Saying no to FTAA

Agricultural liberalisation polices are a clear example of the double standards that exist in international trade. While the United States, the International Monetary Fund, and the World Bank promote indiscriminate liberalisation of agricultural markets in developing countries, rich countries maintain subsidies and protectionist policies. Both the US and the European Union continue to grant huge direct payments to farmers.

According to Oxfam, an international group that lobbies for equity in trade and social issues, the US goes even further than any other country on the continent in its support for domestic agriculture. “Despite rhetoric on reducing trade-distorting measures, US internal subsidies increased through the 2002 Farm Bill by 80 percent compared to those of 1996, granting more than $180 billion in various measures to support US producers over the next ten years.” Export credits are also included as a tool of this policy, said an Oxfam briefing paper, “Make Trade Fair in the Americas — Agriculture, Investment, and Intellecual Property : Three Reasons to Say No to FTAA.”

It must be noted, Oxfam said that these generous subsidies do not reach small North American producers. Rather, they are focused on benefitting large agribusinesses. “Sixty percent of the direct payments go to only 10 percent of producers, who control enormous commercial operations. On the other hand, 50 percent of farmers receive little or no government support. The cotton barons of western Texas are a particularly significant example. They obtained $3.6 billion in subsidies last year, more than they received from their actual cotton sales.” Due to its volume of exports, US agriculture policy plays a predominant role in the global decline of commodity prices. The combination of domestic policies that encourage low prices and tools such as export credits make it possible to export grain at 60 percent of its production cost, devastating small producers both in the US and in developing countries. “At the same time, the measures that the developing countries employed to protect themselves from the impact of this unfair competition have been widely eliminated over the last 15 years,” the document said.

In addition to the support measures for their producers, the US and Canada have been using various types of tariffs and non-tariff barriers to imports from Latin America and the Caribbean. Thus, Brazil is believed to lose $1 billion per year in orange juice sales to the US due to these protectionist measures, Oxfam said. In Latin America and the Caribbean, trade liberalisation began with the IMF instruction to implement structural adjustment programmes in the mid 1980s. At the end of the Uruguay Round of negotiations of the General Agreement on Tariffs and Trade (GATT) in 1994, all countries of the region had significantly cut their tariffs and eliminated many of the non-tariff barriers to imports.

“Compared with other developing regions, Latin America and the Caribbean have the lowest tariffs. The average agricultural tariff is 59 percent for all developing countries and 40 percent for the region (ranging from 25 percent in Chile to 52 percent in Colombia),” Oxfam said, noting that the average applied agriculture tariff (the tariff that is implemented in practice) for all developing countries is 21 percent, while it is 14 percent for Latin America and the Caribbean (from 9.8 percent in Chile to 20 percent in the Dominican Republic). The majority of governments, it was pointed out,  in the region have also eliminated non-tariff related measures such as import permits, quotas and minimum prices, which provided them with mechanisms to manage their import levels.

Domestic agricultural support policies in Latin America and the Caribbean have also been undermined. “The same structural adjustment programmes that sought balanced budgets dismantled rural credit and marketing institutions and other government support services on which small farmers depended. “They also reduced public investment in rural infrastructure. In Bolivia, public investment in agriculture fell drastically from 10 percent of total national public spending in 1989 to only 4.45 percent in 1997.” “In many cases, these government institutions were inefficient and subsidised the interests of the elite rather than the poor farmers. However, they provided important services to producers who could engage in markets on fairer terms.” The dismantling of credit and marketing structures has harmed rural women in particular those who, because they have fewer guarantees to ownership of land, have lost access to key resources for their development, Oxfam said.

These double standards have brought about predictable results. “There has been an increase in agricultural dumping with falling prices and deterioration of living standards among small farmers throughout the continent. Moreover, corporations have increased their control over agriculture, which has resulted in an increase in poverty and malnutrition.” The explicit purpose of the FTAA negotiations on agricultural trade is to promote export opportunities, while limiting the three principal methods used by governments to protect national producers: tariff measures, support for domestic production and export subsidies. The assumption is that government intervention in the market discourages producers from innovating and modernising and prevents the most efficient producers from being successful.

This argument, Oxfam said, does not take into account historical experience. “All developed countries achieved their industrial development by protecting and promoting their agriculture sectors in order to guarantee food security and satisfy growing urban populations. No country in the region can generate sufficient options for subsistence outside agriculture that make up for the current destruction of rural livelihoods caused by liberalisation.” The speed and sequence of integration are crucial considerations in minimising social costs. “Rapid liberalisation, as has occurred in most of Latin America and the Caribbean, is reinforced in the proposed FTAA,” Oxfam said, adding that “this rules out the development path used in various East Asian countries, such as South Korea, Thailand, Vietnam and Taiwan, which succeeded in significantly reducing poverty.” These nations used small-scale agriculture to promote their economic development and gradually liberalised agriculture exports. They developed alternative sour-ces of non-agricultural jobs before reducing the restrictions on imports. The FTAA negotiations consider agriculture for export as the goal of rural economic development, rather than considering it as one element within a broader plan to achieve sustainable livelihoods.

In the current negotiations on agricultural trade, exporters’ interests have prevailed, and access to the lucrative US market for those products that Latin America and the Caribbean can produce more cheaply — vegetables, flowers and other products with market niches — seems to be the sole objective of the governments in the Americas. “The liberalisation of Latin America and the Caribbean in exchange for access to the US market often has negative implications for farmers who produce goods for the domestic market and restricts the policy options for agricultural development,” it was observed. Oxfam argues that eliminating poverty and promoting development in Latin America and the Caribbean requires changes in trade rules based on the recognition of the right to sustainable livelihoods.

In the WTO negotiations, several developing countries have proposed measures that would give them the flexibility necessary to defend themselves against unfair trade practices.
These measures, it said, would allow them to undertake public investments relevant to rural development and food security by exempting their key food security products from liberalisation commitments. Moreover, these measures would better allow governments to promote development by strengthening local and regional markets through protection measures and incentives, including increasing tariffs and internal supports.

Ban dumping of cheap food

The FTAA trade negotiations must prevent US transnational corporations from continuing to sell their agricultural surpluses at prices lower than local production cost. Dumping lowers global prices and weakens small farmers by establishing unfair competition in their own domestic markets. This is why the following measures are required:
• Eliminating any subsidies that permit export below the actual production cost and strict regulation of credits for exports and food aid;
• Permitting importing countries to raise tariffs as a defence against food dumping and implement safeguards to protect their markets from cheap imports;
• Reforming the internal support policies of the US in order to eliminate their effects on unfair competition or export dumping and the concentration of wealth and monopolistic practices of the large agribusinesses. The large North American budget for agriculture must be used to protect the environment, promote food security, ensure the livelihoods of small producers, and increase the prices of products throughout the continent.

Access to markets for developing countries

Developing countries have opened their markets unilaterally while rich countries maintain protection, carving out protected areas for their agricultural sector.
The continent’s poorest nations have lost a large part of their negotiation power. Therefore, the following are required:
• The US and Canada should relinquish their claims for greater access to the markets of Latin American and Caribbean countries, and renounce the minimum access obligations that is now codified in the WTO;
• Canada and the US should unilaterally reduce the tariffs on products originating from the region, particularly those produced by the poorest farmers;
• The US and Canada should eliminate escalating tariffs, which discourage value-added activities in the region.

Equity in the marketplace

The liberalisation of agricultural trade places small-scale farmers in direct and unfair competition with the largest agribusinesses in the world. Standards are urgently required that encourage government support for increasing the market power of small farmers. Disciplinary standards are equally important to control the monopolistic behaviour of transnational corporations.
This would help eliminate export dumping. Therefore, the following are necessary:
• Allowing all countries the flexibility to support small farmers through public marketing enterprises controlled by farmers, marketing boards and similar mechanisms;
• Instituting disciplinary standards on the monopolistic behaviour of the transnational agricultural trade and limiting the market distortions that this behaviour can produce.