The Impact of Trade Liberalisation on Food Security and Poverty
Forum Syd, Sweden
Overview by Johh Madeley
This survey covers 27 case studies and experiences of the effects of trade liberalisation, (the removal or reduction of barriers to international trade in goods and services), on food security and poverty. Some run to several pages, others are much shorter. On the key question of what trade liberalisation has done to people who are already food insecure, their evidence appears remarkably consistent. The common and overriding message can be summed up in a sentence from Hezron Nyangito's study of Kenya - "liberalised trade, including WTO trade agreements, benefits only the rich while the majority of the poor do not benefit but are instead made more vulnerable to food insecurity."
The study looks at trade liberalisation under the World Trade Organisation's Agreement on Agriculture (AoA), signed in 1994; under World Bank/IMF-imposed structural adjustment programmes (SAPs), which have been going on since 1980, (and which led to widespread liberalisation of the economies of most developing countries well before 1994), and under regional free trade agreements. The role of WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), also features. The GATT was signed in 1947 but did not consider agricultural issues until 1987, when the Uruguay Round of trade negotiations were launched. The AoA is a key part of 1994 Uruguay Round agreement which brought the WTO into being. Under SAPs and the AoA, developing countries have to make significant changes in their food and agriculture policies. They are obliged to open up their economies to cheap food imports and to reduce and severely limit support for their farmers. Most SAPs require more sweeping liberalisation measures than are required under the AoA, and also demand related measures such as privatisation of state-run enterprises, the elimination of subsidies and price controls, and the abolition of marketing boards. By contrast, the AoA centres on trade liberalisation measures - it calls, for example, on member countries of the WTO to reduce tariffs on food imports by 24 per cent over a ten year period, (the 48 least developed countries are excluded from this and from other reduction commitments). The AoA - a deal largely stitched up by the United States and the European Union under pressure from business corporations - tightens the screw of structural adjustment. The 1996 Oxfam paper on the Philippines (study number 20) refers to the AoA as "an act of fraud" that will give rise to increased competition from imports and intensify rural poverty and destroy smallholder livelihoods. And unlike SAPs, the AoA is binding on member countries of the WTO (137 countries were members in July 2000). In total, 39 developing countries are covered by these studies. The Philippines is the most surveyed countries, with seven studies listed here, followed by Mexico with five and Kenya with four. While the experience of most developing countries has therefore yet to be gathered in written form - although some may exist which this study was unable to find - the 39 countries are a significant representative sample of countries in Africa, Asia, Latin America, plus one in eastern Europe.
Why, according to the evidence of these studies, does trade liberalisation seem to be failing the poor? Its chief effects are summarised below.
1. Cheap imports The majority of people in developing countries belong to farming families. Most farmers are small-scale, with at best a few hectares of land and sometimes much less. The problems for these farmers caused by cheap imports, made possible by trade liberalisation, comes across in most of the case studies. Cheap imports are coming from both developed countries (especially the US and the EU) and also from developing countries (imports of sugar into the Philippines from Thailand, for example)
Competition from cheap imports is putting farmers in developing countries out of business. Such imports are coming both through commercial channels and through dumping - food sold below the cost of production to dispose of surpluses, and usually cheaper than commercial imports and more damaging. Michael Lumor's study of Ghana, (in case study number 1), is just one of many in this survey which shows how food imports have demoralised small-scale farmers. Having produced maize, rice, soybeans, rabbits, sheep and goats, the farmers cannot obtain economic prices for them, even in village markets. Their produce cannot compete with cheaper imports. Domestic food production is at risk as the agricultural sector is placed in jeopardy.
The studies show that liberalisation has led to an increase in the prices of farm inputs, causing huge problems for small farmers. Forced to pay more for their inputs, they are often receiving less for their produce when they come to sell. The study of edible oils in India reveals this common problem of farmers paying more for their inputs but receiving less for their crop. In economic terms, trade liberalisation appears to have worsened the terms of trade between outputs and inputs.
Harvested food prices have not always fallen. In some countries - Madagascar, for example - there has been a significant rice in the price of major food crops, particularly rice. But because most of Madagascar's small farmers are net rice buyers, liberalisation "seems to have induced significant welfare losses among the country's primarily rural poor". According to the studies higher food prices as result of trade liberalisation would appear to be the exception.
Consumers may appear to gain from cheap food imports. But they only do so if they have the money to buy, which many people in developing countries don't have. And cheap food imports damage the livelihoods of small-scale farmers and also the countries' most basic economic sector - its food-producing sector. Also, if trade liberalisation gives more power to monopolies, then consumers eventually stand to pay higher prices.
While most of the studies deal with crops, such as soybean, maize, coffee and sugar, they also show how milk producers in Jamaica and Uruguay has been similarly disadvantaged by liberalisation, in their case of the dairy sector.
2. More priority for export crops Trade liberalisation means more food imports; often it reduces the priority that governments give to their food crop sector, while increasing the priority they accord to crops for export. Many of the studies show that trade liberalisation has led to more land and resources being devoted to export crops and less to domestic food production. In Benin, for example, government incentives led to an increase in land under cotton; cotton exports have increased to the detriment of food production and food security.
The main study on Uganda points to evidence that the emphasis on exports, both traditional and non-traditional cash crops, has simultaneously meant a decline in the production of foodstuffs consumed locally, both in amounts and in variety. This has consequently undermined the food security of households.
Although governments are generally according more priority to the export crop sector, this does not necessarily mean that farmers are receiving better prices for these crops. World prices for many of them are declining - as is shown in the studies on Kenya, Sierra Leone and Uganda. As traders, and not government bodies, are mostly buying these crops, the price they offer the farmer will be related, in some degree, to the world price. But the power of the traders may mean that the price to farmers is far below the world price. (see section 10).
3. Large entities - transnational corporations (TNCs) Trade liberalisation is proving very beneficial for large entities such as TNCs - this is clearly seen in the studies on India, Philippines, Uruguay and Cambodia. But it is not just proving beneficial for them, it also appears to be helping them at the expense of the poor. The study of cotton in India show how trade liberalisation is aiding TNCs at the expense of India's farmers. The FAO study notes that the process is leading to the concentration of farms, "in a wide cross-section of countries" and to the marginalisation of small producers, adding to unemployment and poverty.
Kevin Watkins' study of Mexico shows that the winners from trade liberalisation are concentrated in the country's fruit and vegetable growing areas where production is predominantly on large-scale, irrigated farms. There is a "dramatic increase in investment in these areas, with large farms or firms leasing land". This finding is consistent with a global pattern. The liberalisation boom that large entities and TNCs are enjoying seems to be coming at the expense of poorer producers.
(More studies are needed that detail which TNCs are taking over land, how much land is involved, how many local farmers are losing their land, etc.)
4. Landlessness The Cambodia study show that more land has been bought and sold, leaving farmers with not enough or no land. Ten years since the adoption of the liberal market economy in 1989, it is estimated that between 10 and 15 per cent of the country's farmers are landless and that land is being concentrated in fewer hands. The top 10 per cent of the population own 33 per cent of cultivated land while the bottom 20 per cent own less than 4 per cent of cultivated land.
5. Women The studies on Kenya, Ghana, Uganda, Zimbabwe, Mexico, Jamaica and the Philippines all show how trade liberalisation is impacting heavily on women and accentuating gender inequality.
In Kenya, as a result of the liberalisation of agricultural trade, many women cannot afford adequate chemicals and fertilisers, and farm output has declined, finds Hellen Jepkerich Too-Yego. The main Uganda study notes how liberalisation may mean that the local parastatal depot is closed down, and producers have to go out of the village to a local market to sell their produce. Failing to do this will oblige them to sell their produce to village traders who will benefit at their expense. Women are often faced with a very heavy workload which gives them little time to go to the local market to sell their produce. If they sell their produce in the village, they will get lower prices.
Women, who produce 60 to 75 per cent of food in most African countries, have been affected disproportionately by the elimination of subsidies, the drying up of credit and the surge of food imports as a result of trade liberalisation. Women have the responsibility for putting food on the family table; but prices of farm inputs have risen under liberalisation, and incomes of farming families have come under serious pressure. As a result, many have been forced to cut back on the quality and frequency of their meals. Life in Zimbabwe, notes the CIIR study, is becoming a nightmare, with everyone in the family was crying out for food. Zimbabwe is hardly alone.
In Mexico, research has shown how male labour migration increases the workload on women and children, who are often withdrawn from school. There has been a sharp increase in the frequency with which women are forced to migrate in search of work as day labourers. It has been estimated that women now comprise about one third of all the day labourers working in the Mexican countryside. "To the extent that liberalisation accelerates these trends, it will exacerbate problems of inequality and rural poverty", notes the study.
Studies on Kenya, Uganda, Zimbabwe show that trade liberalisation has had some positive effects - in Kenya, for example, it has enabled rural women to engage in micro and small enterprises. But the studies indicate that the negative effects far outweigh the positive.
6. Unemployment There are no worldwide figures as to how many people have lost their jobs as a result of trade liberalisation over the last 20 years. In Mexico, between 700,000 and 800,000 livelihoods will be lost as maize prices fall, representing 15 per cent of the economically active population in agriculture. In India, the jobs of 3 million edible oil processors were lost. In Sri Lanka there was "a clear drop in rural employment", says the FAO study, with 300,000 jobs lost following the drop in the production of onions and potatoes. Worldwide it would not be unreasonable to estimate a figure of at least 30 million jobs lost in developing countries because of trade liberalisation and related factors.
7. Environment The cultivation of cash crops for export imposes considerable environmental costs. In the Philippines, for example, the extensive use of agrochemicals in export-crop production has increased soil degradation and the loss of biodiversity.
As Francisco Lara points out, liberalisation encourages producers to abandon traditional and ecologically sound agricultural practices in favour of export monocropping. Also, the encouragement of agri-based exports in special development zones creates massive colonisation of critical watersheds and the depletion of water resources in irrigated areas, previously planted to food crops. Trade liberalisation can again lead to a more extractive and non-sustainable type of agriculture. 8. Government services Under SAPs, liberalisation goes hand in hand with a reduction in government support for farmers, such as investment in agricultural research and extension, controlled pricing and marketing, and subsidies on inputs. Governments withdraw and leave their people to the free play of economic forces. People with money may survive but the poor are left stranded.
The Philippines is probably typical in that, as the SAPRIN forum found, insufficient state support for services such as irrigation, post-harvest facilities and farm-to-market roads has meant that small-scale farmers are unable to improve productivity levels or get their products to market at prices that cover costs.
9. Food self-sufficiency and sovereignty The negative impact of trade liberalisation on food self-sufficiency, let alone food sovereignty, comes across in many of the studies. The effects of trade liberalisation on India's edible oils sector is startling. Binu S Thomas's account shows how India achieved self-sufficiency in edible oils in the span of a decade. But this has been outweighed by reductions in tariffs which allowed the import of huge quantities of edible oils. From attaining self-sufficiency in edible oils a mere five years earlier, India's imports during 1998-99 made it the world's largest importer.
10. Traders gain In a number of countries, the liberalisation of markets has increased participation by private firms and individuals in the trade of food commodities, unlike in the past when public institutions dominated the trade. While, in theory, these activities could generate more employment opportunities, this does not seem to be happening.
Liberalisation has certainly increased the number and power of traders. In Uganda, for example, traders have "invaded" whole villages and used their bargaining power, and the farmers need for money (to buy inputs, for example), to buy harvested crops at low prices. At a later stage, the farmers sell the food at much higher prices. But household food security is endangered.
11. Migration When trade barriers are lowered, many small-scale farmers are unable to compete with cheaper imports and leave their land to head for the cities and towns, adding to pressures on urban services. (There is a need for more detailed figures on such migration.)
12. Indirect effects A number of studies show how changes in economic sectors, other than agriculture, have an impact on food security. In Kenya, for example, the liberalisation of textiles and footwear has led to imports flooding the domestic market and to a more limited market for domestically produced textiles and footwear. "This has led to a drastic decline in the production of cotton and, as a result, a loss of income to cotton producers, exacerbating the problem of food insecurity for most households in rural and urban areas", says one study.
In the Philippines, financial liberalisation has resulted in higher interest rates, lower investments, and higher costs for food inventories and stockpiling which fosters instability in the market for staple foods and threatens the food entitlements of the poor.
Conclusion "Many of us have been saying for a long time that unchecked, liberalised global trade is a disaster waiting to happen. No one listened. Now it's happened", says J D Comtois in his study of Thailand.
Small-scale farmers are bearing the brunt of this "disaster". But consumers too are vulnerable. In free trade theory, production will allocate to where costs are low and consumers - poor as well as rich - will benefit from low prices. The reality is more complicated, however. As noted in section 1 above, if trade liberalisation gives more power to monopolies, then consumers eventually stand to lose.
To achieve food security a country or region does not have to produce all the staples needed. Much of the trade liberalisation of the last two decades have been based on the hope that agricultural production in developing countries will switch to high value crops for export. They should thus be able to import food.
But for example the study on Ethiopia highlights the fact that a government that liberalises trade cannot necessarily bank on higher export earnings, especially if it relies on a commodity as volatile as coffee. Trade liberalisation did not bring the government of Sierra Leone the hoped-for benefits from exports of cocoa and coffee. The FAO study found that countries had not been able to increase their exports. Also Bangladesh has experienced many problems trying to meet food security needs through exports.
Agriculture is the main source of livelihood for hundreds of millions of people in developing countries. If small scale farmers are out-competed without an alternative source of livelihood the availability of cheap imported food is not much of benefit for them. According to the studies, governments seems to be misled or pressurised to put too much faith in trade liberalisation, or to do it too quickly, without adequate preparation.
Antonio Tujan's study on sugar is a warning about a government cutting barriers and allowing in cheap imports before it has improved the efficiency of its own industry. Mexico liberalised its agriculture too rapidly under the North American Free Trade Agreement which meant loss of hundreds of thousands of livelihoods.
The studies indicates that trade liberalisation has brought significant changes, in terms of shifts of power. The already resourceful, including TNCs, seem to reap most of the benefits from the trade liberalisation partly at the expense of the already food insecure .
Trade liberalisation is only one factor exacerbating problems for the poor in many countries. These studies often reveal the interaction of factors that affect food security, such as privatisation, domestic economic and financial policies and the incidence of HIV/AIDS. As the study on Thailand points out "the mess isn't simple"; devastating weather patterns, massive unemployment, the need to earn foreign exchange "to bail out an unbelievably irresponsible private sector" are all factors.
But these studies from a wide range of developing countries suggests that wholesale liberalisation of food trade does not address the problems of food security and poverty eradication. They rather indicates that trade-based food security for the poor is - at least for the time being - more a mirage than a fact.
Yet liberalisation is a policy choice, it is not inevitable. This survey suggests that a fundamental review of the dominating policy paradigm is needed, and that, at the very least, WTO rules need changing so that developing countries can provide domestic support and other regulations to protect the livelihoods of smallholders and promote food security.
Gaps 1. There is a need for more detail about the effects of trade liberalisation. For example, while liberalisation is perceived to help larger food producers, such as TNCs, at the expense of smaller producers - such as by taking over land that the poor can now longer farm economically because of cheap imports - the literature is generally sparse on details. Studies are needed that detail which TNCs are taking over land, how much is involved, how many local farmers are losing their land, etc.
2. More case studies are needed for Latin America.
3. Following trade liberalisation, migration to urban areas is increasing. Again, there is a need for more detailed figures.
4. The WTO has done no studies of the type in this survey. Are they concerned about what the studies would show? Does it mean that the WTO is only interested in furthering trade liberalisation and not interested in its implications for development? As an international body concerned with trade, they surely have a responsibility to conduct studies of this kind. NGO pressure could encourage this.
Note: The studies and examples in this survey come from different sources. My intention was to find all the recent country studies on trade liberalisation and food security. Some were already familiar to me, while others came via specialists and NGOs working in this area. I made a thorough search on the internet and, as far as I aware, everything on the web on this subject has been included - my apologies to anyone whose study has been missed. I have not excluded any country study I found. Others not on the web may have been missed. Many of the studies have been carried out by NGOs, some are more detailed and thorough than others, but all have something to tell us about the practical impact of trade liberalisation on the food security of the poor. John Madeley
Programmet for globala studier Forum Syd Box 15407 104 65 Stockholm Sweden tel: +46-8-506 371 64 fax: +46-8-506 370 99 e-mail: email@example.com
Developing countries (across continents)
1. "Trade and the Hungry: How international trade is causing hunger", APRODEV (Association of World Council of Churches Related Development Organisations in Europe), August 1999.
Draws on papers presented to a conference in Zeist, the Netherlands in April 1999 attended by ngo representatives from Africa, Asia, Latin America, North America and Europe. Thirtysix case studies on the effects of structural adjustment programmes/trade liberalisation on food security were presented to the conference. The document covers 8 of the papers and also a declaration agreed by participants.
(Contact: APRODEV, Ecumenical Centre, 174 Rue Joseph 11, B-1000 Brussels, Belgium. http://www.oneworld.org/aprodev). 2. FAO Symposium on Agriculture, Trade and Food Security, Geneva, 23-24 September 1999, Synthesis of Case Studies, (X3065/E).
Highlights the main conclusions of case studies (carried out by the FAO), which look at the impact of the AoA on 16 developing countries; also includes some of the views expressed at the symposium.
(Contact: FAO, Viale delle Terme di Caracalla, 00100, Rome, Italy. http://www.fao.org).
3. SAPRIN: Bangladesh, Ecuador, Ghana, Hungary, Mexico, Philippines, Uganda and Zimbabwe.
Views expressed at country fora of the Structural Adjustment Participatory Review International Network (SAPRIN).
(Contact: SAPRIN. http://www.igc.org/dgap/saprin).
4. Structural adjustment policies: What are they? Are they working?, David Woodward, CIIR, 1993.
Extract from section on the impact of adjustment on household food security and the environment.
(Contact: CIIR, Unit 3, Canonbury Yard, 190a New North Road, London N1 7BJ. http://www.ciir.org).
5. Views expressed in an electronic debate on globalisation (organised by the World Bank and the Panos Institute), May 2000. Malawi and Mexico.
(Contact: World Bank: http://www.worldbank.org/devforum or Panos Institute, http://www.panos.org.uk).
6. Government views: WTO process - Analysis and Information Exchange 1999.
The views of a number of developing country governments expressed in advance of the WTO Ministerial meeting in Seattle. (These views are for information only, as they were expressed off-the-record there are no contact details.)
7. Country case studies: Kenya, Mexico and Bangladesh, from "Trade and Food Security", Sophia Murphy, CIIR, 1999.
Considers aspects of trade liberalisation for food security in these three countries.
(Contact: CIIR, as above).
8. "Effects of agricultural price and market liberalisation and other factors on food security in selected districts of Uganda", Vredeseilanden-Coopibo-Uganda, SNV-Uganda and OXFAM-Uganda, December 1998.
(Contact: Jan Vannoppen, Vredeseilanden-Coopibo, Blijde Inkomststraat 50, 3000 Leuven, tel: 016/31.65.80; fax: 016/31.65.81. e-mail: firstname.lastname@example.org).
Draws on participatory research in four districts of Uganda - Arua, Iganga, Kitgum and Pallisa.
9. "Trade liberalisation and household food security: a study from Zimbabwe", Catholic Institute for International Relations, July 2000.
Provides evidence of the impact of trade liberalisation on the household food security of smallholder farmers.
(Contact: CIIR, as above).
10. "Food Security and Trade Liberalisation: Experiences from Sierra Leone", Ritchie Jones, Action Aid 1997.
Adapted version of paper presented to an Action Aid seminar in London, 19th November 1997.
(Contact: Action Aid, Hamlyn House, MacDonald Road, Archway, London N19 5PG. http://www.actionaid.org).
11. Impact of Uruguay (Round) Agreement on Agriculture on Food Security: the case of Kenya. Hezron O.Nyangito, Institute of Policy Analysis and Research, Nairobi, August 1999.
Commissioned by the FAO and facilitated by Action Aid, Kenya, this study looks especially at agriculture under AoA rules.
(Contact: IPAR, Ambank House, University Way, PO Nox 45843, Nairobi, Kenya; e-mail:email@example.com).
12.Trade liberalisation and the coffee sub-sector: some implications for the food sub-sector (in Ethiopia). Alemayehu Geda. A study prepared for Action Aid Ethiopia, November 1999.
The conclusions and policy implications of a study into how liberalisation of coffee, Ethiopia's major export commodity, affects food security.
(Contact: Alemayehu Geda, Addis Ababa University, PO Box 81146, Addis Ababa, Ethiopia; e-mail:firstname.lastname@example.org).
13. Madagascar: extract from draft of the World Bank's World Development Report, 2000, forthcoming, September 2000.
Illustrates the paradox of a decline in living stanrdads despite increased farm output.
(Contact: World Bank, http://www.worldbank.org)
14. Globalisation and its impact on Zambia. A country report prepared for the Professors World Peace Academy. Venkatesh Seshamani, University of Zambia, Lusaka, Zambia, November 1999 (extract).
Looks at how the abandonment of the state distribution and marketing system and reliance on the private sector thas led to a virtual collapse of agriculture.
(Contact :Professor V. Seshamani, University of Zambia, Lusaka, Zambia,
15.The EU-South Africa Trade, Development and Co-operation Agreement: the economic impact. Eurostep, 1999.
An analysis of a recent North-South free trade agreement.
(Contact: Eurostep, 15, Rue Stevin, 1000 Brussels, Belgium. http://www.oneworldorg/eurostep).
*16. Selling out: the cost of free trade for food security in India, Devinder Sharma., UK Food Group, November 1999.
Examines the cost of India's trade liberalisation measures to the country's small-scale farmers.
(Contact: UK Food Group, PO Box 100, London SE1 7RT. http://www.ukfg.org.uk).
17. Sunset for India's Yellow Revolution? Impact of trade liberalisation on oilseeds in India, Binu S Thomas, Action Aid, India, 1999 (abridged and adapted).
After achieving self-sufficiency in oilseeds, India became the world's biggest importer within five years, due to trade liberalisation.
(Contact: Action Aid, as above).
18. Impacts of trade liberalisation on Malaysia, Philippines and Cambodia.
Conclusions of discussions held at a conference organised by ERA, Malaysia, October 1998.
(Contact: ERA Consumer, e-mail: email@example.com).
19. GATT and trade liberalisation in agriculture: an analysis of the Philippines and Southeast Asia, Fransisco Lara, CIIR, 1994.
Extract from section about the impact of liberalisation on the environment
(Contact: CIIR as above).
*20.Trade liberalisation as a threat to livelihoods", Oxfam, 1996.
Looks at the impact of trade liberalisation on corn (maize) in the Philippines.
(Contact: Oxfam, GB, 274, Banbury Road, Oxford, OX2 7DZ. http://www.oxfam.org.uk).
21. Asean Free Trade Agreement: too costly for Filipino farmers, Philippine Peasant Institute, 1999 (extract).
Examines the impact of trade liberalisation in the regional trading group, ASEAN, on small Filipino farmers.
(Contact: Philippine Peasant Institute. http:www.ppi.org.ph).
22. When Tariffs Rule: Philippine smallholder agriculture under the GATT/WTO Tariff and Trade Liberalization Regime. Philippine Peasant Institute, 1998.
Discusses the need for small farmers to build up the capacity to shape and survive a free-for-all trade environment.
(Contact: Philippine Peasant Institute, as above)
23. "Thailand Under Crisis: The Larger Picture and Food Security", Rural Reconstruction Alumni and Friends Association, 1999
Includes farmer and NGO responses to the privatisation done under a structural adjustment programme, and proposed government policy to increase area land under high value cash-cropping by private industry.
(Contact: J.D. Comtois, RRAFA, Bangkok, Thailand; c/o ERA Consumer, e-mail: firstname.lastname@example.org)
Latin America and the Caribbean
24. Friends of the Earth: case study of Uruguay, 1999.
Looks at the impact of trade liberalisation on some of Uruguay's small-scale milk producers.
(Contact: Friends of the Earth, 26-28 Underwood Street, London N1 7JQ. http://www.foe.co.uk).
25. Trade liberalisation, poverty and distribution, Kevin Watkins, Oxfam, 1997.
Examines the impact of the North American Free Trade Association (NAFTA) on poverty in rural Mexico.
(Access via http://www.undp.org/hdro/oc32b.htm#part4).
26. Free trade fails biodiversity, Alejandro Nadal, "Seedling", (A GRAIN publication) June 2000, (extract)
Warns of the threats to the diversity of corn (maize) species if small farmers are driven out of business by trade liberalisation.
(Contact: Grain. e-mail: email@example.com)
27. Dumping in Jamaica: Dairy Farming undermined by subsidised EU exports, Eurostep, November 1999.
Looks at the impact of subsidised EU exports on the livelihoods of small-scale dairy farmers in a country that has reduced import barriers.
(Contact: Eurostep, as above.)