Food Security, Farming, and the WTO and CAFTA

by Deborah James

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Porfirio supports his family in Nicaragua by growing beans to eat and sell. He spends most of his day tending to his beans as well as working with his wife to maintain their house and raise all five of their children. If a new “free trade” agreement called CAFTA passes, Porfirio fears that he will not be able to get a decent price for his beans. The cheapest beans at the market in Managua are imported from the US where the average farmer receives $21,000 a year in subsidies from the government. It is impossible for Porfirio’s beans to compete against corporate agribusiness. After producing beans and feeding his family his entire life, Porfirio has been told that the best way for him to compete in the free market (under CAFTA) is to produce sesame, an export crop. His success will be dependent on the whims of the international market. When international sesame prices fall, Porfirio will not be able to sell his sesame. He will have no money to buy food for his family, and his family can’t survive eating sesame. He may have to sell his land and become one more unemployed person desperately looking for work in the cities or migrating to a wealthy country. (Witness for Peace)

As a necessary element to human survival, food is a human right. Small, local family farms are the bedrock of traditional rural communities and global food security- the ability of countries to produce the food they need to survive. Yet the global food supply is increasingly falling under the control of giant multinational corporations. Large agribusinesses have rewritten the rules of the global agricultural economy, using “free trade” agreements to turn food into a commodity for profit rather than a human right. The global corporatization of agriculture has had disastrous effects on farmers, food security, and the environment.

Implemented in 1994, the North American Free Trade Agreement (NAFTA), ‘liberalized’ trade between Canada, the U.S. and Mexico. Under NAFTA, farmers’ income in all three countries has plummeted and millions of small farmers have lost their land, while agribusiness corporations have reaped huge profits.

In spite of its obvious failures, new trade agreements are being written to expand NAFTA-style corporate free trade. In March of 2004, the governments of the United States, Guatemala, Nicaragua, Honduras, El Salvador, Costa Rica, and the Dominican Republic completed the U.S.-Dominican Republic-Central American Free Trade Agreement (CAFTA). If CAFTA is passed in the U.S. Congress, it would impose NAFTA-style agricultural policies on the heavily agriculture-dependent countries of Central America. Over 5.5 million workers and farmers’ livelihoods would be put at risk. CAFTA would also cause a further decline in U.S. family farmers’ incomes.

What’s more, CAFTA would pave the way for a massive Free Trade Area of the Americas (FTAA) currently in negotiations, which would extend the scope of NAFTA to include all countries in the western hemisphere except Cuba—thus multiplying the harrowing effects of NAFTA on small farmers and threatening food security for generations to come.

Both CAFTA and the FTAA are even more extreme than the Agreement on Agriculture (AOA) of the World Trade Organization (WTO), a global agreement involving 148 countries designed to shift world food production to export markets.

Food: To Eat or to Export?

The stated theory of free-trade proponents is that increased trade and decreased government regulation would increase food security and solve rural poverty. But the results have not borne out the alleged theory, because the WTO, FTAA, and CAFTA were never meant to solve global poverty and hunger. In reality, globalization of food production represents an unprecedented hijacking of the global food supply for corporate profit.

Underpinning the WTO, FTAA, and CAFTA is the ideology that all food – from basic grains and meat to fruits and vegetables – should be produced for international export. This is a drastic shift from the centuries-old practice where each country produced the majority of food its citizens needed on local, small farms – and only traded in certain products that could not be grown locally. Indeed, the first great wave of globalization – the colonization of Africa, Asia, and Latin America – was based on transnational companies forcing local farmers to give up local food production, and shift production to plantations using enslaved Indigenous and African labor to grow luxury crops of coffee, sugar, bananas, and cocoa for export to the colonizing countries.

But now, the drive toward globalization of agriculture would put transnational corporations in control of the entire food supply. Market forces, rather than national policies set by democratically elected officials, would control agricultural food systems. Under this scenario, each country would only produce a few export commodities, wiping out local food production, small family farms, and greatly compromising global food security. As a result, the human right to food would be dependent on multinational corporations and markets, increasing the risk of hunger and famine worldwide.

112 Activists protest the WTO's policies at the Ministerial in September, 2003


Reducing “Barriers” to Trade in Agriculture

Global agricultural policy used to be geared towards maintaining stability in global markets. Supply management programs, also called commodities agreements, helped maintain production around the same as demand, so that farmers didn’t produce an oversupply that would cause prices to collapse. These programs helped keep market prices above a price floor, which is a minimum price over the cost of production that farmers need to survive.

In addition, countries have historically promoted their local economies by protecting domestic production from foreign competition. Most countries maintain taxes on foreign imports, called tariffs, as well as outright limits on the quantities of foreign imports, called quotas, in order to favor local economic development. This has especially been true in the agricultural sector, where local food production is key to food sovereignty.

Starting in the mid-1990s, however, these policies were abandoned in the U.S. in favor of free market, export-driven policies that promoted production for export rather than for domestic consumption. As the world’s largest exporter of agricultural products, U.S. agricultural policy has dictated global agricultural policy.

The impact of the WTO and other free trade agreements in agriculture has been to eliminate so-called “barriers to trade,” such as supply management, price controls, and tariffs and quotas, while maintaining practices that favor multinational corporations, such as subsidies and market concentration.

Eliminating Tariffs

One of the main targets of free trade liberalization is tariffs, or taxes on imports. Many countries maintain high tariffs on imported agricultural products to protect their local industries. If an import has a tax that a local product doesn’t, the imported product becomes more expensive than the local product. For example, Mexico has always maintained high tariffs on corn imports, in order to protect small family corn farmers against a flood of cheap imports from industrialized countries. This is a basic strategy used by governments around the world to help guarantee food security through local food production and promote the local economy over foreign competition. Much of the negotiations in free trade agreements involve reducing tariffs.

Eliminating Quotas

Another top goal of free-trade proponents is to eliminate quotas, or limits on the total amount of imports of a particular commodity. For example, the U.S. maintains quotas on the amount of sugar that companies can import, in order to protect the U.S. sugar industry from foreign competition. Opening up the U.S. sugar industry to higher quotas for Central American sugar producers is a controversial keystone of CAFTA.

But many mostly smaller, agricultural nations maintain quotas on basic products like rice, corn, or other basic grains, that are essential to food security and the livelihoods of their rural populations. For these least-developed countries, eliminating tariffs or quotas puts their rural majority at risk of hunger and starvation as they lose their source of income and access to their own food production. Least-developed nations have formed an alliance in the WTO to advocate for the exemption of products vital to food security, called Strategic and Special Products, from tariff and quota elimination.

Gaining “Market Access”

The stated goal of agribusiness interests in ‘free trade’ negotiations is to eliminate quotas and tariffs so that they can gain access to foreign markets for their products, called “market access.” Since most agribusinesses are from rich countries in the global North, market access generally benefits those corporations at the expense of small farmers in poor countries.

But many developing countries also have strong agribusiness sectors. They are negotiating market access by demanding elimination of rich countries’ tariffs and quotas. These countries, led by Brazil, South Africa, and India, have a strong negotiating bloc in the WTO, and have succeeded in raising the issue of market access as a high priority in the negotiations. In fact, negotiations in the FTAA broke down over access to the U.S. for Brazilian orange juice, soy, beef, and sugar exports. Countries like Brazil argue that they need the income from market access for agribusiness products to produce income to pay their foreign debt.

But the majority of developing nations import more food than they export, so market access is not a primary issue. And small, independent farmers from both rich and poor countries are more concerned about ensuring adequate prices for local production than they are about exporting food.

So the primary threats to local food production, in addition to the forced abolition of tariffs and quotas, are unfair subsidies and market concentration that have led to a global crisis in commodity prices and illegal dumping.

Subsidies

Aside from tariffs and quotas, trade agreements also address subsidies. Subsidies are government payments made to producers. In 1996, the U.S. Congress passed a farm bill that eliminated key price supports and supply management programs, drastically reducing the income of farmers. As agricultural prices began to plummet after 1998, Congress has responded with “emergency legislation” year after year to send farmers government payments (subsidies) to prevent the wholesale collapse of the rural economy. Rather than remedy the supply problems created by the 1996 farm bill, this subsidy system was institutionalized in the 2002 farm bill which allocates an additional $190 billion in subsidies over the next ten years. The European Union also heavily subsidizes its agricultural production.

Export subsidies are supposed to be illegal under the WTO and other free-trade regimes. But rich countries, hypocritically, have largely won exemptions for the types of subsidies they use, while prohibiting the types of subsidies used by developing countries. Developing countries usually do not have enough money to subsidize their farmers to the extent as developed countries. Instead, they are reliant on using other mechanisms such as import tariffs, quotas, and price supports. These are the very mechanisms that the pro-corporate policies of CAFTA, the FTAA, and the WTO prohibit.

Subsidies provide huge benefits to corporate agribusinesses by allowing them to buy crops from small farmers at a price far below the cost of production while allowing them to sell at market rates. And while subsidies provide some relief to some struggling family farmers, they are not enough to make up for low commodity prices, and have contributed to the erosion of small farms in the U.S., increasing market concentration.

Market Concentration

Corporations have also lobbied to abolish traditional anti-monopoly regulations called competition policies. Without competition policies, corporate farms have bought up small farms, creating giant conglomerates that operate in multiple countries. Because of this, agricultural exports from the U.S. to Mexico, for example, are often between two subsidiaries of the same multinational parent company. This integration allows corporations to sell and buy within the same parent company, manipulating the market and gouging independent producers. Like NAFTA and the WTO, CAFTA and the FTAA would further undermine anti-trust laws, encouraging further monopolistic control of agricultural markets and putting downward pressure on global agricultural prices.

Global Commodities Crisis

Over the past decade, the U.S. government abolished its supply management program, which caused agricultural oversupply that led to a price collapse. To bail out the system, as noted above, the government instituted subsidies to farmers, which actually benefit multinational corporations by keeping prices low while taxpayers foot the bill. This has led to a global depression in commodities prices. In fact, the prices that farmers receive today for their crops are likely to be well below the cost of production, causing millions of farmers to lose their land and others to go further and further into debt. The greatest threat to the livelihood of small farmers in both the developed and developing world is low commodity prices.

Dumping

The result of these policies has been a downward spiral for independent farmers, and a bonanza for multinational agribusinesses. Global corporations buy commodities from farmers at artificially low prices, subsidized by taxpayers. These same corporations then flood foreign markets with crops priced at below-market prices, called ‘dumping.’ Because the prices are so low, dumping forces smaller producers out of business and captures – unfairly – a greater share of the market for transnationals. Although it is against trade law, in practice, dumping is common.

The Institute for Agriculture and Trade Policy recently documented that U.S. corporate food dumping has risen significantly since the inception of the WTO. Agribusiness dumping of the five main commodities of wheat, soybeans, corn, cotton, and rice averaged between 10-47% below the cost of production. Family farmers have watched their incomes crash as multinational agribusinesses have expanded their markets internationally with artificially low-priced agricultural goods.

Global Corporatization of Food: the Wrong Path

Transnational corporations are attempting to rewrite the rules of the global agricultural economy in order to control the entire food supply. Abolishing tariffs and quotas, increasing market concentration, and maintaining taxpayer subsidies has enabled them to create a global commodities crisis that threatens global food sovereignty. As a result, our human right to food has become dependent on multinational corporations and markets, putting small farmers out of business and increasing the risk of hunger and famine worldwide.

Effects of “Free Trade” Agricultural Policies on Small Farmers and Food Security

CAFTA and the FTAA would consolidate and expand free market policies that have already devastated rural communities under NAFTA and the WTO.

Loss of Small Farm Income

The devastation of Mexican corn farmers due to NAFTA most sharply exemplifies the horrifying effects of these policies. After NAFTA eliminated Mexican quotas for corn, artificially-priced U.S. corn flooded the market. U.S. agribusinesses typically dump corn on the Mexican market at prices 30 percent below the cost of production. Before NAFTA, Mexico only imported about 2.5 million tons of corn per year. In 2001, they imported over 6 million tons of corn. The price of Mexican corn fell 70 percent. Millions of small family corn farmers have been left without a source of income, and have been forced to abandon their communities in search of a way to feed their families. The bedrock of traditional Mexican rural life, corn farming families, have been torn apart by NAFTA.

While agreements like NAFTA and the WTO offer policies that favor agribusiness, they have been slow to address concerns of developing countries facing rock-bottom commodities prices. For example, in the WTO, African countries have raised the issue of low commodities prices in cotton, a staple of income for countries like Benin, Senegal, Mali, and Chad. Recent U.S. production of cotton has doubled, causing a world depression in cotton prices. In a July WTO meeting, the Trade Minister of Benin stated that Benin was “not prepared to accept the death of thousands of peasants as the price of a deal.”

Loss of Food Sovereignty

Under free trade regimes, developing countries are unable to use traditional methods of encouraging self-sufficiency in food production, because NAFTA and the WTO, as would CAFTA, prohibit internal support programs and import controls (quotas). The result has been an increased dependence on imported staples that have to be bought on the global market instead of grown locally. Since many countries can’t afford to buy imported food, they have to increase their foreign debt or suffer increased rates of malnutrition.

Under CAFTA, Central American countries were able to negotiate an exemption to tariff reductions only on one corn variety-- white corn. This means that protective tariffs for staple food products such as rice and beans are prohibited. The result will be that in Nicaragua, for instance, tariff-free imports of yellow corn would increase ten times their current amount in the first year of CAFTA.

Increased Food Prices

Consumer prices were supposed to decline under NAFTA—yet while farmer’s commodity prices have plummeted, consumer food prices have risen in all three NAFTA countries. The U.S. consumer price index for food rose by 22 percent between 1994 and 2002. While Mexican farmers now earn 70 percent less for their corn, they pay 50 percent more for tortillas. Without domestic support for family farmers, poor countries have become increasingly dependent on food imports. Imports of agriculture products in Mexico have increased by 44 percent since NAFTA, pushing local producers out of the market. This is true for products such as: wheat, potatoes, rice, barley, coffee, milk products, sugar, fruits and many others. When exchange rates fluctuate, this can lead to a dramatic rise—sometimes a doubling or tripling—in food prices for poor consumers.

Loss of Land and Increase in Migration

Under NAFTA and the WTO, over one and a half million Mexican farmers have lost their sources of income, forcing them to abandon their farms. This has created a massive farmers’ migration to big cities and other countries in search of jobs. In 2002, an average of 600 Mexicans were forced off their land each day. Annually now 500,000 Mexicans per year attempt to cross the U.S.-Mexico border to find a way to feed their families. In the past five years, 1600 Mexican migrants have died while trying to cross the U.S.-Mexico border searching for jobs. Under CAFTA, Central American corn, rice, beans, and sorghum farmers, as well as poultry, pig, cow, and dairy producers all stand to be driven off their land by cheap imports. In Guatemala alone, experts predict that CAFTA will result in the loss of 45,000 to 120,000 agricultural jobs.

Corporate Consolidation

Since NAFTA was implemented, 38,000 small farms have been lost in the United States, and 11 percent of Canadian farms have gone bankrupt. A mere 2 percent of farms in the United States control 50 percent of American agricultural sales. Over 73 percent of the nation’s farms share less than 7 percent of the market value of agricultural products, while 7.2 percent of farms receive 72 percent of the market value of products sold. Eight-two percent of U.S. corn exports are controlled by three agribusiness firms- Cargill, Archer Daniels Midland (ADM), and Zen Noh. While family farmer incomes have plummeted during the first 7 years of NAFTA, ADM’s profits went from $110 million to $301 million, while ConAgra’s grew from $143 million to $413 million.

Corporate Control of Plants and Seeds

The Trade-Related Intellectual Property (TRIPs) agreement within the WTO establishes global and uniform protection for trademarks, copyrights and patents. Perhaps most controversial and worrisome is the fact that these protections also apply to patenting of life forms. For example, traditional, plant-derived medicines used by Indigenous populations in countries such as Brazil could be patented by a transnational corporation for profit, as long as the Indigenous peoples had not already done so. It is highly unlikely, however, that Indigenous communities would seek a patent, because plants are considered to be a shared resource, not a commodity to be exploited for profit.

CAFTA and the TRIPs agreement also undermine global access to and distribution of seeds and, therefore, the food supply. As corporations begin to patent seeds, local farmers must pay annual fees and/or sign technology use agreements that prohibit saving patented seeds and limit the use of seeds that have been used by generations. Subsistence farmers cannot afford the cost of purchasing new seeds each year, and the limiting of seed varieties makes food supplies vulnerable to plant pests and diseases.

The Spread of Genetically Modified Organisms

Currently, agreements under the WTO and CAFTA grant unprecedented rights to multinational corporations producing genetically modified organisms (GMOs). The WTO has ruled that GMOs must be treated no differently than their conventional counterparts. Thus, consumers are unknowingly being used as guinea pigs for the powerful biotech industry. Scientists have argued that the spread of GMOs drastically reduces biodiversity as a result of the contamination of conventional crops by pollen from those containing GMOs. Currently, no satisfactory protections exist to safeguard our food supply from known or unknown dangers of this new technology. Under CAFTA, GMO corporations would be granted the power to file suit against countries whose farmers replanted GMO seeds.

Environmental Degradation

Industrial agriculture practices replace sustainable family farm practices and take an extra toll on the environment that is not reflected in consumer prices. The overuse of fertilizers and chemicals, overgrazing, and the unenforced regulation of factory farm dumping of agricultural byproducts such as excrement and pesticides into rivers and streams all damage the quality of air, water, and soil, which are our shared resources. Corporate “free trade” agreements continue to stick communities and taxpayers with the costs of cleanup and loss of environmental quality, while corporations reap the profits embodied in industrial agriculture.

Erosion of Democracy

In order to be in compliance with NAFTA, the Mexican government actually had to change the Mexican Constitution’s land redistribution statutes to allow foreign ownership of land. This allowed lands owned collectively by farming communities to be sold off or taken by creditors. This move led to the uprising of the Indigenous people of Chiapas in the Zapatista rebellion on January 1, 1994 – the very day NAFTA took effect. The Zapatistas view NAFTA as a death knell for Indigenous people.

Under Chapter 11 of NAFTA, corporations are also empowered to directly sue national governments (called investor-to-state dispute resolution) in the event that domestic legislation interferes with their profit maximization. CAFTA includes these same investor rights, inviting challenges from foreign corporations over governmental actions such as GMO food labeling, increased food safety standards, or local purchasing preferences.

Farmers across Mexico protested the implementation of the final phase-in of NAFTA agricultural policies on January 1, 2003. A movement called “The Countryside Can’t Take Anymore!” is working to educate the world about the failed promises of “free trade” in Mexico. And hundreds of thousands of farmers in Guatemala, Honduras, and Nicaragua have mobilized against CAFTA and the FTAA in recent years.

Food is a Human Right: Towards a Policy of Food Sovereignty

Farmers worldwide are demanding an entirely different approach to agriculture and trade, one that prioritizes food sovereignty, security, and the preservation of rural livelihoods. Via Campesina, the global movement of peasant and family farmers’ organizations, has led the way in advocating Food as a Human Right and is demanding that governments uphold their right to food sovereignty. A twelve-step program for global human rights and food security would include:

1. Agriculture out of the WTO. Food is a human right and should not be treated the same as any other commodity. Food as a human right demands that governments set national policies that encourage food security—local and diverse production of food to guarantee adequate and accessible nutrition for all citizens. Governments must maintain the ability to pass laws for the national security of their populations—food sovereignty.

2. Stop Dumping. Developed countries should restore farm programs that place price floors under commodity prices and establish supply management and food security reserves to prevent cheap commodities from being dumped on global markets. International trade cooperation should aim at sharing and enforcing this responsibility.

3. Improve Market Access. Developed countries should address the problem of tariff escalation, the practice of increasing tariffs with the level of processing. Developed countries should reduce their tariffs, eliminating higher tariffs faster than lower ones. Without the requisite reduction of high import tariffs on processed and semi-processed commodities, commodity-dependent countries will be unable to diversify into higher stages of the commodity values chain.

4. Reinstate Qualitative Restrictions. Developing countries should be able to put in place qualitative restrictions on imports as well as domestic subsidies for the protection of and support to household-subsistence farming. Developing countries should be encouraged to produce food for their domestic market.

5. Promote Fair Trade. Cash crops like coffee, cocoa, sugar, and bananas represent the largest source of income for developing countries. The Fair Trade system is the best model for an agricultural trading system that guarantees fair prices and community empowerment, based on cooperative economics, farmer empowerment, increased transparency, and decreased power of purchasing monopolies. All commodity crops should be produced under the Fair Trade system.

6. Reinstate Global Commodity Agreements. These agreements, which regulate supply and demand to keep prices within a steady range, promote stability and sustainability within rural communities. Action to reverse the trend in falling commodity prices is essential to any initiative undertaken at the international level to facilitate sustainable development, poverty reduction and debt relief.

7. No Patents on Life. Seeds, plants, animals, and their components–the fabric of life–should be exempt from patenting. Agricultural policy must preserve the rights of Indigenous farmers to utilize their cultural knowledge and collective use of resources. Indigenous knowledge (as related to agriculture methods, use of seeds and plants) should be protected from biopiracy. The TRIPs provisions in the WTO that permit multinational corporations to patent seeds originally developed by farmers, requiring farmers to pay for the right to replant those seeds, must be abolished.

8. No GMOs. Laws and regulations on sanitary and phytosanitary standards should guarantee high quality and safe food for consumers and the environment. GMOs have yet to be proven safe. Utilizing the pre-cautionary principle, any trade agreement should ban the trade of genetically-modified substances.

9. Promote Real Land Reform. There can be no real sustainable development without massive global land reform to remedy the needs of millions of landless peasants around the world. Any global agreement that is truly based on the needs of the poor must prioritize the fair and adequate redistribution of lands that have been concentrated from colonial times in the hands of an elite few. Additionally, the necessary resources must be redistributed to enable them to productively work the lands.

10. Enforce Labor Laws for Farm Workers. Globally, farm workers are among the most exploited laborers, suffering the lowest wages. Even in the U.S., farm workers are not covered under many domestic labor laws. Any global agreement relating to agriculture should include provisions for the enforcement of a living wage for agricultural producers, and include all of the basic International Labor Organization’s labor rights. These include the right to organize freely and form a union; the right to strike; the right to adequate health and safety protections; freedom from discrimination in the workplace; and the elimination of forced overtime.

11. Create Policies Supportive of Small Farmers and Sustainable Agriculture. International financial institutions and governments should finance sustainable agricultural practices and the improvement of rural infrastructures. They should acknowledge that small farmers and cooperatives need policies that protect land ownership, provide access to credit, offer technical assistance, provide appropriate technology transfers, and guarantee pricing mechanisms that reflect the true costs of production. Investments in agriculture should promote local knowledge and organic and sustainable production systems rather than artificial fertilizers, pesticides, and herbicides that harm the planet and place communities at risk.

12. Promote Real Democracy. All countries should guarantee that rural populations are represented in decision-making, nationally and globally. Small producers, farm workers, consumers, and their organizations, previously excluded, should be involved—and invested with real decision-making power—in trade negotiations that affect their futures. Governments must have the right to enact legislation that protects the environment, health and livelihood of its citizens.

Corporate globalization is responsible for the loss of land, the loss of income, and the exposure to unsafe food and unhealthy working conditions for millions of people worldwide. Furthermore, it has severely exacerbated the risk of hunger and starvation, and caused the general erosion of rural communities and biodiversity across the globe. Fortunately, agricultural policies that promote food sovereignty have been developed. We have the power to change the global food system if we work together with farmers, environmentalists, consumers, and human rights advocates to say NO to the global corporatization of the food system and YES to people and earth-centered global agricultural policy.

For more information on Agriculture and the WTO:

Institute for Agriculture and Trade Policy www.iatp.org
Via Campesina www.viacampesina.org
Third World Network www.twnside.org.sg
Citizens Trade Campaign www.citizenstrade.org
Public Citizen's Global Trade Watch www.citizen.org/trade/
National Family Farm Coalition www.nffc.net
Food First www.foodfirst.org