ISGN > Publications > WTO and TRADE

EXCISING WTO FROM AGRICULTURE
COUNTERFEIT PROTECTION FROM A FRAUDULENT FRAMEWORK:

Philippine Rice Under the WTO-Agreement on Agriculture
by Jonathan Roxas Garcia, Resource Center for People's Development (RCPD)


PHILIPPINE AGRICULTURE IN THE WTO: SUSTAINING AND INTENSIFYING POVERTY

This paper holds that Philippine commitments to the General Agreement on Tariffs and Trade-Agreement on Agriculture (GATT-AoA) have been damaging crop production, eroding food security, intensifying poverty and reinforcing backwardness of its agriculture. With rice as indicator, even the purported high levels of protection the Agreement provides has left its local production unprotected and nowhere near achieving food sufficiency and economic security.

The Philippine case proves that the qualitative differences in the economies and agricultural production of developed and developing nations make global free trade in agriculture an illusion if not a deadly product of neo-liberal imagination.

As vulnerable as an open city in wartime, the intrinsic weakness of its underdeveloped agrarian economy and unprotected products proved defenseless in the rampage of the large agri-business transnationals of the United States and the European Union practicing and institutionalizing unfair trade.

While the highly subsidized agri-business monopolies of the North overproduce for profits and the small farming families of the South plant for bare survival and domestic consumption, competition between them is not only inherently uneven but has proven fatal to the lives and livelihood of poor countries and their peoples.

In light of the on-going negotiations on the Agreement on Agriculture in the WTO Ministerial Conference in Doha this November and the WTO Committee on Agriculture before yearend, reforms in pursuit of "fair trade" under the WTO framework is the wrong agenda for developing nations. Begrudging developed nations of their export subsidies and domestic support is not in the interest of developing nations whose own backward agrarian economies are in need of high subsidies to develop.

Rather than beg for special and differential treatment from the WTO under an agreement that stripped them of these instruments early on, developing nations must instead work to reinstate and enhance protective trading policies to arrest the damage they sustained since accession to the WTO. Reliance on a multilateral trading regime such that promoted by WTO to supposedly "level the playing field" is an exercise in futility. It will neither curb the excesses of the North nor cure and develop the South.

The crux of the matter, therefore, is to excise the system and debunk the framework that serves the predatory interest of developed nations and necessarily condemns developing nations to underdevelopment. For even as their common experience show victimization, the South's concerted action must not merely be to secure a "time-out" nor relief from the game but to excise the franchise-holder and biased referee of unfair world trade -- the WTO itself.


RICE PRODUCTION: INDEX OF A BACKWARD AGRARIAN ECONOMY

Rice holds an integral place in Philippine society as the main agricultural produce and staple. The backward state of its production requires no genius to predict that intrusion of exports by the corporate farmers of developed nations would mean exposure to unfair competition. The exploitative relations pervading in rice production subject peasants to the harshest impacts of economic collapse brought about by the unobstructed flow of cheaper and heavily subsidized rice imports. The Philippine experience vividly illustrates how its underdeveloped economy fared and failed miserably in the WTO trade regime. This, despite (or due to) having availed of the highest levels of "protection" accorded by the AoA for its most sensitive produce -- rice.

Rice is the staple food to 80% of Filipinos. Produced in two-thirds of the arable lands and a quarter of the total agricultural area in the Philippines, rice production supports the livelihood of at least half the Filipino labor force. Owing to its place in food consumption, share in rural employment, and over-all national productivity, the state of rice production is perhaps the most definitive socio-political and economic index of the Philippines.

Typical of the country's backward and small-scale commodity production, rice farming, as in most food crops, means cultivation by peasants and small farmholders of an average of 1.5 hectares of farms. Comprising two-thirds of the landowning population, landholdings of small farmers account for only a fifth of the total farm area. Deriving scant income from meager landholdings, poor rice farmers join the landless peasant population in toiling on large landholdings comprising at least 75% of the total farm area controlled by only a fifth of the landholding population.

The total land area allotted to the cultivation of rice currently stands at 4.0 million hectares. The total hectarage of ricelands climbed in the 70's, stagnated in the 80's and saw an incline averaging 0.7% per year in the 90's. Successive agrarian reform programs, failing on both aspects of distribution and beneficiary support resulted to tenurial insecurity and tenuous ownership. Real estate speculation made prime agricultural lands even more vulnerable to landgrabbing and conversion into industrial, commercial and residential areas. Reductions in area planted to rice can also be attributed to conversion to high value cash crops.

Philippines has one of the highest productivity potential in Asia. The International Rice Research Institute (IRRI) sets its maximum attainable yield at 6.30 tons/hectare while the required yield to attain food security is pegged by IRRI at 5.30 t/ha. Figures show, however, that the country's actual yield has never gone beyond 3.07 t/ha since its accession to the WTO.

As the population grows by 2.3% annually, production growth rate of rice has been 0.9% from 1981 to 1997. It is best characterized as a chronic failure to meet domestic consumption requirements, which grows yearly at 3.0%. In 1998, the combined effects of the El Niño and La Niña phenomena led to a 25% cent drop in yields which the government exploited in justifying its over-importation of rice. Production levels recovered the following year but have remained insufficient relative to food security quota.

At the onset of the implementation of Martial Law, funding support to improve productivity has been directed towards farmers shifting to high yield varieties under the Green Revolution Program. Government allocated resources for irrigation, input and farm implement subsidies and some agricultural credit. However, even such limited assistance was drastically cut by the government as structural adjustment programs went full swing in the 80's. Even irrigation programs were downscaled with only 15% of farmlands irrigated by the National Irrigation Administration. Thanks to farmer-built water impounding and shallow tube wells, the percentage of irrigated farmlands increased to 40% by 1997.

Trading, largely monopolized by landlords and merchants, condemns farmers to receiving a measly 9% of the retail price of rice. Getting the lion's share of the farmers' gross sales are land rent and interest payments (22%), merchants price mark-up (30%), transport and post-harvest facilities (20%), with the remainder going to agro-chemical inputs, labor and land preparation. Meanwhile, the retail price of rice has kept the fruits of their labor elusive to the farmers themselves.

Government price support and procurement of rice which existed since the Commonwealth period is undertaken by the National Food Authority. However, budgetary constraints, commitments made to structural adjustments in the form of deregulation, subsidy reduction and eventual privatization has brought the level of price support to its current levels of 5% and buying at 1% of the total rice production. Authorities have yet to decisively dismantle a Rice Cartel composed of seven big Chinese trading families that keeps the retail price high through monopsonistic practices by employing a wide network of local agents buying rice from farmers at low prices.

Having limited control of resources for production, confronted with progressively rising costs of agro-chemical inputs, disease and infestation-prone varieties, insufficient irrigation as well as natural calamities, farm productivity dwindled. Farmers not only defaulted on loan payments and amortization of lands, land reform reversal also set in as they become increasingly and inextricably indebted to merchants and former landlords who provide them usurious loans in the form of cash, inputs and post-harvest facilities.

Broadly, concerns of Philippine rice production remain to be declining hectarage, inefficiency, and unprofitability for small farmers. If the country aims to secure sufficient food supply for the population or even attempt to industrialize, its agricultural production requires radical restructuring with genuine agrarian reform and re-orientation away from export generation as cornerstones. In particular, productivity of local rice production must improve in the light of exhausted agricultural frontier and steady population growth. Ricelands must be protected from encroachment of land and crop conversion and all forms of land reform reversals. Government must infuse massive funding for transfer and development of higher-level technology. The cartelized and profit-wrenching trading system must be abolished. Moreover, small farmholders must be liberated from the system that steals the fruits of their labor.

The nature of agricultural production leaves much to be desired and the socio-economic relations that characterize it condemn peasants to poverty and the Filipino people to chronic food insecurity.


RICE CLAUSE: PAUPERISM OF THE POOR AND THE PHANTOM OF FOOD SCARCITY

Buying the WTO selling line that safety nets plus longer timeframes on market access barriers, domestic support and export subsidy reductions will soften the perceived negative effects of drastic liberalization, developing nations disregarded the stark realities of this lopsided deal. To counter predictions of agricultural demise by critics of trade liberalization particularly the Agreement on Agriculture, a "protective" provision like the Rice Clause was secured for politically sensitive crops such as rice.

A look into the case of the Philippines whose rice production was considered to have been the most protected owing to our availment of special treatment would reveal that not even the "best terms" in the GATT-AoA gave it the level and kind of protection its main crop and staple as well as the small farm holders dependent on it require.

Perhaps in token recognition of its niche in the lives and livelihood of majority of its people, the Philippine Government sought protection for rice under the AoA. It negotiated for the exemption of rice from lifting of quantitative restrictions until 2004 through the Special Treatment Clause or "Rice Clause" of the AoA. While tariffication is postponed until 2004, the WTO forced the country to import, regardless of necessity, a Minimum Access Volume (MAV) of 1% of consumption or 59,000 metric tons in 1995, gradually raised to 119,460 mt in 1999, and 4% or 239,940 mt in 2004. These amounts are allowed entry with a 50% in-quota and a 100% out-quota tariff rate. The Rice Clause will supposedly protect sensitive commodities and staple foods. MAV's imposed by the WTO contradict the very idea of a "special treatment" and render the Rice Clause useless for Philippine rice; its continuance after the implementation period must be negotiated requiring 'additional and acceptable' trade-off from the Philippines. Asking for extension, would therefore entail not only sacrificing other sectors as concession by extending this false sense of security but neglecting the development of local rice production.

Instituting measures like the Rice Clause is token because time-bound exemption proffered by the WTO cannot address the structural frailty of rice production and the plight of peasants. It will take political will on the part of the Government to adopt a major policy shift to develop Philippine agriculture. Government rhetoric of protecting the sector is not only empty but also misleading for MAV requisites have exposed its local produce from unfair competition through import flooding, legal or otherwise.

The figures speak for themselves. A decade and a half before the Philippines' accession as charter member to the WTO, growth in rice production has been moving at a snail's pace of 0.9% while population and consumption grow at 2.3% and 3% respectively. In 1998, rice output dipped by 24% which the Government exploited by importing a record-shattering amount of 2,170,830 mt. Since 1995, importation has gone beyond the MAV requirements: 257, 260 mt vs. 59,000 in 1995, 2.17 million mt against 119,460 mt in 1999 or 239,940 mt in 2004.

Charged with 50% in-quota and 100% out-quota tariffs, the volume of imports thrashed local rice production when it led to depressed farmgate prices for palay. Local rice, priced at almost thrice the world price, cannot possibly compete with imports even with 100% tariff. This implies that even in non-shortage situation, opening the market to rice imports, from Vietnam and Thailand for instance kills the local rice industry. What more when developed nations like the US, starts dumping its highly subsidized and price-supported California rice?


THE PHILIPPINE COUNTRY POSITION: CONTINUING SELF-DECEPTION

At the outset, it seemed as if the over-optimistic embrace of developing country governments of the multilateral trading system bordered on naiveté. The short list of "winners" in the era of free trade betrays the fact that upholding the interests of transnational firms and local elite engaged in agribusiness exports -- the Philippine government threw caution, including the small farmers it seems, to the wind.

Six years after joining the WTO, implementing its commitments, with special safeguard provisions and special treatment clause failing to protect sensitive products and items of "special interest", Philippine experience is mainly that of import surges, a downward trend in production, worsening dependence on imports of staples and depressed prices for its export crops. Mass dislocation of small farmholders, threatened food security, stagnated development of agriculture, reinforcement of exploitative relations of production and a host of emerging inequities now dot the social and economic landscape.

On market access, the government relied on the formula of faithful compliance and making unilateral commitments to open its market beyond GATT-UR requirements expecting developed nations to effect reciprocal measures. The US, its "former" colonial master took more than the bait, its transnationals are now gobbling up the whole domestic market. Worse, surrendering its remaining protection against predatory attacks on the domestic market, the Philippines now finds itself prohibited by the WTO and lacking the wherewithal to support and subsidize agricultural production and development due to chronic indebtedness as well as rigid structural adjustments forced upon it by multilateral funding institutions.

Six years of getting the hellish end of the illusory global trading paradise peddled by neo-liberal exponents, one would think that developing nations like the Philippines would come to their senses and recognize and repudiate the WTO for what it is -- a regime that instituted and maintains the unfettered rampage of the developed nations in their quest for global market dominance.

As part of the so-called on-going reform process in the WTO, negotiations have been undertaken and various positions were expounded on the AoA. Proposals ranging from cuts on the trade-distorting subsidies of developed nations to special and differential treatments for developing nations are brought forth even as nations of the South and North fight over the extent and limit of discussions.

As its long-neglected agricultural sector reels like a drunken man in the sleazy bar of global free trade the Philippine Government along with its fellow victims call for special and differential treatment. Beaten, battered and bruised by burly and overfed thugs-cum-bouncers, Philippines seems to be saying, "It's okay for you to beat me. Just hit me less until I get stronger. Then we can square off."

Joining the chorus of net food exporters from both developing and developing nations in the Cairns group, the Philippines (a net food importing country) wants the WTO to eliminate subsidies and domestic support in developed nations and force the latter to open its markets to developing country products. Again, the drunken man says, "So you won't say I am a masochist, let us change the rules a bit. You may beat me but you must hit me less 'til I grow stronger. But, we should not eat anything or take any performance-enhancing drug until our fight ends. In addition to that, you must allow me to hit you a bit from time to time."

Trivializing the beating sustained by the Filipino people and the economy under the WTO is not this author's purpose. Rising poverty and hunger among our countrymen is not a laughing matter. However, the quixotic posturing and the ridiculous concessions demanded by the Philippine government, scrutinized in the light of our raw encounter with the WTO, is an absurd objective.

Not only is the Philippine Government going about in the wrong way when seen through the lens of development and survival imperatives, the Philippine government's position, an echo of the Cairns Group, reflects a half-baked understanding of the deeper issues at hand if not an alienation from its national situation. It works on the assumption that the excesses of Northern countries can be curbed by the WTO -- a product of the economic détente of the US and the EU in their trade wars prior to the GATT-UR. It assumed that WTO can bring about export subsidy and domestic support reductions or even the elimination of so-called aggregate measure of support (AMS) among developed nations, purportedly to neutralize the devious "trade-distorting" tricks employed by these big players through the blue and green exemption boxes in the AoA.

On the other hand, it is quite impressive to read that the Philippine Government, albeit late, now refutes the neo-liberal proposition that "dismantling of trade barriers and trade-distorting subsidies will enhance food security-in fact "global' food security". It says, "for developing countries grappling with food security as a national imperative, this notion of "global" food security, no matter how lofty, is an alien concept."

While the Philippine Government says that neo-liberal notions of "food security" (i.e. market access security) is undermining the country's growth and pauperizing its people, it cages the issue of the sovereign right of nations to food security in the same neo-liberal dungeon of economic thought. The Philippine country position contradicts its earlier protests by concluding that securing its livelihood and food is a matter of begging for special treatment from the WTO. While it correctly points out the deadly consequences of applying neo-liberal constructs, the government chooses to uphold rather than repudiate the trade regime that wrought damage to its economy and people.

Accordingly, Philippines implores the WTO for enhanced special and differential (SND) treatment to give maximum flexibility to developing countries to pursue rural development programs which will ensure food security and reduce poverty. What maximum flexibility means for the government is yet to be ascertained but if it implies freedom to spend massively on agricultural support and subsidies then the Philippine Government is barking at the wrong tree. Of the 10% of subsidies allowed under the AoA, the government has maintained only 4% in its lip service to agricultural development. If given, SND will prove useless for poor countries like the Philippines who are incapable of providing massive support to agricultural development. SND will not bridge the gap between the stark differences in the production systems or economies of developed and developing nations.

Furthermore, in the unlikely event that these concessions demanded by the Cairns group and senselessly mouthed by the government be awarded, the trading regime can only go as far as giving them a time-bound subsidy reduction scheme with all the strings of "reasonable and acceptable concessions" attached. If SND were provided, even the most sanguine optimist would have to admit that an extension by ten years (like in the Rice Clause) is definitely not enough for the Philippine agriculture to develop.

In fact, by leaving it to the WTO to decide this issue, the Philippines has effectively surrendered its sovereign right to set the pace to develop its own economy. As proven by its experience in rice, reliance on the "highest level of protection" available under the AoA not only gave the Philippines a false sense of security but is actually a disincentive to local farmers. The WTO cannot be expected to ordain arrangements that undermine the trade liberalization gospel; this will set back the clock of liberalizing global trade. Thus, it can be concluded that for as long as developing nations work under the framework of free trade and toil for reforms in the WTO, national survival and development will have to take a backseat.

Its national experience demonstrating the naked reality that the WTO has not served, and will never serve, the interest of developing countries offers no excuse for the Philippine Government to undertake the utterly futile charade of tinkering with WTO rules. For, as in the case of the Philippines, the problem lies not in the rules applied, but on the structure itself.


EXCISING THE WTO FROM AGRICULTURE:
CHOOSING LIVES AND LIVELIHOOD OVER FREE TRADE

Since its intrusion in agricultural trade, the WTO has proven to be destructive not of barriers which hinder trade among nations but of lives and livelihood of the poorest of nations and a great part of humankind. Economies of industrialized nations remain impenetrable and the grip of their tentacles becomes more entrenched in developing countries.

At this juncture, actions that the Philippine Government, or any developing nation for that matter, will take must be weighed insofar as they respond to the imperatives of national development and an honest appraisal of its chances of survival in global trade. For the Philippines, it means getting out of the cumbersome liberalization framework, affirming its priorities as an underdeveloped nation and working solely with the interest of the Filipino people at heart.

The aim of food production in a poverty-ridden nation is necessarily to secure, in sufficient amounts and affordable prices the food its people need. In addition, the end of agriculture or agricultural development is not merely to be capable of bringing forth food from the farms, out of your own labor but to define the trajectory and encourage development of national industries.

Staple production has become unprofitable for small landholders who cannot even be called subsistence farmers for they end up losing four-fifths of the profits their 1.5 has. plots yield. Clearly, only a decisive and genuine land reform project that allocates at least 3.0 has per planter will achieve viability. Government must intervene by subsidizing small farmers to eliminate dependence to landlords and usurious merchants. Industrialization must be geared towards improving practices, decreasing production costs and minimizing loss even as government-sponsored research, extension and development of ecologically sustaining practices and higher level agricultural technology for planting, harvest and post-harvest to modernize are put in place. Total irrigation of agricultural lands must be pursued along with provision of free and timely water supply. A review leading to rectification of land use and export orientation of our agricultural pursuits must lead to an unequivocal prioritization of food security requirements.

Concomitant to the emancipation of peasants from the exploitative relations in agriculture and the departure from its backward state is the destruction of the trading complex that traps Filipinos into chronic poverty and hunger. A challenge must be mounted to the stranglehold of scheming landlords and usurious merchants on trading by building a thorough horizontal and vertical system of farmer-administered system of credit financing, processing and trading of agricultural produce.

All these development initiatives will come to naught, however, if the local economy or agriculture in particular is murderously choked by foreign competition. Extensive or otherwise, funding agricultural development would be like aquaculture in the middle of the Pacific or funneling water on a cracked waterpot. Protective barriers must be put in place to provide the local drive a breathing space. Having ensured the life and growth of local production, the nation must now employ its recovered development tool (i.e. trade policy) to expand economic activity to developing and producing import substitutes and export products.

Developing nations like the Philippines has no business minding how developed nations support their agricultural sector. Small farming families in the North are also largely marginalized in favor of agri-business transnationals. It is in solidarity with these farming families of the North that the South must position itself in the particular effort to dismantle the monopoly of multinational and transnational companies and in the larger project of determining the future-or more desirably, the non-future of the WTO.

The intensification of poverty, food insecurity, and economic dislocation that the Filipino people, peasants in particular, continue to suffer under the free trading regime will not be corrected by reforms in commitments to the AoA. Subjecting the farmers and agriculture to unfair competition has not only aggravated the exploitative relations that condemns peasants to continued poverty and feudal servitude; it has also widened the gap between the economies of the industrialized nations and the backward agrarian economies of the South.

Indeed, for the country to survive, it has to insulate itself from the deleterious kinds of trade relations. It must restore, enhance and control trade policies and development tools to ensure that the nature and pace of its development is a product of democratic choices and not of foreign dictates to consequently shield the largest segment of its population from hunger and poverty and free them from the clutch of exploitation. J

November 2001

Sources: