PACER-PLUS AND FOOD SOVEREIGNTY

Jagjit Plahe (Monash University)

The Concept of Food Sovereignty

• Was first introduced by the world wide movement of peasants, small farmers, indigenous people and landless workers.

• It was introduced during a public session of the official World Food Summit in 1996.

What does food sovereignty mean?

• Prioritising local agriculture• Achieving self-sufficiency (through local inputs)• The rights of farmers to produce food• The rights of farmers to save and exchange

seed• It is not anti-trade, but pro-justice and seeks to

safeguard the livelihoods of farmers

How is the international trading system regulated?

• Multilateral trading system – General Agreement on Tariffs and Trade– World Trade Organisation - 1995

• Regional trade agreements– North American Free Trade Area (NAFTA)– ASEAN

• Bilateral trade agreements– Australia- US Free Trade Agreement– EU Economic Partnership Agreements with various

developing countries– PACERR-plus agreements

The WTO’s Agreement on Agriculture

• Historically the agricultural sector has been excluded from free trade arrangements for political, economic, social, cultural and even spiritual reasons.

• This however changed in 1995 – Formation of the World Trade Oraganisation (WTO) – WTO’s Agreement on Agriculture (AoA)– Bilateral and regional FTAs

• Liberalisation of trade in agriculture is a relatively recent phenomena in the current wave of globalisation.

The WTO’s Agreement on Agriculture

• The AoA’s stated long-term objective is “to provide for substantial progressive reductions on agricultural support and protection sustained over an agreed period of time, resulting in correcting and preventing restrictions and distortions in world agricultural markets” (WTO, 1995).

• The neo-classical assumption behind this objective is that the market will address problems of food security.

The WTO’s Agreement on Agriculture and food security

• Supporters of the AoA argue that liberalised trade in agriculture will enhance food security since global resources will be allocated more efficiently.

• They contend that free market conditions will create win-win situations for all, and “those [countries] that gain from trade [can] fully compensate those that lose, and still be better off: the total gain will be better than the total loss” (FAO, 2003a).

Food security implications of the AoA: flawed assumptions

• The neo classical model assumes that all countries will be better off under free trade.

• The model does not address the reality of declining terms of trade (the ratio of export prices to the ratio of import prices) for primary products.

• Countries that are chronically food insecure primarily export raw materials which increasingly face declining terms of trade in the world market.

• Unprocessed commodities like sugar, tea, coffee and cocoa beans for example, constitute a very small portion of the overall price of chocolates, sweet biscuits, processed tea and coffee.

Food security implications of the AoA: flawed assumptions

• The model also assumes that “buyers and sellers in different markets meet each other as independent agents” (Kanji and Barrientos, 2002) and that a reduction in trade barriers will lead to more opportunities for all potential buyers and sellers.

• Freer trade does not automatically lead to market access. The integration of producers and exporters in developing countries is carefully “managed” by lead firms (Humphrey and Schmitz, 2001). Eg. Coffee, tea, cocoa, horticultural products etc.

The reality of the WTO’s Agreement on Agriculture

• Created rules which allow rich countries, to continue to heavily protect their interests and at the same time oblige poorer countries to open up their markets.

• Created rules which allow rich countries to dump agricultural produce into the world market.

• Dumping is defined as the sale of products in the global market at less than the cost of production.

• Dumped agricultural produce in world markets leads to the widespread displacement of farmers from their own markets in the developing world.

Dumping

• Farmers lose their livelihoods and become food insecure.

• Farmers in developing countries who are engaged in production for the export market suffer from severely depressed prices, due to the high levels of dumping in the world market.

Rigged Rules: example of how tariffs were reduced under the AoA

• AoA required tariffs to be reduced in developed countries by 36% over a 6 year period.

• The rules did not require countries to reduce every tariff line (for each product) but rather required an average total reduction. In this way many countries managed to maintain high tariffs in certain product categories (Beierle).

• Tariff % Reduction Percentage reduction– 100 - 85 - 15%– 100 - 85 - 15%– 100 - 85 - 15%– 4 - 00 - 100%a country with 100 percent tariffs on three products and 4 percent onthe

remaining one could lower the former by 15 percent, eliminate the latter, and achieve (15 + 15 + 15 + 100)/4 = 36.25 percent average reduction (Panagariya, 2002).

Dumping

• The EU alone spends US$ 120 billion a year on domestic support (Beierle, 2001).

• Half of the world’s maize is exported by the US alone. However, the US export prices are one-fifth below the cost of production.

• Similarly, the EU is the largest exporter of white sugar, and the EU export price of sugar is one-quarter of the actual production cost (Oxfam 2002).

Dumping• Approximately 60 percent of domestic agricultural support

in OECD countries is exempt from rules of the AoA (Oxfam).

• The three major users of domestic support - the EU, the US and Japan - have met their AoA requirements despite the fact that domestic support has in fact increased in these countries since 1995, when the AoA came into effect.

The curtailed use of tariffs

• One of the main ways in which developing countries protect their own markets from dumped products is through the use of tariffs.

• However, they no longer have the automatic right to use tariffs to address dumping: while AoA rules permit dumping, they prevent developing countries from using tariffs to block dumping.

• Special Safeguard Facility

Food security and food sovereignty

• Food security is a “multifaceted concept, variously defined and interpreted” (FAO, 2003a).

• In human rights literature, it is defined in the context of the right to food.

• The United Nations Committee on Economic, Social and Cultural Rights definition of food covers both the availability of and the accessibility to food.

The Right to Food and the Role of the State

• The definition in the human rights literature focuses on the role of the state in assuring food security.

• International human rights law requires States obligations to respect, protect and fulfil this right, like any other basic human right. “Thus, to ensure food security is in fact the implementation of obligations under international human rights law” (Zhang, 2004).

• Food sovereignty states that communities should have the right to be included in making decisions about food and agriculture.

The state of food insecurity in the developing world

• The Food and Agricultural Organisation estimates that 923 million people in the world are undernourished, the majority from the developing world.

• Developing countries therefore have a mammoth task at hand to address food insecurity.

• These countries however also have the responsibility to uphold their obligations under international trade law.

The state of food insecurity in the developing world

• Over a quarter of the WTO membership is comprised of countries that suffer from food insecurity.

• Under international human rights law, these countries are obliged to protect the right to food through every means possible, including trade measures.

• Under international trade law they are required to abide by the AoA, reduce agricultural tariffs and subsidies.

• All trade measures including those to protect food security have to negotiated at the WTO level.

What would PACER-plus kinds of agreements entail?

• Tariff Elimination• Rules of origin• The imposition of high sanitary and phytosanitary

standards • Liberalisation of investment • The liberalisation of services• The imposition of strong intellectual property rules

Implications of PACER-Plus• Agriculture

– Reduction of tariffs• A loss of revenue from tariffs – suggestion that Aust and NZ

should establish a tariff loss fund – creates more dependency

– Reduction of domestic support to farmers• Does a “Free Trade Agreement allow for subsidies for local

farmers, local agricultural businesses?

Implications of PACER-plus– A flood of cheaper imports– Investment in biofuels which could affect the price of local food

and lead to the displacement of communities from their land• Already a lot of interest in developing biofuels from coconuts in PNG and

Vanuatu – again if large corporations are involved, then there may be implications for land rights.

• (keep in mind FTAs between Aust and the US; Aust and Singapore; and the current one being negotiated between Aust and China)

– Mining projects which could affect land rights • (Australian corporations already active in searching for gold and

nickel in the Solomon Islands)

• Gas projects in PNG with corporations such as Esso and Exon Mobil quite active and corporate Australia wanting to work with these corporations.

More immediate problems

• Possibility of stronger intellectual property rights regimes which could affect the ability of farmers to save and exchange seed

• Would attract more corporate investment in agriculture (contract farming etc.)

Conclusion

• PACER-plus is being sold as a development agreement but could have dire effects on small economies.

• It is clear that the WTO Agreements have left the smallest countries worse off.

• Food and agriculture should be off the table.