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The U.S., the EU, the World Trade Organization and agriculture
By Devinder Sharma
(Wednesday, May 12, 2004 -- CropChoice guest commentary) -- The United States and the European Union are at it again. After browbeating, coaxing and luring several leading players among the developing countries back to the negotiating tables, the entire exercise is back to square one -- the rich and industrialized countries refuse to move even an inch on the contentious issue of massive domestic support they continue to dole out to
their farmers.
The US Trade Representative Robert Zoellick has already reiterated his call for the total elimination of all export subsidies but refuses to mention the equally and in lot many ways more harmful and pernicious protection that is granted through the 'green box' mechanism. Equally canning, EUs Agricultural Commissioner Franz Fischler told a group of WTO Ambassadors at the re-launch of the negotiations at Geneva in mid-April: "the 'green box' is by definition non-trade distorting and therefore there is nothing to be cut. If some clarification is necessary, it is a technical issue to be discussed by the experts. However in principle, the 'green box' has to be left untouched."
The 'green box' covers subsidies that are expected to cause minimal or no trade distortions. Such subsidies have to be publicly funded but must not involve price support. In simple words, it includes direct income support to European, American and Japanese farmers, which is formally decoupled from production levels and prices. 'Green box' also includes subsidies granted in the name of environment protection and preservation, and for agricultural research and development.
In reality, these subsidies are termed 'non-trade distorting' because only the rich countries have the capability to provide such support. Knowing that the developing countries do not have the financial resources to pose any threat to the protection provided through 'green box', the US and EU are refusing to open up the can of worms.
With mainline economists and many European and American NGOs justifying the 'green box' measures as least trade distorting, and that questions the very foundations of the trade economics that prevails, trade negotiators use the unsound economic arguments to push through the agenda. Developing countries are left seeking an overall cap on all the support programmes, so that the industrialized countries do not agree to cut some subsidies, and then shift them to the 'green box'.
The G-20 (group of countries that stood up on the issue of agriculture at Cancun Ministerial) too refrained to drive home the point. Instead of standing firm on the removal of domestic support before any further negotiations are opened, many member countries are making contradictory statements, not realizing that maintaining a status quo on domestic support
through the 'green box' (and to some extent through the 'blue box') will be catastrophic for millions of farmers in their own countries. Third World farmers have already been hit badly by cheap agricultural imports and unfair rules. And yet, their respective governments are not standing up collectively to demand removal of all kinds of agricultural subsidies as a
pre-requisite to restarting consultations.
When all political coercion and economic arguments fail to defend the huge domestic support, the big players are ready to even use 'moral' and 'ethical' concerns to justify the illegality of maintaining these subsidies. At the ongoing dispute settlement case against sugar export subsides, brought up by Australia, Brazil and Thailand, the EU has invoked a "good faith" defense by arguing that in negotiating its export subsidy reduction
schedule under the Uruguay Round, it did not include cut in export subsidies
for certain kinds (based on quality) of sugar.
Earlier, when the developing countries had wanted sugar subsidies to be discussed, the EU stand was that sugar was off the negotiating table. The same answer came whenever the developing countries wanted the dairy subsidies to be examined. But when it comes to domestic support on sugar and dairy subsidies, developing countries are asked to keep their hands off!
Developing countries need to worry about the "green box" subsidies because
it actually operates like 'income insurance' scheme for the farmers in the
industrialized countries. These farmers remain insulated from the volatility
of the global markets. Whether the international prices slump or go on a
meteoritic rise, they remain unruffled, as their life style has already been
protected by the state subsidies. Take the case of US farmers. "It's a
welfare check," a Chicago Tribune report sometimes back quoted Robert
Johnson, 57, who farms 500 acres of corn and soybeans. "I don't like welfare
and I know other people don't either--but you have to take it to survive."
He said prices for his crops are too low for him to make a living. He drives
a truck at night and his wife drives a school bus to make ends meet.
In Illinois alone, the average income of a farmer before President George
Bush came out with the notorious Farm Bill in 2002, averaged at US $ 37,000
of which, US $16,000 came from government farm subsidies. These subsidies
reportedly help farmers meet their current debt liabilities. In the two
years of 2000-02, direct government payments to farmers in America rose 86
percent to reach US $22.7 billion, and have gone even higher this year.
Whether it is cotton, beef, sugar, or even tomato paste, the brunt has to be
borne by the developing country farmers. And yet, we are always told that
the market is the best mechanism to ensure efficiency. The market, in
reality, is meant only for the developing country farmers. For the farmers
in the developed countries, the governments provide the welfare check. The
market argument is only used to force open the developing countries to
accept the subsidized produce.
Let us move to another part of the world. Monica Shandu was adjusted the
best small-scale sugarcane grower for 2001 in the Entumeni hills of South
Africa. She farms four acres with sugarcane, and the harvest brings her an
equivalent of US $200. Despite being a progressive farmer with high
productivity levels, Monica lives in penury barely managing to survive
against all odds.
Los Angeles Times reported that far away in France, Dominique Fievez
cultivates his farm of 400 acres with sugar beet. His is an average farm,
which remains untouched by the price fluctuations in international market
since 1984. The reason: Fievez receives a huge subsidy support under the
European Union's Common Agricultural Policy at the rate of US $23,000 for
each of the 33 acres that he grows with beet.
Such heavy subsidies not only depresses the international sugar prices
making it difficult for developing countries to export but also insures
French farmers against any downslide in their incomes. When faced with a
drop in prices, Minica Shandu on the other hand will first cut back on
sugarcane and then abandon agriculture and move out into the urban slums.
With her livelihood lost, she either lands in a menial job or the chances
are she would end up committing suicide.
Whether it is sugarcane, wheat or coffee the result is the same. Far away
from South Africa, Indian farmers in the southern state of Karnataka, hit by
low coffee prices and a loss of markets, have reportedly started taking
their own lives. The French farmers on the other hand can go off on a cruise
in the Atlantic, and return after the holidays to be sure to milk the
'income-generating' farms.
In other words, the rich and developed countries have perfected a
well-established state intervention programme to ensure that their farmers
get a minimum level of income. Markets therefore have no meaning for the
developed country farmers. These farmers, whether they live in the US,
France, Germany, Switzerland, Japan or Australia, are financially insured.
It is only the poor farmers in the developing countries who are being forced
to face the vagaries and cruelty of the markets. For the rich, the
scandalous cover of "green box" subsidies protects direct payments. For
almost 3 billion farmers in the developing world, even their own governments
(and of course the economists), are refusing to address the consequences of
the grossly uneven playing field to which they are being exposed.
That the developed countries are not willing to re-open the "green box"
first became evident when the concept of a 'development box' for the
developing countries was proposed. It was backed up by some large western
NGOs who too were trying to protect the home turf. Many developing country
NGOs, receiving funding support from these western outfits, too had begun to
chant the mantra saying that export subsidies were the only culprit.
Then came the 'multi-functionality' of agriculture, a term coined by the EU
to protect its massive agricultural support, which actually acts as a
smokescreen for protecting domestic subsidies. It doesn't mean this writer
is against income support to western farmers, but it is unfair to use faulty
economics to pamper one class of farmers in the developed countries at the
cost of millions of poor and subsistence farmers in the majority world.
Economists tell us that elimination of agricultural subsidies (and that
includes the 'green box' payments) actually changes nothing. Land has a
greater influence and the withdrawal of subsidies would mean that farmers
change the cropping pattern. Such a change doesn't have a significant impact
on reducing the global prices and therefore there is no economic sense in
phasing out agricultural subsidies. Several American institutes and European
university studies now point to the same conclusion.
The reason is obvious. It is not economics that drives the analysis but
politics, and the line between economics and political economy has now
blurred. Such analysis is the outcome of a faulty prism being used to
actually protect the subsidies. Let me explain.
For an Indian rice farmer, for instance, it doesn't matter what the
prevailing international price is. He doesn't know what constitute
competitiveness in a globalised world. But what shocks him is that despite
having one of the lowest cost of production for rice in the world, the
Indian government refuses to pay him an assured price on the plea that the
'minimum procurement price' that he is supposed to get has actually become a
'maximum support price' since rice is available at a much power price in the
international market. The government therefore has frozen the rice
procurement price at the 2002 level of Rs 6.10 for a kilo of rice paddy.
In reality, an average Indian farmer produces a kilo of rice at Rs 6.10.
Taking the prevailing conversion rate of Rs 43 for a US dollar, each dollar
would buy roughly seven kilos of rice. Can the economists tell us where in
the developed world can you get seven kilos of rice for a dollar? How come
than the Indian farmer is then priced out of the market? In that case, isn't
there something terribly wrong with the way economics is dictating the trade
agenda? Even in the retail market, a kilo of rice is available for Rs 10,
which means you can get more than four kilos for a dollar. On the other
hand, look at the retail market in the UK. A kilo of rice is available at
2.54 pound sterling, good enough to buy 20 kilos of rice in India.
And yet, the Indian farmer does not receive any income support. His income
is not secured, and the growing volume of 'green box' subsidies merely
forces him to abandon farming and migrate to the urban centers. Domestic
support in the developed countries is leading to the newly emerging
phenomena of agriculture displacements in the developing countries. In the
years to come, developing countries will witness an upsurge in the
displacement of farming populations from their only economic possession -
meager land holdings.
-> The G-20 countries, therefore, must strive to bring the 'green box'
subsidies to zero before any meaningful talks on agriculture trade are
re-initiated. There is no other way out.
(Devinder Sharma is a New Delhi-based food and trade policy analyst.
Responses can be emailed at: dsharma@ndf.vsnl.net.in)
Source: http://www.zmag.org/sustainers/content/2004-05/10sharma.cfm | |
