Farmers’
Opposition to Corporate Globalization and Trade Agreements
by
Darrin Qualman
Executive
Secretary
National
Farmers Union
Toronto,
Ont. March 2, 2002
Introduction
There were
many farmers in the streets of Seattle, Quebec City, Porto Alegre, and other
places where citizens have gathered by the tens-of-thousands to protest the
negative effects of trade agreements, structural adjustment, and corporate
globalization. Farmers around the
world, through organizations such as the Via Campesina,1 have asked that food be taken out of the
World Trade Organization (WTO) agreement.
To
understand their opposition to trade agreements and the globalization of food
and farming, you must understand farmers’ experiences so far. This paper presents Canadian farmers’
experiences with trade agreements and globalization over the past thirteen years.
How trade agreements and
globalization harm farmers
Since
1988—the year Canada signed the Canada–U.S. Trade Agreement—Canadian agri-food
exports have nearly tripled.2 Canadian farmers and exporters have been
very successful in increasing exports, in gaining “market access.” The result, however, has not been the farm
prosperity that politicians, economists, and trade negotiators predicted. Since 1988, net farm income has remained
stagnant—or fallen dramatically if inflation is taken into account.
Why have trade our trade agreements—the Canada–U.S. Free
Trade Agreement (CUSTA), the North American Free Trade Agreement (NAFTA), and
the World Trade Organization (WTO) agreement—failed to bring prosperity to our
farms? The answer comes when one realizes
that increasing exports is only one effect of these agreements. To understand the spreading farm income
crisis, you must understand the often overlooked, and much more significant,
effects of these agreements.
For farmers, so-called “free trade agreements” do two
things simultaneously. By removing
trade barriers—tariffs, quotas, and duties—these agreements erase the economic
borders between nations and force the world’s one billion farmers into a
single, hyper-competitive market. Simultaneously,
these agreements facilitate waves of agribusiness mergers that nearly eliminate
competition for these corporations.
Economists agree: when competition
increases, prices and profits decrease; and when competition decreases, prices
and profits increase. Thus, as trade
agreements and globalization increase competition among farmers, these
agreements predictably decrease prices and profits. And, by fostering a dramatic decrease in competition among
agribusiness corporations, trade agreements dramatically increase
profits for these companies.
The NAFTA and the WTO agreement may increase trade but, much more
importantly, they dramatically alter the relative size and market power of the
various players in the agri-food production chain. For
farmers and their net incomes, increased exports may be one of the least
significant effects of trade agreements and globalization. Much more important—perhaps completely
overwhelming any potential benefits from increased exports—may be the effect
these agreements have on the balance of market power between farmers and
agribusiness corporations, because this relative balance of market power is
the primary determinant of the distribution of profits within the agri-food
production chain.
Trade agreements
and farmers: the empirical data
Some may doubt that trade agreements
and globalization decrease farmers’ prices and profits. Canadian net farm income data for the past
75 years, however, strongly support these assertions.
Figure 1 graphs Ontario per-farm net income adjusted
for inflation. Figure 2 presents that
same data for Saskatchewan. Graphs for
many other provinces are similar. The graphs show three distinct
periods. In the 1930s, net income on
the average farm fell to zero or below.
Then, for 50 years, net incomes were relatively stable—fluctuating
within a consistent range, but never falling below $10,000 per farm. Finally, in 1989, net farm incomes dropped
dramatically and stayed down—fluctuating within a much lower range. What happened in 1989? Canada implemented its first major trade
agreement: the Canada-U.S. Trade Agreement.
Figure 1: Ontario Per-Farm,
Realized Net Farm Income, Adjusted for Inflation, 1926–2001
Figure 2: Sask. Per-Farm, Realized Net Farm Income, Adjusted for
Inflation, 1926–2001
Sources for both graphs:
Agriculture Economic Statistics, Statistics Canada Cat. # 21-603E; Consumer
Price Index, Statistics Canada Cat. # 62-010; Historical Overview of
Agriculture, Statistics Canada Cat. # 93-358.
Basic
economic theory predicts that when corporations and governments use trade
agreements to globalize markets, they will increase competition among farmers
and, thus, push down farmers’ market power, prices, and profits. The evidence in Canada over the past twelve
years supports that prediction. This
prediction becomes inescapable if governments and corporations force
farmers into highly-competitive, globalized commodity markets at the same
time that agribusiness corporations are encouraged to merge globally and
nearly eliminate the competition they face.
This is because the resulting shift in relative market power between
farmers and agribusinesses will ensure that the latter will capture almost all
the profits within the agri-food chain.
Other effects of trade agreements and globalization
Canadian
farmers have benefitted greatly from our orderly marketing systems, including
the Canadian Wheat Board (CWB) and our supply management systems for milk,
eggs, and poultry. The NAFTA, however,
effectively ended our ability to create new orderly marketing agencies or
expand existing ones. Under the NAFTA,
farmers and government cannot implement single-desk selling for potatoes or
cattle and we can’t add canola to the CWB.
NAFTA
Chapter 11, Article 1110 states:
No Party may directly or indirectly nationalize or
expropriate an investment of an investor of another Party in its territory or
take a measure tantamount to nationalization or expropriation of such an
investment except: …
d) on payment of
compensation….
Ethyl
Corporation’s NAFTA victory and the pending Sunbelt Water case indicate that,
under Article 1110, the Canadian government would have to compensate companies
such as Cargill if farmers and the government add canola to the CWB’s
single-desk-selling jurisdiction.
Affected companies would argue that such a move expropriates their
potential profits and, by reducing the profit potential of their elevators and
other property, expropriates a portion of those assets. If the government does not pay compensation
voluntarily, Cargill and other companies could sue the Canadian government
under Section B of Chapter 11 of the NAFTA.
Chapter
11’s compensation requirement effectively deprives the government of a number
of other policy options including our abilities to:
● create railway competition
by requiring railways to grant widespread running rights;
● ban unwanted agricultural
technologies such as genetically-modified (GM) wheat;
● regulate grain-handling
tariffs (as we did before 1995); and
●
use government payments to induce farmers to move to organic agriculture.
The NAFTA has stolen many of the vital agricultural policy
tools from Canada’s toolbox.
Examples of
trade-agreement interference in domestic farm polices continue. Annex 2 of the WTO Agreement on Agriculture
prescribes the details of domestic support programs “exempt from reduction
commitments” (“green box” programs).
The design of Canada’s failed AIDA program is taken directly from that
Agreement, which states:
(a) Eligibility for such payments
shall be determined by an income loss… which exceeds 30 per cent of average
gross income or the equivalent in net income terms…in the preceding three-year
period or a three-year average based on the preceding five-year period,
excluding the highest and lowest entry.
The key
elements of AIDA are in the WTO Annex: three-year averages, 70% coverage (100%
- 30% = 70%), etc. Trade agreements
such as the WTO increasingly dictate the domestic measures that the Canadian
government can take to support our farmers.
As another
example, the Canadian government used the then-pending 1995 WTO agreement as a
major reason for terminating the Crow Benefit.
Since the end of the Crow Benefit, farmers’ freight rates have increased
more than two-and-one-half-fold to become the single largest expense on many
western farms.
In addition
to restricting the types of programs governments can create in the future, the
NAFTA and WTO agreement facilitate attacks by transnationals and their
(nominal) governments on existing farm programs and agencies. There have been nine unsuccessful attacks
against the CWB. Under the WTO
framework, there have been several attacks on our milk supply management system. While corporations and foreign governments
have been only partially successful in weakening our CWB and supply management
agencies, corporate meat packers have succeeded in destroying hog farmers’
single-desk-selling agencies in Saskatchewan, Manitoba, Alberta, and Ontario.
Positive effects
on agribusiness
While
farmers have lost as a result of trade agreements and globalization,
corporations have gained. The NAFTA
Chapter 11 that robbed farmers and their governments of so much power,
transferred that power to the world’s dominant agribusiness corporations. Chapter 11 gives corporations the power to
sue foreign governments. It gives
corporations near absolute rights to their profits and property and requires
governments to pay compensation if regulations decrease those profits or the
value of corporate property.
Corporations
have won increased patent protections—enhanced “intellectual property
rights.” These protections have
resulted in longer, more wide-ranging patents on drugs, agricultural chemicals,
and seeds and in decreased competition and increased corporate profits. One of the major outcomes of a process
advertised as focusing on ”free trade” and “deregulation” has been to
dramatically expand corporate mechanisms of monopoly control and to create a
huge global bureaucracy charged with enforcing corporate patents.
The greatest contribution to corporate power, however, has
been the de facto suspension of anti-combines and competition laws around the
world. Just twenty-five years ago, Canadian farmers were buying tractors made by
Allis Chalmers, Versatile, White, Massey Ferguson, International Harvester,
Case, John Deere, Deutz, Ford, and Steiger.
Today, two tractor manufacturers dominate the world market: John Deere
and Case/New Holland. Through
unrestricted mergers and takeovers, tractor makers have restructured themselves
into a duopoly. This dramatic reduction
in competition and increase in market power was facilitated and spurred by
globalization and trade agreements.
Grain companies are merging to reduce competition. Agricore
United (which may soon be controlled by U.S.-based Archer Daniels Midland),
Sask. Wheat Pool (which may soon be controlled by U.S.-based ConAgra), and
Cargill now control 75% of western Canadian grain-handling capacity.
Monsanto sold the seed used on 94% of the acres planted to
genetically-modified crops in 2000.[1]
Canada’s agri-food chain stretches from oil and gas
companies at one end; through fertilizer, chemical, and seed companies; through
farmers in the middle; and to grocery stores and restaurants at the other
end. Every link, with the exception of
the farm link, is dominated by between two and ten multi-billion-dollar
transnationals. The size of the
companies that dominate each link is increasing and the number of companies is
decreasing. Figure 3, below, highlights
the acceleration of global corporate consolidation.
Figure 3: Value of mergers
and acquisitions
Source: Etc Group Communiqué, July/August,
2001, Issue # 71.
The
dominant agribusiness corporations have pursued strategies of rapid growth and
equally-rapid reductions in competition.
In so doing, these corporations have dramatically increased their market
power. At the same time, trade
agreements have also added to corporations’ powers and reduced the powers of
national governments. Taken together,
these events have yielded awesome increases in corporate power. This, much more than increased exports, is
the primary effect of trade agreements and globalization.
The future: Doha
and beyond
Any new WTO
agreement will extend and accelerate the trends outlined above—increasing
corporate concentration, decreasing competition, increasing corporate profits,
declining net incomes for farmers, and the erosion of governments’ powers to
shape agricultural policies. Farmers
will be the clear losers if we move forward with the Doha WTO round, a Free
Trade Area of the Americas (FTAA), or a latter-day Multilateral Agreement on
Investment (MAI).
In numerous challenges to the Canadian Wheat Board
and our supply-management systems, the U.S. has proven that it will work
relentlessly to destroy these institutions.
It will do so because these institutions serve both as barriers to U.S.
corporate penetration and as counter-models to the corporate-dominated U.S.
system. Increasingly stringent and
corporate-friendly “disciplines” contained in new trade agreements or in a
re-negotiated WTO agreement will ensure that the U.S. and others will, in the
end, be successful: they will force Canadian farmers to relinquish their
marketing agencies and force the Canadian government to relinquish more of its
powers to shape agricultural policy.
In much of rural Canada, corporations are tearing down the
elevators and ripping up the railways.
Increased trucking is destroying the roads. The schools, hospitals, stores, and rinks are closing as the
impoverishment of rural Canada leads to its depopulation. Much of this decline and de-development began
in the 1980s when we pledged ourselves to free trade, and it intensified throughout
the 1990s as we learned the word “globalization.”
With more than a decade of evidence and experience, there
can be little debate: free trade and corporate globalization are granting
tremendous benefits to agribusiness and other corporations and heaping huge
costs onto farmers, public infrastructure, rural communities, and the
environment. This is the reason that
farmers are taking to the streets in increasing numbers to protest against
these agreements. This is also the
reason that farmers are organizing nationally and internationally through
organizations such as the Via Campesina.
The
government of Canada, like governments around the world, has committed a
fundamental policy error. It has
mistakenly signed agreements corrosive to the common good and beneficial to a
small number of wealthy and powerful corporations and individuals. The National Farmers Union, the Via
Campesina, and organizations around the world are acting in the best traditions
of democracy in opposing such agreements and in helping our elected
representatives to reverse their policy error.
Footnotes
1The Via Campesina was conceived in 1992, and born in May
1993 in Mons, Belgium, at its First International Conference. It has grown to
include more than 84 organizations from 42 countries. Member organizations
represent landless peasants, small- and medium-sized farmers, agricultural
workers, rural women and indigenous communities.
2From $10.7 billion in 1998 to 26.5 in 2001.