Security: An Important Non-Trade Concern
The following is the text of an informal paper by India that was presented at a November 1998 session of the WTO Committee on Agriculture. The paper argues that developing countries, particularly those with predominantly agrarian populations, have the right to pursue a "market-plus" approach as opposed to a purely market-oriented approach, in agriculture. In making out the case for "flexibility" in the provisions of the Agreement on Agriculture, India contends that these countries are entitled to provide domestic support to their agricultural sector to meet the twin challenges of food security and rural employment.
1. The objective of the Agreement on Agriculture (AOA) was to bring about discipline in one of the most distorted sectors of trade by inter alia disciplining the unrestricted use of production and export subsidies, as well as by reducing import barriers, including non-tariff barriers. Thus the AOA sought to limit the extent of support granted by individual countries and attempted to ensure that countries adopt a more liberal policy as far as agricultural trade was concerned. At the same time, as indicated in the preamble, the AOA recognized non-trade concerns (NTCs) of countries. These NTCs, amongst others, included food security and the need to protect the environment.
2. However, this fine balance between trade and non- trade concerns, as mandated in the preamble, does not appear to have been fully reflected in the provisions of the Agreement and consequently in its implementation. The major thrust of the Agreement appears to be based on the hypothesis that liberalization is the panacea of all ills in the agricultural sector. While this may be tenable from a conventional economic viewpoint, such reasoning does not take into account the problems faced by a number of developing countries, which because of certain underlying constraints, have to necessarily take into account non-trade concerns such as food security, while formulating their domestic policies. This is particularly true of developing countries where a significant percentage of the population is not only dependent on the agricultural sector for its livelihood, but is also surviving just around the "poverty line". In such countries, a purely market-oriented approach may not be appropriate. Instead, for some countries, it may be necessary to adopt what we would like to term a "market-plus" approach, in which non- trade concerns such as maintenance of the livelihood of the agrarian peasantry and the production of sufficient food to meet domestic needs are taken into consideration. We, therefore, feel that at this juncture it is important to closely examine this aspect of the AOA, so as to ensure that the reform process in the agriculture sector takes into consideration the food security and other non-trade concerns of countries like India.
Food security - a basic objective
3. Ensuring food security, that is the access of the population to sufficient food to meet its nutritional requirements, is a basic objective of governmental policies in agrarian developing countries. Hence, food security issues cover not only issues related to the availability and stability of food supplies but also issues of access to this supply, that is, related to the resources that may be needed to procure the required quantity of food. It is therefore clear that issues related to food security are sensitive issues and hence countries in which a large percentage of the population is dependent on this sector, would like to have a certain degree of autonomy and flexibility in determining their domestic agricultural policies. These policies would naturally be geared towards improving productivity, enhancing income levels, reducing vulnerability to market fluctuations, ensuring stability of prices and so on. Inter alia this would be achieved through reliability of production and supplies, so that seasonal variations in access to food are minimal. It is for this reason that national production policies have been central to domestic agricultural policies, not just for developing countries, but also for the developed countries who are net importers of food, as has been brought out in the papers recently submitted by Norway and Japan. It is therefore clear that in this sense food security is a legitimate national concern and has been so recognized by the FAO. In fact, during the World Food Summit of 1996, "the importance for food security of sustainable agriculture, fisheries, forestry and rural development in low and high potential areas" was explicitly recognized. This recognition of the importance of food security even for low potential areas clearly underlines a developmental perspective which goes beyond mere trade concerns, and is therefore germane to the outlook and interest of developing countries.
4. Let us therefore examine both the external and internal dimensions of this problem, particularly from the perspective of developing countries.
Foreign exchange reserves
5. Countries which argue for and support rapid liberalization of the agricultural sector contend that global food sufficiency would in a way ensure food security since countries could then produce what they are most competent and efficient in, while importing the rest of their food requirements. Such an argument presupposes that all countries would at all times have sufficient foreign exchange to procure their food requirements internationally. This assumption is obviously not true since not all developing countries would be in a position to import food grains, even if these were available at competitive prices, due to their limited foreign exchange reserves. Moreover, these countries often face cross- sectoral pressures on their available funds, which further limits their capacity to procure internationally. This problem is further compounded in case there are unforeseen variations in the international prices.
6. Similarly, there are various internal constraints which, if not appropriately addressed, would severely limit the capacity of developing countries to increase domestic production, to at least a certain minimum percentage of their requirement. Firstly, holdings are small and the majority of farmers belong to the small and marginal category. This limits any attempts to introduce mechanized farming and also constrains the adoption of new technologies unless accompanied by large-scale extension programmes. Consequently, the productivity is low and the total production varies substantially, since a large percentage of the agricultural sector continues to be at the mercy of the vagaries of nature. Further, only a small percentage of what is produced finds itself in the market, the rest being used by the small and marginal farmers for sustenance or for simple barter. At the same time, there is increasing pressure on land from non- agricultural users, both because of the rising level of urbanization as also because of the geographic spread of industries. If this limitation on the availability of agricultural land is viewed in the context of the growth in populations, which most of the developing countries invariably face, it would be clear that the only way in which agricultural growth can be sustained and the objective of food security attained, would be through increased governmental support in the use of inputs, particularly in terms of irrigation, electricity, fertilizers, pesticides, technical know-how, high-yielding varieties, infrastructural development, market support and so on.
7. It is therefore clear that there are significant external and internal ramifications of attaining the objectives of food security. While it may not be possible to immediately ensure that developing countries are able to produce at least a certain minimum percentage of their annual food requirement, this is a goal which has to be pursued, particularly in light of the constraints that developing countries would face in adopting an external solution to this problem. Recognizing the percentage of small farmers in the agricultural sector of most developing countries, it is clear that a major part of the financial burden of increased inputs would have to be met through government subsidies. It would need to be recognized that the small farmer would not be able to meet his principal responsibility without adequate support from the government. Public intervention would therefore be necessary in order to achieve these national goals.
8. Finally, it needs to be said that 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 the population, which in turn spurts industrial growth. Self- sufficiency in food production has therefore a specific developmental perspective as opposed to a purely commercial perspective. Hence it is our view that developing countries need to be provided the requisite flexibility within the AOA to pursue their legitimate non-trade concerns. More specifically, developing countries need to be allowed to provide domestic support in the agricultural sector to meet the challenges of food security and to be able to preserve the viability of rural employment, as different from the trade- distortive support and subsidies presently permitted by the Agreement. It is therefore important that a differentiation is made between such domestic support measures which are presently being used to carve out a niche in the international trade and those measures which would allow developing countries to alleviate rural poverty.
9. India is anxious that the AIE [Analysis and Information Exchange] process must therefore examine the manner in which developing countries can be provided additional flexibilities by appropriate adjustments to the provisions of the AOA, in order to enable them to pursue their legitimate non-trade concerns. India believes that a focussed discussion on the subject will contribute to increased awareness of the non-trade concerns of countries like India, such as food security and rural employment, and thus enable the WTO Membership to deal with the subject of continuation of the reform process in the agricultural sector with sensitivity to these concerns. (Third World Economics No. 202, 1-15 February 1999)