One person dies every four seconds
because of hunger, 24,000 people die of hunger or hunger-related illnesses
daily. (1) One in every five persons in the developing world is chronically
undernourished; the majority women and children.
At the WTO, talks and more talks on
agriculture trade are not likely to alleviate this trend, but to exacerbate it,
yet world leaders and policy makers seem to have become desensitized to such
suffering. Their focus remains steadfast on the profits of their agri-business
corporations and the global markets they can pry open.
Four years of pleas by some developing
countries' negotiators for rules that will address their food security and
rural employment problems have resulted nothing more than lip service paid to
these issues at the WTO. It has already been revealed by studies that the
currently iniquitous trade rules have exacerbated rural poverty and hunger.
Instead of remaining steadfast in their demands for equity, or even the full
right to defend themselves against the onslaught of subsidized food dumped on
their doorsteps, developing country negotiators are scrambling to secure the crumbs
that fall from the negotiating table at which the US, EU and the more powerful
members of the Cairns Group are seated.
This story can partly be gleaned from the
trade figures. In the recent years, food imports to developing countries have
surged, while exports by developing countries have more or less remained
stagnant. Developing countries' exports on the world market amounted to 26 per
cent of trade in 1995-1997, about the same share as in 1980. Developing
countries' share of imports, while only 28 per cent in the 1970s, surged to 37
per cent in 1997. The import increases are even more stark for least developed countries
(LDCs) and net food importing developing countries (NFIDCs) - with food imports for LDCs increasing by
almost 50 percent between the early 1980s and 1997 (from US$3.9 billion to US$6
billion), and by 40 per cent for the 19 NFIDCs, from US$9.3 billion to $13
billion.
The food deficit in developing countries
is increasing. Not only are developing countries increasingly dependent on
imports for their basic food needs, sky rocketing food import bills are also
becoming a major burden.
The US Farm Bill endorsed by President
Bush in May 2002 raises US spending on agriculture by US$73.5 billion in the
next decade, an increase of more than 63 per cent. The Bill provides supports
mainly on eight crops - all important for livelihoods in developing countries -
cotton, wheat, corn, soybeans, rice, barley, oats, and sorghum. Most of these
supports will be provided in the form of direct payments. Today, US is already
dumping produce in Third World markets, exporting corn at twenty per cent below
the cost of production, and wheat at 46 per cent below cost. Cotton prices in
the US have also been slashed by 66 per cent since 1995 to fifty cents a pound
in order to undercut Third World producers, while US producers are receiving 75
cents in subsidies. The Farm Bill will aggravate such distortions.
In the parlance of the WTO, these are
supposedly non-trade distorting subsidies since they are de-linked from
production. The present Agreement on Agriculture (AOA) allows these subsidies
(Green Box programmes) to be provided without limits. That they are non-trade
distorting is patently untrue, since they obviously increase the income and
lessen the risks for producers, hence encouraging more production. The
artificially low prices make the commodities competitive on the world market.
While farmers in the North are compensated for these low prices, Third World
farmers, on the other hand, are being wiped out.
The European Union's Common Agricultural
Policy (CAP) is also little different. In fact, the explicit policy of the EU
is to shift their export subsidies and, increasingly, their 'production
limiting supports' (usually known as Blue Box payments) into direct payments
(Green Box), which are presently legalized by the WTO. Like the US, the
argument they use is that Green Box programmes distort trade less. The shift
away from export subsidies in the WTO is presently well-received. However,
developing countries should watch out for these subsidies re-emerging in
another form. Experience is already indicative. The EU reduced export funding
on cereals by 60 per cent between 1992 and 1999, from 2200 million euros to 883
million euros. However, cereal producers were given direct payments up to the
tune of 2102 million euros during the same period. The total subsidies in fact
increased by 36 per cent. (2) If in fact these direct payments were really
non-trade distorting and de-linked from production, production levels should
have contracted. The EU's intervention price was after all fifty per cent
lower. However, the increased levels of direct aid payments led to 25 per cent
increase in EU cereals production.(3) Therefore, not only are subsidies
increasing, but the mechanisms of export dumping are becoming much less
transparent, making it much more difficult for developing countries' policy
markers to argue against such practices.
Countries which have trade arrangements with the EU are particularly vulnerable,
for example, the over 70 ACP countries where the EU is presently negotiating
reciprocal trade agreements. 'Competitively' priced EU products will be
flooding those markets and the ACP countries will effectively become the EU's
dumping ground.
The increasing dependence of developing
countries' on world markets for their food - and the increasingly distorted
world markets - is extremely worrying. While only two per cent of the
population are agricultural producers in the US, and five per cent in the EU,
75 - 80 per cent in China, 77 per cent in Kenya, 67 per cent in India, and 82
per cent in Senegal depend on farming for their livelihoods and source of food.
The FAO has concluded that increased
trade is not sufficient to alleviate poverty.
'For [the poor and food insecure in
developing countries], economic access is assured only if they produce the food
themselves or have economic means to purchase, which in the current state of
their economies must come from increased food and agricultural production.'(4)
The main fight in agriculture is over
market access. The food-producing giants, from the US to many in the Cairns
Group, and also the EU, are hungry for markets. The Chair of the Agriculture
Committee, Mr Harbinson, released a first draft of the 'modalities' paper of
the new WTO Agreement on Agriculture on the 12 February, and a (marginally)
revised version released on 18 March. Since then, the exporting giants have
been in a brawl over exactly how deep tariffs cuts are going to be. Harbinson proposed
these different brackets of tariff cuts: 1) Tariffs above 90 per cent should be
cut by 60 per cent and a minimum of 45 per cent per tariff line. For developing
countries, tariffs greater than 120 per cent will be slashed by 40 per cent on
average, and a minimum of 30 per cent per tariff line. 2) Tariffs between 15
and 90 per cent should be reduced by 50 per cent on average, with a minimum of
35 per cent per tariff line. For developing countries, tariffs between 60 and
120 per cent should be reduced by 35 per cent, with a minimum cut of 25 per
cent per tariff line, and tariffs between 20 and 60 per cent will be reduced by
30 per cent, with a minimum cut of 20 per cent. 3) Tariffs 15 per cent or lower
are to be cut by 40 per cent, with a 25 per cent minimum cut per tariff line.
For developing countries, tariffs lower than 20 per cent are to be cut by 25 per
cent on average, with a minimum of 15 per cent per tariff line. The feeble peace offering handed out to
developing countries is Harbinson's idea of 'strategic products' (SP) 'with
respect to food security, rural development and/or livelihood security
concerns'. Developing countries can declare some products 'SP' products, but
these will still be subject to tariff reduction commitments - despite their
sensitivity! Tariffs on SP products have to be reduced by 10 per cent on
average, and a minimum of 5 per cent per tariff line over 10 years.
In current talks, positions are polarized
- with the US and Cairns Group (Australia, New Zealand, Canada, Argentina,
Brazil, Costa Rica, Malaysia, Thailand, Chile etc) on one side versus the EU
and a large following of developing countries on the other. The US and the
Cairns Group have complained that the tariff cuts in the Harbinson draft have
not gone deep enough. They are pushing for more ambitious tariff reductions
through the Swiss Formula. (5) The EU, reluctant to open up its domestic
markets, is complaining that the cuts proposed by Harbinson are too steep. The
EU has sensitive products in the 15 - 90 per cent tariff bracket. Japan, Norway
and Switzerland on the other hand are most concerned about the tariff cuts above
the 90 per cent bracket. To undertake the level of cuts proposed by Harbinson
would threaten their ability to retain their domestic markets for their own
producers. The EU and its allies instead are advocating a Uruguay Round
formula, as was adopted in the last Agreement on Agriculture. At that time,
developed countries were required to cut tariffs by 36 per cent on average, and
a minimum of 15 per cent per tariff line. This led to many developed countries
cutting their sensitive products only by the required 15 per cent per tariff
line. They made deeper cuts on less sensitive products as well as products
which had low tariff levels. (6)
In their attempts to garner support, the
EU, Norway and Switzerland have embarked on a campaign to lobby developing
countries on to their side in supporting the Uruguay Round formula approach. On
28 February 2003, they presented a statement with 75 signatures to the
Committee on Agriculture endorsing a Uruguay Round formula to tariff cuts. This
left the US and the Cairns Group stumped and feeling quite isolated in their pro-liberalization
approach.
Obviously, many of these signatories came
from developing countries, particularly the ACP countries (which receive some
preferential market access to the EU markets), as well as India. However,
countries that have not endorsed the statement include Venezuela, Kenya,
Zimbabwe, Sri Lanka, Pakistan, Dominican Republic and Honduras for a variety of
reasons. Some declined to support the EU because they did not want to be seen
as closely allied to the EU, since it may have implications on their position
on domestic supports (Most developing countries want domestic supports lowered
whereas the EU wants to maintain these). One negotiator explained that they had
not endorsed the EU position since they could live with the Harbinson text as
long as the SP concept is developed further. Another said that they could live
with any formula as long as their sensitive low bound tariffs are not cut.
These low bound tariffs seem to be threatened by both the Uruguay Round formula
as well as an ambitious Swiss formula. Yet
another said that the Uruguay Round approach would not target tariff peaks and
escalations which developing countries have complained about for so long and
despite attempts by the EU to get them on board.
To further complicate matters, exporting
developing countries in the Cairns Group - particularly Argentina, Brazil,
Malaysia, Thailand Costa Rica and Chile have joined hands with the US and
Australia to push aggressively for market opening. In fact, developing
countries attempting to protect the livelihood of small farmers, and hence
requesting for the expansion of the SP category of crops are aggressively being
opposed by these other developing countries arguing that such measures could
impede South-South trade.
For now, the positions are so entrenched that
the 31 March deadline for modalities to be agreed upon has been missed.
WHEREFORE DEVELOPING COUNTRIES: ROUND II OF AOA TRADE TRICKS?
Many trade tricks were employed in the Uruguay Round Agreement on Agriculture, which led to developed countries slipping out of any commitment to liberalize. It is well known that domestic support levels since 1995 have increased significantly and that 'dirty tariffication' was employed so that tariffs increased rather than decreased in many developed countries. Small farmers, wiped out of their livelihoods, the rural poor and hungry, have paid the heaviest price. Unfortunately, the current Harbinson draft offers nothing but more of the same for them.
The tariff cuts proposed go much further
than the last round, where developing countries had to cut tariffs by 24 per
cent on average and a 10 per cent minimum cut per tariff line. At the same
time, absolutely nothing is being proposed to eliminate the distortions in the
world market. The domestic support modalities Harbinson has proposed will only
allow the status quo to continue, and in fact worsen. Developing countries have
been repeating - like broken records - that the market access modalities and domestic
supports and export subsidies modalities have to be linked. This has been
ignored by Harbinson. Developing countries have called for a cap in overall
domestic support levels, and particularly a cap on the Green Box. Again, these
recommendations do not feature. Much has been made of Harbinson's proposal to
eliminate export subsidies over nine years.
However, as mentioned above, it is already the explicit policy of the European
Union (the main provider of export subsidies) not to remove these subsidies,
but merely to shift them into the Green Box.
With these distortions set to continue,
the SP concept proposed by Harbinson - hailed by some developing countries as a
success since their food security and livelihood concerns have been reflected,
albeit inadequately - is no more than wool being pulled over the eyes of trade negotiators
and Ministers. It is a fictitious fig leaf offered to entice the less WTO savvy
politicians in the developing world.
Firstly, tariff levels on SP products
must also be cut - by an average of 10 per cent. This is no less than the 10
per cent minimum cut per tariff line developing countries had to take on in the
last round. Any relief felt by negotiators is not likely to be echoed in the
rural plains.
Secondly, the number of SP products each
country can declare is already being disputed from all sides. Developed
countries and Cairns Group developing countries have asked for strict criteria
that would make the instrument quite useless as a defense mechanism when
practically applied. For instance,
developed countries could come up with a criteria that an SP product will have
to account for 20 per cent of a country's total production, or be a crop where
a significant percentage of people depend on for the livelihood. This could
work for certain countries which are highly dependent on two or three
commodities. However, for others - particularly developing countries with
diverse land and environmental conditions and hence a huge diversity of crops
which small farmers depend on - many more crops need to be protected. The
aggressiveness with which the Cairns Group is showing in opposing flexibility
in the SP concept is also likely to limit its final utility.
The other issue developing countries have
been lobbying for is a safeguard mechanism, which would allow them to increase
their tariff levels when prices dip below a trigger price, or when there is an
import surge. The complainant is not required to show that imports have caused
injury before the mechanism is triggered. Developing countries have asked for
such a mechanism in order to protect their small farmers against the volatility
of world prices. An increase in tariffs would only be implemented temporarily.
The existing safeguard mechanism is only available to 37 countries. Only seven
countries - all developed countries -
have actually made use of it. Developing countries have asked that the
mechanism is applied only by developing countries.
The Harbinson draft deals a severe blow
to developing countries' safeguard request. Developed countries will eventually
be graduated from being able to use this mechanism but only at the end of the
five-year tariff reduction implementation period, or two years after this
implementation period. At the same time, plans are being hatched to put very
strict limitations on the number of products developing countries can apply a safeguard
to - perhaps only a handful. Such limitations would be outrageous in comparison
with the fact that the EU has 539 product lines that can avail of this
mechanism at present, and the US 189 product lines. (See Annex 1 below.) Furthermore, informal consultations have
been taking place about excluding the possibility of developing countries
invoking the safeguard mechanism against other developing countries. This runs
counter to the concerns of countries asking for such a mechanism, such as
India, Sri Lanka, Indonesia, Pakistan etc. For them, any sudden import surge
that might threaten rural livelihoods must be addressed, be it from a developed
or developing country. In addition, developed countries wanting to avoid facing
a higher safeguard tariff could easily send their exports via a developing
country, if such a provision were instituted.
However, the present stalemate is a
political one. The technical work in Geneva clarifying and sharpening all
aspects of the modalities is in fact still very much underway. Judging from the
present talks, what is needed in Cancun will be political endorsement by
Ministers on a refined version of the present draft with the most critical
political decision to be made in the area of tariffs (largely between the US
and EU).
Whether it is an 'ambitious' or 'less
ambitious' agriculture text for the European Union and the US, the lives of
ordinary people in many developing countries will be threatened. Developing countries will be called upon to reduce
their tariff levels even though the issue of dumping has been side-stepped by
the major powers dictating the terms of the both global trade and politics.
38 WTO members currently have reserved
the right to use a combined total of 6,072 special safeguards on agricultural
products. The numbers in brackets in the table below show how many products are
involved in each case, although the definition of what is a single product
varies.
Table: WTO Members with the Current Right
to Use Special Safeguard Measures Australia (10); Barbados (37); Botswana
(161); Bulgaria (21); Canada (150); Colombia (56); Costa Rica (87); Czech
Republic (236); Ecuador (7);
El Salvador (84); EU (539); Guatemala
(107); Hungary (117); Iceland (462);
Indonesia (13); Israel (41); Japan (121);
Korea (111); Malaysia (72);
Mexico (293); Morocco (374); Namibia (166);
New Zealand (4); Nicaragua (21); Norway (581); Panama (6); Philippines (118);
Poland (144); Romania (175); Slovak Republic (114); South Africa (166);
Swaziland (166);
Switzerland-Liechtenstein (961); Thailand
(52); Tunisia (32); United States (189); Uruguay (2); Venezuela (76)
Between 1995 and 1999, the seven
countries that have used the Special Safeguard are EU, Japan, South Korea,
Poland, United States, Hungary and Switzerland.
Aileen Kwa is a policy analyst with
Focus on the Global South. She is based in Geneva.