Sacrificing the right to food on the altar of free trade
The right to food vs international trade commitments. That’s the balance that developing countries have to strike in a globalised world. Increasingly it’s the food security of their populations that is being sacrificed, with developing countries having to negotiate the right to food within the World Trade Organisation, says Jagjit Plahe. “How, when and if states can regulate trade to uphold the right to food will be determined by international trade rules, and not by international human rights standards,” she states.
One of the underlying reasons for the collapse of the Doha Development round in July 2006 was the failure of developed nations to address the issue of food security in the agricultural negotiations. In a context where a worldwide backlash has developed against the WTO, this article examines the broad implications of the WTO Agreement on Agriculture (AoA) on the right to food.
It is argued that the Agreement fails to recognise key factors which affect food insecure countries’ capacity to improve their situation, and in fact establishes conditions which perpetuate food insecurity.
Food Security [1] in a Human Rights Framework
Food security is a “multifaceted concept, variously defined and interpreted” (FAO, 2003a, p. 3). The World Bank (1986) for example, defines food security as: “access by all people at all times to sufficient food, in terms of quality, quantity, and diversity for an active and healthy life without risk of loss of that access.”
The United Nations Committee on Economic, Social and Cultural Rights goes a step further and defines food security in the context of the human right to food. The right to food covers both the availability and the accessibility of food. According to the Committee the availability of food constitutes the “quantity and quality sufficient to satisfy the dietary needs of individuals” and therefore “refers to the possibility of feeding oneself directly from production land or other natural resources, or from well-functioning distribution, processing and market systems that can provide more food from the site of production to where it is needed” (UN Committee on Economic, Social and Cultural Rights, 1999). Importantly, the definition focuses on the role of the state to ensure food security. As Zhang notes:
“International human rights law imposes upon States obligations to respect, protect and fulfil this right, like any other basic human right. Thus, to ensure food security is in fact the implementation of obligations under international human rights law” (2004, p. 567).
The Food and Agricultural Organisation (2003b) estimates that 842 million people in the world are undernourished, of whom 798 million people are from the third world. Developing countries therefore have a mammoth task at hand to address food insecurity. These countries however also have the responsibility to uphold their obligations under international trade law. Currently, 15 out of the 20 countries which are chronically food insecure (where over 35 percent of the population is food insecure) are members of the WTO. Similarly, 24 out of 28 food insecure countries where between 20 to 34% of the population is food insecure, are also members of the WTO. These states have to undertake a precarious balancing act between their various obligations under international law. Their options to address food security are seriously limited by their obligations under the AoA.
The notion of food security in the WTO’s AoA
The raison d’etre of the AoA is to liberalise global trade in agriculture. The AoA’s stated long-term objective is “to provide for substantial progressive reductions on agricultural support and protection sustained over an agreed period of time, resulting in correcting and preventing restrictions and distortions in world agricultural markets” (WTO, 1995). The neo-classical assumption behind this objective is that the market will address problems of food security [2]. These assumptions are well stated in various WTO documents.
The 1986 GATT Punta del Este Declaration for example, which set out the negotiation objectives of the Uruguay Round, starts off by asserting that GATT contracting parties are:“Determined to develop a more open, viable and durable multilateral trading system” and that they are “convinced that such action would promote growth and development” (GATT, 1986).
Supporters of the AoA argue that liberalised trade in agriculture will enhance food security since global resources will be allocated more efficiently. Using the theories of comparative advantage and factor endowments [3], they argue “that the differences in productivity and opportunity costs of production between countries” are the main reasons why countries should engage in international trade (FAO, 2003a, p. 13). They contend that free market conditions will create win-win situations for all, and “those [countries] that gain from trade [can] fully compensate those that lose, and still be better off: the total gain will be better than the total loss” (FAO, 2003a, p. 14).
One of the objectives of the Punte Del Este Declaration clearly reflects this view, stating that negotiations will “bring about further liberalization and expansion of world trade to the benefit of all countries, especially less-developed contracting parties” (GATT, 1986).
In supporting free market conditions, the AoA seeks to reduce the role of the state in agricultural production and trade. This has both direct and indirect implications for food security, particularly in developing countries where agriculture plays such a vital role in the national economy. Agriculture accounts for over 50 percent of total employment in the third world. In food insecure countries however, the role of agriculture is far more critical, comprising 30 percent of GDP and employing nearly two thirds of the work force (FAO, 2003b, p. 16).
The AoA therefore has extremely profound and far-reaching implications for developing countries. These implications have brought to the fore an intense and bitterly divisive debate on the roles and responsibilities of the state in a globalising era. As well as being ideological, the debate is also based on some very specific structural problems with the AoA, which have had the effect of allowing developed countries not only to continue to protect their agricultural sectors, but ironically, to increase their protection. Critics of the AoA therefore argue that far from achieving food security, the AoA has had the opposite effect (Murphy, 2002; Oxfam 2005; IATP, 2005; Bernal 2003; Stevens, Greenhill, Kennan and Devereux, 2000). This is not only due to the simplistic ideological assumptions which underpin the agreement, but also because the agreement legitimises and perpetuates an imbalance in world agricultural trade which prevents developing countries’ agricultural sectors from growing in the way that is necessary for improved food security.
The food security implications of the AoA
Given the human rights definition of the right to food, nation states have an obligation to protect the livelihoods of small farmers, enabling them to produce food for their local community and ensuring that they gain a fair share in the commodity chain if they are engaged in production for the export market. Also, the state should have the right to protect the livelihoods of small farmers who suffer from cheap agricultural imports. The AoA however curtails the freedom of nation states to protect food security. The following section examines food security implications of the AoA.
Flawed Assumptions
The neo classical model, which underpins the AoA assumes that all countries will be better off under free trade. The model however ignores several key elements of the economics of international agriculture. Firstly, it does not address the reality of declining terms of trade (the ratio of export prices to the ratio of import prices) for primary products. Countries that are chronically food insecure primarily export raw materials which increasingly face declining terms of trade in the world market [4]; the products they export fetch a much lower price in the world market relative to the price of their imports. Moreover, unprocessed commodities like sugar, tea, coffee and cocoa beans for example, constitute a very small portion of the overall price of chocolates, sweet biscuits, processed tea and coffee. In many cases, farmers engaged in the production of primary products for export are simply price takers and have not shared in the big gains which have taken place in global markets (MacEwan, 1999 p. 53).
Secondly the model assumes that “buyers and sellers in different markets meet each other as independent agents, in which no single buyer or seller has a monopoly” (Kanji and Barrientos, 2002, p. 19) and that a reduction in trade barriers will lead to more opportunities for all potential buyers and sellers.
Freer trade does not automatically lead to market access. The integration of producers and exporters in developing countries is carefully “managed” by lead firms (Humphrey and Schmitz, 2001). These lead firms are often huge multinational corporations based in the OECD countries, and they wield immense power over agricultural commodity chains. The liberalisation of agricultural markets does not benefit all agents in commodity chains equally, especially those that are locked in at the production stage. The existing literature on the governance of commodity chains in the current era of globalisation does not point to “equal gains for all”. In fact, some coffee, cocoa, horticultural and fruit farmers from developing countries in Latin America and Africa, have steadily become poorer, or have lost their livelihoods altogether, because of the concentration in agents further downstream – branded merchandisers, international traders and supermarkets – and due to structural adjustment and deregulation of agriculture in their own countries (Gwynne, 1999; Dolan et al, 1999; Fold 2001; Ponte, 2001; Ponte, 2002).
Thirdly, the model assumes that the global market is competitive. However the reality is that agriculture is the most highly protected sector in international trade, with the OECD countries subsidising their domestic production by US$ 1 billion a day. High subsidies in rich countries - which have led to dumping in the world market - threaten small farmers in poor countries and hamper their exports.
The AoA does not discourage dumping
Dumping is defined as the sale of products in the global market at less than the cost of production. Dumped agricultural produce in world markets leads to the widespread displacement of farmers from their own markets in the developing world, because they cannot compete with highly subsidised products (Bernal, 2003, IATP, 2005). These farmers lose their livelihoods and become food insecure. Also, farmers in developing countries who are engaged in production for the export market suffer from severely depressed prices, due to the high levels of dumping in the world market.
Various studies outline the complex implications of domestic and export subsidies in OECD countries (Beierle, 2002; Matthews 2000; Matthews, 2001; OECD 2001a; OECD 2001b, Murphy, 2002; Diaz-Bonilla, Robinson, Thomas and Yanoma, 2002; Oxfam 2002; Oxfam, 2005).
One of the main implications of the AoA for food security is that it has not curtailed the high levels of trade distorting protection given to agricultural producers in the OECD countries and therefore it has not curbed dumping in international markets. This is because the baseline periods chosen under the AoA (1986-88 which was the time from when agricultural support had to be reduced) was a time when “trade distorting” domestic and export support was historically high in the OECD countries (Beierle, 2002, p. 33).[5]
Also, there were no reductions in commitments for domestic subsidies, which are deemed to be “minimally trade distorting” under the AoA, a term which remains undefined. As the OECD contends, “it is virtually impossible for domestic support measures to be fully de-linked from production and trade and therefore nondistortionary” (2001, pp. 63, 64).
The EU alone spends US$ 120 billion a year on domestic support (Beierle, p. 30). The high subsidies allow the EU and the US to dump agricultural produce in world markets. According to Oxfam (2002, p. 17), half of the world’s maize is exported by the US alone. However, the US export prices are one-fifth below the cost of production. Similarly, the EU is the largest exporter of white sugar, and the EU export price of sugar is one-quarter of the actual production cost. Approximately 60 percent of domestic agricultural support in OECD countries is exempt from domestic support commitments under the AoA (Oxfam, 2002, p. 18). The three major users of domestic support - the EU, the US and Japan - have met their AoA requirements despite the fact that domestic support has in fact increased in these countries since 1995, when the AoA came into effect.
The proposed changes - under the Doha Round of negotiations - to the domestic support pillar do not address the flawed structure of the AoA or the simplistic assumptions of the neo-liberal model on which the AoA is based. The categories of domestic support (trade distorting and non-trade distorting) are still maintained, despite the fact that domestic support has actually increased in the post-Uruguay round era. With these categories still in place, it is quite unlikely that the proposed changes will have any far-reaching implications in terms of dumping. Ironically, one of the main ways in which developing countries can protect their own markets from dumped products is through the use of tariffs. However, they no longer have the automatic right to use tariffs to address dumping: while AoA rules make room for dumping, they prevent developing countries’ use of tariffs.
Curtailed use of Tariffs
Tariffs are the most viable tool available to developing countries to protect their markets from price volatility and from sudden increases in imports. The market access rules of the WTO require all members to reduce both tariff and non-tariff barriers. In the current round of negotiations, developing countries have argued for special safeguard mechanisms (SSMs) as well as provisions for special products (that would be exempt from reduction commitments). While this approach has not been rejected out-right by the OECD countries, the fact is that developing countries no longer have the freedom to pursue policies to protect food security. In order to uphold their human rights obligations developing countries now have to negotiate this right within the WTO.
Conclusion
In the current era of globalisation, developing countries are struggling to uphold both their internationally recognised human rights and international trade obligations. In terms of food security, the WTO’s AoA does not acknowledge nation states’ food security obligations or needs. A state can no longer automatically take measures to protect the right to food, but must negotiate for this right at the WTO. How, when and if states can regulate trade to uphold the right to food will be determined by international trade rules, and not by international human rights standards. The right to food should be fundamental. However, in this era of liberalised trade, it has been compromised.
• Jagjit Plahe is an activist and academic currently based at Monash University in Melbourne where she coordinates that International Trade Policy Unit. She is in the process of completing her doctoral thesis which is on the Political Economy of the WTO’s TRIPS Agreement and the Indian Rice Value Chain. Formerly, Jagjit worked with EcoNews Africa based in Nairobi where she was actively involved in initiating the Debt Cancellation movement. While at EcoNews, also authored a book entitled “Multilateral Agreement on Investment: National Sovereignty for Sale?”
• Please send comments to or comment online at www.pambazuka.org
Notes
[1] The terms food security and the right to food are used interchangeably in this paper.
[2] The AoA only addresses the effects of trade liberalisation on net-food importing countries, and the issue of food aid. Article 16 of the AoA calls on developed country Members to take action as is provided in the framework of the “Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and net Food-Importing Developing Countries.
[3] Factor Endowments or Heckscher-Ohlin (HO) is the leading theory in terms of what determines a given country’s trade pattern (Gionea, 2003, p. 54). The theory was first developed by Swedish economic historian Eli Heckscher and later by his student Bertil Ohlin. According to Ohlin, “Commodities requiring for their production much of [abundant factors of production] and little of [scarce factors] are exported in exchange of goods that call for factors in the opposite proportions. Thus indirectly, factors in abundant supply are exported and factors in scanty supply are imported (Ohlin, 1933, p. 92).
[4] Importantly, the AoA does not address tariff escalation (where higher levels of tariffs are applied to higher levels of production) in the OECD countries, which actually discourages developing countries from investing in value added activities.
[5] In addition, the formula to reduce trade-distorting support was calculated on an aggregated basis, rather than a commodity-by-commodity basis. This allows developed countries to continue to provide much higher support to sensitive commodities, and still stay within the AoA limits Mathews (2001, p. 82).
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