Food: Trading away our future - part II

The increase in trade has big environmental repercussions as well as a big social and cultural impact. The increasing distance makes it easier for market actors to externalize costs and more difficult to citizens and the political system to influence the way things are produced. Trade is not only a response to market demand, it creates demand and therefore recreates the need for it; trade becomes its own justification.

In a previous post I demonstrated the rapid growth of international trade in food and agriculture commodities. Global food production increased with over 50% between 1986 and 2009. Meanwhile the trade in food for direct human consumption has increased from 15% of total production in 1986 to 23% in 2009, thus about one fourth of food production is traded.

This globalization of food commodities has led to, or enabled, an increasing disconnection between human populations and the land and water resources that support them through crop and livestock production. The graph of global agricultural trade below from Graham K. Macdonald et al 2015 (reproduced with permission), says more than thousand words. [1]

Click to view

Trade has improved food access, but primarily for those that are rich. In 1965 insufficient domestic production meant insufficient food supply, but in recent years the deficit has been increasingly compensated by rising food imports.[2] Of course, you have to afford food in order to buy it in international markets; the average per cap GDP in countries that achieve sufficient food supply by imports was approximately tenfold compared to countries with insufficient food supply and production.[3]

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But isn’t it more efficient that countries with good conditions produce food for those with less good conditions?

Perhaps, but this is really not driving trade. For example, Sweden has good conditions for arable farming and even better for livestock production. Despite this it imports almost 50% of its beef and a lot of other agriculture products it could grow. Meanwhile Sweden has let more than 1 million hectare of arable land and even larger areas of pasture revert to forest or lie idle. The reason that beef is imported is simply that it is cheaper to produce somewhere else.

As I showed in my previous post trade can very well go from places with scarcity of resources to places where these are abundant, as other economic factors (or government support programs or tariffs) will determine where production will be most competitive. The water use efficiency of food trade (i.e., food calories produced per unit volume of water used) has declined in the last few decades.[4]

The global food trade has also affected agricultural landscapes, fully in line with trade theory. Competition drives farmers in to more and more specialization and larger scale in order to cut costs. This first leads to that farms go into monocropping and, ultimately, economies of scale will make whole landscapes devoted to one or a few lines of production/commodities. The implication on bio-diversity is huge and ironically some of these bread baskets are increasingly becoming food deserts. 

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Trade puts pressure towards harmonization of standards which has a number of non-desirable effects.

First, the development of international (harmonized) standards is dominated by the richer countries and as they are the main markets, exporters and exporting countries tend to go along with the standards demanded by main markets. This puts producers in exporting countries in a disadvantage as their needs are mostly not listened to. Other stakeholders in exporting countries, such as consumers or farm workers have even less say in the development of these standards.

Second, while some environmental problems are global (global warming), most are local or regional in scope. For example, in some countries, limiting erosion or water use in agriculture may be a primary objective, in others eutrophication or pesticide contamination of waterways might be central and in a third country with intensive agriculture the loss of bio-diversity in the agriculture landscape. It is highly unlikely that international standards can encapsulate all this. It is equally unlikely that the various social and cultural situations will be well reflected in international standards.

Third, there is a tendency for international standards to move towards lower standards. For example, the EU farm lobby in Copa & Cogeca requests that the license for glyphosate as a pesticide shall be renewed as a ban would “put us at an unfair  competitive disadvantage vis a vis non-EU countries who export to the EU.” Similar arguments can be heard in almost all countries. 

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Trade can allow population densities larger than those that would prevail if these regions would have to rely solely on domestic supply. But the increasing distance between consumers and producers comes with a lot of problems. As Jeniffer Clapp[5] outlines in Distant agricultural landscapes,  ”…distance enables certain powerful actors to externalize ecological and social costs, which in turn makes it difficult to link specific global actors to particular biophysical and social impacts felt on local agricultural landscapes. Feedback mechanisms that normally would provide pressure for improved agricultural sustainability are weak because there is a lack of clarity regarding responsibility for outcomes.” Consumers are mostly unaware of the ecological and social consequences of their consumption choices and even if they wanted to it makes it hard for them to influence.

There is a similar effect on the political level. When the costs associated with a products are externalized onto other actors and landscapes that may be half way around the world, the politics of addressing those problems is fraught with challenges and governments in the country where the products are consumed have no jurisdiction in the places where it is produced. This is one of the drivers behind the efforts to use “the market” and “consumer choice” to favour sustainable production. But the ability of “consumer choice” to have a real influence on the production in distant places is very limited (I elaborate my arguments around this in the post Ethics for sale? and even more in my book Global Eating Disorder).

Trade can and is more often a means to sustain affluent lifestyles of wealthy nations, while reducing negative environmental impacts of crop production on their own territories, allowing them to shift burdens elsewhere.[6] Meanwhile, trade often perverts the consumption of the resource-poor. In the article Taking Political Ecology Global antropologist Richard Wilk shares his observations from the Kekchi in Belize: ”I watched mothers selling the eggs from their family’s chickens, to spend the money on Coca-Cola and candy, while their children clearly needed protein more than sugar. I saw men selling their pigs to get money for a boom box, or a carton of cigarettes, when they could have been sending their kids to school, or building a latrine, or improving their corn storage, or planting some cocoa.”[7]

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Trade is not only a response to market demand, it creates demand and therefore recreates the need for it; trade becomes its own justification. The argument goes along these lines:

“Development makes people happy. Trade is good for development. We need free trade in order to promote more trade. Thus, free trade makes more people happy”

This post will be followed by two more on the trade theme, please stay tuned.

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[1] Graham K. Macdonald et al 2015, Rethinking Agricultural Trade Relationships in an Era of Globalization http://bioscience.oxfordjournals.org

[2] Porkka M, Kummu M, Siebert S, Varis O (2013) From Food Insufficiency towards Trade Dependency: A Historical Analysis of Global Food Availability. PLoS ONE 8(12): e82714. doi:10.1371/journal.pone.0082714

[3] Porkka M, Kummu M, Siebert S, Varis O (2013) From Food Insufficiency towards Trade Dependency: A Historical Analysis of Global Food Availability. PLoS ONE 8(12): e82714. doi:10.1371/journal.pone.0082714

[4]  D’Odorico, P., J. A. Carr, F. Laio, L. Ridolfi, and S. Vandoni (2014), Feeding humanity through global food trade, Earth’s Future, 2, 458–469, doi:10.1002/2014EF000250.

[5] Clapp, J. Distant Agricultural Landscapes, Sustain Sci (2015) 10:305-316

[6] Thomas Kastner, Karl-Heinz Erb nd Helmut Haberl 2014 Rapid growth in agricultural trade: effects on global area efficiency and the role of management, Environ. Res. Lett. 9 (2014) 034015 (10pp)

[7] Wilk, R. 1998, Taking Political Ecology Global, Indiana University.

The invisible hand at work - gives and takes

At the onset of World War I, Britain imported 60% of its food and roughly 80% of its grain for bread (basically wheat), as a result of its laissez-faire trade policies and the enclosures. Initially, the government thought the market could ensure food supplies, but quite soon it had to step in, even more so when Germany’s unrestricted submarine warfare commenced in January 1917. The government increasingly regulated both price and supply of bread, “whatever else was in short supply, the supply of breadstuffs had to be maintained”. It took over importation and in April 1917 it took also control over the mills from the private sector. In 1918 all staple foods were regulated in price and many were rationed. People were encouraged to produce their own food; herds of cattle and sheep were reduced.

The policies worked so well that it is estimated that during the war the average provision of food was 3,500 calories, compared to 3,400 calories the years preceding the war (the quality of food didn’t necessarily improve, for instance fruit and vegetable consumption plummeted).

Even more interesting is that the difference between the diets of rich and poor decreased in war time. This was a result of that the government intervened in the food distribution and access as the market is simply not geared towards equitable distribution. It is inherent, almost a definition, in an unregulated market that the distribution is inequitable as it is based on economic purchasing power and not needs. So this observation is not saying that the market doesn’t work. It does work as a market should, but that doesn’t equal that it produces a result society wants. The invisible hand doesn’t always do the right thing.

(extract from Global Eating Disorder-the cost of cheap food)

Pot calling the kettle black

Global Trends by Martin Khor
Star, 23 Sept 2013

Food is one of the most important and emotive of all issues.  As consumers, we  can't survive without it.

Agriculture also employs the most people in most developing countries. Ensuring farmers have enough income is key to development and social stability. Some countries that did not achieve this have faced first rural disgruntlement and then upheaval.

Increasing food self-reliance is a goal in many countries.  Food security became a high priority after global food prices shot up to record highs in 2008, and there was a near-scramble for supplies of some food items including rice because of potential shortages.Also, reducing and eventually eliminating hunger worldwide is one of the key development goals adopted by governments at the United nations.

Against this background, there is a remarkable discussion now taking place at the World Trade Organisation, as part of preparations for its Ministerial Conference in Bali in December. Developing countries grouped under the G33 are asking that their governments be allowed to buy food from their farmers, stock the food and distribute it to poor households, without this being limited by the WTO's rules on agricultural subsidies.

However their proposal is facing resistance, mainly from some major developed countries, especially the United States, whose Ambassador told the WTO earlier this year that such a move would "create a massive new loophole for potentially unlimited trade-distorting subsidies". This clash is outstanding example of the how the agriculture rules of the WTO favour the rich countries whist punishing the developing countries, including their poorest people.

It is well known that the greatest distortions in the trading system lie in agriculture.  This is because the rich countries asked for and obtained a waiver in the 1950s from the liberalization rules of the GATT, the predecessor of the WTO. They were allowed to give huge subsidies to their farm owners, some of who do not even carry out farm activities, and to have very high tariffs.   When the WTO was set up, it had a new agriculture agreement that basically allowed this high farm protection to continue.  The rich countries were obliged only to reduce their "trade distorting subsidies" by 20% and could change the nature of their subsidies and put them into a "Green Box" containing subsidies that are termed "non trade-distorting or minimally trade-distorting."

There is no limit to the Green Box subsidies.  So the trick played by the rich countries has been to move most of their subsidies to the Green Box, including subsidies that are not directly linked to production, or that are tied to environmental protection.  But studies have shown that the Green Box subsidies are in fact trade distorting as well. With this shifting around, the rich world's subsidies have been maintained or actually soared.  WTO data show that the total domestic support of the United States grew from US$61 billion in 1995 (when the WTO started) to US$130 billion in 2010.The European Union's domestic support went down from 90 billion euro in 1995 to 75 billion euro in 2002 and then went up again to 90 billion in 2006 and 79 billion in 2009. A broader measure of farm protection, known as total support estimate, shows the OECD countries' agriculture subsidies soared from US$350 billion in 1996 to US$406 billion in 2011.

The effects of continuing rich-country subsidies have been devastating to developing countries.  Food products selling at below production costs are still flooding into the poorer countries, often eating into the small farmers' from incomes and livelihoods. Ironically the developing countries, already the victims of the rich world's subsidies, are themselves not allowed to have the same huge subsidies, even if they can afford it.  The reason is that the agriculture rules say that all countries have to cut their distorting subsidies.  So if a developing country has not given subsidies before, they are not allowed to give any, except for a small minimal amount (10 per cent of total production value).

In other words, if you have given $100 billion subsidy, you have to bring it down to $80 billion and you can transfer the rest to the Green Box, but if you haven't given any before, you cannot give one dollar, except for the minimum allowed. This is where the present WTO controversy comes in.  The developing countries are asking that food bought from poor farmers and given to poor consumers  should be considered part of the Green Box without conditions.

The present rule sets an unfair condition :  that any subsidy element in this purchase scheme should be considered a trade-distorting subsidy which for most developing countries is limited to this minimum amount (10% of production value). Other Green Box subsidies, that developed countries mostly use, do not carry such a condition.

The developing countries merely seek to remove the unfair condition that in effect prevents them from adequately helping their poor to get sufficient food. For example, India's parliament has just passed a food bill that entitles the poor (two thirds of the population) to obtain food from a government scheme that buys the food from small farmers.  But the estimated US$20 billion-plus the government will spend annually may exceed the small minimum amout of subsidy it is allowed, because India was not a big subsidiser before the WTO rules came into force. Other developing countries that provide subsidies to their farmers and consumer, such as China, Indonesia, Thailand, and Malaysia may also one day find themselves the targets of complaints.

For rich countries who are subsidising a total of US$407 billion a year to disallow poor countries from subsidising their small farmers and poor consumers, is really a specially bad form of discrimination and hypocricy.    An outstanding case of the pot calling the kettle black!

Reproduced with the permission of the Third World Network.