Integrated Rural Development Foundation of the Philippines
Policy Advocacy Papers
January 2002

For countries in the South and the millions of people that depend on it, agriculture is certainly beyond the narrow bounds of trade.

In the South, agriculture can never be commodified like any other industrial goods simply because a great majority of its population depend upon agriculture for their subsistence. There is a great difference when 70-80% of the population depends on agriculture [and is the foundation of the national economy] as compared to a situation where less than 5% of a population is involved in agriculture. Although we are also well aware of [and are in solidarity] the problems now besetting the family-based farms in the North as a result of unhampered trade liberalization.

More importantly, agricultural produce, especially the staple crops are essential to the food needs [the most indispensable basic need] of a population.

The understanding of the backward, agrarian, low-level and small-scale nature of agriculture and its over-all impact in the domestic economies of the South must be the starting point of governments and those of us engaged in international agriculture advocacy in dealing with the issue of the AoA, agricultural trade liberalization and the WTO in general.

Before we even start to talk about leveling the playing field, increase market access and the like, we must first ensure that all players can play in the field. Obviously, small peasant producers and farm workers in the South can never compete with the large TNCs that dominate the whole agricultural process, be it in the international or the domestic markets.

The rural economies of the South must first be developed, re-route it from its current import-dependent and export-oriented track, to be competitive enough to engage in international trade. Seven years into the AoA and the WTO, agriculture is far worse than before. The WTO in fact has seriously undermined the local economy and the South country’s food sovereignty, destroyed livelihoods of poor peasants and subsistence producers and retarded agricultural and economic development.¹

The AoA, far from being a fair international agricultural agreement, has only succeeded in prying open agriculture to cheap imports and subjecting farmers’ produce to unfair competition from the highly subsidized products of the North. The promise of market access in developed countries did not materialize as the AOA is not really about increasing market access for developing countries but expanding market opportunities for the big players such as the US and EU.²

The WTO-AoA worsened existing exploitative relations in agriculture. Land monopoly intensified as agribusiness corporations, commercial producers and the landed elite expanded their landholdings and intensified production for exports. Traders and big agribusiness corporations expanded their control in credit, marketing and processing. In the Philippines, agricultural trade liberalization reinforced further the export-oriented import-dependent model of the agriculture. In effect, the AoA under the guise of "free trade," only succeeded in further cementing the colonial trade relations between the Philippines and advanced industrial nations.³

No less than the studies of UN FAO and UNCTAD have indicated that agricultural liberalization has undermined food security of developing countries and does not necessarily improve their export earnings. The FAO report found that all 16 countries in the study experienced a rapid rise in food imports while exports were flat. "In Sri Lanka, for example, the rise in food imports was accompanied by a decline in domestic production, resulting in a clear drop in rural employment ... with 300,000 unemployed as a result of importation of potatoes and onions."⁴

The AoA has seriously eroded the South’s food sovereignty by legitimizing dumping of cheap food imports. By tearing down remaining barriers to trade, the AoA ensured powerful agricultural exporters from the North a ready market for their products while depriving the local country's capacity to produce adequate and quality food for its population.

The Philippines, from a historically net food-importing country, has become a net food-dependent (exporting) country in the last six years.

It is of equal irony, that the Philippines government has cling on their membership to the CAIRNS group of exporting countries when it is resorting to importing in addressing the country’s basic food needs.

Of course, we simply don’t put the blame squarely on the WTO and trade liberalization. Centuries of gross structural inequities in the predominantly agrarian and backward rural landscape, landlessness, monopoly and monopsony trading and marketing practices in the country have all contributed to this appalling situation. The AoA and the WTO is the culmination of all these processes.

Under the Comprehensive Tariff Reform Program, the government generally lowered tariffs for virtually all product lines in line with its stated goal of phasing down all tariffs to a uniform rate of 5% by the year 2004.

Hence by 1999, the Philippines’ average tariff reduction was 30% when developing countries are only required by WTO rules to reduce tariffs by an average of 24% over ten years, i.e. until 2004.⁵

But the fact remains that ever since the WTO came into existence, hunger and poverty were not solved but has gone from bad to worse. Surely, the recipe of producing agricultural products for exports undermines food self-sufficiency of the local population as production for export substituted for the objective of producing for domestic needs.

We chose food sovereignty because more often than not, the concept of food security has been mangled and has become even the by-words (lip-service) of the WTO and other apologists of global trading monopolies.

The concept of food security today has been mangled and distorted to suit the interest of the global monopolies and a few countries in the North. Food security in recent years has come to replace food self-sufficiency. Under globalization, it does not matter whether or not the peasants or farm workers produce enough food for themselves, after all the food they produce is intended to be consumed somewhere else.

What matters to the government, especially in the South, is that farmers produce "efficiently" the agricultural crop assigned them so that they are "competitive" in the international market. The food requirements of the local population can be imported anyway from where it is produced "efficiently" (read cheap i.e. import dumping).

Thus, for governments like the Philippines, it would rather stop supporting rice farmers and instead support the production of deemed export winners (like the exotic cut flowers, asparagus, "nata de coco" or whatever is the current fad in Japan, in the US or in the EU markets) and then just import rice from Thailand or India.

It is certainly the height of absurdity to call a situation where the vagaries of international market and the hold of global agriculture trading monopolies on the country’s food supplies as food secure.

The Philippines’ food security situation is at its worst. Domestic laws that at least give some support to rice farmers and the poor consumers were repealed; government programs ensuring the availability of cheap rice in the markets were significantly reduced.

The 1995 Magna Carta for Small Farmers, which provided quantitative import restrictions (QRs) on sensitive products and retained the role of state agencies in import licensing was repealed. The Seed Act, which banned importation of seeds and planting materials, was also repealed. The QR on rice was retained using the Special Treatment Clause of the GATT mainly because subsequent Philippine governments, since Marcos, have treated rice as a political commodity. But QR on rice is immaterial as far as the country’s experience in recent years with rice importations is concerned.

Republic Act (R.A.) No. 8178 or the Agricultural Tariffication Act and subsequently Executive Order 313 established tariff-rate quotas for certain products subject to current or minimum access commitments which include live animals, beef, pork, poultry and goat meat, potatoes, corn, coffee, and sugar.

With regards to reduction and elimination of domestic and export subsidies, the Philippines just like any other third world country, do not have anything to reduce. The Agriculture Agreement prescribes that as long as subsidies for production and export support do not exceed 10% of production value; the country was not obliged to reduce subsidies.

According to the data provided by the Department of Trade and Industry, government market price support for rice and corn in 1996 was only 5% and 1%, respectively, of production value. Also, the government procured only less than 1% of total rice production when it was mandated to procure at least 10% of total production.⁶

Six years ago, when Philippine accession to the WTO and the ratification of the GATT-UR was being debated in Senate, "free traders" in government [no less than spearheaded by then Senator and now Philippine President Arroyo] painted a rosy picture of what the country stands to gain from the GATT:

Six years after, the prophets of doom, as what we were labeled then, were somehow vindicated. Neither because we want to be proven correct nor because government has admitted complicity, but rather because the facts are so revealing to show the Philippines did gain nothing and almost lost everything under the WTO regime. Millions of local producers have lost their livelihoods and the country’s food situation has worsened.

Historical and structural imbalance in global trade explains why a third world country like the Philippines, because of its being an exporter of cheap agricultural raw materials and importer of finished industrial goods, is always mired in chronic trade deficit. However, it was only since 1994 that the Philippines were importing agricultural products more than it was exporting, in a predictably increasing pattern with the country gradually reducing tariffs on an increasing volume of imports while the value of its exports stagnates given depressed world prices.⁷ The country’s trade deficit increased sharply from an average of US$ 1 billion in the 70’s and 80’s to US$ 7 billion in the 90’s.

Export earnings specifically from food and live animals have been decreasing from 1996-1998. Crude coconut oil, which is the 4th top merchandise export of the country has posted significant declines for the past three years, from P14 million export earnings in 1998 to a mere P4.6 million in 1999 and partially recovering to P10.5 million in 2000 at constant prices.⁸

In a matter of six years, the flood of cheaper imports dramatically affected local production, especially staple food production, which is largely subsistence agriculture. Such a situation is further aggravated by lack of government subsidy for production and basic rural infrastructure, e.g. farm to market roads, irrigation, etc. From 1984-1998, budgetary allocation for agriculture was only 3% to 5% of government revenues.

The state-managed National Food Authority (NFA) has not been procuring what it is mandated to do. To be influential in the local rice market, NFA should be buying at least 24% of the total rice production, but it has not done so. In the last 5 years, NFA procurement was less than 5% of the total rice production. Government’s budget for irrigation has declined by 75% from P2.8 billion to less than a billion since 1998.

Government’s agricultural support in the form of price support, credit, research and development, and infrastructure has been on the decline. Specialized government banks have stopped lending to agriculture since 1995. Land Bank, which is the repository of the Agrarian Reform Fund, has allocated only 28% of its loan portfolio to agriculture and agrarian purposes. The expansion of irrigated lands has slowed down from an average of 25,000 hectares per year in the 70’s and 80’s to less than 10,000 hectares per year in the recent years. Declining government support is evident in the declining share of agriculture in the national budget from 3.99% in 1997 to 2.29% in 2000.

Table 3. Annual Budget of Department of Agriculture, 1994-2000 [Source: Dept. of Agriculture]

Weak governance in agriculture is evident even in the government’s implementation of the S&D provisions in the WTO. The legislated measures designed to provide protection to local industries adversely affected by dumping and import surges such as the Anti-Dumping Act (RA No. 8752) and the Safeguard Measures Act (RA No. 8800) put all the burden on the affected sectors/groups to prove that such unfair trade practices exist. Such actions entail a lot of time and resources on the part of the complainant. Implementation experience at the global level showed that only developed countries because of their resources have successfully utilized these provisions to the detriment of developing countries. Indeed, without active government support in prosecuting such cases, the possibility of poor peasants winning against powerful transnational corporations is almost preposterous.⁹

On the other hand, OECD countries practicing their usual double talk supported their agriculture sector to the tune of $327 billion (almost $1B /day) and prices received by OECD farmers (almost $18,000/farmer) were 38% above world prices.¹⁰ This year, OECD support to agriculture could total up to $420 billion, some 8-10 fold of their Official Development Assistance (ODA).¹¹

Direct payment to US farmers has jumped from 4.6 billion in 1996 to over 32.3 billion this year. An additional 79 billion has been allocated for 2001-2011 to compensate farmers in any event of price collapse, conservation, and for export promotion programs.

In contrast, developing countries have little or no financial resources to support farmers. US subsidies are almost up to 25-30 per cent of its agricultural production and the OECD estimates US' Producer Support Estimate to be 26 per cent of production in 2000. Developing countries' subsidies are unlikely to even reach 5 per cent of their production value.¹²

From 201,000 metric tons of rice importation in 1994, it ballooned tenfold to 2.2 million metric tons in 1998 – or almost 20% of the country’s rice needs when the GATT-WTO only allows minimum access of rice imports at 1% rising to 4% of domestic consumption by 2004. [table 4]

Corn is the country’s secondary staple food and major source of animal feeds, hence it is not only corn farmers that rely on the sector but also the small-scale backyard swine and poultry raisers. Corn importation swelled by almost 500 times, from 640 metric tons to 462,000 metric tons. Beef, poultry and pork imports likewise increased. Most of the local, small backyard hog-raisers and poultry producers who make up 84% of the country’s swine producers and 70% of chicken growers have been affected. Total importation of corn and feed substitutes like wheat was equivalent to an average 25% of local production from 1994 to 1998.

Ironically in the WTO, the Philippine government sought for exemption of rice using the Special Safeguard provisions of the Agreement on Agriculture. That means lifting of quantitative restriction on rice imports is postponed until 2004 and a minimum access quota of 59,000 mt in 1995 gradually increasing to 119,460 mt in 1999 and 239,940 mt in 2004 would be allowed to enter the country at 50% tariff rate. Rice import volumes beyond the minimum quota would be slapped with 100% tariff rate.

TABLE 4 Rice Imports vis-a-vis Local Production (in metric tons) Source: Bureau of Agricultural Statistics (BAS)

TABLE 5 Corn and Substitute Imports vis-a-vis Local Production (in metric tons) [BAS]

Areas planted to pineapple have doubled in less than 10 years, from 61,000 hectares in 1989 to 102,000 hectares in 1996. Asparagus production on the other hand has increased 16 times in just five years. Banana plantation areas grew by 40,000 in the last seven years. Multinational agribusiness corporations like DOLE and Del Monte have expanded their plantation areas by almost a 100%. The area devoted to cutflower production has grown from 1,008 hectares in 1990 to 1,427 hectares in 1996. Moreover, rice and corn lands in Mindanao have been reduced by 63.56% and 46.67%, respectively, to give way to high value crops.¹³

TABLE 6 Hectares Planted from 1989-98 (in ‘000 hectares) [BAS]

TABLE 7 Production and Importation (in metric tons) from 1995-98 [Source: Supply and Utilization Accounts]

Thanks to government encouragements, [tax holidays, financial incentives and the like] landholdings of multinational companies have further increased. To entice investments in export production, the government has allowed foreign and local companies to get concessions and licenses over land and coastal resources held as areas of the public domain. Hence, subsistence farmers, settlers and indigenous peoples living in upland areas are driven out from their land to give way to large mining and timber plantation concessionaires.

Marginal fishers who live along coastal areas are further marginalized as commercial fishing companies are given government leases to convert foreshore or coastal areas into aquaculture farms and allowed to encroach on communal fishing grounds, using environmentally destructive fishing gears that compound the problem of already depleted marine resources. Government laws that facilitated all these such as the Mining Act of 1995, Foreign Investors Lease Act of 1993 and the Fisheries Code of 1998 practically legitimized the privatization of the country’s national patrimony into the control of foreign and local monopolies. And this would not have been possible without the wholesale displacement of peasants, indigenous peoples and fisherfolk communities.

By 1998, key sectors of agriculture suffered steep declines in real gross value added, notably rice and corn, the country’s staple food. Rice production dropped by 24% from 1996 to 1998 and corn production by 20% from 1993 to 1998. [Table 8]

Import liberalization has pitted the essentially backward level of agricultural production in the Philippines into competition with the capital-intensive and highly subsidized agricultural surpluses from industrial countries. In 1999, five years into the WTO, the agriculture sector (including fishery and forestry) contracted. Its annual growth rate fell to 0.23% from 1994-1998. Local rice production, the country’s staple, registered a negative 2.

Areas planted to corn contracted by 1 million hectares in ten years. Hectares planted to palay have likewise declined, though not as much as corn. However, government’s support programs on the rice sector have over the years been deregulated. Instead of planting food crops, government has preferred that the "world class" Filipino peasants farm instead the so-called high value crops such as cut flowers, mangoes, eucalyptus and asparagus - the country’s comparative advantage in world trade.

Rice prices in fact increased almost a hundred times, from P 9-11 per kilo of NFA rice in 1994 to P 16-20 in 1999. From 1993-1995 alone, the price of rice increased by 136%, sugar by 76%, corn by 40%, coconut oil by 76% and meat by 20%. Since last year, average domestic rice prices have reached the 25/kilo level, more than double the amount of imported rice. (BAS)

Local corn prices are the highest in Southeast Asia (US$290/mt compared to US$160/mt). World market price of corn is only half of the local corn.

TABLE 10 Domestic Prices versus World Prices [BAS]

Domestic measures to promote the interest of small farmers, subsistence fisherfolk, indigenous peoples, and peasant women takes precedence over the WTO, the AoA and other international trade agreements. National policies that ensure food self-sufficiency (food sovereignty) and the development of local agriculture is a sovereign act of governments and peoples for survival and self-preservation; therefore it must be outside the purview of the WTO and all other international trade agreements [including the bilateral and regional type].

International "free" [sic unfair] trade is no excuse to trample upon the basic social and human rights of the people and the sovereign right of a nation to feed its hungry population.

South governments must be pressed to depart from a framework of export-dependence and hopeless crusade for market access. They must be convinced that protection for agriculture and the domestic economy is the most effective tool to check the current imbalances in global trade and should take primacy in their negotiating position.

Centuries of orienting agriculture towards export production has proven to be devastating and even stunted the growth of agriculture and domestic economies. As such, South governments and NGOs must realize the "increased market access bait," be it the US, the EU or CAIRNS. There is simply no way for developing countries [backward and underdeveloped agriculture as compared to the industrial and highly mechanized farm systems and agricultural infrastructure in the North] to access markets (new or traditional) and compete [using the comparative advantage hoax] with the cheaper and more accessible produce of the monopolies in the North given the constricted market and the global overproduction of agricultural commodities.

In fact, it is neither the small peasants nor the lowly farm worker in the South who are engaged in exports, it is also these same global agri-monopolies operating in the South and the few big local landlord-comprador. This also explains why some underdeveloped country-members of the CAIRNS group [like the Philippines] are so adamant for market access. It is not the farmers or the local agriculture that they are protecting but rather it is these agri-business monopolies and the local elites who will reap [granting, there is] whatever benefit is derived for market access.

Likewise, multifunctionality definition of agriculture does not mean anything if it only means multifaceted coating for further agricultural support mechanisms in the North. For peoples in the South, it does not need to belabor or technically define the multifunctional nature of Agriculture, for them, agriculture is the backbone and lifeblood of their existence and is part of the country’s rich heritage and diverse culture.

Governments in the South must take the necessary unilateral steps in protecting their local agriculture, especially in the light of the results of Doha where manipulation, coercion, economic blackmail and highhandedness were the rule of the day. This is the only option for governments if it seeks to reverse the tide of unbridled liberalization that has drowned millions of its people to bankruptcy and helplessness.

Way before we can talk about international trading, export subsidies or market access, South governments must introduce radical measures to develop its backward and agrarian economies. There is simply no way of leveling the playing field without these domestic measures such as a thoroughgoing agrarian reform. In the first place, the field will never be conducive to playing when one tries to put sheeps in a wolf’s den.

Countries must assert their sovereign right to install protective trade measures to prevent undermining the domestic economy with import dumping and other unfair trading practices. National efforts must be geared towards developing local production and food self-sufficiency rather than on export-oriented agriculture. To most NGOs and peasant movements, this is what we term as food sovereignty.

Local communities and the country in general must assert their independence to define their own agricultural and food policies, over and above all international and domestic economic policies.

Food and agriculture in the South is not a simple commodity for trade [is certainly beyond trade]. Agriculture is the source of livelihood for millions of farmers. Countries must exercise its sovereign right to chart its own policies and programs concerning food security and domestic agriculture over international trade.

In this light, it is worth supporting the demand of some NGOs for food security exemptions in international trade, whether bilateral, regional or multilateral. This includes the lifting of the 4% access requirements of developing countries’ markets for foreign agricultural imports and the maintenance or increases of subsidies deemed necessary for food security and agricultural development.

Hence, domestic subsidies for small farmers must be increased instead of withdrawn. In the first place, this is continually done with impunity by the rich countries of the North, so why can’t the governments of the South do so and they have all the more legitimate reasons to do so.

It is also worth supporting the demands of some developing countries for a so-called "food security box" that would "allow" developing countries to protect their farmers by raising tariffs on competing imports, especially the staple crops. The Africa group has likewise put forward a proposal to strengthen local production and food security.

The clamor of some South governments to expand the provisions on special and differential treatment and safeguard clauses in a way that these can allow protective measures for the third world is also worth supporting. The demand for increased food aid to Least Developed Net-Food Importing Countries must be supported but should not be tied to some conditions or concessions that the North may demand from these countries.

State trading enterprises that ensures guaranteed prices for farmers and steady supply of affordable food to poor consumers must be maintained and not privatized. However, to ensure that peasants and small farmers benefit from all these, it is imperative that a genuine land reform and productivity enhancement program is in place.

South governments should bat for a re-installation of protective tariffs on imports or at least a postponement of tariff reduction. For some governments, a unilateral suspension of the AoA is an alternative [until domestic reforms are in place] if it finds too strong the demands of peasants worldwide to remove agriculture from the purview of the WTO.

The above demands are much-needed buffers of developing countries and therefore must be supported. They are corollary and must be linked in the context of the increasing calls and demands of peasants and mass movements worldwide [and supported by NGOs and civil society groups both in the South and North] to have agriculture out of the WTO.

The WTO’s concern is trade, and agriculture, as we have discussed, is beyond the confines of trade. Therefore, it is only logical that a body such as the WTO should not govern something [as in the case of agriculture] which it has neither the mandate [or as you say it here in France - savoir faire] nor expertise and legitimacy, be it in the legal, social and political; or even in the cultural and moral context.

Is it not strange, if not ridiculous, to hear all of a sudden in the WTO negotiations such phrases as "non-trade" concerns and "non-trade" issues? If it is non-trade [in the true sense of the word], then it is simply not part and parcel of the WTO trade regime.

Far from a political slogan, the call to remove agriculture from the WTO is a historic rectification of taking out something [agriculture] that should not be there in the first place [from the sphere of trade]. Hopefully, this gathering that rightfully themed the conference as such [agriculture beyond trade], will be an instrument in that direction.

Jayson Cainglet
Integrated Rural Development Foundation of the Philippines (IRDF)
#98 Mapang-akit St., Pinyahan, Quezon City 1100 Philippines
Tel/Fax No. (632)- 4361831
Tel. No. (632) - 4350815
e-mail: irdf@info.com.ph
str2000@hotmail.com

* Paper presented to the International Conference organized by Solagral "Agriculture Beyond Trade." Paris, France. 8-10 January 2002. Much of the text was taken from a recent paper by the author "Of exotic’ orchids, sumptuous asparagus, empty pots and bare plate," presented to a Conference in Brussels, Belgium, 4-6 December 2001.

1 | WTO and Philippine Agriculture, Seven Years of Unbridled Trade Liberalization and Misery for Small Farmers. Francisco Pascual and Arze Glipo, IRDF. December 2001.

2 | Ibid

3 | Ibid

4 | Justice: The Heart of the Matter. Report prepared by the Ecumenical Coalition for Economic Justice for the World Council of Churches. January 2001.

5 | Department of Agriculture, "WTO and Philippine Agriculture: Case Studies on Selected Subsectors, Manila, 1999.

6 | The Impact of Agricultural Trade Liberalization in the Philippines" by Natividad Yabut-Bernardino, September 2000. www.isgnweb.org

7 | Ibid

8 | Economic and Social Statistics Office, NSCB 2001

9 | The last two paragraphs were culled from the paper "WTO and Philippine Agriculture, Seven Years of Unbridled Trade Liberalization and Misery for Small Farmers." Francisco Pascual and Arze Glipo, IRDF. December 2001

10 | Agriculture Policies in OECD Countries. Monitoring and Evaluation 2001.

11 | SDC Report by the Director-General (Walter Fust), Bern 23 October 2001.

12 | WTO AGRICULTURE NEGOTIATIONS: A Sorry Tale of American Arrogance, European Hypocrisy and Developing Countries in Disarray, Aileen Kwa, June 2001

13 | Aquino, Carlos. Changing the Rules of the Game ... PPI Briefing Paper, December 1998.