WTO may not have useful role in agriculture, charge NGOs

A group of NGOs have questioned the need for developing countries to continue participating in the WTO agriculture negotiations if gross distortions are not redressed which reduce the Third World to being a dumping ground for heavily subsidized produce from the North.

by Chakravarthi Raghavan

GENEVA: A group of civil society organizations have expressed concerns over the agriculture talks at the WTO and said the way the negotiations are going, in terms of what is on the table and what is not, with the market distortions coming from the rich countries because of their domestic and export support and subsidies, the WTO may have no useful role to play in agriculture.

The civil society groups and farm organizations, in a joint letter to the WTO Director-General Dr. Supachai Panitchpakdi, complained that instead of focusing on these basic distortions in the markets and the dumping of agricultural products, the negotiations are focusing on market access and breaking down the barriers in the developing world.

“If fundamental reforms to end domestic support and export subsidies and credits cannot be achieved - and the latest US Farm Bill and the EU’s CAP [Common Agricultural Policy] reform status make these harder to achieve - developing countries should seriously consider whether it is worth continuing to negotiate,” the NGO joint statement and letter said.

The statement came as the WTO’s Committee on Agriculture was holding the last of its scheduled special negotiating sessions this year, chaired by Stuart Harbinson, who is to produce a first draft of the negotiating modalities by the end of the year.

The EC and Japan have so far failed to put forward any firm proposals, though they have aired some initial views, on the three pillars of the agriculture reform programme in the WTO: domestic support, export competition and market access. At a “mini-ministerial” meeting in Sydney on 14-15 November, the EC Trade Commissioner Pascal Lamy said the EC would put forward a paper before the end of the year.

Outlining some fundamental reforms needed - an end to dumping and recognizing the right of developing countries to protect themselves against dumping by the rich nations, a ban on export subsidies and credits and domestic support that depresses commodity prices, and enforceable rules to recognize special and differential treatment for developing countries - the civil society groups said that without such changes, the WTO rules will continue to be detrimental to food security and development.

Targeting Third World markets

Speaking for the Institute for Agriculture and Trade Policy, a Minnesota-based non-profit US NGO, Sophia Murphy told the media on 19 November that both the US and the EC have basically made clear that they are not interested in each other’s markets. With the members of the Cairns Group (of agricultural exporter countries), the US and EC are focused on the markets of developing countries.

The US wants the EC tariffs to be cut but knows that the EC would use other measures to shut off its markets. Both the US and the EC are thus focused on accessing the markets of the developing countries.

The Cairns Group itself, Murphy said, is not so united, and some of its developing-country members which have a large population of poor farmers do not endorse the group’s proposals. And the Cairns Group is not focusing on changing the rules to end domestic support and export subsidies and credits.

On food aid, Murphy said she and the NGOs were not opposing food aid. However, she said, the US aid to the developing countries was provided in the form of food, which is sold in local markets to raise money, and this competes unfairly with and harms the local farmers.

On the arguments of the rich countries about the social disruptions that will be caused by cutting subsidies and opening markets, Murphy said she was not unsympathetic to this view and did not believe in market access irrespective of social consequences. However, she said, this was an argument used merely to defend their highly protectionist policies. This ignores the much larger and more serious social problems and disruptions caused by the subsidies and dumping policies of the North in the developing world, and the wider problems of liberalization of their markets across sectors, irrespective of the disruptions and consequences.

And all the talk about food security and non-trade concerns voiced by the rich countries does not address the fundamental questions, but rather focuses on the kinds of aid and support that the developing countries could not afford to provide.

Accusing the rich countries of sheer hypocrisy in their talk of market access and agriculture reforms, Murphy said of the US proposals: “They talk of zero-zero-zero approach - zero domestic support, zero export subsidy and zero tariffs - but there were a lot of zeroes in their proposal. They have ignored the $40 billion farm bill, and the $20 billion in domestic support, most of which are not captured by the rules.”

The dumping of subsidized cotton exports by the US was ruining cotton producers in Africa, while the EC’s subsidized sugar exports were hurting the poor sugar producers of the developing world, Oxfam said.

[Coincidentally, in a recent speech in Munich, the World Bank’s chief economist, Nicholas Stern, accused the US and the EU of hypocrisy over their agricultural trade policies, and said that their huge subsidies were hurting poor farmers in the developing world. “It is hypocritical,” Stern said, “to preach the advantages of trade and markets and then erect obstacles precisely in those markets where the developing world have a comparative advantage.... This hypocrisy does not go unnoticed in the developing world.”]

Murphy complained that the developing countries themselves are not fighting strongly enough the battle against the dumping of agricultural products by the industrialized countries on developing-country markets, by changing the rules on domestic support and export subsidies or credits.

The US, the EC and the members of the Cairns Group are basically focused on the markets of the developing countries, and thus, the developing countries have a “market power” they should exercise. They are in a majority at the WTO, which is supposed to take decisions on the basis of consensus, and they should say “no”, Murphy said.

The distortions in the agricultural markets are coming from the rich industrialized countries, but instead, the developing countries are being asked to liberalize and open their markets. Even the developing countries, more so the Cairns Group members, are also focusing on liberalizing market access in the belief that gaining market access will achieve the reforms in agriculture, she said.

A representative of Oxfam International, Romain Benicchio, said that unless the domestic-support and export-subsidy and credit policies are changed and the distortions in the market removed,  developing countries which already have low applied tariffs, as a result of IMF/World Bank structural adjustment policies and conditionalities, should not lower their bound tariff levels.

Agricultural trade, said Oxfam in a briefing paper, could play a key role in the fight against poverty. But in practice the rules which govern world agricultural trade benefit the rich rather than the poor. Rich countries spend vast sums of money protecting the interests of their producers, while at the same time forcing poor countries to open their markets to subsidized imports, Oxfam said.

“Achieving an equitable outcome from the WTO agricultural negotiations will be a litmus test of the so-called Doha Development Round. Developing countries should not sign a new agricultural agreement, if their vital development needs are not adequately addressed,” Oxfam said.

The Oxfam paper accused the rich countries of “spectacular double standards.” While protecting and subsidizing their own domestic producers, they have been forcing developing countries to open their markets. Oxfam cited the case of Haiti, which has now become “one of the most open economies” in the world, with a tariff on rice of only 3% as a result of IMF conditionality. Rice imports, mainly subsidized rice from the US, have increased thirty-fold, but the price of rice in Haiti has hardly fallen and malnutrition affects 62% of the population. Only big rice traders and American farmers have benefited. With high tariffs maintained in the North and the limited marketing and diversification opportunities for developing countries, liberalization of agricultural markets has only benefited the few transnational corporations dominating this trade and a tiny minority of wealthy landowners.

Murphy said that the liberalization of market access in agriculture trade, as the experience of the Uruguay Round showed, had only depressed commodity prices and the earnings of developing countries and marginalized small farmers and their incomes while big farms are being consolidated, resulting in underdevelopment of the developing world.

Even the huge subsidies provided by the EC, the US and Japan are not in fact supporting the farmers but subsidizing the transnational corporations and the agriculture oligopolies, Murphy complained.

The US Farm Bill and the state of the reform of the Common Agricultural Policy in the EC will make it hard to ensure that the agricultural trade policies at the WTO can promote food security and support development goals.

Reforms in farm rules

Murphy said the joint NGO letter had been sent electronically to the WTO Director-General Dr. Supachai Panitchpakdi but was really addressed to Stuart Harbinson, who is chairing the agriculture negotiations and is due to produce a first draft of a modalities paper by December.

Both Benicchio and Murphy said that it was perhaps too early to make a judgement as to whether having a person from the developing world, Supachai, heading the WTO secretariat had made a difference. However, added Murphy, Supachai could make a difference by listening to the concerns of developing countries and by the way he organizes the negotiating process and makes it inclusive in the scheduling of meetings and consultations.

In their joint letter, the civil society groups and farm organizations told Supachai that addressing trade imbalances and development needs must be the first objective of the Agreement. The second objective must be to recognize the fundamental differences in agriculture between the developed and developing worlds, and the consequent need for different rules to apply. The diversity of agricultural systems and cultures is a strength that needs to be protected.

There are real differences between the US and EC, where agriculture represents about 2% of the workforce, and say a country like Rwanda, where agriculture employs 80% of the working population.

“Agriculture is vital to food sovereignty, to rural employment, to national income levels and to the generation of foreign exchange in most developing countries. Sustained development for these countries and the realization of the right to food depends on a healthy agricultural sector.

“Even for larger and richer developing countries, agriculture remains a vital source of livelihoods and economic health,” the NGO letter said, adding: “women outnumber men in agricultural production and have a vital interest in international agricultural trade rules.”

In outlining a set of reforms in the multilateral trade rules to promote the right to food and support development goals, the NGOs called for:

   *  An end to the dumping of agricultural products through enforcing GATT disciplines against the sale of products at below cost of production plus a reasonable profit.

   *  An end to subsidizing transnational agribusinesses through a ban on export subsidies and credits, an end to domestic support that depresses the price of commodities, the establishment of regulations that ensure fair prices, and a ban on abuses of food aid.

   *  Recognition of the right of developing countries to protect themselves from dumped production through tariffs, quantitative restrictions, safeguards and other measures.

   *  The creation of enforceable rules that recognize the special and differential needs of developing countries in meeting the needs of their vulnerable populations.

   *  Recognition of the right of farmers and communities in developing and developed countries to adopt production and marketing systems that are governed by interests of food security, environment and development values.

   *  Recognition of the rights of farmers to save, use, exchange and sell seeds and other propagative materials, and the right of indigenous peoples and other local communities over their knowledge, customs and resources. (SUNS5239)    

From Third World Economics No. 295 (16-31 December 2002)