Agricultural Trade Negotiations and the Challenges of Food Security

Introduction

Freer trade agreements on agricultural products have historically been more difficult than those on manufactures. Beside the destabilizing influence of natural events, agriculture is also subject to a pervasive political sensitivity embodied in the relationship between farmers and government. Public policies in support and protection of farming activities are in force everywhere around the world, aimed at guaranteeing national self-sufficiency on food and/or providing a stable level of income to farmers, as illustrated by the Common Agricultural Policy (CAP) of the European Union (EU).

Since the outset of the Tokyo Round of General Agreement on Tariffs and Trade (GATT), in the early 1970s, agriculture has been regarded as a cornerstone of, and also an obstacle to, the progress of multilateral negotiations towards trade liberalization. Despite the achievements in liberalizing industrial trade and the significant growth of trade transactions, the Uruguay Round (UR) of GATT was close to a fiasco due to agricultural issues. In 2006, five years after the Doha Round (DR) was launched, trade negotiations were once again entangled in a conflict between developed countries, protecting farming activities, and developing ones, resisting to opening their markets to industrial products. Negotiations were eventually suspended. So, once again, agriculture is in the spotlight of a stagnant forum, obstructing movement on trade talks.

Why has this happened if countries have apparently been so eager to promote trade liberalization? A partial explanation to this apparent paradox is offered in this article, based on two assumptions. First, the principles of free trade do not entirely fit the actual dynamics of farming activities, given their importance for the livelihood of large social segments in many countries. Second, farming policies implemented in most countries after the Second World War collided with the expansion of international trade, especially after new developing countries went through the Green Revolution and increased significantly their shares in food and raw material markets. As a result, most developed countries carried on with policies to protect domestic producers and the status quo in the countryside. This combination of protection and growing competitiveness resulted in increasing surpluses sustained by government purchases. Initiatives to control acreage became pointless, as only the worst plots of land were removed from use (Friedmann 1993). In addition, after the conclusion of the UR, not only the liberalization agenda for agriculture remained rather elusive, but changes in farming policies were mostly postponed to future negotiations.

As argued below, the obstacles to the conclusion of another round of trade negotiations cannot be seen as market distortions to be scrapped in a context of free trade relations, but as intrinsic ingredients of multilateral trade. In particular, the reluctance to implement reforms in domestic policies according to what had been agreed upon in previous rounds only vindicates the interpretation by which agriculture does not fit in the free international trade agenda. The crossroads at which negotiations have stalled reveal not only different options for organizing trade itself, but also a conflict between freer trade, which most technical assessments recommend, and the actual status quo of national policies. Such a conflict is due to concerns regarding the impact of increased competition on local farming business and the risk of relying on foreign supply. In order to deal with this matter, we firstly review the political and economic circumstances surrounding the deadlock of negotiations and also the inconsistencies of the liberal principles guiding most of the optimistic assessments of the DR prospects. The critical view worked out in the first topic is followed by a discussion of the evolution of trade and the shortcomings of the negotiations conducted over the last two decades, with protectionism remaining pervasive worldwide. The discussion is concluded with an examination of the evolution of the food system, taking into account the onset of the food crisis that occurred after 2005, in relation to the latest decisions of the World Trade Organization (WTO), including those of the Bali Ministerial Conference.

A Resilient and Unsupportive Background to the Liberalization Agenda

The logic of free trade arguments is ideologically anchored in the laissez faire doctrine constructed during the twentieth century. As pointed out by Henry (2008: 215), this cannot be seen as the expression of a superior and logical arrangement of modern economics. In fact, it ought to be regarded as a consequence of an intentional and well-orchestrated reaction to growing state intervention since the 1930s aiming to take the economies of the United States and Western Europe out of depression. The critical views condemning the Keynesianism that prevailed worldwide for decades followed assumptions sustained by models concocting economic relations ruled by perfect and predictable markets deemed to be able to deliver greater efficiency and welfare. After several decades, and particularly since the 1970s, not only did the world economy become more integrated, as well as more conflictive, also a liberal perspective began to shape the evolution of trade negotiations, in the form of the Washington Consensus.

In this section, we examine why the strategies of trade liberalization have not succeeded within the framework set up by multilateral negotiations under the GATT/WTO mandates. More recently, the world economy has moved towards deeper integration in terms of trade, finance and investment. As a result, national governments and institutions have become more susceptible to the rules of free trade and open international competition. Differences in competitiveness, foreign policy, exchangerate systems and participation in regional trade areas among economies have not prevented initiatives to implement pro-market reforms. Regardless of their economic background, most countries jumped on the bandwagon of laissez faire to participate in the world market, as liberalization became a tenet of multilateral negotiations.

Despite the institutional structure and the state of mind driven by beliefs in liberalization during the history of GATT/WTO, the DR has been stuck in deadlock, raising fears that protectionism could jeopardize the WTO, as well as the achievements of previous rounds. After two decades, trade relations have become widely fragmented and deeply affected by the disappointing results of the multilateral negotiations. A first thread of explanation to the stalemates of the DR is to be found in the growing diversity of interests of the GATT. The United States and Western Europe were the political core of GATT at its creation, joined by a few other countries on specific questions. During the following decades, as the number of GATT members rose to 140 countries and the issues on the table became thornier, that core lost power over the setting of the agenda in the international trading forum. A larger diversity of interests came to the fore due to the growing competitive power of developing nations in agricultural and industrial markets. Simultaneously to being part of world supply, many of these countries, despite their negotiating power remaining weak, were able to limit market access commitments, while demanding more favourable conditions for their exports to developed nations (Tarullo 2006). As a result of a growing complexity in the world markets, rounds of negotiations became longer and the deadlocks more difficult to avert. The world trade system also became more entangled, as the Cold War coalition between United States and Western Europe gradually lost its thrust in leading the world economy.

A second aspect challenging the evolution of a multilateral trade system concerns the proliferation of regional free trade agreements, such as, the North Atlantic Free Trade Agreement (NAFTA), Mercado Común del Sur (MERCOSUR), Asia-Pacific Economic Cooperation (APEC) and the EU, the most significant, and also a large number of bilateral trade agreements, amounting to Bhagwati’s (1995) metaphoric ‘spaghetti bowl’. Regional trade areas nearly trebled in numbers after the creation of the WTO: Under GATT, 124 bilateral and regional trade areas were set up, while 240 new ones came into existence under the WTO. Transactions of farming goods within regional trade agreements, as a share of total agricultural trade, have also expanded. In Latin America, for instance, that share increased more than 90 per cent between 1985–90 and 1996–2001 (FAO 2004: 28). Even though regional trade agreements can be seen as a stepping-stone towards multilateral arrangements, they may in fact weaken the global regulatory system of the WTO (Bhagwati and Panagariya 2003; Tarullo 2006).

A third explanation for the difficulties of trade negotiations can be found in the very principles of liberalization, according to which free trade among specialized economies promotes growth, reduces poverty and boosts development. As shown in the Doha/WTO Ministerial Declaration of November 2001, free trade is regarded as a way out of poverty, by increasing welfare and access to the world supply of goods at lower prices, especially in the context of a globalized world economy. Mr. Pascal Lamy, former WTO General Secretary, repeatedly claimed that free trade can promote balance between supply and demand, offsetting food scarcity in some countries by surpluses in others. Countries would be rewarded by becoming parts of a global system under the culture of laissez faire or ‘freedom from any form of coercive authority—in conventional terms, the government’ (Henry 2008: 221). Domestic policies should not hinder countries from reaping the gains of free trade (Bhagwati 1997; Winters 2004), but drive them into the dominant economic and political pattern, for example, by transferring actions aiming at rural development to private interests. As stressed by Chang (2009), the advice by adepts of the liberal ideal is that private agents should be in charge of supporting and providing incentives to farmers while state involvement should be eliminated.

Nevertheless, multilateral negotiations based on such a worldview have been frequently confronted by a pervasive implementation of protectionist and supportive policies in all countries, regardless of their position in world trade (Wise and Gallagher 2007). In fact, the persistence of such policies implies that that free trade neither lead to fair trade nor avert market instabilities and trade wars, in which some countries may fall prey to those striving to expand their market shares. The so-called distortions are, in fact, ingredients of the existing trade system, as such determining the way countries integrate into world markets. Contrary to the view that market forces can drive sectors and entire economies to higher levels of competitiveness, economic relations have been forged by practices and regulations of all sorts. This is demonstrated by the aggressive farming lobbies of the United States and the EU in favour of protectionism, usually due to a structural lack of competitiveness, and also in the case of periodical protests of farmers against multilateral negotiations that lead to higher imports, as demonstrated in Japan, France, Korea and other countries more exposed to growing imports and external influence on their consumption habits. That is, governments are frequently induced to implement policies converging with the global status quo (Katzenstein 1978), compelling others to drop trade barriers, while pre-empting access to their own domestic market.

On the whole, international trade relations have been in constant conflict, whereby free trade and multilateralism are goals to be achieved in the future only. The more integrated the global economy, the fiercer the competition becomes, based on which governments and economic agents tend to protect national jobs and local businesses. In particular, the implementation of protective trade policies, such as, subsidies, import quotas, tariffs and non-tariff barriers, has blocked the access to domestic markets for reasons of national food security or compliance to farming interests. In the light of the above, we discuss next the difficulties faced at the WTO negotiations in reaching a multilateral framework for agricultural trade and the effects of recent decisions concerning developing countries, and more particularly with regards to the survival of small-scale food production.

The Underachievement of Trade Negotiations on Agriculture after the Uruguay Round

The deadlock of the DR is a critical point in the evolution of the food system which emerged in the early 1970s, when governments, facing a situation of food scarcity and price hikes, reoriented their policy instruments to stimulate production. The consequence was a larger food surplus and trade war between Western Europe and the United States, which ended up contaminating the world trading system. Growing exports supported by subsidies and income-support policies became a central feature of the food system, until the UR. As described by Friedmann (1993), the model of production forged under the Green Revolution was replicated particularly in the new agricultural countries (NACs), where strategies to modernize production and increase exports triggered a battle over market access. Goodman and Redclift (1989: 4) have shown how the agricultural system evolved through a period of crisis when other countries, following the US model, also added surplus to the international market; in their words,

the system worked so effectively so long as excess productive capacity was concentrated in the United States but the internationalisation of modern intensive technologies and the associated protective structures of regulation carried the seeds of future instability of world agricultural markets.

Throughout most of the last century, world agricultural trade followed a vicious circle. Through subsidies, North American and European farmers have systematically been spurred to increase production, causing world prices to fall. While insisting on trade liberalization in those sectors in which they are more competitive, they have also protected their non-competitive sectors, particularly agriculture. This contradiction, embodied in the discussions over agricultural policies, vindicates John Kenneth Galbraith’s point, as quoted by Murphy and Suppan (2005: 21):

the reality is that no industrial country—not the United Sates, not Canada, not the countries of the EEC, not the other European states, not, we all know, Japan—leaves its farmers to the free market. None. Those who affirm the beneficence of the free market for agriculture are, as regards the industrially developed countries, speaking of something that does not exist.

This, however, is not only an academic or theoretical judgement on agricultural trade. From a quite different standpoint, Dwayne Andreas, President of Archer Daniels Midland Co. (ADM), one of the five biggest multinational corporations in the world grain market, expressed a similar opinion: ‘There isn’t one grain of anything in the world that is sold in a free market. Not one! The only place you see a free market is in the speeches of politicians’ (Carney 1995).

After years of stability and persisting food surpluses mostly concentrated in the United States, world agriculture was driven to a period of scarcity and skyrocketing prices in the early 1970s. However, as a reaction to such a context of food shortage, mainly US and European governments resumed incentives to increase food supply, leading to growing stockpiles and an aggressive strategy to both promote exports and block imports. Moreover, the tension emerging between the United States and Europe not only almost sparkled a bilateral trade war but was aggravated after competitive developing countries started pouring grain into the foreign markets (Friedmann 1993; Goodman and Redclift 1989). Therefore, competition became the rule of the game and its regulation a much harder task for the multilateral organizations, as shown by trade negotiations taking place in the UR when agricultural protectionism was firstly addressed. The resulting agreement created a framework of ‘boxes’ (green, red, amber and blue) for the identification and negotiation of domestic farming support. ¹

The strengthening of the WTO as a multilateral regulator after the conclusion of the UR was seen by the World Bank as a precondition to reducing poverty and increasing income. Market-oriented farm policies in developing countries since the 1980s fuelled the belief that less protection and a deregulated trade system for agriculture would prevail (Anderson and Valenzuela 2006). The above framework set by the UR to deal with policies of support and protection consisted of three main issues, namely market access, domestic support and export subsidies. Underlying these issues were expectations that agriculture should, in the long run, be guided by free trade relations. Mechanisms of price support, income transfer and subsidies, aiming to protect the less efficient producers, were to be gradually eliminated such that only the most efficient farming segments would survive.

Nevertheless, agriculture still remained a stumbling block for the negotiations that began in 2000. The resiliently high levels of protection and incentives practised mainly by developed countries, the instability in world trade and uncertainties surrounding the negotiations made agricultural trade even more complex. ² Hence, the engagement in multilateral talks did not eliminate the complexity of agricultural trade, given the obstacles to reforming supportive domestic policies. If the exposure of US and EU agricultures to more intense world competition threatens some of their farming business, maintaining protection defies multilateral agreements and certain domestic macroeconomic demands. Moreover, by keeping protections in place, the developing countries create greater difficulties particularly for less developed countries, since the more developed the economy, the less important agriculture is in employment and national income. On the whole, agriculture accounted for 25 per cent of GDP and 50 per cent of employment in developing countries in 2001, whereas in Organisation for Economic Cooperation and Development (OECD) economies it accounted for two per cent and 7.3 per cent, respectively (Acharya and Daly 2004). Oddly enough, the small share of agriculture in developed economies has not diminished the power of the farming lobby in shaping farming policies. Most agricultural policies implemented in the United States and the EU in the last 20 years have been influenced by reactions to the growing competitiveness of developing countries, such as Brazil, especially in commodities like soybean, cotton and orange juice.

Despite some achievements of the UR, the idealized trade liberalization was held back. Furthermore, most of the UR decisions were regarded merely as principles, lacking practical effect (Das 2005), as agriculture remained immersed in a dense network of protective measures and incentives. The backlog produced by agricultural policies has remained almost intact. The amount of producer support estimates (PSE) in the high-income countries increased from US$ 243 billion in 1986–88 to US$ 254 billion in 2002–04. Payments based on planted area, animal herd, historic entitlements, input constraints or overall farming income increased their weight in total PSE from 3.3 to 7.7 per cent in the same period (Anderson and Valenzuela 2006).

Most importantly, despite expectations that the UR final agreement would pave the way for further reforms, so far there has been no sufficient ground to believe in such a change. Recent trade developments have been deeply shaped by a proliferation of protective policies to stimulate production in the developed world. According to Burfisher (2001), nearly 80 per cent of market ‘distortions’ have been caused by a small group of developed nations. In 1995–2001, the amount of domestic support given by the EU and the United States was, respectively, 27.5 and 19 times that of Brazil. In 2001, total domestic support as part of the total value of agricultural production in the EU and the United States was 34.3 and 36.3 per cent, respectively (WTO 2006). In contrast, the same measure was 7.2 per cent in Brazil and 3.9 per cent in Australia (WTO 2006). This discrepancy has been at the core of WTO discussions since the Cancun Conference, after the downward effect on world prices of the artificial increases in domestic production and exports. Although the EU reduced the amount of subsidies significantly between 1995 and 2000, in the end it was still responsible for 87 per cent of the global amount given to farmers under this policy (WTO 2006).

The intensity by which protection was trimmed down was not sufficient to persuade other nations to follow suit, leading them to pay more attention to the limited results previously achieved and to the risk of making the first move. This process was rather costly, both socially and economically, for a transition to open competition required producers to change activities and governments to support them. In fact, differing national producing circumstances and institutional strategies do not easily adapt to a changing trade environment (Cranfield et al. 1998).

The achievements of the UR, mainly in terms of market access, tariffication of non-tariff barriers and the introduction of the aggregate measure of support (AMS) to monitor government expenses on agriculture, can be regarded as important steps to reduce distortions and promote orderly and fair competition. However, new trade conflicts and obstacles emerged as at the WTO negotiations, not only due to the enforcement of the UR Agricultural Agreement, but mostly due to the food price instabilities already occurring since the mid-1980s. Therefore, there seem to remain great difficulties challenging the framework established for further negotiations under a new mandate. Not only will the negotiators have to examine the implementation of rules decided in the UR, but also deal with new latent trade conflicts emerging within the realm of WTO regulations.

A case in point is the strategy adopted by the United States to deal with the effects of the 1996 and 2002 Farm Bills. The United States shifted countercyclical payments from the Amber Box to the Blue Box, so that price reductions caused by the removal of set-aside programmes could be offset. The EU and Japan have adopted a similar strategy, circumventing the necessity to reform their support policies (Murphy and Suppan 2005). Overall, policies under the Blue Box have reached around 45 per cent of the total farming support, whereas PSE have not been reduced in high-income countries since the mid-1980s. American agricultural trade policy has not changed subsequently, as noticed in 2008 and 2012 Farm Bills. Crop insurance subsidies and revenue protection to farmers have increased, especially in unfavourable circumstances of market downturn and low yields.

As stressed by Bureau et al. (2012), the way agricultural policy is evolving in the United States will add new obstacles to an agreement on tighter regulations in the multilateral negotiation process. Furthermore, this might disseminate strategies of support or protection in other countries, resulting in a more distorted trade system. The Farm Bill of 2014 introduced what had been approved in 2012 regarding insurance protection for specific crops, food aid under the food for peace programme, and support for exporting under food aid programmes. According to Banga (2014: 8), ‘[t]he Farm Bill of 2014 eliminates direct and countercyclical payments to farmers and in turn offers expanded crop insurance programs for risk-management. These include new programs like Price Loss Coverage and Agriculture Risk Coverage.’ In other words farming, activity remains protected, though through different mechanisms, from the hazards of market conditions and income reduction. The bill also retained the Commodity Credit Corporation (CCC) Export Credit Guarantee Programme and other agricultural export market promotion programmes, such as, the Market Access Programme (MAP), which gives support to generic and branded US agricultural products, and the Foreign Market Development Programme (Johnson and Monke 2014).

In a context of inconclusive trade negotiations, the United States has so far suggested that the Green Box remains intact, while the EU has argued for an expansion of the Green Box to include rural development programmes, environmental payments and animal welfare. As for the Blue Box policies, the United States has proposed a 2.5 per cent reduction of the total production value under such a condition, even though the EU has rejected it. On the opposite side, developing countries represented by the G20 and the Cairns Group, have favoured stricter discipline on both Blue and Green Boxes and have condemned initiatives to expand them, given their interest in accessing foreign markets (Blandford and Josling 2007).

The main damaging effects of such protectionist policies by developed countries have mostly fallen over developing and poor countries. Agricultural policies of incentive and protection by the former have transferred to farming activities an estimated value of US$ 300 billion, one-third of which in the EU alone, spent through direct production subsidies. Similar policies have cost the US budget around US$ 50 billion. US farmers, for instance, became exporters of cotton despite their high costs of production, causing the world price to decline by half between 1997 and 2002. A negative impact was then inflicted on market access, and ultimately on the income of farmers in countries where cotton is produced at lower costs, without equivalent support. A similar situation was seen in Japan, where tariffs on imported rice reached the level of 700 per cent, thereby reducing market access of other Asian producers (Palley 2003).

As far as market access is concerned, negotiations have produced a more flexible set of regulations for developed countries, as shown by the shifting of policies from the Amber to the Blue Box, and also the less stringent rules on the Green Box. The EU, for example, made adjustments to the CAP which resulted in the reduction of domestic support under the Amber Box, but also a shift to the Green Box. According to Banga (2014), Amber Box policies were reduced from €50 billion to €6.5 billion in 1995–2010, while Green Box policies increased from €9.2 billion to €68 billion in the same period. With this shift, the total domestic support under the Green Box in 2010 exceeded the amount under the Amber Box in 1995.

A comprehensive and critical analysis by Das and Karma (2011: 28) provides a clear picture of the changes recently introduced in trade regulations and how they have made farming more difficult in developing countries, while ‘obligations on developed countries have progressively become less stringent, which would help in shielding farmers in developed countries from import competition’. Furthermore, despite demands by developing countries that the Blue Box be eliminated and despite the Doha Declaration which requires reductions of trade-distorting domestic support, a wider array of products have been subject to more lax regulation. As pointed out by the authors, new windows have been opened for developed countries. With regard to the Green Box, similar flexibility produced in the documents after 2007 has resulted in a more comfortable environment for developed countries, widening the scope for domestic support and creating ambiguities that undermine the original proposal under the UR agreement. In short, developed countries have pursued a strategy of greening domestic support policies. Das and Karma (2011) also highlight the unbalanced trade conditions between developed and developing countries related to export subsidies. Specifically, the changes introduced in the WTO drafts after 2008 made the disciplines on interest, premium, risk, foreign exchange and measures to prevent loss, less severe, giving ‘greater flexibility to developed countries to provide other forms of export support through credits, credit guarantees, etc.’ (Das and Karma 2011: 54).

In the end, the difficulties to reach a deal during the DR lie in the refusal of proposals to increase market access and reduce farm support, proposals made especially by poorer countries, like the G90, whose needs require more, not less, state incentives, which are incompatible with trade liberalization, despite the good intentions of the DR development agenda. ³ As argued by Kwa (2007), negotiations have failed developing countries, by ignoring their issues concerning food security and the survival of rural populations. In other words, the sluggish DR is rooted in the conflict between the domestic policies of the United States and the EU and the requirements of poor countries for a fair multilateral trade system. In short, ‘trade liberalization…simply cannot deliver on raising standards of living and full employment’ (Kwa 2007: 6).

Whither Free Trade?

Since the onset of the DR, multilateral trade negotiations have pursued a framework to make national agricultural policies more market oriented. However, given social and economic differences between countries, the present round, if ever concluded, is more likely to reinforce the prevailing asymmetry in the world’s agricultural markets. The developed countries with competitive farming sectors are likely to receive most of the benefits produced by freer trade, regardless of the measures used to access their distribution.

Projections based on the hypothesis of full liberalization made by Anderson et al. (2006) revealed that high-income countries would, by 2015, increase imports by 65 per cent, developing countries by 52 per cent and low-income countries by 99 per cent. As for exports, the percentages were 16, 67 and 52 per cent, respectively. Within this apparent reshuffle in world trade, some developing countries would keep their advantageous positions, while others, less competitive in farming activities, would bear a visible loss. Thus, countries like Brazil, Argentina, New Zealand and Australia, known by their competitiveness in agriculture, would be rewarded. However, after the Cancun Ministerial Meeting in 2003, the gains foreseen were reduced as the stalemates increased. Estimates that the world would gain US$ 832 billion, of which the developing countries would gain US$ 539 billion, were reduced to US$ 287 billion and US$ 90 billion, respectively (Wise and Gallagher 2007).

The optimistic view of the World Bank and WTO about the gains from trade liberalization in terms of poverty reduction has been challenged by the very studies sponsored by those institutions. Different models and data treatments have come to the conclusion that the biggest winners in DR are the high-income countries. In a scenario of agricultural liberalization established by the World Bank, high-income countries would seize 88 per cent of the potential gains (Wise 2009). Projections based on the Global Trade Analysis Project, as shown by Ackerman (2005), indicate that trade liberalization in agriculture would result in a gain of US$ 55.7 billion, 75 per cent of which accruing to high-income countries. Moreover, the main beneficiaries of agricultural liberalization implemented by high-income countries would be themselves: ‘[t]he benefits from eliminating high-income countries’ export subsidies and domestic support are quite small, and are largely or entirely concentrated in the high-income countries’ (Ackerman 2005: 4).

The removal of subsidies in the United States and the EU and the consequent increase in world prices would, on the one hand, benefit competitive agricultural economies, while on the other, it would bring losses to those dependent on imports to sustain domestic food supply. Most developing countries, however, would not profit from the situation, given the actual international division of labour in which rich and industrialized countries, such as the United States and the EU, are also the most powerful players in agricultural trade. Moreover, the outcome of a successful round is bound to diverge from the optimism expressed in the estimates made by international institutions. Gallagher (2006) estimates that the gains of developing countries would be equivalent to 0.2 per cent of their GDP, less than a penny-a-day per capita. By the same token, the global gains of full liberalization, as put forward after the Cancun Ministerial Meeting, were reduced from US$ 832 billion to US$ 287 billion.

Even sophisticated forecasts based on free trade assumptions, however, fall short of grasping the social complexity of national economies and the impacts of an overall market change on local communities. For example, small farmers can easily suffer from liberalization, due to price reduction caused by growing imports and lack of alternative employment in a fragile economy (Wise and Gallagher 2007). Despite WTO regulations, the subsidy for crucial crops, such as wheat and rice, has reached a level between 20 and 50 per cent. Consequently, the developing world has been directly struck, particularly those countries in which small farmers are the main food producers. Moreover, the lack of a welfare safety-net based on credit and price policies makes this scenario more dramatic, as rural populations are forced out to unemployment in urban areas.

An illustration of this point can be seen in the blatant questioning by the US Department of Agriculture of GATT’s Article XI and its permission for exceptional protective measures, clearly echoing the neoclassical economic view of market superiority and efficiency in providing food security (McMichael 1997). ⁴ American farming groups then persistently recommended through their congressmen that US trade policies should widen their access to foreign market by, for example, exempting agriculture from unilateral US economic sanctions, using exports and food aid programs extensively, and fighting against obstacles abroad to US farm products. Taking into account the importance of foreign markets for US farm income, any restriction to exports was regarded as economically harmful. Therefore, the requirements of multilateral negotiations and the pressures coming from farmers’ lobby have been opposing forces both on the WTO forum and in the United States and other developed countries.

The Challenge of Food Security and the Meaning of the Bali Agreement

The tendencies depicted above activated policy instruments at national level to protect farming businesses and secure food supply. Furthermore, many developing countries, by adopting Western consumption habits, also became dependent on foreign supply, with obvious negative impacts on their national food systems. This particular issue came to the fore in the early 2000s, when price spikes triggered concerns over food security throughout the world, after which impulsive actions were taken to restore normality in local supply. Trade liberalization, as historical evidence shows, can make things worse, given its visible flaws and short-sightedness with respect to the high level of concentration and financial control of the food supply. The retreat of the state and regulatory agencies over food trade has been coupled with greater power of large corporations, controlling all aspects of global food chains. More than 70 per cent of farming inputs is produced by six firms, while over 80 per cent of the global grain trade is controlled by four giant companies—ADM, Bunge, Cargill and Dreyfus, known as ABCD—with food processing and retail being similarly concentrated in the hands of a few multi-nationals and supermarket chains. Moreover, food markets have widely become an extension of financial operations, whose speculative logic has transformed food stocks in derivatives, and land in attractive assets.

Over the last decade, under the prevailing domain of liberalization, a severe food crisis has aggravated the vulnerability of many countries, at the same time as the WTO has been incapable of fulfilling the commitments established at the launch of the Doha Development Round. As this crisis persists, concerns about food security are no longer restricted to local communities but are crawling into the agenda of multilateral institutions, such as, the World Bank and the WTO, due the explosive effects of recent food hikes the world over. However, given the uneven playing field of trade relations and the vulnerability of millions of small famers, coupled with a record number of more than one billion people undernourished, the DR negotiations will hardly be successful if they continue to force free trade as the sole guideline for a final deal. In other words, the agenda of food security on a global level will require decisions that go beyond the simple implementation of a free trade strategy. Only then will the system as a whole be driven to a new and sustainable balance, through boosting the potential of small-scale farmers and increasing food availability among local communities, thereby mitigating the burden of the food crisis (Wise and Murphy 2012).

Furthermore, as the present crisis unfolds, the local food systems of developing countries are being hit harder by the excessive exposure of their domestic food supply to international trade and the priority given to foreign over domestic markets. Can the multilateral talks ignore this and still claim the pursuit of a more sustainable food system? The obstinate litany of liberalization, thus, seems to be too sour a recipe to promote development, balanced trade relations and, most importantly, food security.

It seems not only that governments cannot play by the rules of free trade, but also that these rules can hardly work as a guide for national governments to tackle their farming problems. Given that the proposals for pursuing free trade combine with institutional deregulation on the domestic front, the underlying adjustments may become uncoordinated and even chaotic under certain circumstances. Producers, particularly in less developed countries, might be deprived of any kind of compensation should market forces create a disadvantageous environment, for instance. The adoption of a market-oriented position would then require effective state policies to promote competitiveness, through adjustments in local productive structures. Therefore, a major potential problem is that, because farm income might become increasingly dependent on market forces and less on government support, a clash seems inevitable between free trade-oriented policies and the requirements for farmers to survive the ingrained uncertainty of agriculture.

If the DR reaches any significant agreement, evidence suggests it will not be a fast track to widespread liberalization, but rather a slow process in which trade barriers may be reduced only superficially and the concessions limited. Any expectation that free trade will be adopted as a strategy for foreign relations is disconnected from what rural development and food security require. So far, the achievements of trade negotiations in the present WTO meetings fall short of what is necessary to propel trade into a mutually beneficial new order, particularly to those negatively affected by the functioning of the present global food system. Therefore, trade liberalization, seen as a multilateral agenda turns out to be irrelevant. WTO itself may still be left with the role of adjusting specific trade conflicts, while insisting on the need for changes in the political will and institutional framework. In order to avoid a thorough collapse of the DR and the WTO itself, a half-baked deal might be sufficient to keep the institution in the game, even though lingering in a limbo. However, its reputation will be restored only if meaningful measures are taken towards a sustainable agricultural trade system.

In December 2013, ministers of 160 country members of WTO gathered in Bali, Indonesia for what was to be the last meeting of the DR, under huge pressure to avoid another failure, and, more importantly, to save the organization from being relegated to ostracism and innocuousness. Thus, any deal would be a deal, regardless of its implications for world trade. The pessimism that prevailed for so long over the fate of the DR was replaced by a wave of optimism derived mainly from the fact that the deal would add up to US$ 1 trillion in the world trade, resulting from reduction in red tape and modernization of trade facilitation (WTO 2013). The most striking event in Bali, however, was produced by India, backed up by the G33, by putting on the table a proposal to increase farm subsidy for the sake of food security and support for small rice producers. Despite allegations of domestic electoral motives for raising farmers’ income, India’s government somehow brought in a crucial issue for the developing world. The acceptance of the proposal by trading partners cannot be seen as a new state of mind among negotiators, but an indulgence, in particular by rice exporters, such as, those in Thailand and Pakistan. By strongly endorsing the principles of free trade within the WTO, and bringing to the table the US farmers’ demands to increase exports, the United States took a position against such allowances, even though without any repercussion (Guardian 2013). Therefore, it is difficult to admit that the thorny issues that frustrated previous agreements, such as the farming and trade policies mainly of the United States and the EU, are still on the table, let alone food security as a global question. Even so, this much celebrated agreement must be seen only as one event of a whole package to be dealt with shortly, still conditioned to adjustments and further negotiations, whose results are impossible to predict. The unbalanced trends of recent negotiations, as analyzed by Das and Karma (2011), must be reversed to produce a more positive scenario for developing countries in a reformed world trading system.

Concluding Remarks

The stalemates of the DR are bound in persistent conflicts in trade relations that hinder any progress on the road to a freer environment. The road does not seem to be as smooth and safe as some want to portray it. And there seem to be many crossroads emerging from the difficulties to bring opposing interests to converge and from the strategies embodied in trade policies that are more responsive to national interests than to multilateral requirements. In fact, this is the core issue that makes the liberal expectations concerning the evolution of agricultural trade unlikely to be realized. Evidence suggests that liberalization, if possible in the realm of the WTO, will have upsetting impacts on many farming communities. As long as overall deregulation is taken as a guide for national policies, resistance to negotiations will grow and multilateral institutions will become more discredited. On this basis, multilateral negotiations may be held up by national strategies concerned with stability in the food market. Besides, interests expressed through political pressures stemming from farming lobbies have increasingly made a compromise in trade negotiations less likely.

Attention is needed to the factual obstacles to free trade, not only to its potential (and uncertain) future benefits. The technical rationale underlying simulations and possible scenarios are useful in the analysis of the gains and losses of free trade. They fall short, however, of accounting for the current evolution of international trade, not only in terms of comparative advantages, but mainly with respect to the difficulties and consequent conflicts emerging from the necessary adjustments to be made in national farming sectors. Negotiators may come to a deal in the next few years in an attempt to make WTO deadlines (and their work) meaningful. From the current scenario, however, liberalization in agricultural trade seems far from becoming a guideline to national governments in the implementation on farming policies. The theoretical logic behind free trade is bound to succumb to the realities of the world trading system, given the potential damage worldwide of connections between farming and local demand.