AOA to hit poor farmers

By Roshan Malik

The World Trade Organization (WTO) is the only international body dealing with the rules of trade between nations. The WTO is home to a series of agreements, out of which Agreement on Agriculture (AoA) is of great importance for developing countries with respect to their economies and food security.

In Doha Ministerial, the developing and the least developed countries (LDCs) were very vocal about their concerns and even Pakistan was an active member of the like- minded group, which demanded for the Development Box, the protection of domestic agricultural production and food security of small farmers.

The AoA was brought in Uruguay Round (1986-94) when developed countries (North) had threatened to walk out of the Multilateral Trade Liberalization Negotiations if agriculture sector would not have included. The AoA has three main pillars.

In the area of market access, tariffs resulting from "tariffication process", and non-tariff measures should also be converted into tariffs. While tariffs on agriculture products are to be reduced by an average 36 per cent by developed and 24 per cent by developing countries.

Domestic support commitments aimed at reducing expenditures, like input subsidies on fertilizers, seed, pesticides and electricity, to domestic producers (farmers). It is to be reduced by 20 per cent and 13.3 per cent by developed (North) and developing (South) countries respectively. The domestic support measures in the AoA are Amber Box i. e payments and subsidies paid to producers are to be reduced, but not yet eliminated.

These measures are based on aggregate measurement support (AMS) which is cash equivalent to total government support for agriculture producers. Blue Box are certain direct payments to farmers aimed at limiting production that are not currently subject to any reduction. Green Box is a list of domestic payments that are exempt from Amber Box. This list includes payments linked to environmental programmes, research and development programmes, pest control, infrastructure development and domestic food aid.

Export subsidies are to reduce by 36 per cent for developed countries and by 24 per cent for developing countries. There must also be reductions of 21 per cent and 14 per cent respectively on the volume of exports subsidized.

Developed countries have to fulfil these reductions over the period of six years which ran out on 31 December 2000. While developing countries have 10 years period. Some 29 LDCs have been given special and differential treatment and they are exempted from the time period. In Doha Declaration, it was emphasized that the countries will make their policies based on the AoA.

The AoA is a model for rich countries that wish to pursue industrial agriculture and ignores the interest and needs of billions of farmers who do not live in that world. After World War II, North provided a huge amount of domestic support and export subsidies to their agriculture sector because of food shortage. Now their agriculture sector is highly developed and they want to export their surplus production, optimum in cost and quality as well, to the South.

Advocates of trade liberalization argue that free trade between the countries produce higher economic growth in all national economies, which ultimately will improve the global economy. Competition between the nations will lead each nation specializing the product, which they can produce (comparatively) more efficiently. They argue that goods will then be available to consumers at the lowest possible prices.

Unfortunately there is no way of knowing whether the theory of comparative advantage would work in practice as no governments operate a free trade policy because they all protect their domestic interests in some or the other way. Since the countries are starting out from very different levels of development, the result of competition would always favour the rich. Therefore, North want market access and reduction in export subsidies and domestic support from the South.

Agriculture on the other hand is a way of life for the majority of people in many agrarian economies. This is the only sector which has edge for South. In developing countries more than 50 per cent of people live on the farms, while ratio in EU is 4 per cent and in US 2 per cent. Whereas it employs 70 per cent of labour force in low income, 30 per cent middle income and 4 per cent in high income countries.

Its share in GDP (1990-96) is 34 per cent for low income, 8 per cent for middle income and 1.5 per cent for high income countries. Similarly its earning in foreign exchange (1995-97) is 34 per cent for LDCs, 27.3 per cent for developing countries and 8.3 per cent for developed countries.

Mexico liberalized its agricultural sector under North America Free Trade Agreement (NAFTA). Maize is a source of livelihood of its 3 million people, which accounts 40 per cent of its agriculture sector. US maize is also grown on large farms. A massive influx of US maize has resulted in large reduction in the prices and the local farmers are in a great anxiety. On the other hand there are no input subsidies or government support. Therefore native farmers are in great problem. They have minimized their production for their domestic need only. Most of the farmers are migrating to urban areas for employment or planing to sell their land to multi-national corporations (MNCs) on cheap rates.

In Pakistan, agriculture is a growth engine of national economy. More than 74 per cent of our population live in rural areas of which 93 per cent are small farmers and agriculture is their main source of income. Its share in GDP in the year 2001 was 26.4 per cent. It is understandable that trade liberalization in agriculture sector will have disastrous effect on small farmers, who are working with the conventional methods of farming. They do not have financial capacity as well as government support to use new technology for the cultivation of their crops. On the other hand developed countries are advanced in their methods of cultivation and crop yields. So, they are in a position to harm our domestic production and enhance food insecurity.

It is crystal clear that the AoA has promoted an industrial model of agriculture that has played havoc with food security in developing countries. Unlike the traditional definition of food security, here in this part of the world, the access to food is determined by applying a single formula: whether a household can grow or purchase it. In poor communities people's access to food can be affected by the availability and price of food, the availability to earn wages or gather produce to sell, or how well their crops have fared.

The AOA is already being criticized the world over as the Food and Agriculture Organization (FAO) has shown great concerns on AoA and its adverse effects on food security. In 1996-98, 826 million people were estimated by the FAO to be undernourished, with about 792 million were from the developing countries. If we use the World Bank definition of poverty (people living at less than 1$ a day), in 1998 about 1.2 billion people were below this poverty line, 98 per cent of whom were in developing countries.

The sad fact is that with 70 per cent of world's extremely poor and food insecure people are living in rural areas.The FAO argues that the situation in many food insecure countries is fundamentally different and requires a different approach from that of reducing support to agriculture.

Poverty in Pakistan is increasing with an alarming pace. Government statistics show that more than 30 per cent of the population is poor. But the Asian Development Bank's recent survey shows poverty in Pakistan is much more than that. World Bank(2001) defines less than $2 a day earning as the upper poverty line and the people living on this amount in Pakistan are 84.7 per cent (1996).

Poverty growth rate is increasing alarmingly in the country. Even the efforts like structural adjustments and poverty grants facilities by IMF, ADB and World Bank are not achieving the set results. They are granting the loans and grants by setting the policies of the country towards liberalization.

According to the AoA, there will be no domestic support from the government sector in buying farmer's harvest. The market forces will further exploit the poor farmers. We do have an example of last two years when government remained as a second buyer in the form of the Trade Corporation Pakistan (TCP) in case of cotton and Passco and provincial food departments in case of wheat, and let the market players buy directly from the farmers.

The small farmers were in great distress. In order to keep their body and soul together they sell their crop at prices lower than fixed by the government. One may only realize that there was no competitor before . Trade liberalization will allow more foreign products and producers (corporate farming), government will not be in the market as a second buyer and only market forces will manipulate the fate of poor small farmers. It will do nothing but enhance food insecurity, poverty and deprivation.

Corporate farming is another threat to the food security of third world countries and particularly Pakistan. The ministry of food and agriculture has prepared the proposal and the Board of Investment (BoI) is assigned the responsibility to find foreign investment in corporate farming.

According to the proposal, corporate farming will be given the status of industry and there will not be any limitation on land ceiling. Big land lords and foreign investors will be eligible to make corporate companies and enter in this sector. 1.5 million acres of government land has been allocated for corporate sector. The ministry of agriculture has even asked for five to ten years exemption from tax and labour laws for corporate companies to give a temptation to multi-national corporations (MNCs) to jump into the agriculture sector.

Small farmers which are 93 per cent of the agricultural community will have no space to survive in these conditions. They will be unable to compete with MNCs and local resources will be no more in the hands of indigenous farmers. Their food security is on high risk because their production will be no more competitive in the market. They will either get jobs without labour laws or migrate to the cities which are already in distress.

In Doha Ministerial, the developing countries were little bit vocal about their concerns with regard to trade liberalization. They had submitted joint proposals (although not all have signed every proposal).These proposals included papers on market access, a Development Box and Special and Differential Treatment.

Development Box was submitted by the like-minded group to the Committee on Agriculture on June 2000. It consists of a package of changes in AoA aimed at enabling developing countries to address their food security concerns and improve rural livelihoods. It advocates the rules for developing countries to provide flexibility to small farmers and "food security crops" like staple foods or the crops which are a source of livelihood for low income farmers. Developing countries would be able to impose "special safeguard measures" temporarily raising tariffs when small farmers are threatened by import surges.

They would be able to nominate a list of food security crops that would be exempted from the AoA commitments. Developing countries would also be able to spend money for support of small farmers without being included in (AMS) and hence subject to AoA commitments to reduce levels of domestic support. But the EU and USA, having a dominant role in WTO, are opposing the idea of Developing Box i.e food security.

Therefore it is suggested to WTO policy makers that AoA should be amended in the perspective of above threats being faced by poor farmers of the South. Their access to the North should be improved by reducing export subsidies as well as domestic support.

The North should also be prevented from using high safety standards as an unfair trade barrier to exports from developing countries. It is also suggested that there should be a balanced trade liberalization with the principles of sustainable development and poverty eradication.

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