Ploughed Under: WTO and the Small Farmer

By Anuradha Mittal

OAKLAND, May (IPS) On January 1, 1995, the World Trade Organisation (WTO) was established with a commitment to raise standards of living and ensure full employment by expanding trade, while upholding the objective of sustainable development.

The reality has been almost the opposite.

Prior to the Uruguay Round in 1995, agriculture fell outside the discipline of the predecessor to the WTO, the General Agreement on Tariffs and Trade (GATT), ironically because of pressure from the United States. Threatening to leave GATT unless it was allowed to maintain protective mechanisms for sugar, dairy products, and other agricultural commodities, Washington was given a ''non-time limited waiver'' on agricultural products.

Soon, however, the need for ''rules of engagement'' in the struggle for Third World markets got the European Union (EU) and the US to press for the inclusion in 1996 of an Agreement on Agriculture (AOA) in the Uruguay Round.

The AOA sought the liberalisation of trade in agricultural products by opening up markets, and cutting domestic supports and export subsidies to help create more equal competition in the market. Instead this agreement has become the first step in making food production into a business monopolised by a few.

The AOA both proved a threat to the stability of Third World farmers lacking competitive advantages and engendered a US domestic agricultural policy that favours agribusiness over family farmers.

For the last twenty years, US policy has been to depress agricultural commodity prices with the stated aim of increasing US market share in agricultural trade. Despite these efforts, the US market share in principal grain exports has fallen steadily during this period -- only 30 percent of US agricultural production is traded internationally. Meanwhile, however, family farmers and rural communities have been devastated.

Soon after the AOA came into effect, the US passed the Federal Agriculture Implementation and Reform Act (FAIR), hoping to provide income and price stability for US farmers. The goal was to expand agricultural exports with promises of a return to a free market, greater freedom for farmers, and reduced levels of government spending and controls. This bill, drafted in a period of high agricultural commodity prices, was formulated and supported by the representatives of corporate farms and agribusiness, even though farmers as well as policy makers knew that it lacked a safety net for family farmers.

The most significant change FAIR brought about was the replacement of farmer compensation for the difference between the price received for their crops and the actual cost of production, with Production Flexibility Contracts, fixed payments to farmers based on past production levels, and not reflecting either current or projected production. For both wheat and dairy exports, the US Secretary of Agriculture was directed to implement maximum volume and funding levels consistent with the GATT Uruguay Round commitments to develop markets throughout the world.

As it turned out, export subsidies were distributed mainly to the exporters and agribusiness and did little to alleviate market price volatility for family farmers. In fiscal year 2000, the US government paid 28 billion dollars in subsidies, mostly to large landowners. These payments comprised 49 percent of net farm income in 2000 and kept large farm operations in business, all while the family farmers were driven off the land.

In 2001, the US House of Representatives passed an emergency aid package of 5.5 billion dollars for farmers. Once again, however, this money will not necessarily go to the farmers in dire straits, as the aid is not based on need.

These farm policies have generated an average 15 percent annual return on equity for agribusiness, compared to an average two percent return for the US farmers.

The 1996 FAIR Act reduced the number of strategies open to the producers in the US, forcing farmers to increase production in an effort to realise a more efficient scale. Facing record low prices and unfair market competition, thousands of American family farmers have been forced off the land each year, while corporate agribusiness made record profits as taxpayers footed the bill for record levels of spending on these programmes.

Economic globalisation, driven in part by the WTO, has increased corporate influence throughout the US food supply system. Giant multinational corporations now control almost all aspects of American agriculture. The top 10 agrochemical corporations control over 84 percent of the 30 billion-dollar agrochemical market. Meanwhile two companies, Cargill and Continental, who shared 50 percent of US grain exports in 1994, now control about two-thirds of the grain in the world.

This accelerated concentration of the food industry has had an equally profound impact on the political process. Cargill, the world's largest grain-trading company, had a disproportionate role from the start in shaping the rules under the old GATT framework.

President Nixon's first trade advisor was William Pearce, a vice president of Cargill. Another Cargill alumnus, Daniel Amstutz, drafted President Reagan's agricultural proposal for GATT. The long-standing precedence in trade talks of agribusiness profits over the concerns of family farms should come as no surprise.

The model that causes overproduction in the US and drives American farmers off the land is the same model that drives peasants off the land in the Third World. For a fraction of the amount American taxpayers currently pay, it should be possible to design a system that preserves family farming and builds a healthy rural America without damaging the ability of farmers in other countries to make a living.

The opposition to proposed trade rules is growing. American family farmers marched with the workers and environmentalists in Seattle and put the issue of the globalisation of agriculture on the agenda of social and economic justice. The message is clear: it is time to stop artificially expanding trade without regard for the consequences.

(*) Anuradha Mittal is the co-director of the Institute for Food and Development Policy (Food First).