. In these countries, traditionally dependent upon coffee exports, over170,000 jobs were lost the same year with the loss in wages computed at US $ 140 million. The negative impactwas also felt in sub-Saharan Africa, where Ethiopia and Uganda reported huge losses in export revenues. In2000-01, 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 fromUS $ 257 million to US $ 149 million between 1999-2000. Ironically, in January 2002, the EU and USAID warnedof increased poverty and food insecurity in Ethiopia not realizing that much of the fault rests with their ownpolicies.

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 southernprovinces of Karnataka and Tamil Nadu. In Brazil, low coffee returns have resulted in increased unemploymentand hunger. In Honduras, such has been the terrible impact that the World Food Programme reported in March2002 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 $3.9 billion in subsidy payments, for producing acotton crop that was worth only US$ 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 thegross domestic product of several African countries and three times the amount the US spends on aid to half abillion 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 andPakistan too have been forced to lower import duties, allowing a surge of cotton imports thereby pushingfarmers 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 industrytoo complains of export dumping. In 1999-2000, India imported over 130,000 tonnes of EU's highly subsidizedskimmed milk powder. This was the result of Euro 5 million export subsidies that were provided, approximately10,000 times the annual income of a small-scale milk producer. Butter export subsidy paid by the EU, forinstance, is currently at a five-year high and butter export refunds have risen to an equivalent of 60 percent of the EU market price. Consequently, butter oil import into India has grown at an average rate of 7.7per 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 dairysector.

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 ofvegetables in the world, the import of vegetables has almost doubled in just one year - from Rs 92.8 millionin 2001-02 to Rs 171 million in 2002-03. Far away in Peru, food imports increased dramatically in the wake ofliberalization. Food imports now account for 40 per cent of the total national food consumption. Wheat importsdoubled in the 1990s, imports of maize overtook domestic production, and milk imports rose three times in thefirst 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' onagriculture. Everyday, thousands of farmers and the rural people in the majority world - without land andadequate livelihoods - constituting a reservoir of frustration and disaffection, trudge to the cities, theirabject 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 arebeing fed a daily dose of promises - increase in poverty in the short-run is a price that has to be paid forlong-term economic growth.

The complete impact on human lives - women and children in particular - and the resulting loss inlivelihood security and thereby the accelerated march towards hunger and destitution cannot be easilyquantified. Surging food imports have hit farm incomes and had severe employment effects in many developingcountries. 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.

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

The colourful band of boxes - green box, blue box and amber box - have come in handy for the rich countriesto 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 lowprevailing world markets. Still further, US is permitted under AoA to provide $ 363 million in exportsubsidies for wheat and wheat flour, and the EU can limit it to $ 1.4 billion a year. At the same time, the USincurs annually $ 478 million under its Export Enhancement Programme (EEP), which is not being subject to anyreduction commitments.

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

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

On the other hand, 'green box' and 'blue box' subsidies categorise the farm support that only the richcountries were providing, and which the developing countries are not in a position to afford. Subsequently, inJuly 2002, the US proposed significant cuts in 'trade distorting' domestic support for all products and tradepartners, with a ceiling of five per cent of the value of agricultural production for industrial countries and10 per cent for developing countries. This however does not mean that the US will make any major cuts in itsfarm subsidy support, despite the US Farm Security and Rural Investment Act 2002, which provides for US $ 180billion in subsidies to agriculture for the next ten years, with more than a third coming in the first threeyears.

New EU Common Agricultural Policy reform proposals that have been announced prior to the Cancun WTOMinisterial have also made no attempt to make radical changes in reduction commitments. Moving on US lines, ithas shifted most of the 'blue box' subsidies to 'green box'. European agriculture will continue to besubsidised to the tune of Euro 43 billion for another decade, and that amount will increase further when thenew members join in. Like a magician, both the US and EU have managed to juggle the farm support from one boxto another without making any significant commitments. The magical trick is now being used to create anillusion of sincerity of the rich towards 'free' trade, using it as a bargaining block for seeking more marketaccess from the poor countries.

As if the massive subsidies are not enough, developed countries have used high tariffs to successfullyblock imports from developing countries. They have used special safeguards (SSG), used only by 38 richcountries so far, to restrict imports from developing countries. Developed countries took advantage of thisflexibility by reserving the right to use the SSG for a large number of products: Canada reserves the right touse SSG for 150 tariff lines, the EU for 539 tariff lines, Japan for 121 tariff lines, the US for 189 tarifflines, and Switzerland for 961 tariff lines. On the other hand, only 22 developing countries can use SSG. Themost vulnerable of the WTO members, whose trade in agricultural products take place under a tariff onlyregime, have been denied to access to these instruments.

At the same time, these countries have managed to fulfil the technical requirements for tariff cuts underAoA without any meaningful reductions. Although the US, EU, Japan and Canada maintain tariff peaks of 350 to900 per cent on food products such as sugar, rice, dairy products, meat, fruits, vegetables and fish thethrust of the ongoing negotiations remain on pierce opening the developing country markets to more subsidisedexports.

Keeping the economic interests of the developed countries in mind, the chair of the agriculturalnegotiations, Stuart Harbinson, had proposed a compromise formula that suggested creation of two newinstruments: 'special products' and 'special safeguard mechanisms'. For crops which are crucial for foodsecurity needs, the proposal is to put them in the SP category for which the tariff reduction should on anaverage be of 10 per cent with a minimum reduction rate per tariff line of five percent. For the remainingproducts, tariff reduction should be between 25 to 40 per cent. The US-EU proposal however does not make amention of the special products. The general feeling is that developing countries do require special safeguardmeasures that act as a partial protection rather than they be allowed a more permanent feature of resorting to'special products'.

For all practical purposes, the concept of 'strategic products' or 'special products' is merely a proxy forthe 'development box', a proposal that will eventually turn out to be more damming if implemented. Moreover,the negotiations are going to be centred around the number of 'special products' that a country can claim. Inother words, the debate will very conveniently shift from the more contentious issue of agricultural subsidiesin the west. The AoA does not realize that production of crops and its imports into developing countriescannot be equated with industrial production. What the developing countries need is a trading system thatrecognises their specific needs of food security and rural development based on the principle of production bythe masses rather than production for the masses.

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 developedcountries." No wonder, while the negotiation continues and the developing countries are kept busy withdiversionary tactics like 'special products', agricultural exports from the OECD countries continue to rise.Between 1970 and 2000, EU share in agricultural exports increased from 28.1 per cent to 42.7 per cent. Franceincreased its share from 5.7 per cent to 8.1 per cent, Germany from 2.6 per cent to 5.9 per cent and UnitedKingdom from 2.7 per cent to 4.1 per cent.

Developing countries cannot afford to be a silent spectator. If the rich industrialized countries canprotect their agriculture, developing countries should not feel shy in doing the same. Instead of succumbingto pressure tactics that comes along with olive branch of a 'development box' or 'special products' that helpsin partially protecting agriculture, the entire effort should be to demand the abolition of agriculturalsubsidies in the OECD countries. A collective stand based on the following three planks is the only wayforward for developing countries to protect agriculture, the mainstay of their economies: