The WTO's Broken Promise
by David Moberg
In These Times magazine,
Trade negotiators promised that "development"
of the world's poorer nations would be at the top of their agenda
during negotiations over new trade rules that the World Trade
Organization members launched two years ago.
They planned to focus on agriculture,
since the vast majority of people in poor countries still work
the land as small landowning peasants or as rural laborers. But
as both governments and concerned citizen groups prepared for
the September 10 WTO meeting in Cancun, Mexico, it seemed more
likely that any new agreement would further enhance multinational
corporations' control over global agriculture and not the economies
of developing countries or, least of all, the well-being of the
world's poorest people.
For roughly five decades, agriculture
was excluded from negotiations for reduced tariffs and trade barriers,
largely because the United States wanted to Protect its domestic
agriculture programs. But with the establishment of the WTO in
1995, agriculture was put on the table.
At the last WTO meeting in Doha, Qatar,
trade ministers agreed to increase agricultural producers' access
to markets (especially for poor countries selling to richer countries)
and to decrease domestic financial support for agriculture. In
theory, this was supposed to lead to freer, more "liberalized"
trade in agricultural products.
Most countries, however, recognize that
agriculture, which is wildly subject to the vagaries of weather,
is not like other industries. Having secure food supplies, for
example, is more important than having a steady supply of automobiles
or portable disc players. Agricultural practices also have a big
impact on natural environments and the social fabric of society,
even in societies where farm populations have shrunk. And many
small, poor countries are dependent on one or a few agricultural
products for their export earnings, which was one of many reasons
the WTO talked about establishing distinct rules to help developing
In the model of free trade comparative
advantage, it may make sense for Portugal to make wine and for
England to produce wool, but most agricultural trade decisions
involve far more complex social, economic, and environmental calculations.
Consequently, there are a large number of blocs of countries with
quite different interests.
One group of major exporting countries
(the Cairns group) includes both developed and developing nations
that want to minimize trade barriers. But some of those same countries
also want special protections for their domestic ag industries.
Both the European Union and the United States promote the ideology
of free trade, but both also want to keep their farm subsidy programs
in place. For that, poor countries attack them as hypocrites who
want to pry open markets and "dump" their products at
destructively low prices and at the same time keep their own markets
closed to Third World products.
Despite the complex patterns of barriers
and subsidies, agricultural trade has opened up in many countries,
not only , _ through NAFTA, the WTO, and other trade agreements
b t al o through International Monetary Fund pressure on cash-strapped
countries. So far the results have been encouraging only for the
global agribusiness companies that control and profit from the
trade in goods and often depressed world commodity prices.
Researchers at Food First and the Institute
for Food and Development Policy studied the effects of more liberalized
agricultural trade policies in Brazil, China, India, Mexico, South
Africa, and the United States. They found that the freer trade
"has cost the poor jobs and income, has increased rural poverty
and inequality, and has wiped out small farms and communities."
Even when increased agricultural trade brings more revenue to
some countries, it is the very big farmers and multinational corporations
that gain the most.
As agriculture is restructured to become
more concentrated, more industrial and more environmentally harmful,
small farmers and peasants suffer. Consequently, the shift to
agricultural exports pushes farmers producing food for domestic
consumption out of business. The export agricultural producers
profit from the labor of poorly paid, landless workers, which
makes a bad social situation worse and leads to greater economic
inequality. For poor people, underdevelopment is preferable to
this free-trade engineered development.
Agricultural policies in the United States
and Europe cause trouble for those developing countries that do
open their markets by encouraging dumping, that is, selling goods
below the cost of production. Dumping may be related to the existence
of domestic subsidy programs, but it isn't the same thing. It
would be possible to guarantee that U.S. farmers are paid at least
the full cost of production, to limit crop production, and to
prevent crops from being exported at a below market price. Doing
this would reduce the volume of U.S. exports and allow farmers
in the United States and in most other countries to come out ahead
Instead, farmers in the U.S. often earn
far less than it costs to produce their crops, receive subsidies
that don't make up the difference, and then have their crops sold
in the grain markets at unfairly low prices around the world,
thereby depressing incomes for farmers elsewhere. IATP calculated
that in 2001 it cost U.S. farmers on average $6.24 to produce
a bushel of wheat, but big U.S. exporters like Cargill were able
to sell the wheat on the world market for $3.50, or 44 percent
below the cost of production.
Government support payments compensate
for only a small part of that shortfall for most farmers. And
those payments were concentrated among the largest and richest
farmers, leaving smaller-scale farmers-those that don't go bankrupt-to
rely on income from jobs off the farm to make up for their losses.
Cargill-and the handful of other companies
that dominate the global grain trade-profit from selling this
cheap grain, and processors, like Archer Daniels Midland, or end
users, like food giants from Coca-Cola to Tyson's, benefit from
these low-cost agricultural products. But such dumping simply
leads to low prices and fewer markets for the products of farmers
and peasants elsewhere in the world-like Mexican peasants flooded
with cheap U.S. corn under NAFTA.
European milk is dumped in central America,
destroying its indigenous dairy industry, and the dark meat that
is less prized in European and American chicken markets is dumped
in Senegal or other countries, wiping out flourishing domestic
poultry industries. The milk is subsidized, but the chicken isn't.
Both cases of dumping have the same deleterious effects.
In the eyes of some free trade theorists,
the consuming countries should be delighted at getting cheap food
at less than "L the cost to produce it. Some countries can
benefit, especially if they do not have a big farming economy
(like Saudi Arabia). But by destroying the still-large agricultural
sectors in most other countries, low price imports depress domestic
agricultural markets around the world-markets that are needed
for development. Rarely are the economies of those countries adequate
to absorb the flood of displaced peasants even if hundreds of
new sweatshops are opened. Countries that depend on their limited
supply of hard foreign currency to buy other crucial goods, from
machinery to medicines, are thereby forced to spend it on food.
Further, consumers don't always benefit from depressed farm prices.
Over the past 15 years in the United States, for example, the
spread between farm and retail prices for a market basket of goods
has increased sharply. Even in Mexico, since agriculture was liberalized,
the price of tortillas has skyrocketed while corn prices have
If all dumping were halted, developing
country economies would be strengthened, as people in the rural
sector would have more income to buy goods, educate children,
and improve their livelihoods. And the transition of the workforce
out of agriculture could be managed more humanely.
As the Center for Economic and Policy
Research co-directors Dean Baker and Mark Weisbrot note, simply
removing trade barriers will do little to develop the poor countries.
The World Bank calculated that low and middle income countries
would only gain about six-tenths of one percent in their gross
domestic product if all rich country trade barriers-for both industrial
and agricultural goods-were phased out by 2015. It is important
to protect these countries from unwanted dumping and to open access
to rich markets, particularly for products that are not environmentally
destructive or produced with heavily exploited workers. Free trade,
however, will not on its own yield the development promised at
The forces pushing the agricultural trade
talks are not poor farmers, despite the fact that many developing
countries were taking a more independent, aggressive stand heading
into the meeting at Cancun. The global agribusiness corporations
that profit at the expense of farmers in both the developed and
developing world have set the agenda, while peddling panaceas-like
genetically modified crops-for agricultural crises that are partly
caused by the corporate-dominated market. This concentration of
corporate power is as much a distortion of markets as are agricultural
Not surprisingly, however, no proposals
at the Cancun meeting will address the corporate power of global
agribusiness and how it shapes the global markets in farming and
World Trade Organization (WTO)