The global trade in food

There has been a global trade in food for millennia - what is new today is its pace, scale and who controls it.

During the Roman Empire, wine, grains, salted meat and fish were imported into the UK; the spice trade between Asia and Europe flourished between the fifteenth and seventeenth century and the wealth of the British colonial era was built on global trading in sugar, coffee, tea and salt. In more recent times, there has been a massive growth in the global trade in food, with a three-fold increase between 1965 and 1998.[99]

This growth has been supported by technological changes such as the industrialisation of agriculture, refrigeration and new processing technologies together with cheap air transport and the emergence of powerful multinational food corporations. It has been encouraged by the rise of free market economics and international trade agreements like the GATT/World Trade Organisation's Agreement on Agriculture (AoA) and the European Union's single market policy and by institutions which have liberalised and regulate global trade.

The argument for the liberalisation of trade (the removal or reduction of barriers to international trade in goods and services) starts from the premise that the market works best by when competition is least regulated.

In this unregulated market, the collective outcome of millions of self-interested (greedy?) transactions between buyers and sellers is supposed to result in the greatest good for society.

Free trade theory goes on to argue that each country should produce the thing that it makes or does best - the idea of comparative advantage over other producers by virtue of climate, natural resources, lower wages, proximity to markets etc. The argument is that specialisation will increase efficiency, more can be produced and from the profits generated the other things a country is less suited to produce can be imported. So for developing countries this means producing tropical crops (mangoes, bananas, coffee etc) that can't be produced in the developed world and then using the earned income to buy food staples (wheat, rice or maize) from other countries, both developed and developing, that can produce them more cheaply.

The General Agreement on Tariffs and Trade (GATT), a global system of trade rules based on free trade principles, originated in 1947 in an attempt to counter the protectionism of the Great Depression of the 1920s and 30s. Food and agriculture were excluded from the GATT until 1986, when the Uruguay Round of trade negotiations was launched. The Uruguay Round was completed in 1993 and brought the World Trade Organisation (WTO), a global regulatory body, and the Agreement on Agriculture (AoA) into being.

The underlying philosophy of the AoA is the 'right to export'. The AoA aims to create a market-oriented agricultural trading system through the liberalisation of the trade in agricultural produce, primarily by removing or reducing tariffs on food imports and also reducing other barriers to trade such as production and export subsidies. The AoA was designed by the US and EU (the two largest exporters) under pressure from other major food exporting countries (Argentina, Australia and Canada) and from US corporations.

Developing countries were only brought in at the last minute and the agreement has a clear bias towards the interests of powerful developed world governments and agribusiness corporations and rather than the interests of small farmers or the creation of global food security. The latest round of WTO talks (September 2003 in Cancun, Mexico) failed when an alliance of developing country governments walked out after who refusing to be bullied by the US and EU.[103]

An underlying problem with the GATT/WTO conceptual framework is the fiction that trade takes place between countries. Multinational corporations in the food sector, rather than national governments, drive agricultural economics.

As the agriculture sector has become globalised, countries (like the US and Brazil) do not compete for a share in the world soya bean market, rather they compete for investment by a global grain trader such as Cargill. Trade rules focus almost exclusively on government intervention in markets (subsidies, tariff barriers etc) on the false assumption that governments create the only distortion in world agricultural markets. But the entities primarily involved in global agricultural trade, the multinational food corporations, are not controlled in any way by these trade agreements.[104]

One of the most common arguments in support of increased trade liberalisation is that it will bring access to rich-country markets, and therefore accelerate economic growth in developing countries. But all the indicators suggest the exact opposite.[105] The supposed benefits of trade liberalisation, such as an increased share of export markets, have not been realised and market shares of world agricultural exports have remained fairly constant.[106]

A United Nations report which looked at the 48 least developed countries showed that, although they had gone further than most to liberalise their markets, these countries had been pushed further into poverty.[107] Developing countries have been unable to gain increased access to global markets, instead they have seen increasing food import bills (also see section 'Trade Liberalisation: On balance good or bad for the developing world?' on page 21).[108]

Small farmers both in the developed and developing world have not seen the promised benefits of trade liberalisation.[109] Global trade favours larger farms, mono cultures and mechanisation.

For farmers who cannot match the technology needed for intensive, large-scale farming or who don't have the advantage of favourable geography and climate, the globalisation and liberalisation of agricultural trade threatens their survival. Yet the policies of governments in both developed and developing countries push farmers headlong into this globalised free market economy.

The global trading of food requires farmers to become more internationally competitive in order to survive. It forces farmers into competition with farmers from other countries where geography and climate are more favourable, labour costs lower and environmental and animal welfare standards less stringent. Crops that could be produced locally can now be imported, often at prices well below the local cost of production, damaging farmers' livelihoods and undermining local economies.

Multinational food corporations have no allegiance to communities and switch from producer to producer and from country to country in search of the cheapest price. They exploit their global scope, political influence and the free trade legislation to play farmers around the world off against each other (see box 'Playing off farmers around the world').

Farmers however can't simply relocate their farms and are forced to continually lower their prices, frequently to below the cost of production, in order to win contracts.

The lower prices being paid to farmers for their produce have not translated into lower prices for consumers. Instead the gains have mostly been absorbed by the food corporations involved in processing and marketing food, partly to cover their overheads -processing, packaging, transport and advertising - but also helping to increase corporate profits (see 'Are these low prices being passed on to consumers?' on page 9). Sophia Murphy of the Institute for Agriculture and Trade Policy says, 'it's not that consumers cannot benefit from trade liberalisation, but in practice they have not.'[111]

Trade liberalisation intensifies the pressures to industrialise food production, farmers strapped for cash must jump onto the treadmill of industrial agriculture in order to survive (see section 'The expand or go bust treadmill' on page 7). The intensive use of synthetic inputs (pesticides and fertilisers), machinery, crop monocultures, large scale factory farming and long distance transportation all promote environmental degradation (see section 'The Environmental crisis' on page 10).

By removing trade barriers (tariffs, quotas and duties), trade liberalisation has created a single, hyper-competitive, market in which the world's one billion farmers are forced to compete to sell their produce to the food corporations. At the same time, by erasing borders and globalising markets, trade agreements have enabled and encouraged the already dominant players (the multinational corporations) to grow ever larger through mergers and acquisitions of other corporations.[112]

Trade agreements and globalisation have dramatically altered the size and market power of the various players in the food system. This upset in the balance of power is a key reason for the disparity of distribution of profits. The restructured global food system increases competition among farmers for limited markets, driving down farmgate prices and farmers' profits. At the same time it encourages corporate concentration, decreasing competition among agribusiness corporations and increasing their profits.[113 & 114]

The main beneficiaries of the global food system are the multinational corporations who have become experts at reaping the economic benefits of trade liberalisation and the global trade in food, while at the same time shifting the economic, social and environmental costs onto farmers and the public. Essentially this global market place is driving a 'race to the bottom' in the search for the cheapest labour and resources, weakest regulations, externalised risks and lowest taxation.[115]

What makes corporations so effective at achieving their agenda is their combination of market power with political lobbying power. Even seemingly powerful governments feel the pressure from the food corporations on their agriculture and trade policy-making when there are huge tax revenues and jobs to be lost if corporations decide to disinvest. US grain trader Cargill has had a hugely influential role in the development of US trade policy and numerous Cargill executives have had direct ties with the US administration. For example, Cargill was one of the principle architects of the US proposal to the GATT agricultural negotiations in 1987, which paved the way for the increased global trade in agricultural products.[116] Two key figures who have helped shape US trade policy over the last 20 years, Daniel Amstutz and William Pearce, both worked for Cargill (Pearce, former vice-chair of Cargill, was a deputy special representative for trade negotiations in the Nixon era; Amstutz, a former president of Cargill Investor Services later became chief US negotiator on agriculture in the GATT negotiations).[117]

More recently President Bush appointed Cargill chairman and CEO, Warren Staley, to serve on the Export Council (the national advisory committee on international trade) and Cargill Assistant Vice President for Public Affairs, Daniel Pearson, to represent farmers on the US International Trade Commission.[118] In addition to direct participation in the development of trade policy US agribusiness corporations give large amounts of money to US political parties: $53 million in 2002.[119] It is no surprise, given that they are the architects, administrators and funders, that the ultimate winners of US and, by extension, global agricultural trade policy are agribusiness corporations.

While most agree that the development of strong agricultural economies is the lynchpin for food security and poverty alleviation in the developing world, there is currently a debate among food and agriculture policy analysts and development NGOs as to whether trade liberalisation will be the most effective route to the creation of food security and poverty reduction in developing countries. Some, like development NGO Oxfam and Guardian columnist and author George Monbiot, seem to have been seduced by the World Bank/WTO argument that market access will reduce poverty by allowing developing countries, with their lower production costs to undercut developed world farmers, win substantial markets in rich countries and strengthen their economies.[122] Others argue that production by local people for themselves and for local markets is more important than developing an export economy. They say that the model of free market access will not ensure that poverty is reduced and wealth generated in developing country economies. Rather the economic, social and ecological costs to developing countries of favouring export-oriented agriculture policies over policies which ensure food security and food sovereignty will destroy the livelihoods of poor farmers and create more poverty rather than reduce it.[123]

All the evidence so far seems to support the latter view - that the livelihoods of small farmers are being undermined by the free trade philosophies of structural adjustment programmes and international trade agreements.[124] A study by the UN Food and Agriculture Organisation (FAO) has shown that as trade barriers fall developing country farmers are increasingly facing competition from cheap imports in their local markets.[125]

Trade liberalisation has reduced the ability of developing countries to protect their agricultural economies against cheap imports by preventing their use of domestic price support mechanisms and import tariffs and has encouraged the development of export-oriented economies at the expense of food production for local consumption. At a conservative estimate 20-30 million people in developing countries have been driven from their land because of trade liberalisation.[126]

'Whole families used to work on the land. We grew almost everything we needed. Now imported wheat is destroying our market. It's just not worth going to the trouble of producing food any more and the village is being emptied of people.'

Dolma Tsering, farmer from Northern India [127]

On the face of it cheap imports sound like a good thing, as they might make food cheaper for consumers in poor countries, making it easier for those in poverty to buy food. But there are downsides that clearly outweigh any short-term benefits.

Cheap imports and particularly food dumping (the practice of exporting food at below the cost of production) depress global commodity prices, creating a knock on effect on prices in local markets. Small farmers can no longer compete and are forced out of the market and out of business.

Indian farmers who traditionally grew oilseeds like sesame, linseed and mustard have been driven under by cheap soya oil from US imports. India was formerly selfsufficient in the production of edible oils, but trade liberalisation and the reduction of tariff barriers on edible oil imports mean that it is now the world's largest importer of edible oils.

Pastoral farmers in West Africa have been displaced by cheap meat and dairy imports from Europe. Cote d'Ivoire and Burkina Faso also had healthy cattle sectors until beef from the EU was dumped on local markets. Mexican beef producers are losing out as US beef sales have tripled in Mexican markets since the introduction of the North American Free Trade Agreement, as a direct result of competition from US industrial food production methods.

Cheap imports and food dumping create a vicious circle: they drive developing country farmers out of their local markets because they can no longer compete, local production falls, farmers abandon their land, the whole of the rural economy shrinks, people are forced to move to the cities for work and more food must be imported.

Many farmers in developing countries are facing increasing pressure to grow crops for export. this comes not only from their families' need for cash but in response to government or corporate incentives or to World Bank/IMF structural adjustment programmes that seek to increase foreign currency earnings through agricultural production.

While growing commodity crops for export may generate cash, it does not create local food security. Food security, ensuring that a country's citizens have enough to eat, is the most basic of national government responsibilities. Until recently, local and national economies produced much of their own food and had a reserve for when food was scarce. Trade liberalisation has led to more land and resources being devoted to export crops and less to domestic food production thereby eroding food security.[129] For example to meet the demand for meat and meat products in industrialised countries, countries in the developing world are increasingly growing feed grain for export. The human consequences of this transition were dramatically illustrated in 1984 in Ethiopia when thousands of people were dying each day from famine. At the very same time, agricultural land in Ethiopia was being used to produce linseed cake, cottonseed cake and rapeseed meal for export to the UK and other European countries as feed for livestock.[130]

Export-oriented policies not only divert scarce land and water resources from meeting local food needs to producing luxury goods (flowers, shrimp, out-of-season vegetables etc) for rich countries. They also transfer control over resource use from small farmers to big corporations by increasing the concentration of land in the hands of a few, benefiting investors, agribusiness and larger farmers while marginalising small producers. Small farmers, who currently ensure that their own family's food needs are met and sell small surpluses at local markets, are likely to be displaced from their land and forced to become wage labourers on big farms producing for the global export market or alternatively forced to migrate to cities to find work.

Farmers who depend on export markets are also very vulnerable to losses from fluctuations in prices on the global commodity market, exchange rate fluctuations and economic slowdowns around the world. Those still embedded in the local economy can still feed their families, selling any surplus to local markets, whereas those who have been drawn into the global economy and have specialised their production for export can easily be destroyed by low prices on the commodity market or an economic downturn overseas over which they have no control (see boxes 'Wake up and smell the coffee' and ‘Bitter-sweet deal for sugar farmers’ on pages 23 and 24).[131]

The failure of developing countries to gain access to rich-country markets has been blamed on the refusal of the US and Europe to lower their trade barriers (export subsidies, producer subsidies and import tariffs). It is indisputable that trade barriers imposed by developed country governments exclude developing country exports and it is hypocritical to maintain these barriers in the face of requirements under structural adjustment programmes for developing countries to open their markets.

However, it is doubtful that removal of developed world barriers to trade would greatly assist the majority of farmers in the developing world to gain access to markets. It is unrealistic to expect small farmers to be able to take advantage of liberalisation to gain access to foreign markets. Small farmers in developing countries face numerous constraints including access to land, technology, cash or credit, the means to get produce to market or the bargaining power to get a reasonable price for it. As a consequence small farmers rarely export directly. They are more likely to sell through middlemen or supply under contract to multinationals and so are at the mercy of these more powerful players who control the market price to their advantage. [132] Those most likely to benefit from market access to the developed world are the big agro-exporters (see box 'Marginalising small farmers with excessive quality standards' on page 25).

References
[98] Richard Douthwaite (1996) Short Circuit: Strengthening Local Economies for Security in an Unstable World, Totnes : Green Books
[99] Food and Agriculture Organisation FAOSTAT http://apps.fao.org; Viewed 6/1/04
[100] Daryll Ray et al (2003) Rethinking US Agricultural Policy: Changing Course to Secure Farmer Livelihoods Worldwide, University of Tennessee http://agpolicy.org/blueprint/APAC%20Report%208- 20-03%20WITH%20COVER.pdf; Viewed 6/1/04
[101] Daryll Ray et al (2003) Rethinking US Agricultural Policy: Changing Course to Secure Farmer Livelihoods Worldwide, University of Tennessee http://agpolicy.org/blueprint/APAC%20Report%208- 20-03%20WITH%20COVER.pdf; Viewed 6/1/04
[102] Daryll Ray et al (2003) Rethinking US Agricultural Policy: Changing Course to Secure Farmer Livelihoods Worldwide, University of Tennessee http://agpolicy.org/blueprint/APAC%20Report%208- 20-03%20WITH%20COVER.pdf; Viewed 6/1/04
[103] Lucy Michaels (2003) 'Once Upon A Time in Mexico' Corporate Watch Newsletter 15 September / October 2003 www.corporatewatch.org.uk/ newsletter/issue15/issue15_front.htm; Viewed 11/2/04
[104] Sophia Murphy (2002) Managing the Invisible Hand: Markets, Farmers and International Trade, Institute for Agriculture and Trade Policy www.tradeobservatory.org/library/uploadedfiles/ Managing_the_Invisible_Hand_2.pdf; Viewed 11/2/04
[105] John Madeley (2000) Trade and Hunger an overview of case studies on the impact of trade liberalisation on food security and poverty, Forum Syd http://online.forumsyd.se/web/FS_Globala%20studier/ 002B5F94-000F6CFB-002B5FB1.0/T&Hunger.pdf; Viewed 6/1/04
[106] Sophia Murphy (2002) Managing the Invisible Hand: Markets, Farmers and International Trade. Institute for Agriculture and Trade Policy www.tradeobservatory.org/library/uploadedfiles/ Managing_the_Invisible_Hand_2.pdf; Viewed 11/2/04
[107] UNCTAD (2000) Least Developed Countries Report 2000 UNCTAD New York and Geneva www.unctad. org/en/docs//ldc00ove.en.pdf; Viewed 11/2/04
[108] FAO (2000) Agriculture, Trade and Food: Country Case Studies, Volume II: Synthesis of the Country Case Studies www.fao.org/DOCREP/003/X8731e/x8731e01a.htm; Viewed 6/1/04
[109] See for example National Farmers Union of Canada (2002) Free Trade: Is it Working for Farmers? National Farmers Union (Canada) www.nfu.ca/briefs/1988vs2002FINAL.bri.pdf; Viewed 6/1/04; Raj Patel and Sanaz Memersadeghi (2003) Policy Brief 6 Agricultural Restructuring and Concentration in the United States: Who Wins, Who Loses? Food First www.foodfirst.org/pubs/policy/ pb6.pdf; Viewed 6/1/04; John Madeley (2000) Trade and Hunger; an overview of case studies on the impact of trade liberalisation on food security and Poverty, Forum Syd http://online.forumsyd.se/web/ FS_Globala%20studier/002B5F94-000F6CFB- 002B5FB1.0/T&Hunger.pdf; Viewed 6/1/04; Kevan Bundell (2002) Forgotten Farmers:Small Farmers, Trade and Sustainable Agriculture, Christian Aid www.christian-aid.org.uk/indepth/0206farm/ farmers.pdf; Viewed 6/1/04
[110] Michael Hart, chair of the Small and Family Farms Alliance speaking at the 'On Fertile Ground' Gathering, Oxford, March 2001
[111] Sophia Murphy (2002) Managing the Invisible Hand: Markets, Farmers and International Trade. Institute for Agriculture and Trade Policy www.tradeobservatory.org/library/uploadedfiles/ Managing_the_Invisible_Hand_2.pdf; Viewed 11/2/04
[112] National Farmers Union (Canada) (2002) Free Trade: Is it Working for Farmers? National Farmers Union (Canada) www.nfu.ca/briefs/ 1988vs2002FINAL.bri.pdf; Viewed 6/1/04
[113] National Farmers Union (Canada) (2002) Free Trade: Is it Working for Farmers? National Farmers Union (Canada) www.nfu.ca/briefs/ 1988vs2002FINAL.bri.pdf; Viewed 6/1/04
[114] Raj Patel and Sanaz Memersadeghi (2003) Policy Brief 6 Agricultural Restructuring and Concentration in the United States: Who Wins, Who Loses? Food First www.foodfirst.org/pubs/policy/pb6.pdf; Viewed 6/1/04
[115] Michel Pimbert at al (2001) Global Restructuring, Agri-Food Systems and Livelihoods, International Institute for Environment and Development www.iied.org/docs/gatekeep/GK100.pdf; Viewed 6/1/04
[116] Brewster Kneen (2002) Invisible Giant:Cargill and its transnational strategies, 2nd Ed London: Pluto Press
[117] For more information see 'Cargill: Arrogance Incorporated' GE briefing series. Corporate Watch 2001; Brewster Kneen (2002) Invisible Giant:Cargill and its transnational strategies, 2nd Ed London:Pluto Press
[118] Al Krebs (ed) Agribusiness Examiner no 202 ( November 15 2002) and no 227 (March 7 2003)
[119] 'Steady course needed from MPC in statistical fog' Guardian September 18 2003 www.guardian. co.uk/business/story/0,3604,1044396,00.html; Viewed 5/1/04
[120] Hezron Nyangito (1999) Impact of Uruguay (Round) Agreement on Agriculture on Food Security: the case of Kenya, Institute of Policy Analysis and Research cited in John Madeley (2000) The Impact of Trade Liberalisation on Food security and Poverty Forum Syd www.tradeobservatory.org/library/ uploadedfiles/Impact_of_Trade_Liberalisation_on_ Food_Securit.htm; Viewed 6/1/04
[121] Oxfam International (2002) Rigged Rules and Double Standards: trade, globalisation and the fight against poverty www.maketradefair.org/ assets/english/Report_English.pdf; Viewed 6/1/04
[122] Oxfam International (2002) Rigged Rules and Double Standards: trade, globalisation and the fight against poverty www.maketradefair.org/ assets/english/Report_English.pdf; Viewed 6/1/04; George Monbiot (2003) The Age of Consent: A Manifesto for a New World Order, London : Flamingo
[123] Vandana Shiva (2002) Export At Any Cost: Oxfam's free trade recipe for the third world www.countercurrents. org/exportatanycost-shiva.htm Viewed 6/1/04; Colin Hines (2002) Oxfam's Jekyll and Hyde Approach to trade will worsen the lot of the poor www.gaff.org.uk/index.php?a=3; Viewed 6/1/04; Kevan Bundell (2002) Forgotten Farmers: Small farmers, trade and sustainable agriculture, Christian Aid www.christianaid. org.uk/indepth/0206farm/farmers.pdf; Viewed 5/1/04; Via Campesina (2001) Our World is Not for Sale: Priority to Peoples' Food Sovereignty.www.peoplesfoodsovereignty.org; Viewed 5/1/04
[124] John Madeley (2000) Hungry for Trade: How the Poor Pay for Free Trade, London:Zed Books; Sophia Murphy (2002) Managing the Invisible Hand: markets, farmers and international trade. Institute for Agriculture and Trade Policy www.tradeobservatory. org/library/uploadedfiles/Managing_the_Invisib le_Hand_2.pdf;Viewed 5/1/04
[125] FAO (2000) Agriculture, Trade and Food: Country Case Studies, Volume II: Synthesis of the Country Case Studies www.fao.org/DOCREP/003/X8731e/ x8731e01a.htm; Viewed 5/12/04
[126] John Madeley (2000) Hungry for Trade: How the Poor Pay for Free Trade, London : Zed Books
[127] Helena Norberg Hodge, Todd Merrifield and Steven Gorelick (2002) Bringing the Food Economy Home: Local Alternatives to Global Agribusiness , London : Zed Books
[128] Oxfam International (2002) Mugged: Poverty in your Coffee Cup www.oxfamamerica.org/pdfs /mugged_coffee-report.pdf ;Viewed 23/1/04
[129] John Madeley (2001) Trade and Hunger an overview of case studies on the impact of trade liberalisation on food security and poverty, Forum Syd, http://online.forumsyd.se/web/FS_Globala%20studier/ 002B5F94-000F6CFB-002B5FB1.0/T&Hunger.pdf; Viewed 5/1/04
[130] Jeremy Rifkin (2002) 'The Worlds Problems on a plate; meat production is making the rich ill and the poor hungry' Guardian May 17 2002 www.guardian.co.uk/comment/story/0,3604,71 7044,00.html; Viewed 12/2/04
[131] Steven Gorelick (2000) 'Facing the Farm Crisis' The Ecologist vol 30, no 4
[132] Kevan Bundell (2002) Forgotten Farmers: Small farmers, trade and sustainable agriculture, Christian Aid www.christian-aid.org.uk/indepth/ 0206farm/farmers.pdf; Viewed 5/1/04
[133] Bill Vorley (2003) Food, Inc. Corporate concentration from farmer to consumer, UK Food Group www.ukfg.org.uk/docs/UKFG-Foodinc- Nov03.pdf ; Viewed 12/2/04
[134] Oxfam (2002) The Great EU Sugar Scam: How Europe's Sugar rRegime is Devastating Livelihoods in the Developing World. www.oxfam.org/eng/ pdfs/pr022508_eu_sugar_scam.pdf; Viewed 12/2/04
[135] Bill Vorley (2003) Food, Inc. Corporate concentration from farmer to consumer, UK Food Group www.ukfg.org.uk/docs/UKFG-Foodinc- Nov03.pdf ; Viewed 12/2/04
[136] Felicity Lawrence 'Growers' market' Guardian May 17 2003 www.guardian.co.uk/food/focus /story/0,13296,956536,00.html; Viewed 12/12/03
[137] Erik Millstone and Tim Lang (2003) The Atlas of Food: Who eats what, where and why Brighton : Earthscan