December 15, 2015
Huffington Post, December 15, 2015
Those of us who believe in a world free of hunger have an exciting opportunity to open up a pathway for progress on this entrenched issue — yet hardly anyone has noticed because it is happening at the World Trade Organization (WTO) in Geneva.
Fortunately, U.S.-based anti-hunger groups have become engaged, and have communicated their views in two letters that the United States should support, rather than block, these efforts in the WTO. Their timing couldn’t be better: this week Trade Ministers are holding a high-level meeting of the WTO in Nairobi, Kenya, and these issues will be at the forefront of the debates.
Anti-hunger advocates in the United States have led an impressive effort in Washington in the past several years to fight global hunger. They have sought to reform the way the U.S. delivers international food aid, supported a focus on women and smallholder farmers in the Feed the Future initiative, advocated for special attention to the nutritional needs of pregnant women and children under two, and promoted a comprehensive Global Food Security Act to codify important policy advances into law.
Underlying many of these initiatives is the broad consensus, backed by research, that the best way to combat global hunger and create food security is to support strong, resilient domestic agricultural systems. Unfortunately, while the U.S. government has been at the forefront of these efforts in some arenas, it has undermined them in others. One of the most glaring examples is U.S. support for unfair agriculture rules at the WTO that inhibit the ability of developing countries to feed their own populations.
What’s the WTO Got to Do with It?
WTO rules do not only govern trade in agriculture, but also domestic production. As currently constructed, the rules against domestic subsidies in the WTO’s Agreement on Agriculture (AoA) form a direct obstacle to developing countries seeking to invest in their own agriculture sectors to create local and national food systems that are at the core of creating food security.
The AoA that would become a foundational part of the WTO global trade rules was negotiated in 1994. At that time, it was agreed that agricultural subsidies would be capped at their levels at the time, and would be subject to gradual reduction. This applied most strongly to subsidies of food that would be exported, but also to domestic subsidies, except in certain specified circumstances.
The core unfairness of this arrangement resides in the fact that it was overwhelmingly rich countries that were then subsidizing agricultural production. Developing countries, by and large, were either too poor, or were subject to specific loan conditionalities by the International Monetary Fund or the World Bank that prohibited agricultural subsidies.
During this period, the focus was largely on how developing countries could produce commodities like coffee or sugar cane for export and trade in order to earn money that could then be used to buy food imported from the global market (theoretically for cheaper prices than what could be produced domestically).
As we now know, this export-led approach had a series of unintended negative consequences. Many countries producing the same commodity led to oversupply on the global market, bringing down the prices that producers could get for their exported goods. In many countries, land that was formerly used to feed local populations was given over to export non-food crops such palm oil. Yet even while the “global glut” of supply brought down the prices of exported goods for poor producers, climate change-related droughts, commodities market speculation and other factors have caused food prices to sky-rocket for consumers, causing two global food crises in the past decade that led to widespread hunger and rioting across the globe. Food prices remain highly volatile, and World Bank data shows that this problem will only get worse.
This reality is why the global anti-hunger community — including NGOs, developing country governments and donor nations — has focused in recent years on the importance of creating local food systems that enable countries to become food self-sufficient and untie the ability to feed their populations from the vagaries of the global commodities market. Yet current WTO rules run directly counter to this goal.
Current WTO Rules Hamstring Support for Local Agriculture
Countries like India are taking action to create strong domestic agricultural economies. Two-thirds of the population depends on agriculture, and most farms are no larger than a few acres. Meanwhile, hundreds of millions suffer from hunger and a lack of access to adequate food; half of children under five years old in the country are chronically malnourished. The Indian Food Security Act is intended to reduce poverty among both producers and consumers. It purchases food from poor farmers at a Minimum Support Price (MSP), and then distributes that food to the poor through a Public Distribution System. This is where it runs afoul of the WTO.
Just as a comparison, the U.S. food security program benefits around 47 million people and costs $106.7 billion (about $2,272 per capita per year), and is not inconsistent with WTO rules. But India’s program, which costs only $13.8 billion and benefits close to 800 million people with a tiny benefit of 17 dollars per person per year, is being challenged at the WTO.
Despite the new global consensus around the need for local agriculture sectors to be strengthened, WTO rules regarding developing countries’ support for local agriculture have not changed. As a country that was not subsidizing in 1994, the rules do not allow India to subsidize beyond the “de minimis” amount allowed to all WTO members — which is Latin for “so small it’s not worth tracking.” And this is not the only problem. When calculating the subsidies, India is required to figure the difference not between the MSP and current prices; it has to use the WTO-mandated “reference price,” which is the average world price from 1986-1988. This preposterous standard assumes that the price of rice over 25 years ago has any bearing on today’s markets. Since developing countries have experienced far more inflation than have developed countries, this “reference price” requirement is another aspect of the gross unfairness of the current rules.
The Special Rapporteur on the Right to Food of the UN Food and Agriculture Organization has detailed how WTO policies are incompatible with the right to food, and has made concrete suggestions for what changes need to be made in his superb paper, “The World Trade Organization and the Post-Global Food Crisis Agenda: Putting Food Security First in the International Trade System,” [PDF] which caused a massive uproar at the WTO. The African Union announced in the Maputo Declaration in 2004 its commitment to invest 10 percent of national budgets in agricultural production [PDF], which it reiterated last year in launching the “Year of Food Security.” In proposed Sustainable Development Goals being negotiated at the UN, the need for developing countries to invest in food production is highlighted as a priority more than half a dozen times. The South Centre’s extensive report on the issue documented the need for equity and justice and thus a change to the WTO’s rules on agricultural subsidies.
December 2015 Deadline Creates Urgency and Opportunity
Fortunately, change is afoot. A group of 46 developing countries, supported by other groups totaling over 100 countries, have introduced a new Food Security proposal in the WTO to change the rules so that developing countries would be allowed to invest in agriculture for domestic food security purposes. Countries including Botswana, Cameroon, Egypt, Ghana, Kenya, Malawi, Morocco, Senegal, Tanzania, Tunisia, Zambia and Zimbabwe have public stockholding programs, in line with the African Union commitment. India, as noted earlier, has passed a Food Security Act. Many other countries are currently developing programs or legislation to support the goal of creating resilient local agricultural systems.
Unfortunately, throughout 2013, the United States blocked negotiations on the Food Security proposal. It argued that India in particular was trying to “roll back previous commitments,” or that its distribution of poor farmers’ produce to poor citizens would somehow distort global markets. During the December 2013 WTO Ministerial meeting in Bali, the developing country Food Security coalition in the WTO was unable to change the U.S. position, but did win a commitment for further negotiations — that WTO members would try to find a permanent solution through future talks, but giving themselves an entire four years to do so. In the interim, a “Peace Clause” would be in effect. This deal was struck in exchange for other concessions by developing country governments in what is known as the “Bali Package.”
The Peace Clause means that for countries with existing programs, if they comply with onerous reporting requirements and prove that their subsidies were not distorting markets — something that, incidentally, the United States is not required to do for its subsidies — they would not be subject to a legal case by another WTO member. No new programs may be implemented, and there was no guarantee that a permanent solution would be agreed at the end of the four years.
After foot dragging by the U.S. which appeared to want to “wait out the clock” until the Peace Clause expired with no new deal in place, an agreement was reached in November 2014 to allow the Peace Clause to be in place until a permanent solution is found. This decision [PDF] also sped up the timeline, as members agreed to “make all concerted efforts to agree and adopt a permanent solution on the issue of public stockholding for food security purposes by 31 December 2015.” This means that a decision on the Food Security proposal is on the table at upcoming Ministerial, in Nairobi, Kenya, this December 15-18.
ACTION: The U.S. Anti-Hunger Community Supports the Food Security Proposal at the WTO
Removing WTO obstacles to food security — by allowing developing countries to invest in their own agricultural production, and feed their own populations, thus reducing their dependence on foreign aid — is achievable. The demands of the Food Security Coalition at the WTO are reasonable and deserve the support of anti-hunger activists worldwide.
In October, 20 faith-based, development, and anti-hunger groups in the United States took up the challenge and wrote to the White House on the issue, arguing that in order to “ensure aid effectiveness and policy coherence, and help advance the global commitment to eradicate hunger by 2030,” the United States should [PDF] ensure that:
U.S. representatives participate in negotiations on the food security issue in good faith, giving due consideration to and not obstructing existing proposals such as the G33 Public Stockholding for Food Security (JOB/AG/27 of 16 July 2014) – put forth by nearly 50 developing countries and Least Developed Countries – as well as broad appeals to revise outdated subsidy calculations.
Unfortunately, to date, the groups have received not a single communication from the administration.
Since then, related issues have emerged as hot topics in the WTO agriculture talks. There are widely supported proposals on the table to discipline what is called export competition — the supports that countries give to national companies to give them further advantages through the exporting process. The European Union, Switzerland, and Norway use direct export subsidies; Canada and a few others use marketing boards; and the United States assists exporters with extended credit, and also sometimes uses its food aid to offload surpluses. Sometimes the U.S. does this through monetization, a highly controversial practice involving exporting the surplus food and then allowing international NGOs to sell it locally to pay for their emergency operations. This has very damaging impacts on local economies; better practices would involve supporting governments or consumers to purchase food from local or regional suppliers.
Developing countries have long cried foul over these types of supports, which displace local markets and are widely acknowledged to be far more trade distorting than subsidizing food for local consumption by the poor. Proposals to discipline all of the different types of export competition policies are supported by most countries using export competition policies, but the U.S. is resisting tightening the trade-distorting export credits or reducing monetization of food aid.
And this doesn’t even begin to mention the domestic supports provided to producers whether or not the products are exported. As an example, the United States provides over $134.3 billion in domestic supports while India provides $51 billion; but although these investments support 2.4 million producers in the United States, yet support 265 million people in India, it is India that has been criticized in the U.S. press. Disciplining these subsidies was a prime reason that developing countries agreed to launch the Doha Round to begin with. For some products, like sugar, the domestic support provided by the U.S. government exceeded a whopping 50 percent of the value of production, for the last nine years (up until 2012, the last year of notifications). Unfortunately, this issue is unlikely to even be on the agenda at the ministerial in Nairobi.
In addition, developing countries have for years been demanding a solution to the import surges they experience when subsidized products are dumped on their markets, displacing local farmers. A mechanism for this — called the Special Safe Guard (SSG) — exists, but nearly all developing countries are not allowed to use it. They have been advocating a Special Safeguard Mechanism (SSM) that would similarly allow them to protect their local farmers and rural development when foreign-dumped products are wreaking havoc on local markets. A proposal is on the table for the Nairobi Ministerial, but it also is opposed by the United States, along with Australia and the EU.
That’s why it was so important that U.S. faith-based and food security organizations issued a follow-up letter to their previous missive, this time urging U.S. support not only for public stockholding, but also to “support a functional Special Safeguard Mechanism, without making that support dependent on other concessions on market access.”
They further noted that the U.S. should “[a]gree to the modest disciplines proposed by the EU and others on the U.S. practice of monetizing international food aid.” Adding, “there are other, smarter and more efficient ways for the U.S. to support food security around the world.”
These changes would remove the most damaging aspect of outdated WTO rules that keep farmers poor and contribute to over 800 million people living with hunger worldwide. It would bring the WTO more in line with the global consensus on agricultural investment and food security. It would allow developing countries to be more self-sufficient and less dependent on foreign aid. Fewer of the 22,000 people who die every day of poverty and hunger-related diseases would perish. It would help nations reach the new Sustainable Development Goals, to which the United States subscribed, of eradicating hunger and malnutrition. It won’t solve global hunger. But it will remove key barriers that currently hamstring the ability of developing countries to reduce hunger at home.
Unfortunately while these issues receive regular coverage in the Indian and other foreign press, the U.S. press has yet to produce a single article covering the food security issue in the WTO.
But worst of all is that U.S. negotiators seem willing to thwart any success at the negotiations in Nairobi in order to keep subsidizing agribusiness and preventing India from subsidizing the poor.
What is it going to take? Anti-hunger groups have taken a stand, and now can bring their powerful advocacy to bear on the WTO negotiations. Given the particular role of the U.S. in these talks, members of Congress who care about global food security are in a position to play a pivotal role in pushing the U.S. Trade Representative to rethink its current stance in the negotiations that is currently based on agribusiness export-lobby interests. This work can be achieved in partnership with farmers and right to food campaigns across the developing world – like the one in India that achieved landmark legislation.
It can be done. We have a short window to act. Let us not miss this opportunity.
Deborah James is the Director of International Programs at the Center for Economic and Policy Research, and facilitates the WTO campaign of the Our World Is Not for Sale (OWINFS) global civil society network.