The Agreement on Agriculture (AOA)
Trade in agriculture came under GATT discipline after
the Uruguay Round ended in 1994, when GATT was replaced with the WTO and
the liberalisation of agriculture became known as the Agreement on
Agriculture (AOA). There are three main areas of commitments namely
market access; domestic support ie support by governments to domestic
producers; and export subsidies ie support by governments to exports.
The AOA while pushing free trade on the South
actually promotes monopoly for the North; the GATT agreement instead of
dismantling the structure of subsidies in the North had left them intact
as the US and EU agreed among themselves that direct income payments to
farmers will be exempted from GATT rules. Direct income payments are
payments e.g. made to farmers to withdraw land from farming ie to keep
it fallow. For example, farmers in England are paid some one million
pounds every year for not growing any thing. These direct payments
account for a growing proportion of subsidies provided under the EU’s
Common Agricultural Policy (CAP). Direct payments have generated new
investment to farmers and have raised EU cereals output by some 30
million tons which is more than the average total of EU cereal exports
for the second half of the 1980s (Watkins: Dec ’98 - Jan ’99).
Through this, the EU & US have maintained and even increased their
subsidies to their farmers thus allowing them to export more of their
subsidised products to the Third World.
In this situation, where massive subsidies allows the
North to maintain their mountains of foods which will be disposed
through exports; against the South which have to open their markets to
the North’s agricultural products, free trade is used to regulate
monopolistic competition to prise open the markets of the South.
Under the AOA, Third World countries have to reduce
their domestic support and their export subsidies to their farmers over
a 10 year period; they have to open up their markets to the agricultural
products and services of other nations as well. Although the AOA offers
concessions like the lifting of quotas and tariff reduction on Third
World exports, these will only benefit the large scale commercial
exporters of coffee, sugar, cocoa and oilpalm.
These measures namely import liberalisation,
reduction of domestic support and export subsidies will have serious
implications as Third World countries have used tariff walls and quotas
to protect their farmers against competition from the food products of
the North especially the EU and the US. We have seen how under SAPs US
grain imports and cheap EU exports of subsidised beef into Africa had
destroyed the pastoral economy including small scale cattle growers in
SS Africa. The reduction of domestic subsidies and the removal of
non-tariff controls on agricultural products will expose Third World
farmers to global competition.
Third World farmers comprise the majority in many
countries where agricultural is the main economic activity. They will
not be able to compete with cheaper imports and this would endanger the
livelihoods of millions in the Third World. In fact FAO in a recent
study of 16 developing countries implementing the Uruguay Round
Agriculture Agreement concluded that: ‘A common reported concern was
with a general trend towards the concentration of farms. In the virtual
absence of safety nets, the process also marginalised small producers
and added to unemployment and poverty. Similarly most studies pointed to
continued problems of adjustment. As an example, the rice and sugar
sectors in Senegal were facing difficulties in coping with import
competition despite the substantive devaluation in 1994’ (FAO: 1999).
In several Third World countries, agriculture is not
so much a matter of commerce: it is intimately interwoven with the
pattern of rural life. Many farmers cultivate their land, not as a
commercial venture but as part of a family tradition which goes back to
several generations and those cultivating it have no other source of
income to support their families. As a result of the division of
holdings many farmers possess small parcels of land which are not
commercially viable. These small and marginal household farmers will
face great difficulty when faced with world competition (Das 1999:228).
Under the WTO rules, India has to reduce all import
barriers on over 27,000 items, of which over 800 are agricultural items
including milk, milk products, wheat, rice, pulses, livestock,
agricultural chemicals, tea, rubber and others. Over 700 items have gone
off all quantitative restrictions in 2000. This has already created a
crisis in the tea and rubber industry where millions of workers are
unemployed as the plantations could not withstand the competition from
cheaper imports (Jan Swasthya Sabha 2000: 44). The loss to
livelihoods will spread to milk and milk products where millions of
women earn their livelihood as well as to those growing cereals like
wheat and rice (Ibid: 45).
The reduction of direct subsidies which also include
sales from stocks by government at a lower price than the domestic
market; and subsidized exports means that there is a pressure to lower
government procurement and support price policies. The subsidy on
fertilizers is sought to be lowered greatly. Indian farmers do not get
direct export subsidy unlike the farmers in the North with whom they
have to compete. (Ibid: 45).
Food consumption is the single most important
determinant of good health. In India, as in many countries, food
security has been one of the most important and central objectives of
economic planning since the country’s independence. It is considered
the cornerstone of India’s economic and political independence and
food security is therefore a question of national sovereignty.
This is all the more crucial as chronic hunger and
malnutrition is widespread in India. There are some 320 million poor
people in India. For almost 90 percent of Indians, the share of income
that goes to buy food is more than 50 percent. For the poorest 50
percent of the population, expenditure on food is over 70 percent of
income. Thus, any food scarcity or a rise of food prices will have a
grave impact on food consumption; similarly any fall in wages will have
adverse consequences on food intake. Food scarcity affects women more
and threats to food security will have a grave and immediate impact on
women’s health (Ibid: 43-44).
On the other hand, there are some Third World
countries who are net importers of food; as subsidies for food
production are progressively reduced in the North, this could result in
a price increase in their food exports and poor countries who rely on
food imports may face rising import bills, especially when many of the
Third World countries suffer from lack of foreign exchange problems.
This would threaten their food security which is made worse by the fact
that food aid to the poor countries have seen a steady decline; between
1987 and 1997 food aid shipments were halved from 12.7 million tons to
5.43 million tons (Raghavan C. December ’98 - January ’99).
With the implementation of AOA, the adverse social
impacts which resulted with the first round of liberalisation under SAPs
will only worsen. Allowing the free forces of the market to operate in
agriculture will threaten the food security of farmers in the Third
World. Cheap subsidised food imports will destroy farmers livelihoods,
displace communities and create rural unemployment; increased reliance
on food imports undermines a nation’s food security; and poverty,
hunger and starvation can only worsen for the majority of small farmers.
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