Trade policy reform on its own is not a panacea for food insecurity and hunger in our world. However, poverty cannot be reduced significantly without trade policies and rules which give the countries of the South additional advantages and opportunities, and the ability to protect themselves against unfair trade.

This publication calls upon the rich and powerful countries, the EU in particular, to redress the existing imbalances and inequities to make trade work for development and poverty reduction. Nowhere is change more critical than in relation to the WTO’s Agreement on Agriculture (AoA). This paper shows that the AoA is skewed in favour of northern corporate agricultural interests and has many deficiencies and defects which threaten the livelihoods of small farmers in the South.

The EU, the world’s largest trading bloc but also its biggest aid donor, has a particular responsibility to ensure that trade serves to enhance and not to undermine development efforts. As food security is among the EU’s six priority areas for development co-operation, we call on the Union to pursue, at WTO level, those types of trade policies that are coherent with and advance its objectives of food security and poverty reduction.

The analysis, reflections and recommendations for a pro-poor trade agenda presented in this paper constitute a key part of CIDSE’s advocacy work on issues of economic justice.

Jef Felix
Secretary General
CIDSE

Executive Summary

Trade policy and food security are fundamentally matters of justice and human rights. Although the current system of multilateral rules was agreed by consensus, it was designed by a small number of economically powerful states primarily to promote their own economic interests. The World Trade Organisation (WTO) must change, from an organisation that sees trade and trade liberalisation as ends in themselves to one that places trade at the service of human development.

The Agreement on Agriculture (AoA)

The principal international agreement on agricultural trade should enshrine as its overarching goal the World Food Summit commitment to halving world hunger by 2015. Thus far, the AoA has promoted an industrial model of agriculture that has jeopardised food security in developing countries. More productive and sustainable methods exist, but are not being properly promoted.

The agreement has legitimised the use of subsidies in developed countries, while narrowing the options available to developing countries, which must compete in an increasingly global market. The result is the worst of both worlds. Food security, and the potential of agriculture as an engine of growth for the South, have been undermined.

The global food chain is increasingly distorted by the disparities in power between global agribusinesses, on the one hand, and farmers and consumers on the other. This is driving the liberalisation of agriculture and the food trade in directions inimical to the public interest. Many developing countries have unilaterally liberalised their trade regimes (often as part of structural adjustment programmes), in reforms they are prevented from reversing by the WTO. There has been no reciprocal liberalisation in the North.

The AoA has not fulfilled predictions that it would lead to rising world prices for farmers and falling levels of production in the US and the EU. In part this is because the EU and US introduced exemptions into the agreement, enabling them to increase their support to farmers. Under the AoA, world food prices have in fact fallen, but net food-importing developing countries have failed to reap the benefits, partly because of corporate control of the global food business.

Issues for developing countries

In the WTO, some issues of major concern to developing countries are:

· The continuing protectionism and double standards displayed by the developed countries.

· The problems of implementing the Uruguay Round, including the difficulty of implementing so many agreements in so short a time; the damaging consequences for health and development of some aspects of the agreement on Trade-Related Intellectual Property Rights (TRIPs) and the protectionist abuse by developed countries of textiles liberalisation, anti-dumping rules, and the rules on Sanitary and Phytosanitary Standards.

· Many of the poorest countries rely on preferential access to developed country markets, which has in many cases been eroded by the AoA and other free trade agreements.

· Despite the promises of the AoA, domestic support for agriculture has risen in developed countries, leading to the dumping of subsidised food on to the world market, with damaging effects on southern producers.

· Provision for Special and Differential treatment (S&D) has been systematically watered down. It now involves little more than exemptions for the least developed countries, and longer transition periods for other developing countries. There is a need to rethink S&D in order to turn the WTO into an institution that works for development, poverty reduction and food security. One step in this direction would be to introduce a Development Box into the AoA. Another would be to convert existing S&D provisions from “best endeavour” clauses into binding and operational elements of the agreement.

· Above all, the AoA has failed to strengthen, and in many cases has undermined, the food security of poor households and communities in developing countries.

Doha

Very little substantive progress has been made at the WTO since the ministerial meeting in 1999 in Seattle. At the next meeting, in November 2001 in Doha, there is likely to be serious disagreement between proponents of a broad round, proponents of a limited round and those developing countries that oppose any new round until their concerns have been addressed. Most NGOs, including CIDSE, support this last position, requiring that the WTO put its house in order before moving on to new areas.

Recommendations

1. Targets

· The WTO should state publicly that the achievement of the 2015 poverty reduction target is an explicit objective of its work.

· The AoA should adopt the World Food Summit target of halving world hunger by the same date.

2. The AoA should be reformed to:

· Reduce the excessive levels of domestic support and export subsidy in the developed countries, which are seriously undermining developing countries’ trading prospects by dumping cheap food on the world market, thereby artificially reducing world prices.

· Increase access for developing country exports (especially those produced largely by small farmers) to developed country markets.

· Increase flexibility for developing country governments to protect and support small farmers and the production of food security crops, by introducing a Development Box into the AoA.

· Give extra help to those poor countries that have seen their preferential trade agreements eroded by broader tariff reductions.

· Overhaul the Marrakesh Decision and make it operational by using a given world food price to trigger access to international aid for food purchases.

3. The TRIPs agreement is in urgent need of reform because it restricts public access to genetic resources and undermines food security in developing countries. In particular, governments that want to ensure that intellectual property rights regimes genuinely benefit poor people and communities in developing countries should seek to:

· Use the current substantive review of Article 27.3(b) of TRIPs to exclude all life forms from patenting and remove the requirement for plant variety protection.

· Ensure consistency between TRIPs and the provisions of the Convention on Biological Diversity – ensuring free and fair access to genetic resources, prior and informed consent, and benefit sharing.

· Stop the development and commercial application of ‘terminator technologies’.

4. CIDSE’s members do not support the EU’s proposal for a broad round of negotiations. Instead, the priorities for the WTO in the coming years should include:

· Giving serious attention to the many difficulties in implementing the Uruguay Round of trade agreements.

· Bringing the agriculture negotiations to a successful and pro-poor conclusion.

· Introducing impact assessment as a central activity, both in reviewing past agreements and policies, and in designing any new agreements.

· Broader institutional reform of the WTO to ensure greater transparency, and more equal participation by developing country members

· A greatly enhanced role for Special and Differential treatment for developing countries, focussing on measures to end poverty and food insecurity.

Foreword

Trade policy and food security are fundamentally matters of justice and human rights. Access to adequate food is a fundamental human right. States and international organisations should co-operate in joint and separate action to achieve the full realisation of the right to food.

Catholic development agencies in Europe and North America, with their wealth of experience of, reflection on and commitment to social and economic justice, are increasingly engaging with issues of trade and the power relationships behind them. CIDSE and its member organisations are calling for a global ethic, one in which trade and globalisation work for poor people and their communities, and in which trade policies help build cohesive societies as well as sound economies.

Catholic Social Teaching has highlighted the urgency of ending hunger and achieving food security, and speaks strongly on the values that should underpin global economic relations and structures. Pope John Paul II notes that “a society of free work, of enterprise, of participation ... demands that the market be appropriately controlled by the forces of society and by the state so as to guarantee that the basic needs of the whole society are satisfied” (Centesimus Annus No. 35). No need is greater than that for food.

Although no single panacea exists that would tackle world hunger and promote food security, some necessary elements have been identified. In trade, especially agricultural trade, the current system is one of multilateral rules agreed by consensus, but primarily designed by a small number of economically powerful states. Agreements born out of such unequal circumstances cannot represent a fair balance of interests. This inequality brings into question the legitimacy of current trade agreements and the approach to trade liberalisation on which they are based. The WTO, as the international body primarily charged with overseeing trade policy, particularly the liberalisation of markets, has come in for especially heavy criticism in this regard.

Some key principles underlying Catholic Social Teaching are useful in analysing current debates on trade liberalisation and the role of the WTO. While the principle of subsidiarity in Catholic Social Teaching is often taken to mean that decisions should be taken as close as possible to those directly affected by them, this same principle also demands higher levels of organisational authority where lower ones cannot carry out such responsibilities. Catholic and other Church leaders have pointed to the need for organs of global governance to provide for the common good of the whole human family. Such a viewpoint provides a rationale for building a fair and just rules-based international trading system, avoiding a descent into “beggar my neighbour” trade policies.

Global trade rules must encompass a commitment to justice in order to ensure that people have what they need to survive and develop, including food security. It is not enough merely to ensure that everyone has an opportunity to compete. Catholic Social Teaching stresses the need for co-operation as well as competition. In the case of agricultural trade, many developing countries are seeking greater special and differential provisions to guarantee food security and support for local farmers. However, while developed countries make a show of listening to developing country needs, the nature of negotiations ensures that the strongest players extract the greatest concessions and shape the outcome to suit their immediate interests. Taking an ethical perspective and drawing on Catholic Social Teaching means asking what the impact of policies will be on the poor. This requires a “poverty-proofing” of trade policies by considering their potential impact on the poor and vulnerable before they are implemented, and assessing that impact once implementation has begun.

In assessing the impact of trade policies and their future directions, CIDSE agencies’ commitment to tackling the root causes of poverty requires us to highlight how trade policies can undermine the food security of the world’s poor. Often such damaging impacts spring from the disparities in power between the parties negotiating the rules that govern world trade. A poverty focus also obliges us to suggest how trade and other policies can help tackle inequality and deprivation. At the same time, drawing on the principle of subsidiarity and the right of people to participate in the decisions affecting their lives, this report highlights the importance of giving governments and civil societies in the developing world the space to be the authors of their own development and through this to arrive at optimal policy choices. The present imbalance, with developing countries lacking the resources and negotiating capacity to present their case at the WTO, works against this. The international community must begin to support capacity building in this area.

CIDSE’s analysis shows that radical new thinking is needed by trade policy-makers. Often policy-makers fail to distinguish between development (things getting better, as measured by poverty reduction, greater social inclusion, and so on) and more rapid growth in exports and gross national product (things getting bigger). Experience is increasingly showing that the most successful efforts at development are participatory in design and implementation. That means governments engaging with their civil societies. The intention of the analysis, reflections and recommendations contained in this paper is to help decision-makers move towards effective joint action to make sure that trade policies reduce poverty and inequality and to make them effective instruments for the promotion of food security for all. In the end, trade as a process of exchange should represent a fair social bargain, not a narrow and unequal economic transaction. Viewing trade policy through such a lens would help ensure that the WTO supports trading for development rather than working to develop trade at any cost.

Summary

· Trade policy and food security are fundamentally matters of justice and human rights.

· Although the current system of multilateral rules was agreed by consensus, it was designed by a small number of economically powerful states to promote their own economic interests.

· The WTO must change from an organisation that puts trade and trade liberalisation first, to one that places trade at the service of human development.

Introduction

At the World Food Summit (WFS) in 1996, the UN Food and Agriculture Organisation (FAO) defined food security as “food that is available at all times, that all persons have means of access to it, that it is nutritionally adequate in terms of quantity, quality and variety, and that it is acceptable within the given culture.”¹ No definition is perfect, but this definition provides a helpful basis for policy.² For CIDSE and many other non-governmental organisations (NGOs) working to promote food security, access to sufficient and appropriate food is a human right.

Agricultural production, consumer health, nutrition, employment and trade policy all affect food security. To ensure food security entails a consideration of both national and household levels of supply and distribution of, and access to, food. It is a complex issue, which is often defined in simplistic ways. The definition of food security as a country’s access to world markets for food is deeply inadequate, yet so widely accepted in some government and multilateral circles that many NGOs and farm organisations have turned to other phrases to capture more precisely what they mean by food security. For these organisations, building food security by relying on imports paid for by exports is a problematic and risky strategy that forecloses the potential of agricultural production as an engine of development.

Thus the term “food sovereignty” has entered NGO vocabulary. Coined by La VÌa Campesina (an international association of peasant and small farmers from every continent) in its 1996 Tlaxcala Declaration, food sovereignty introduces the element of national decision-making into food security.³ The concept does not mean self-sufficient production at the national level, but emphasises the centrality of national decision-making structures in determining food and agriculture policy. The role for trade in this strategy is left up to national governments rather than to international trade bodies.

All people, whether in developed or developing countries, have an interest in the production of safe, ecologically sound food in adequate quantities to meet their own needs and those of their families and communities. Many countries, in North and South, have invested heavily in their agricultural sectors and have an interest in protecting and promoting that investment. This is not only a matter of economics, but also of culture, social fabric, ecologies, and genetic resources. For hundreds of millions of people living in developing countries today, it is a matter of life or death. In the North, the issues are less raw, perhaps, but long histories of misguided public programmes and unchecked industrialisation have damaged the trust between producer and consumer and left rural communities to waste away. This is not just a struggle between rich farmers in the North and poor farmers in the South (although that too is true), but a clash between competing world views and models for agriculture.

The WTO Agreement on Agriculture (AoA) presupposes a model for agriculture and reinforces that model through the rules it establishes. It is a model for wealthy countries that wish to pursue industrial agriculture. It ignores the needs and interests of the billions of farmers who do not live in that world. While ostensibly dealing only with world markets and trade, the agreement dictates the kind of border measures (trade tariffs and quotas) that countries can impose in their agricultural sectors and the kind of investment they can make. As this paper will show, by only half doing the job of trade liberalisation, the agreement has legitimised the use of subsidies in developed countries, while narrowing the options available to developing countries that must compete in an increasingly global market. The result is the worst of both worlds. Food security, and the potential of agriculture as an engine of growth for the South, have been jeopardised in the process.

Agriculture is overwhelmingly important for the economies and livelihoods of developing countries. In the developed countries 8 per cent of people farm for a living (in the US it is only 2 per cent, in the EU just over 4 per cent). In the South, those numbers rise above 80 per cent and average more than 50 per cent.⁴ If there is one sector in which developing countries ought to have an edge, it is agriculture. In practice, however, this is not so. It is important to understand why, and to ensure that any recommendations for future policy are grounded in this understanding.

Power and policy making

The World Trade Organisation (WTO) is a political rather than an economic forum. At its heart lies an uncomfortable contradiction between economic theory and practice. On the one hand, the WTO espouses free trade theories, arguing that the main beneficiaries of liberalisation are consumers and producers in the countries that liberalise. If WTO members acted on this basis, there would be a stampede of delegations offering to liberalise their economies. In practice, however, delegations operate as mercantilists, trying to extract maximum trade liberalisation from their trading partners, while minimising their own.

Under structural adjustment programmes, the South has been obliged to liberalise unilaterally. A simple version of the role of structural adjustment programmes in changing trade policy goes this way: owing to excessive borrowing (and rash lending by northern banks) in the 1970s and the rapid increase in interest rates in the early 1980s, many developing countries found themselves trapped by unsustainable levels of debt.⁵ Twenty years later, efforts to resolve the crisis are limited to finding ways of keeping the debt payments manageable – while forcing countries to prioritise exports in order to earn the foreign exchange needed to pay interest on their debts. The indebted countries came to depend on the International Monetary Fund (IMF) and World Bank for capital, and these institutions forced on them a series of economic policy changes, called structural adjustment programmes, which oriented developing economies to servicing world trade and increased their dependence on access to developed country markets. However, much less was done to open up access to markets in the North. The WTO agreements then locked these changes into trade policy in the South, but without changing the fundamental power dynamic of the world economy, which makes the poor countries serve the wealthy.

The reality of global trade shows the power imbalances that underlie the WTO. By 1999, the EU countries accounted for 38 per cent of global imports (almost two-thirds of it between EU member states)⁶ Trade volumes (imports and exports) expanded in all regions of the world in 2000, but particularly for developing countries and the transition economies of the former Soviet Union. But the volume of exports did not grow for those countries in Africa and Latin America that remain dependent on a few non-oil primary commodities.⁷ Far too many countries – those with least access to foreign exchange to pay for imports – are increasing their dependence on world markets. There is little sign yet that the international trade agreements of the 1990s have contributed to the development potential of countries in the South. The northern markets of most interest to developing countries, notably textiles and agriculture, remain heavily protected.

Beyond these somewhat crude measures (increased trade volume as indicator of development), it is not clear that market access and export-based development are the best strategy to reduce poverty. The experience of Asian countries, some of which have made startling progress in reducing poverty among their peoples, indicates the importance of supportive domestic policies, including universal education and access to resources, for example through land reform. Access to foreign markets can then provide a helpful impetus to investment and economic growth. But the overall experience is that relatively few developing countries have been able to continue reinvesting the gains from export growth into higher value industries. Globalisation as structured by existing rules makes it very easy for companies to move whenever they find cheaper labour (from Taiwan to Malaysia to Vietnam) while other, higher value, industries do not necessarily develop to take their place.

Talking to farmers in North and South reveals that this is not a simple North/ South divide. The hypocrisy of the US and EU aside (protecting themselves at the expense of the South) some interests remain invisible within the current trade debate. The model of industrial, export-oriented agriculture does not serve farmers, whether they live in Belgium and want to retain floor prices and high tariffs, or in Mali, where most farmers work with hardly any capital or external inputs. Farmers do not themselves engage in trade at the global level. They sell to companies that trade, whether grain traders, processors or retailers (and some firms fit more than one category). There are many powerful actors, such as the multinational corporations that dominate international trade, who for the most part support (and often actively promote) the trade system represented by the WTO agreements, but are largely invisible in the negotiations and policy debates.

Agribusiness

The global food chain is increasingly consolidated both horizontally, among those performing one function in the chain (for example, food processing) and vertically, between functions: across input supply, trading, processing and retailing. One effect of this is to create price transparency problems. For example, the vast majority of chickens destined for the dinner table in the US are sold only when they go from processor to retailer. There is no longer any independent check (price discovery) on chicks, chicken rearing, transport and slaughter costs. This is an almost completely vertically integrated sector. Another example of vertical integration is provided by Cargill, a private commodity trader and the largest private company in the US, and Monsanto, a chemical company made famous recently by its promotion of genetically engineered crops. Cargill recently sold its international seed business to Monsanto for US$1.4 billion. The companies then announced a joint venture to develop genetically engineered foods to meet specialised needs. Between Monsanto and Cargill, the venture will have access to every stage of the food chain except on-farm cultivation and final sale to consumers. This concentration of market power allows companies to skim off the lion’s share of whatever wealth is generated, at the expense of both farmers and consumers.

Horizontal integration also prevents agricultural markets from functioning properly. In 1998, a company called Glencore controlled 80 per cent of all trans-border maize shipments in Southern Africa. At the time, the company was negotiating with the government of Zimbabwe to replace the state-operated Maize Board with a 100 per cent monopoly on maize imports. Maize is a staple food in the region and is vital to Zimbabwe’s food security. The domination of staple food supplies by only one or two players in a region creates clear potential for market distortions, and a considerable political weapon.

Cargill is one of the top two exporters of soybeans from the US, Argentina and Brazil, who between them dominate world supply. Cargill exports an estimated 40 per cent of the corn that leaves the US, which in turn supplies about 30 per cent of the world market. Cargill is a major corn exporter and importer around the world, buying, shipping and milling grain in more countries than there are WTO members (160 or so). This kind of market power is an aspect of global agricultural trade that is entirely ignored by the current rules but that cries out for more attention, to ensure market distortions are managed. Even simple transparency measures are not yet in place. Trade rules need to reflect the actual conditions under which markets work, rather than theoretical models of efficient markets that have little connection to reality.

CASE STUDY

Burkina Faso

Consumers fail to gain from trade liberalisation⁸

Burkina Faso has undergone trade liberalisation in a number of sectors, but the predicted social benefits of importing food at lower world prices have failed to accrue to consumers. This has undermined food security.

The lack of connection between world prices and consumer prices is explained by the control of marketing networks. Trade liberalisation has pushed up the number of rural traders and improved access to the market for rural producers. However, to a large extent, large urban traders have retained control. Since 1992, the concentration of power in the marketing chain has had more effect on consumer prices and their stabilisation than have regional economic policies.

This phenomenon – of the gains of liberalisation being captured by companies in the distribution chain, rather than by consumers – has been observed in several countries.

Making globalisation work for the poor

The WTO in practice treats trade and trade liberalisation as ends in themselves, rather than as means to achieve the greater goal of human development. CIDSE believes a change of approach, placing human development needs above the dictates of free trade theory, is essential to make the WTO an effective and pro-poor member of the international system.

International trade rules embodied in the WTO are part of a process of globalisation that brings both opportunities and threats for the poor. This process adds to the fear of millions of people that they will lose influence and control over decisions that affect their lives, the fear that economic forces invisible to ordinary citizens are taking over the roles of politicians and legislators without the corresponding degree of public control. The peaceful demonstrators in Seattle, Quebec and Genoa (who far outnumbered the violent protesters) have shown that this political analysis has taken root among a wide range of civil society organisations in both South and North. Debt cancellation for developing countries in the South, codes of conduct for multinationals, Tobin-type taxes on capital flows – many of these proposals are part of a “people before profit” agenda of pragmatic policy solutions emerging from protest movements, including Catholic development organisations and other Church-based groups.

The global community is committed to a number of international development goals derived from recent UN world conferences. Most immediately relevant to the AoA are the commitments made at the WFS in 1996,⁹ when leaders of 186 countries committed their governments to halving the number of malnourished people in the world by 2015. Latest projections from the FAO, however, suggest that progress is likely to fall well short of that figure, with 580 million people malnourished in 2015, rather than the target of 400 million. The most recent figures (1996-98) show that 792 million people in developing countries are undernourished.¹⁰ The WFS also committed world leaders to “ensuring that food trade and trade policies in general foster food security for all.” Moreover, the Universal Declaration of Human Rights and the Covenant on Economic, Social and Cultural Rights both guarantee the right to food.¹¹

The urgency of the task was captured in the FAO’s publication The State of Food and Agriculture, 2000:
"Despite past progress, during the 1990s one in five people in developing countries ate less than the caloric minima for metabolic, work and other functions. Worldwide, there are still more than 150 million children under five who are underweight; more than 200 million – more than one in four – are stunted. These conditions appear to be implicated in about half of the 12 million deaths annually of children under five and, for some of the more damaged survivors, in physical and even mental retardation."¹²

The importance of these targets lies, in part, in providing the international community with guidelines for developing national and multilateral policy. As long as governments choose not to create a link between the WTO and the UN system, legal and moral tension will remain, because commitments that states undertake in one arena are not coherent with those they undertake in another. The struggle between the protection of intellectual property rights provided by the Trade Related Intellectual Property Rights (TRIPs) agreement and the imperative to provide affordable healthcare to people is only one of many examples.

CIDSE is calling on the WTO to make the WFS commitments an overarching goal of any new AoA.

Were governments at the WTO to adopt such a shared international vision, they would be providing substance to their stated objectives of realising sustainable development and economic opportunity for the South. Embedding trade policy in national food security and poverty reduction strategies would also increase the sense of national ownership. Too often trade liberalisation is seen in developing countries as something imposed by the IMF or a government’s commitments at the WTO. The WFS commitments would provide a framework for assessing the successes and failures of the agreements in practice, helping to shape future trade rules. It would also provide a basis for the discussion among developed and developing countries on how to implement the agreements.

In the days before the WTO ministerial meeting in Doha on 9-13 November, the countries present at the WFS in 1996 will reassemble to take stock of the progress made in the past five years. It is vital that the sense of urgency and commitment to ending world hunger carries over to the meeting in Doha, setting the tone for serious reforms at the WTO.

Agriculture and development

Larger developing countries contain vast internal differences. In China, Brazil, India, and South Africa, urban and rural areas seem like different countries. Moreover, the gap between rural and urban development is real and increasing. Governments must choose between the employment creation potential of globalisation, perhaps with safety nets if countries can afford them, and the need to protect the livelihoods of vulnerable populations. In a country such as India, the rural population numbers some 500 million people – nearly double the entire population of the US.

This leads to the question of what kind of agriculture to support. The South is overwhelmingly agricultural, yet few of its people are engaged in an agriculture that has anything to do with the world market. While researchers celebrate the sustainable practices and responsible resource management found in developing countries, international economic pressures, together with age-old local power structures, are driving people from the land. Moreover, the AoA, as currently constituted, pushes countries away from more sustainable options towards an industrialised model of agriculture. Simply changing the language in the AoA will not resolve these problems.

The challenge is to develop models for agriculture that strengthen public goods (including food security), resilient ecosystems, vibrant economies, and genetic diversity. To some extent, this is already happening. Researchers at the University of Essex found that 9 million farmers around the developing world now use sustainable agricultural practices and technologies, up from 0.5 million in 1990. The new approaches, which account for about 3 per cent of all agricultural land, have systematically improved yields:

· When 45,000 families in Guatemala, Nicaragua and Honduras introduced the nitrogen-fixing velvet bean into their maize fields, the natural fertiliser produced by ploughing the bean back into the soil led to a rise in yields from 400-600kg/ha to 2,000-2,500 kg/ha.

· Kenyan farmers who used double-dug beds with composting, green and animal manures found that after four to six seasons, their land had better water holding capacity, and was able to sustain vegetable growth into the dry season. The number of households free from hunger rose from 43 per cent to 75 per cent, the number of households buying vegetables during the year fell from 85 per cent to 11 per cent, and the number of maize self-sufficient households more than doubled from 22 per cent to 48 per cent.¹³

We should acknowledge that local communities and the domestic private sector can protect and promote some of these practices, while recognising the role of accountable national governments and international institutions in moving towards better models. The WTO Agreement on Agriculture embodies one among several different models of agriculture. It favours large-scale, industrial farming, and – for the South in particular – significantly narrows the choices that each country can make about its own economic development.

Gender and agriculture

“There will be no food security without rural women” Jacques Diouf, FAO Director General

It is difficult to overstate the importance of women in developing country agriculture. Women account for 70-80 per cent of food grown in Sub-Saharan Africa, while in South and Southeast Asia, 60 per cent of the work in agriculture and food production is done by women. There is also an increasing trend towards the “feminisation of agriculture”, owing to conflict, HIV/AIDS and rural-urban migration.

However women also suffer from severe gender biases. Women face unequal access to capital (notably credit), legal and social ownership rights (land in particular) and inequalities in access to productive resources and services (including agricultural extension services, training, technology and market information). Women’s higher rates of illiteracy lead to exclusion from new market opportunities, while women farmers are often neglected by policy makers and their contribution to agriculture is not properly valued or understood.

These gender biases constrain and accentuate women’s ability successfully to take part in some sectors of developing country agriculture. What has been termed “gender exploitative integration” ¹⁴limits women’s participation in export-oriented agriculture, and also in larger-scale – and more profitable – activities (trading, marketing) in domestic agriculture. Gender biases in turn often trap women in low-productivity, low-growth economic activities, leaving them few opportunities other than home-based employment in low-technology sectors.

Many questions remain about how policies of trade liberalisation directly affect women. However there is a broad consensus that “Women… have tended to be the least able to seize [market liberalisation’s] opportunities, and are most likely to suffer from the rapid changes that societies undergo.” ¹⁵

Studies show that trade liberalisation often exacerbates existing gender differences and the “gendered nature of markets”:

· Two studies in Ghana found that liberalisation led to government prioritising the (mainly male-controlled) cocoa export crop rather than (mainly female-controlled) domestic crop production, disproportionately hurting women farmers.^{16 17}

· Better access to technology and credit, and a “gendered division of labour”, have led men to dominate the production of maize as a cash crop in Malawi (confining women to growing maize for home consumption).¹⁸

· In rice market liberalisation in Guinea, the relative market power of (predominantly male) traders means that (predominantly female) peasants receive small returns and therefore lack incentives to produce.¹⁹

However, the picture is by no means all negative. Women’s employment in non-traditional export crops is substantial and evidence suggests the number of women engaging in agricultural trading activities increased after liberalisation. However, women’s enterprises are more likely to be trapped in the vicious cycle of petty trading because of gender-based inequalities of access.²⁰

"The benefits of agricultural market liberalisation have been skewed towards medium and large-scale commercial farmers, large-scale private traders/wholesalers and processors, and transporters and other providers of market services. Since the majority of women’s activities are concentrated in small-scale farming, processing and petty trading, they have gained relatively limited benefits from liberalisation."²¹

Summary

· The AoA should enshrine as its overarching goal the WFS commitment to halving world hunger by 2015.

· The AoA as currently designed has promoted an industrial model of agriculture that has jeopardised food security in developing countries. More productive and sustainable methods exist, but are not being properly promoted. The agreement has in practice legitimised the use of subsidies in developed countries, while narrowing the options available to developing countries which must compete in an increasingly global market.

· The global food chain is increasingly distorted by the disparities in power between global agribusinesses on the one hand, and consumers and small farmers on the other. This is driving the liberalisation of agriculture and the food trade in directions inimical to the public interest.

· Many developing countries have unilaterally liberalised their trade regimes (often as part of structural adjustment programmes), in reforms that have then been locked in by the WTO. There has been no significant reciprocal liberalisation in the North.

· Women have tended to be the least able to seize the opportunities offered by market liberalisation, and are most likely to suffer from the rapid changes that it brings.

CASE STUDY

Mexico

Trade liberalisation harms small farmers²²
The North American Free Trade Agreement (NAFTA) demonstrates the dangers of rapidly liberalising trade without taking food security properly into account. For Mexicans, maize cultivation is the main source of livelihood for some 3 million producers, accounting for 40 per cent of the agricultural sector. US maize is grown on large farms at an average of 40 per cent of the cost of production in Mexico, with average yields per hectare between four and five times higher. Moreover, some 60 per cent of Mexican farmers use locally adapted varieties, providing a rich genetic resource-base for maize farming. Given the social sensitivity of maize, NAFTA allowed a 15-year phase-in of free trade in maize. However, the Mexican government waived this right and the maize trade was effectively tariff-free within 30 months. A massive influx of US maize ensued, leading to a sharp reduction in the price paid to Mexican producers. By August 1996, prices had fallen by 48 per cent and since that time have failed to recover significantly.

Contrary to expectations, this has not led to mass emigration from the countryside or a decline in Mexico’s maize production, which has held remarkably steady. Mexican farmers have continued to plant maize for a combination of economic and cultural reasons. Small farmers plant maize to have a crop (if they have irrigated land) or to claim the new ‘Procampo’ subsidy on rain-fed land: they plant the maize, claim their subsidy, and any crop is something of a bonus. However, the end of Procampo in 2008 could lead to increased emigration. Already the greater pressures on maize farmers, and the reform of the land tenure laws, have produced a sharp increase in land concentration, often within communities, with a few of the richer farmers buying out the rest.

The WTO and the Agreement on Agriculture

The WTO was established on 1 January, 1995 by an agreement negotiated within the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). The Uruguay Round of negotiations lasted from 1986 to 1994, lurching from crisis to crisis, often because of the agriculture negotiations. The creation of the WTO, proposed once the Uruguay negotiations were under way, established a permanent forum for trade negotiations. The GATT was first signed in 1947 but was not recognized in law as an international organisation, although it had a small secretariat based in Geneva to service trade negotiations and agreements.

The WTO is home to a series of trade agreements, including the most recent version of GATT, but also agreements on agriculture, services, intellectual property rights (IPR) and other issues that were never previously included in international trade rules.²³ Unlike IPR and services, agriculture and textiles were conceptually included in GATT in 1947, but all commitments were waived after interventions by the developed countries, especially the US. The Uruguay Round agreements were negotiated as a single undertaking, so that to be party to any one of the agreements, governments had to be party to all of them.

With the creation of a permanent forum for trade negotiations, governments established an enforcement mechanism to ensure members would abide by the rules. Annex 2 of the agreement created the Dispute Settlement Understanding (formally the Understanding on Rules and Procedures Governing The Settlement of Disputes). The resulting Dispute Settlement Body (DSB) hears complaints from member states about other states’ trading practices and decides whether or not the rules have been broken, and if so, what retaliation is permitted.

In practice, the DSB turns the essentially political process of trade negotiation into a legal matter, resulting in decisions that are often politically awkward to implement. Thus the EU has chosen to pay fines rather than relax its ban on imports of beef treated with growth hormones. Trade policy in food should not be reduced to discussions of science and economic theory. Politics and culture remain paramount concerns.

The WTO works by consensus. It has a governing body – the General Council – where every member is represented, although in practice many of the poorest countries find it hard to ensure adequate representation. Some 30 WTO members have no permanent mission in Geneva. This is largely due to the cost – the British government estimates that it costs around US$900,000 a year to run its relatively modest mission in Geneva (not including the costs of office buildings).²⁴ Every two years, Ministerial Conferences are held to review the work programme and direction of the organisation. There are a number of subsidiary bodies, including the council on Goods and Services. The Committee on Agriculture reports to this Council. For the purposes of the negotiations on agriculture, a special committee has been created that meets informally. All members are invited to belong to each of these structures.

The WTO works on the basis of several core principles. The first is “most favoured nation treatment” – every member of the WTO must extend to all other members the same trade advantages that it offers to its most favoured trading partner for any given product.²⁵ The second core principle is “national treatment”: imports must be subject to the same standards and rules (or better) as similar domestic products.

WTO negotiations are based on reciprocity: you gain access to my market only if I gain access to yours. This creates an unequal power dynamic: a country with a huge internal market such as the US or India is much more attractive to negotiators than a country with relatively few consumers. (Total population is less important than the number of people with money to spend.) To gain access to a large overseas market for their exports, countries will open up their own markets considerably. On the other hand, a relatively small, or even a large but poor country, such as Namibia or Bolivia, will often have only one or two sectors that are of interest to exporters. This puts these countries at a relative disadvantage in negotiations. For the EU, lack of access to Bangladesh’s markets is incomparably less significant than lack of access to the EU market is for Bangladesh. Nowhere in the WTO is this equity issue considered. Other imbalances are also obvious. For example, richer countries have more staff monitoring the talks and are much better placed to follow the profusion of informal meetings, consultations and negotiations that take place daily in Geneva.

Negotiations at the WTO are never about one sector alone. Negotiators try to balance different commercial sectors against one another to determine the most favourable outcome for the country as a whole. Even within sectors, there are conflicting interests. Grain processors want cheap grains, if necessary through imports, while farmers and local grain traders want to maintain good local prices. The EU, for example, seems prepared to liberalise its agriculture significantly, to the advantage of some producers (for example of wheat) at the expense of others who are less competitive (for example dairy farmers).

In considering the effects of trade liberalisation on agriculture, particularly the impact of the WTO Agreement on Agriculture, it is useful to remember the context of the negotiations in the 1980s. In reviewing the literature of the time, it is rare to find disagreement with the assessment that multilateral rules to govern the effect of governments’ agriculture policies on world markets were urgently needed.

Many developing country negotiators, particularly those whose countries export temperate agricultural commodities such as wheat or beef, hoped new rules could stabilise and increase world prices for temperate food products. The US and EU systems together lowered world prices and depressed production in other countries. Developing countries also wanted to increase their access to developed country markets. Since many developing countries had already liberalised their markets to a significant degree under structural adjustment programmes, they wanted to see reciprocal liberalisation from the North.²⁶

In the 1980s, development NGOs began investigating the impact of EU and US dumping policies on developing countries. It became clear that dumping was undermining domestic production and food security. Beef dumped from the EU was shown to have damaged the market for domestic livestock producers in countries such as Côte d’Ivoire and Burkina Faso.²⁷ NGOs also made a strong case against poorly timed food aid deliveries, which destroyed grain markets for local producers rather than supplementing local production.²⁸

However, the strongest supporters for a WTO Agreement on Agriculture were those who wanted to globalise food trade. Initially, the impetus came from the United States, whose negotiator on agriculture at the outset of the round was a former vice-president of Cargill.

The Agreement on Agriculture

The AoA has three so-called pillars: market access, domestic support and export subsidies. In general terms, the commitments were to increase market access, and reduce both domestic support and export subsidies. All parties to the agreement had to take steps in this direction, although the least developed countries (LDCs) were exempt from some obligations and developing countries overall had smaller reduction commitments. The agreement also opens and closes with explicit reference to non-trade concerns (food security and the environment in particular), which some countries view with justification as a fourth pillar.

The implementation period was five years for developed countries and nine for developing countries. That is, developed countries had to make their reductions by 2000 while developing countries have until 2004. LDCs were not subject to any time limit, because they were exempt from reduction commitments. They did, however, have to promise not to introduce new forms of domestic support in the future.

The agreement’s key concepts are couched in specialist terminology:

Red Box. Measures outlawed by the agreement. For example, non-tariff measures such as variable levies had to be replaced by tariffs in a process known as “tariffication”.

Amber Box. Payments and subsidies paid to producers that were to be reduced, but not yet eliminated. These measures are based on the Aggregate Measure of Support (AMS), which is a cash equivalent of total government support for agricultural producers, including both direct and indirect spending (for example input subsidies and price supports). The AMS excludes certain kinds of spending that is exempt under various articles of the agreement.

Blue Box. The result of an agreement between the US and EU in 1992 that broke the deadlock in the Uruguay Round negotiations. Article 6.5 of the AoA allows countries unlimited spending for direct payments to farms, as long as these are linked to production-limiting programmes based on fixed areas and yields, or per head of livestock. Ironically, government support to limit production is allowable, while many forms of government support to increase production are not, even though that is precisely what is needed to tackle food insecurity in many developing countries.

Green Box. Annex 2 of the agreement – a list of domestic payments that are exempt from the AMS (Amber Box) calculation. The Green Box list includes payments linked to environmental programmes, pest and disease control, infrastructure development, and domestic food aid (paid for at current market prices).

It also includes payments to producers that are not linked to changing levels of production (so-called decoupled payments) and government payments to income insurance programmes. Also exempt from AMS commitments are levels of spending on the agricultural sector and on particular commodities that fall below a specified ceiling – the so-called de minimis levels, which are 5 per cent of the total value of production of that crop for developed and 10 per cent for developing countries.

The Peace Clause (Article 13: Due Restraint) overrides the Agreement on Subsidies and Countervailing Measures. In effect this prohibits countries from protecting their markets against exporters who subsidise their agriculture within the parameters set by the AoA. It is due to expire in 2003 and this is considered to be a significant pressure on the EU, and others who rely heavily on export subsidies, to continue the negotiations on agriculture.

Special Safeguards (SSG). Article 5 of the agreement specifies that countries that at the outset converted non-tariff measures into tariffs (“tariffied”) for each crop could reserve the right to apply safeguard tariffs to protect against sudden import surges or falls in world prices for a limited time, to protect their domestic industry. It was mainly developed countries that tariffied in this way. Only 21 developing countries have access to this provision, the rest having opted to declare general ceilings for tariffs across all their imports, a choice that precluded them from using SSG measures.

Tariff peak. A high tariff on a particular product within a given tariff line (eg on cheese but not on cream or milk powder).

Tariff escalation. Tariff variations (usually upwards) associated with the degree of processing (eg higher tariffs on chocolate than on cocoa).

Tariff Rate Quotas (TRQs) created a zone between completely duty-free access and the high tariffs that resulted from tariffication, to ensure that a level of minimum access was established. Thus if the tariff that resulted from tariffication was 150 per cent, a TRQ was created to ensure at least 5 per cent of domestic demand could be met by imports through a much reduced tariff level.

Article 20 of the AoA (Continuation of the Reform Process) called for a review at the conclusion of the implementation period. Negotiations were to be undertaken a year before the end of the implementation period, taking into account four criteria:

(a) the experience of implementing the reduction commitments;

(b) the effects of the reduction commitments on world trade in agriculture;

(c) non-trade concerns, Special and Differential treatment (S&D) for developing country members, and the objective of establishing a fair and market-oriented agricultural trading system, and the other objectives and concerns mentioned in the preamble to the agreement; and

(d) what further commitments are necessary to achieve the above mentioned long-term objectives.

The AoA contains clear discrepancies and imbalances. In brief, members such as the EU with a history of protecting their agriculture, and that had not had to undergo structural adjustment, were able to continue much of their protection. Countries that had already liberalised were left with very limited market access, yet signed away their right to create new protective measures. The most flexible part of the AoA is in spending levels, exactly where developing countries have the least flexibility, because their governments are so strapped for cash and are often tied into onerous debt repayments.²⁹ Developing countries, which are generally forced to rely on border taxes to protect their farmers, found the constraints on these measures a good deal tighter than those on northern-style farmer support.

Implementation experience

The AoA has not had the outcome its supporters promised before the conclusion of the Uruguay Round. In a 1999 study of 14 countries, the FAO³⁰ draws the following conclusions:³¹

1. Few studies reported improvements in agricultural exports after the Uruguay Round. The typical finding was that there was little change in the volume exported, or in diversification of products and destinations.

2. Food imports were rising rapidly in most cases. Some regions were facing difficulties coping with import surges owing to “detrimental effects on the competing domestic sectors”. On the whole it was observed that while liberalisation brought about an almost instantaneous surge in food imports, these countries were not able to raise their exports owing, among other factors, to supply side constraints.

3. There was a “general trend towards the concentration of farms in a wide cross section of countries”. The concentration of farms led to increased productivity and competitiveness; but in the absence of safety nets, the FAO found that this process marginalised small farmers and added to unemployment and poverty.

4. For many developing countries, key agricultural sectors that were vital for the economy in terms of food security, employment, economic growth and poverty reduction, were being seriously eroded owing to the inability to compete with cheap imports.

In part, this discrepancy between predictions and outcomes was due to poor economics. For example, increased demand in Asia was expected to fuel a large part of the price increase predicted as an outcome of the AoA. Yet recent work by Dr Phillip Baumel, an economist at Iowa State University, shows that for years, the US Department of Agriculture has predicted rising export demand for corn in the face of an actual 20-year downward trend.³²

The predictions also failed to some extent because they ignored some basic facts about agricultural economics. Production levels in Europe and the US have remained high, in the face of dramatic falls in world prices. The US now officially relies only on “non-trade-distorting” payments to the domestic agricultural sector, but American farmers have not responded to the collapse of world commodity prices by reducing supply. If anything, acreage under production has increased, partly because land is not a mobile factor of production. It is hardly ever worth leaving land idle, since even idle land incurs maintenance costs for the landowner. Over prolonged periods of time, land might come out of agricultural use, but in the short to medium term, the pressure on farmers is to sow, however low prices go. Moreover, if the margin of profit possible on a given production level is low, then it makes economic sense to increase production to spread the cost of working the land over more acres.³³ Unless farmers act collectively, there is no incentive for an individual farmer to reduce production to raise prices, because one farmer alone cannot affect prices.

The AoA did nothing to discipline developed country spending on domestic programmes. All the AoA seems to have done is to shift spending from AMS categories to the Green Box. By 1996, Green Box spending was larger than total AMS. The largest element of this was food aid, mostly from the US.³⁴ While AMS levels have been reduced, the more comprehensive measure of government spending on agriculture used by the Organisation for Economic Co-operation and Development (OECD), the Producer Support Equivalent (PSE), remains high. According to the OECD, the AoA’s objective of reducing domestic support to agriculture has not been realised.³⁵ In the EU, Common Agricultural Policy (CAP) spending is quoted at 44 billion euro (US$40 billion) and is projected to rise to 44.9 billion euro (US$41 billion) in 2001. In the US in 2000, domestic spending on agriculture climbed to US$28 billion, not including food aid. The OECD estimates that farmers in Japan, the EU and the US receive an average of US$20,000 per year in domestic support.³⁶ In developing countries, on the other hand, unilateral cuts in import tariffs have further reduced government revenues, making it even harder for them to support poor farmers.

As world prices have fallen, EU export subsidy levels have automatically increased (because domestic prices are fixed, the export restitutions, as they are called, rise and fall inversely with world prices). The EU accounts for 90 per cent of export subsidies as calculated under WTO rules. The US, like the EU, continues to sell many of its crops at less than the cost of production, both domestically and abroad.³⁷ Low world prices are reflected in the US in increased domestic spending, while in Europe low prices push up export restitution costs. Both regions cushion domestic producers (and processors) and allow the transnational companies that conduct trade to enjoy massive price advantages over producers and processors in other countries.

World prices for agricultural commodities are decreasing, but have also been more volatile since the AoA came into effect. Public stockholding has been cut, reducing transparency in the market. Now the major grain holders are trading companies, which have an interest in keeping supply levels secret to profit from speculation. This runs counter to the public policy interest in predicting food shortages and in preserving a measure of price stability, for the benefit of both consumers and producers.

The volatility is also in part the triumph of agricultural realities over the assumptions of free trade theorists. Just as local harvests are unpredictable, so too are harvests at the world level. A bumper crop in Brazil does not always arrive to counterbalance a poor crop in the US. For some crops, such as rice, a large percentage of production depends on the same monsoon. If it fails, world rice supplies fall dramatically. In 1995-96, El Niño affected production around the world, and it is predicted that climate change will do the same.

Decreasing world prices might be thought beneficial for Net Food Importing Developing Countries (NFIDCs), a group of about 19 developing countries that have been net importers of food since the mid-1970s, and for LDCs, which have as a group been net food importers since the mid 1980s.³⁸ However, FAO analysis shows that because their purchases have been increasingly from commercial sources, their costs have increased over recent years. With the decrease in public stockholding in developed countries, concessional food sales have gone down. In 1998, the FAO estimated this price increase to NFIDCs at an average of 20 per cent.³⁹ Increased price volatility has also been a problem for NFIDCs, because it makes budgetary planning more difficult. At the same time, a strong dollar has increased the cost per unit of imports in countries with weaker currencies.

In 1990, 66 per cent of exports from Africa, excluding South Africa, consisted of mining products and unprocessed agricultural commodities.⁴⁰ In 1999, these commodities still accounted for 60 per cent of these countries’ exports, despite a general trend for all developing countries that has seen trade in manufactured products grow significantly more than that in agricultural commodities. The US share in the overall value of world exports of agricultural products fell slightly in the 1990s, from a 1986-90 average of 19.9 per cent to a 1995-98 average of 19.8. For the EU as a bloc, those numbers rose from 16.6 per cent to 17.7 percent. For 36 Sub-Saharan African WTO members (again excluding South Africa), the share in global trade fell, from 0.12 to 0.09 percent. The share of the Cairns Group of agricultural exporters also hardly changed, rising from a 1986-90 average of 1.7 per cent to 1.8 per cent by 1995-98.⁴¹ The AoA was expected to hurt African countries’ interests, while the wealthest countries were expected to profit most from the new rules. This was openly acknowledged and accepted as the probable outcome of the agreement and is one of the few predictions that has been borne out by experience.

Summary

· The Agreement on Agriculture has not fulfilled predictions that it would lead to rising world prices for farmers in the South and falling levels of production in the US and the EU.

· In part this is because the EU and the US introduced exemptions into the agreement, enabling them to increase their levels of support to farmers.

· Under the AoA, world food prices have shown increased volatility.

· The cost of food to the Net Food-Importing Developing Countries has risen they have lost access to food at concessional prices and had to increase purchases at commercial prices.