Trade Imbalance: The Struggle to Weigh Human Rights Concerns in Trade Policymaking
Not All Quiet on the Home Front: Stimulating Sustainable Development Abroad While Maintaining a Sustainable Livelihood at Home
The European Union’s agricultural commissioner, Mariann Fischer Boel, likes to tell a story about the European Union’s Common Agricultural Policy (CAP), the EU system of agricultural subsidies. These subsidies are designed to guarantee a minimum price to farmers and to pay them a direct subsidy for the crops they plant. Boel reminds listeners that before Europe was the name of a continent, Europa was a woman in Greek legend. The god Zeus was so impressed by her beauty that he disguised himself as a bull and carried her off to the island of Crete as his prisoner. She notes that just as Zeus was Europa’s jailer, many people believe that the CAP is the European Union’s jailer. But, she argues, this “myth” is wrong. The CAP is being revamped to ensure that farmers receive public money to produce the public goods we want - a pleasant, well-tended countryside with high environmental standards.”(161)
Many people disagree with Commissioner Boel’s interpretation of the myth. In their view, it is not Europeans that suffer, but poor farmers in other countries (particularly those from the developing world). (162) They argue that Europe’s comprehensive system of agricultural subsidies undermines human rights in the developing world, such as the right to work and the right to a sustainable livelihood. They stress that these subsidies contradict Europe’s commitment to sustainable development. Europe’s problems with the CAP, they argue, reveal the difficulty of reconciling Europe’s internal trade objectives (maintaining and creating jobs at home) with its external trade objective of reducing poverty and encouraging sustainable development.
The EU’s agricultural support programs were designed to ensure that the people of the EU would have a sufficient supply of food. After World War II, Europe had many food shortages. Blizzards during the winter of 1947 brought Europe to a standstill. Farmers left their land fallow and flooded into the cities, reducing wages and opportunities for urban workers. Food supplies ran low. To ensure that this would never happen again, France, West Germany, Italy, the Netherlands, Luxembourg, and Belgium devised policies to keep farmers on their land, rather than seeking jobs in the city, to prevent food shortages and to preserve the land rather than exhaust it. (163) European officials hoped this program (the precursor of the CAP) would ensure that Europeans had food security and farmers could earn a sustainable livelihood from their hard work.
Today, the CAP includes three elements: price supports, a tariff arrangement, and subsidies. These domestic policies can distort market pricing and create incentives for overproduction by European farmers. For example, policymakers set external tariffs to raise the price faced by consumers of imported commodities to the European Union’s target price. (164) But, in recent years, the European Union has taken a number of steps to make the CAP less trade distorting. It now provides direct income payments rather than price supports for many farm products, and these payments are linked to other objectives such as environmental protection, food quality, and animal welfare. (165) However, the European Union still subsidizes farmers for production and provides export refunds. Moreover, farmers are given subsidies based on the area of land growing a particular crop rather than on the total amount of crop produced. (166) Thus, these policies continue to distort market signals, encourage farmers to overproduce, and shield farmers from global price fluctuations.
Whatever its flaws, the CAP has achieved many of its goals. Today, the European Union is the world’s second-largest exporter of food and agricultural products. EU farmers accounted for about 20% of the world’s agricultural exports and imports in 2002-2003. (167) However, the CAP is expensive. Although agriculture represents only about 1.7% of EU GDP, taxpayers provided 58.8 billion euros or about 45% of the European Union’s budget to support farmers in 2006. (168) Moreover, the CAP tends to benefit mainly large farmers. Approximately 80% of the CAP subsidies go to the richest 20% of European farmers. (169)
Not only is the CAP expensive and inequitable, but it has political liabilities as well. EU members are deeply divided on how to reform the CAP, with France being its most ardent defender. (170) France’s trade minister, Christine Lagarde, has argued that agriculture is “fundamental to our identity” and that CAP is the cornerstone of [our] relationship with our land.” (171) Thus, to French, these subsidies protect their right to culture and maintain the European way of life. France’s determination to keep these subsidies in place has been supported by some of the new entrants to the European Union, such as Poland, which has many small family farms. (172) However, other EU member states, such as the United Kingdom, the Netherlands, Denmark, and Sweden, are net contributors to the CAP, and they are demanding gradual reform of these policies. (173) But the European Union has been unable to achieve consensus on these issues because any three countries can collaborate to block decision on reform. (174)
Today, some of the most vociferous opponents of the CAP include not just citizens but also development activists, policymakers, scholars, and trade officials concerned about the trade distortions created by this policy. During the Uruguay Round of trade talks (1986-1994), GATT contracting parties developed an Agreement on Agriculture, which was designed to gradually reduce tariffs and trade-distorting subsidies for agricultural products. (175) But, in the eleven years since the agreement came into effect as part of the WTO, developing countries still confront significant trade barriers to their agricultural exports, particularly in the European Union. (The poorest countries, however, have free access to the EU market under the Everything but Arms initiative.)
Agricultural trade liberalization is also supposed to be a key component of the Doha Development Round. But agricultural exporters, food importers, and big subsidizers have many different perspectives on what trade-offs they will make and accept. The European Union has insisted that the United States must first revamp its agricultural support policies, while it insists that developing countries must make concessions in other sectors to compensate the European Union for agricultural reforms. In the four years of negotiation since the Doha Round agricultural trade talks commenced, the members of the WTO have achieved some success in developing modalities for agricultural trade liberalization. (176) However, in September 2003 at the Cancun ministerial meeting of the WTO, developing countries walked out when the industrialized countries could not find common ground on trade facilitation and market access issues. Developing countries - in particular, India and Brazil - made it clear that they would prefer no deal to a bad deal. (177) But some good came out of this failure when, in 2004, WTO members achieved a framework agreement for negotiations on agriculture. (178) As of this writing, policymakers from countries such as the United States, Canada, South Africa, India, and Australia continue to blame the European Union for the failure to achieve a final agreement on liberalizing agricultural trade.(179)
The international development NGO Oxfam has repeatedly chastised the European Union for its agricultural policies. It blames the European Union for overproducing, dumping its excess production, and protecting its home markets. Oxfam has called this situation “one of the principal injustices of world trade. (180) It has concluded that the CAP has a “disastrous” impact on the livelihoods of the many farmers in developing countries and obstructs these countries’ economic development process. (181) Farmers, activists, and development officials also make human rights arguments against the CAP. They claim that if the CAP were truly reformed, farmers around the world - in particular, developing country farmers - could export more, gain greater access to resources, and compete more effectively on world markets. In addition, they argue that more people would have access to affordable food under more competitive markets. (182)
Some economists have provided supportive economic arguments to buttress these opinions. According to William Cline of the Center for Global Development, the liberalization of agricultural markets could reduce the number of people in poverty worldwide by 200 million or about 7%. (183) The World Bank concurs, noting “growth in agriculture has a disproportionately positive effect on poverty reduction because more than half the population in developing countries lives in rural areas, and poverty is highest in rural areas.” (184) The World Bank has thus called for “coordinated, global trade reforms if we are to help the rural poor.” (185) Nonetheless, many of the rural (and urban) poor in the developing world live in countries that are net food importers. These people depend on cheap dumped or subsidized food from the European Union. Thus, agricultural trade reforms will not automatically increase access to food or the right to a sustainable livelihood around the world. The impact of agricultural liberalization depends on factors such as a country’s level of development, its resource base, and its food needs. A 2005 New York Times article summarized the contradictions in arguments that subsidies hurt smaller, poorer farmers and help rich farmers in the industrialized world: the article stressed that most economists believe that, rather than focusing on EU/US. agricultural trade liberalization, developing countries could help themselves even more by focusing on internal reform. Poor countries often heavily protect their farms and support vast, uncompetitive agricultural sectors, drawing investment and labor into farming when it could be better used elsewhere. (186)
According to EU Trade Commissioner Peter Mandelson, the EU cannot work toward trade justice by simply abandoning agricultural subsidies: “Trade justice cannot be equated with big bang agricultural liberalization, and with it, a race to the bottom for EU agriculture and a free market mayhem that would gravely damage the interests of some of the poorest countries in the world.” (187) Moreover, Mandelson has argued that only highly competitive agricultural exporters such as Brazil and Argentina, rather than poorer developing countries such as Guatemala or Cameroon, will benefit. (185)
Thus, while EU taxpayers and consumers may benefit from changes to the CAP, such changes would not necessarily have positive human rights or economic spillovers in Europe or abroad. Some farmers will have difficulty adjusting to market conditions, and some may lose their livelihood and land. (189) Nonetheless, change in the CAP is inevitable: it is expensive, it may no longer make political and economic sense, and many of the EU’s trade partners will no longer abide it.
161. Mariann Fischer Boel, Member of the European Commission Responsible for Agriculture and Rural Development, Europa Lecture, “European Agricultural Policy in a Changing Environment,” 3/6/zoo6.
162. The German Marshall Fund found that 45% of Europeans feel that it is acceptable to subsidize domestic farmers even though developing country farmers suffer. But 21% more agreed when they were told EU farmers would close without subsidies. Twenty eight percent found trade-distorting agricultural subsidies unacceptable in either circumstance. German Marshall Fund, “Perspectives on Trade and Poverty Reduction,” 18.
163. Boel, 2; and Trans Atlantic Consumer Dialogue, “Towards Fairer Food and Agricultural Markets,” 4/19//2005, Germany Embassy to the United States.
164. Becker, “Agricultural Support” 4-5.
165. http://ec.europa.eu, last searched 4/27/ zoo6.
166. Boel, “European Agricultural,” 4.
167. http://www.ers.usda.gov, last searched 5/04/zoo6.
168. http://europa.eu.int last searched 4/28/zoo6; and Gregory S. Becker, “Agricultural Support Mechanisms in the European Union: A Comparison with the United States,” 7/31/ 2002, RL30753, 2, 4.
169. “European Farming - Why the European Union Retains its Strange Fondness for Farm Subsidies,” The Economist, 12/08/2005, at http://topics.developmentgateway.org, last searched 3/30/2007; and Tom Wright, “France Digs in Heels on Farm Subsidies, International Herald Tribune, 10/20/2005, www.iht.com, both last searched 3/30/2007.
170. “European Farming - Why the European Union Retains its Strange Fondness for Farm Subsidies,” The Economist, 12/08/2005, at http://www.economist.com. France’s Europe Minister, Catherine Colonna, has made clear that the reforms agreed on “cannot be changed until 2013.”
171. Christine Lagarde, “Big Cuts in Farm Tariffs Are No Solution to Poverty,” Financial Times, 11/21/2005.
172. Interview with Zbigniew Kubacki and Andrzej Gdula, Minister Counselor Economic and Commercial Affairs and Counselor for Economic Affairs, Polish Embassy, Washington, DC, 1/o3/zoo6.
173. Anthony Browne, “Blair Stands Alone on Rebate But With Friends on Reform,” The Times, 6/13/2005.
174. Becker, “Agricultural Support Mechanisms,” 5.
175. http://www.wto.org, last searched 5/o4/2oo6.
176. These nations had agreed to continue the reform process (Article 20 of the Agriculture Agreement). “Members agree that negotiations for continuing the process will be initiated one year before the end of the implementation period, taking into account” their experience, effects of reduction commitments, “non-trade concerns, special and differential treatment to developing-country Members, and the objective to establish a fair and market-oriented agricultural trading system, and the other objectives and concerns mentioned in the preamble to this Agreement; and what further commitments are necessary to achieve the above mentioned long-term objectives,” http://www.wto.org.
177. http://www.wto.org; and Larry Elliott et al., “Blow to World Economy as Trade Talks Collapse,” The Guardian, 9/15/2003.
178. According to the WTO Web site, the framework also stresses that the balance of the outcome will only be found at the end of the negotiations - a balance both between agriculture and other subjects (the “single undertaking”), and within agriculture itself. The three pillars are connected, part of the whole deal, and must be balanced equitably, the text says. The introduction also reiterates issues such as development and non-trade concerns. The framework includes a short paragraph on “monitoring and surveillance”: this will be improved by amending Article 18 of the Agriculture Agreement, to “ensure full transparency,” including prompt and complete notifications on market access, domestic support and export competition. Developing countries’ concerns on this will be addressed.
179. See, as an example, Boel, “European Agricultural Policy,” 6; “Agriculture Modalities: Deadlines Missed, Eyes Now at Cancun,” Bridges Weekly Main Page 7(12), 4/2/2005, http://www.ictsd.org; “EU Holding Talks Hostage,” Fin24 (a South African newspaper), http://www.fin24.co.za, all last searched 5/3/2oo6.
180. Oxfam International, “Making Trade Work for Development in 2005 - What the EU Should Do,” Oxfam Briefing Paper 75, May 2005, http://www.oxfam.org.uk, last searched 4/26/2006.
181. Oxfam International, “Stop the Dumping! - How EU Agricultural Subsidies are Damaging the Livelihoods in the Developing World,” Oxfam Briefing Paper 31 (October 2oo2), http://www.oxfam.org.uk, last searched 4/28/zoo6.
182. Canadian farmers believe EU subsidies have led to overproduction, depressed prices, and a farm income crisis. National Farmers Union, “The Farm Crisis, EU Subsidies and Agribusiness Market Power,” Testimony to the Senate Standing Committee on Agriculture and Forestry, Ottawa, Ontario, 2/17/2000, http://www.nfu.ca/feb17-brief.htm. A broadside on the human rights effects of the WTO agreement is IATP and 3D3, “Planting the Rights Seed,” March 2005.
183. William R. Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief, 2(4/2) (2003).
184. World Bank, “Agricultural Trade Reforms.”
185. Ibid.
186. Eduardo Porter, “Ending Aid to Rich Farmers May Hurt the Poor One,” New York Times, 12/18/2005, 4.
187. Peter Mandelson, “EU Agriculture and the World Trade Talks,” speech at the National Farmer’s Union (NFU) Annual Conference, 2/27/2oo6, Birmingham, last searched 4/27/zoo6.
188. Peter Mandelson, “EU Trade Policy after Hong Kong,” speech at Hans der Deutchen Wirtschaft, 1/23/zoo6, Berlin, http://europa.eu.int, last searched 4/26/2oo6.
189. Just as Europe had a wide range of nontrade concerns for subsidizing agriculture, many other countries have put forth a wide range of arguments for maintaining or abolishing agricultural subsidies, including food security (a variant of the right to food). For an overview, see “Non-Trade Concerns: Agriculture Can Serve Many Purposes,” http://www.wto.org, last searched 5/o4/zoo6.