Food security as important as national security

by Chakravarthi Raghavan

Geneva, 27 Sep 99 -- In the approach to Seattle and beyond, developing countries should not be guided by the mindset of the framework and texts of Agreement on Agriculture (AoA) in the WTO, but look conceptually at the problems of agriculture development, employment and problems of food security and feeding of their people which was no less important than the "security" of a country.

Third World trade expert and former negotiator for India in the GATT, Mr. Bhagirath Lal Das, was speaking at an FAO-organised symposium last week on 'Agriculture, Trade and Food Security' and in a panel discussion on the issues at stake for developing countries in the negotiations.

Das said: "Let development and agriculture experts and thinkers of the South consider and formulate policies and recommendations needed in the South in this important sector of political economy. The technical aspects of putting them into agreement can be left thereafter to negotiators. We should not be bogged down or be guided by the existing rules, and the various 'green', 'blue' and 'red' boxes," Das said in response to questions and comments about existing rules, provisions for Special and Differential Treatment, and how the developing country concerns could be addressed within these rules.

Earlier in the panel discussions and presentations, Das said that agriculture was politically a sensitive issue in all major industrial countries, and political sensitivities was important. This was why from the beginning trade liberalisation in this sector had been tempered and muted since the beginning.

The sensitivity of agriculture is even more for developing countries, for many of whom agriculture is a way of life, and those engaged were not doing so for commerce or profit-oriented occupation, but because their small-holdings and land was an asset handed over for generations in their families. This was the kind of situation that had prevailed in the US before their independence war.

If the AoA was looked at from this perspective, its inequities and asymmetries become glaring and evident. During the Uruguay Round, some of them entered into coalitions with those in the North - the Cairns group - and while they had some say in the negotiations, most of the other developing countries had no say. And towards the end of the round, even Canada and the Cairns group did not matter - it was a negotiation between the US and EC and their interests were reflected in the compromises - whether on domestic support or export subsidies etc. As a result even now the US could provide $20 billion subsidy to its farmers. Developing countries had no import restraints, did not subsidise their domestic agriculture and provided no export subsidies.

The AoA prohibited the developing countries from undertaking any of these support or subsidies for ever in the future, while merely partially restraining or reducing the developed world.

In effect the UR and AoA was saying: "those who did not distort in the past shall never do so in the future; and those who did could continue to distort, but to a lesser extent of 70-80 percent of previous distortion."

Hence, in the mandated negotiations on agriculture, it was necessary to keep in mind the special nature of agriculture in developing countries and remover all imbalances and inequities.

Flowing from these were a number of conclusions for action: * food production in developing countries is for domestic consumption, and the current concepts of globalisation and liberalisation could not be applied at all. Such production should be completely exempt from these disciplines.

Even more, food production in a developing country for domestic consumption is as important as food security. What use was it to have secure borders, if the population inside could not be fed. Thus the food security issue stood on the same level as the absolute right of security exception of GATT (Art. XXI) that the industrial countries invoke.

Allowing total liberalisation and imports, and sending such farmers out of their land and employment, would create a major social crisis - certainly in large countries like India, many parts of Africa, and even Latin America, and even in South East Asia where several countries are members of the Cairns group.

Measures taken by developing countries to protect small and household farmers and food production for domestic consumption should be outside the disciplines of the AoA.

Another inequity is the way developed countries are allowed to provide domestic support and raise tariffs so much so the market access in the developed countries, under the AoA has created tariff barriers, in some cases of over 400 percent. All such support and restraints should be eliminated. Equating the farmers of developed countries, and the small and house-hold farmers of developing world, and placing same restrictions was just not equitable, and should go.

A third inequity flowing from the AoA lay in the fact that the developed countries were able to export subsidised agriculture products, sometimes by subsidising 3-4 times the production cost.

All export subsidies in agriculture of the developed countries should hence be completely eliminated.

On the problems of the Net Food importing developing countries (NFIDC), Das noted that the Marrakesh decision merely pointed to the financial institutions, and enabled developed countries to provide food aid. There was no obligation. And so long as it was an enabling and best endeavour provision nothing would happen.

In Das view, it was time to set up a fund, and put an obligation on all agricultural exporting developed countries to contribute to this fund, and the fund should be used to help the NFIDCs.

In comments and discussions, it was suggested that if the NFIDC problem was to be left in terms of contributions by donors, they would just "rob peter to pay peter" - cut their current aid under one head, and give it to this fund.

Several participants from developing countries said there was little doubt that the AoA had gross inequities - as the green box, blue box payments allowed to the developed world showed. At a minimum they said, both these should be combined, and the amounts under either that developed countries could use should be a proportion of their AMS and production - and not as now where all green box payments were exempt.

One of the participants from the Cairns Group did not see any reason to change the AoA to meet the problems of development of agriculture, and said that even now there was sufficient leeway, in terms of a higher proportion of their AMS that could be spent, as also public distribution on the basis that the state bought at market prices, and distributed it to the poor.

But this view was challenged by others who noted that developing countries and their budget constraints would not allow it.

A non-government participant from the US-based Institution of Agricultural Trade Policy said their own studies showed that the concept of payments to farmers decoupled from production, and the view that if farmers produced more and prices went down, they would cut back production had not happened. Household farmers became bankrupt, and their farms were taken by bigger commercial farms, and production had increased. The theory of 'market' and price signals had not operated either. There was in fact a disconnectivity between prices and production. Also, there were only 2 or 3 traders, and Cargills was the biggest, to whom farmers could sell and thus at their mercy.

In a summing up at the end of the symposium, Mr.Panos Konandreas, Senior Liasion Officer of the FAO at Geneva, that prior to the Uruguay Round the main problem faced was the prevalence of production and trade distorting policies in a number of developed countries, leading to excess supply on the world market, and to the detriment of others.

The AoA was a major step in stemming the large distortions and lack of disciplines.

But the problem of developing countries had been opposite. They produced well below their needs, and after there were disincentive policies that distorted production and trade, but which did not impinge on trade interests of others.

But under the UR, by subscribing to the same production-limiting measures as the developed, developing countries had given away some of the flexibility that had been available to them, and could not correct their past distortions. They had agreed to a set of measures to address a problem they did not have.

It was not surprising therefore that many developing countries were having second thoughts on AoA, and had been expressing serious concerns.

Their problems, and need for flexibility, could perhaps be addressed under the broad category of Special and Differential Treatment - to enhance their capacity to produce, improving their market access, and safeguarding their domestic market stability, while removing the distortions created by developed countries.

Among the suggestions were measures by developed countries for significant reduction of their total AMS (aggregate measure of support), elimination or reduction of de minimis for countries with a large AMS, tightening up the green box measures, bringing blue box measures under AMS reduction, put limitations on the applicability of the peace clause (due to expire at the end of the initial reform process and under which there is to be restraint on subsidised agricultural exports by invoking agreements other than agriculture), and a substantial reduction of export subsidies by developed countries that displace domestic production in recipient countries.

In terms of S&D, Konandreas noted, a number of suggestions had been made including an option to developing countries to recalculate their AMS levels and revise their schedules, higher de minimis levels to them for non-product specific AMS, particularly in cases of large negative product-specific AMS, credit for negative product specific AMS by excluding them from calculations of expenditure for food security, extension of green box measures to include food security measures, and clarification of several of the definitional and methodological problems.

Developing countries also felt that the agriculture export opportunities to them under the UR had not materialised, and they had not been able to diversify away from raw to processed exports.

To tackle this, tariff peaks and tariff escalation on products of export interest to the developing world should be reduced, if needed by using a harmonisation formula approach; eliminating complex tariffs and specific tariffs; compensating preference receiving countries during adjustment phase; expanding tariff rate quotas (TRQs) and agreeing to some rules on setting in-quota tariffs; adding product specificity to minimum access commitments by disaggregating TRQS and making their administration in importing countries more transparent.

The existing agreement also discriminated in respect of the special safeguard measures (SSG), by enabling developed countries to use them, but developing who had no measures in the past being precluded.

And given the large population dependent on agriculture, and a sizeable portion of developing country export earnings spent on food imports, and a large part of their population spending household incomes on food consumption, developing countries were extremely risk averse.

It had been suggested that developing countries need to be able to take simpler instruments, rather than complicated ones like anti-dumping etc. It was necessary to make SSG a permanent instrument available to all members, but for a limited number of sensitive basic foodstuffs and some tightening of "triggers" so that SSG is not abused, and support use of price bands as a legal instrument to cushion impact of world market variability on the domestic market.

It was also necessary to help developing countries to develop their agriculture, build capacity to enable them to participate in trade negotiations, and ensure technical assistance such as in complying with sanitary and phytosanitary restrictions. (SUNS4518)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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