Tricks of the Trade
Injustices in the Global
"Free-trade" Food System
New Internationalist magazine,
January / February 2003
The global trade system, dominated by
rich-world corporations, keeps poor countries poor. The World
Trade Organization (WTO) is the international body that makes
the rules. These rules require poor countries to cut support to
farmers and open their agricultural markets to rich countries
- which are powerful enough to protect their own markets. In the
words of the US campaigner Ralph Nader: 'The world doesn't have
free trade, it has corporate-managed trade.' WTO rules also favour
food and agricultural corporations over consumer and environmental
concerns. Here are some examples of injustices in the system,
explained using some common food items
PATENTS: Who does the food belong to?
WTO rules allow corporations to patent
or own agricultural plant varieties and genetic sequences of animals,
thereby permitting huge companies to gain control over poor .
In India basmati-rice exports were valued
at $425 million in 1998-99. But in September 1997 RiceTec Inc,
a Texas-based corporation, won a US patent on basmati rice. Such
examples endanger the livelihoods of farmers in India.
UNNECESSARY TRADE: The great food swap
In 1998 Britain imported 61,000 tonnes
of poultry meat from the Netherlands. It also exported 33,100
tonnes of poultry meat to the Netherlands.
Global corporations searching for the
lowest commodity prices fuel this kind of unnecessary trading.
Local producers are often undercut by cheap meat flooding into
This also has consequences for animal
welfare, encouraging intensively reared livestock and the export
of live animals under cruel conditions. Under WTO rules a country
cannot refuse to export a product - a ban on live exports could
contravene such rules.
Aviation fuel is not taxed. This is a
hidden subsidy to the global food trade. While much food goes
by sea, air-freighted food - such as chickens from Brazil and
Thailand, mainly for use in processed foods - makes a major contribution
to global warming.
LIBERALIZATION: Poor countries open their
Before 1992 Jamaican dairy farmers produced
over 25 per cent of the milk consumed in the country. But in 1992
World Bank liberalization policies required Jamaican tariffs (import
taxes) on dairy imports and subsidies to local dairy farmers to
Subsidized powdered milk from the European
Union (EU) poured in. In 1993, one year after liberalization,
millions of dollars worth of local milk had to be dumped, hundreds
of cows were slaughtered prematurely and many dairy farms closed
down. Nestle, the major buyer of Jamaican milk, now buys a third
less than three years ago.
While Southern governments have to open
their markets to the North in line with World Bank loan 'conditionalities'
and WTO rules, rich countries continue to subsidize their own
agriculture. EU milk subsidies do not help farmers anywhere in
the world - the benefits go to processors and exporters.
SUBSIDIES: Protection for the rich
Subsidized food from rich countries undercuts
domestic markets in poor countries and pushes down world commodity
Under WTO rules developed countries are
supposed to reduce export subsidies by 36 per cent. But the US,
the EU and Japan have continued to subsidize their corporations
and large traders.
EU sugar processors receive a guaranteed
price three times that on the world market. The EU is the world's
largest exporter of white sugar - export prices are only a quarter
of production costs. A World Bank study estimated that world prices
fell by 17 per cent as a result of the EU sugar regime. In 2001
Europe exported 770,000 tonnes of white sugar to Algeria and 150,000
tonnes to Nigeria - both natural export markets for African producers
like Mozambique. But sugar farmers in Mozambique - one of the
poorest countries in the world - can't compete with subsidized
EU sugar. Meanwhile, small farmers in Europe don't benefit either
- large processors, traders and retailers are the main beneficiaries
DUMPING: Getting rid of surplus food
Dumping (exporting at a price below the
cost of production) by rich countries creates unfair competition
for local producers. Giving food away as food aid is one way of
World Food Programme figures show that
food aid peaks in years when world cereal prices are low and stocks
are high. Ironically this means that food aid is most readily
available in overproduction years - when it is least needed. Between
1996 and 2000 the price of wheat dropped while food-aid shipments
increased by more than 50 per cent. The US and the EU account
for half of all wheat exports, with prices respectively 46 per
cent and 34 per cent below the cost of production. WTO rules which
outlaw dumping make exceptions for aid. The US is unique in giving
its aid in kind rather than cash, helping to undercut local economies.
The International Food Policy Research
Institute estimates that in 2000 US food aid - coupled with imports
from the EU and Turkey - depressed local wheat prices in Bangladesh
by 20 per cent; an additional 100,000 tonnes of food aid reduced
local wheat production by as much as
91,000 tonnes. USAID's own website reads: 'The principal beneficiary
of America's foreign-assistance programs has always been the US.
Close to 80 per cent of the USAID contracts and grants go directly
to American firms. Foreign-assistance programs have helped create
major markets for agricultural goods.'
COMMODITY A PRICES: Overproduction pushes
Countries that have developed their capacity
to produce and export cash crops are confronted with falling prices
due to chronic world overproduction.
Overproduction has caused the price of
coffee to crash by almost 50 per cent in the past three years
to a 30-year low. Twenty-five million coffee farmers face ruin.
Families are unable to buy medicines, enough food, or to send
their children to school. The four big coffee corporations (Nestle,
Sara Lee, Kraft, Procter and Gamble) make the profits, while farmers
receive a smaller and smaller share of the market value. Ugandan
farmers get 2.5 per cent of the retail price of coffee. Cheaper
prices are not being passed on to consumers.
Prices were previously controlled by the
International Coffee Agreement. But the coffee market has been
transformed from a managed market, in which governments played
an active role both nationally and internationally, to a freemarket
system. Recently this has brought very cheap rawmaterial prices
for the giant coffee companies.
There has been a massive increase in coffee
production in Vietnam and in Brazil, where mechanization has increased
yields. Together with the slowing of coffee consumption in the
North, this has pushed down farm-gate prices. Coffee farmers,
mostly poor small-holders, now sell their coffee beans for much
less than they cost to produce - only 60 per cent of production
costs in Vietnam's Dak Lak Province.
LABELLING: Informing consumers about their
GM SOYA & MAIZE
In the US, manufacturers of genetically
modified (GM) foods are not required to label their products.
Almost all food produced there contains some GM soya or maize.
But European consumers have consistently shown that they want
their food labelled GM or non-GM. So the European Commission has
introduced a limited labelling scheme covering GM soya and maize.
However, soya and maize derivatives - which are used in most processed
food in Europe - including soya oil, lecithin and corn (maize)
syrup, were excluded from the labelling scheme, to the dismay
of pressure groups.
In any case, such labelling could be challenged
by the US under WTO rules, arguing that GM foods are equivalent
to conventional foods and so to label them as different is to
discriminate against US producers.
While the US hasn't yet taken Europe into
an all-out trade war over GM crops, worried that this might derail
the free-trade train, the threat remains potent. When Sri Lanka
tried to ban GM crops outright in 2001, the US didn't hesitate
to exert pressure via the WTO rules to get the ban overturned.
Julian Edwards, Director General of Consumers
International, representing 235 consumer organizations in 109
countries, stated: 'One of the ironies of this issue is the contrast
between the enthusiasm of food producers to claim that their biologically
engineered products are different and unique when they seek to
patent . them - and their similar . enthusiasm for claiming g
that they are just the same as other foods when asked to label