A paper presented during the WTO Public Forum, Geneva, September 25, 2008; Convenor of the Asia-Pacific Network on Food Sovereignty (APNFS), a network of NGOs and farmer organizations engaged in policy analysis, advaocacy and campaigns on issues around trade, agriculture and development.

The Export-Oriented Growth Fallacy

The so-called Washington Consensus led many countries to pursue an export-oriented growth strategy, making them abandon their food self-sufficiency policy in favor of market-based food security and the promotion of agribusiness for exports.  Over the years, this strategy has siphoned off public funds for farm subsidies, credit, infrastructures and investments that in the 80’s had raised developing countries’ domestic food production. This skewed priority led to the reduction of food stock, particularly grains reserves  in many countries, making them increasingly dependent on the international market for their staple food and raising their agriculture import bills to unsustainable levels.

The WTO and Growing Food Insecurity and Poverty in Developing Countries

The trade rules of the WTO particularly bear close scrutiny because many developing countries experienced dramatic surge in food imports as a result of the drastic reduction of their import tariffs or the removal of import controls. Many are now facing less than half of their WTO final bound rates.  Some have applied import tariffs hovering only at around 5% -7% including Indonesia and the Philippines. 

This rapid relaxation or elimination of their border protection has resulted in undermining their own domestic food production as cheap subsidized food imports flooded the local markets displacing farmers’ products and sending many smallholders to bankruptcy, further fuelling hunger and poverty in the rural areas.

For example, in Indonesia, soybean imports doubled from 657,000 metric tons in 1995-1997 to 1,166,000 metric tons per annum in 1998-2004, undermining domestic soybean production and rendering almost 2 million people unemployed.

In the Philippines, rice imports have surged dramatically from an average of 161,800 metric tons per year in 1990-1994 to around 1.5  million MT  in recent years and to more than 2 million metric tons this year, which practially created the signal for international rice prices to shoot up in previous months, given tight supply in the international market.

Ironically, while the multilateral trade rules demolished the protective policies of developing countries, rich countries are allowed to carry out agricultural dumping.  To date, despite disciplines in domestic support and export subsidies, the agriculture subsidies of developed countries continue to escalate.  Food aid which is a mechanism of developed countries to dispose of their agriculture surplus has also increased food import dependency of poor countries, as local products were edged out of the market and local llivelihoods demolished.

Meanwhile, export promotion has intensified under WTO resulting in even more disastrous consequences.  Indeed while exports of some developing and LDCs have grown, their more numerous poor subsistence producers have failed to benefit. For example, in Thailand, which is a major exporting country and has exhibited dramatic increases in its food exports, more than 3 million households are heavily indebted with each family having an average debt of US $600-$900. Moreover, Thailand’s rising food exports have been accompanied by increasing exploitation of its natural resources, including the over-exploitation of dryland areas and conversion of mangrove forests and coastlands to massive shrimp farming.

On the other hand, the power of corporations expanded enormously under globalization. They command increasing control of the food system – from the farm to the supermarket and they continue to shape as well as benefit from maintaing the existing highly unequal international trade rules. Transnational agribusiness corporations such as Cargill, ADM, Bunge have even made a killing out of the food crisis. In Indonesia, only four giant companies including Cargill control food trade. During the height of the crisis, when soyabean prices shoot up dramatically it was found that Cargill was hoarding 14,000 tons in its warehouse.

Even the rapid rise in biofuel production and use especially in developed countries which has been attributed to as one of the major drivers of food price explosion, has been driven largely driven by the rising market power and concentration in the international market. The highly concentrated market governed by powerful business interests from the agribusiness, biotechnology, finance and energy industry has created the condition (financial flows, market incentives and policy environment) for the massive shift of agriculture resources away from producing food and increasingly into fuels – thus driving food prices into phenomenal heights.

In conclusion, globalization and the growing corporatization of agriculture, entrenched through policies and trade rules enforced by the IMF-WB and the WTO, have increasingly denied millions of poor people their right to food and livelihoods. Their vulnerable position have made them ever more vulnerable to food price spikes that are again brought about by forces linked to increasing market concentration, in a situation where neo-liberalism has practically stripped governments of their capacity to regulate corporations and to protect their people and their economies. Thus, besides the needed short-term actions by governments to address the global emergency, long-term solutions and policy responses that address the roots of the crisis are needed.

In the immediate, poor country governments should target raising their domestic food production to achieve food self–sufficiency in the shortest time possible. This requires massive subsidies in production inputs like seeds and fertilizers and to making available cheap credit for poor farmers.  Large-scale public investments in agriculture particularly in improving and expanding irrigation facilities, promoting water management and building rural roads, post-harvest facilities and infrastructure are most urgent as these are areas seriously neglected in the past two decades. Research and development oriented towards generating farmer’s knowledge and appropriate technologies in the light of climate change should be funded. This massive investments in agriculture should come not from loans but from expanded development aid if not from developing countries own resources based on the cancellation of their external debts.

Obviously the policy responses require that developing countries should revisit their neo-liberal export-oriented strategy of growth. As a first step, developing countries and their people must be able to assert their sovereignty over food and agriculture policies within a broader framework of economic and social development. This allows governments to use the relevant policy mix where trade is only a part of broader strategy in which land reform and asset redistribution, strengthening of producers and marketing associations, local economic development and social protection are all necessary to promote development. Food sovereignty within this strategy means that markets are not autonomous and that their actions should be framed by public policy.

Such policies should place emphasis on the important role of agriculture in securing food security, employment generation and rural development. Agriculture needs to return to its function as the provider of life rather than a source of huge profits for transnational corporations.

Thus, if the Doha Round of negotiations is to support this agenda it must first secure the widest possible policy space for developing countries’ agriculture to be shielded from import surges, agriculture dumping and other unfair trade practices of rich countries and their powerful companies. Otherwise countries should opt for a more sovereign trade policy and international trade regulation should find itself in international frameworks where the basic fundamental rights of people are observed and protected. Moreover, such trade regulation must address the problem of market power and concentration in the global market through international and national mechanisms – to include investment regulation, strengthening of STEs and enforcing stricter international and national anti-trust laws.

Finally, given the contribution of biofuels in the food price spike, mandatory targets and incentives for biofuel production and use in rich countries as well as emerging economies must be stopped.

Clearly, the challenge for all stakeholders in both the near and long-term is to rethink the current dominant model of “development” which has bred the crisis and to envision that a new people-centered, just and sustainable model of development is possible.  # # #