Economics and politics - comment and analysis

The World Trade Organisation and agriculture in developing countries

The defeat of the developing countries at the Nairobi Ministerial meeting of the WTO is not just about a shift in the agenda for multilateral trade negotiations. The death of the “Doha Round” could well be a death warrant for many poor farmers across the developing world as well. It is true that that this Round has lingered on without much success for more than a decade, so that many across the world were cynical about its potential to deliver anything of substance. But this final nail in its coffin comes at a particularly bad time for developing countries – and most of all for the peasant farmers who still make up the bulk of their work force.

Agriculture was always one of the most significant issues being discussed in the Doha Development Round, which came into being after widespread protests among developing country members that the WTO Agreement on Agriculture allowed disproportionate leeway to developed countries to continue their agricultural subsidies and import protection, even while preventing developing countries from providing support to agriculture in the interests of food security and livelihood protection.

Consider the current reality. Supports provided by developed countries to their farmers and agribusinesses are now mostly classified as “non-distorting” measures, and they remain very high. A small number of giant multinational agribusinesses now dominate global trade and food distribution even more than before and marketing margins have increased. Financial companies are involved in commodity futures markets, causing even commercial players to behave in speculative ways and creating volatile price movements that do not always reflect changes in “real” demand and supply.

Increasing uncertainty and volatility in global food trade, especially since 2006, have operated against both small producers (who do not benefit from price increases and lose out when price declines with import surges) and poor consumers who face much higher prices. In many developing countries this has created two linked problems: food insecurity because of high and volatile food prices, and livelihood insecurity of food producers because of rising costs and uncertain price movements.

Addressing these concerns requires the global trade regime to address the problems of excessive concentration in global food markets, persistently high levels of subsidies given to agriculture in developed countries and price volatility caused by speculative activity. But some issues are immediate and compelling, and were the crux of the demands made by developing countries at Nairobi.

The first relates to domestic support to farmers, of which “Amber Box” measures like administered support prices or subsidies directly related to production quantities are considered as trade-distorting. The 30 (mostly developed) countries that had notified such support during 1986-88 were required to bring them down by 36 per cent; other countries are allowed to provide such subsidies only “de minimis” – up to 10 per cent of value of output for developing countries and 5 per cent for developed countries.

Blue Box measures of support are “Amber Box with conditions” – supposedly designed to reduce distortions – and currently subject to a ceiling of 8 per cent of the value of production. Green Box subsidies are not product specific, direct income support for farmers that are decoupled from production or prices, policies for environmental protection or regional development. They are not considered to distort trade and are therefore not subject to any conditions. Most developed countries have shifted to relying more on Green Box subsidies for agriculture, so they continue to provide very large support to their farmers without breaching WTO commitments.

Developing countries wanted to expand the definition of Green Box support to “policies and services related to farmer settlement, land reform programmes, rural development and rural livelihood security in developing country Members, such as provision of infrastructural services, land rehabilitation, soil conservation and resource management, drought management and flood control, rural employment programmes, nutritional food security, issuance of property titles and settlement programmes, to promote rural development and poverty alleviation.” This would include public stockholding for food security, which obviously would involve crop-specific subsidies. They wanted the reference price for calculating the amount of de minimis subsidies to be changed from 1986-88 (which is clearly absurd as that relates to prices of nearly three decades ago!) to a more recent time period that would correctly reflect the value of the support. They wanted Special Safeguard measures similar to those already available to developed countries, which would allow countries to respond to sudden import surges that affect the viability of production of certain crops within the country.

These would appear to be eminently reasonable, even obvious, requests – especially as they are only a small part of the concessions and flexibilities that the Agreement already provides to farming and agribusiness in developed countries. But none of them has been accepted in the final declaration. Instead, the declaration introduces the possibility of negotiations in newer issues like investment, public procurement, competition policy, transparency, the introduction of which had earlier been strongly resisted by developing countries.

In the years since the WTO has been setting the rules for global agricultural trade, nearly 400,000 farmers in India alone have committed suicide in a reflection of extreme agrarian distress because of the falling viability of smallholder cultivation. Across the developing world many small cultivators are close to desperation. Meanwhile, the global community that has just signed off on Sustainable Development Goals that include “end hunger, achieve food security and improved nutrition and promote sustainable agriculture” appears to find no contradiction in upholding a multilateral trade regime that will do just the opposite.