Liberalising food trade to death

Shawn HATTINGH

Billions of people are struggling to afford food because of the huge disparities and inequalities that have been exacerbated by the current economic system — neo-liberal globalization. Over the last 30 years, almost all states across the world have adopted neo-liberal economic policies.

These policies have favoured giant corporations’ interests over those of people and have enabled a handful of companies to gain a virtual monopoly over the human food chain. The poor, however, have suffered the consequences of neo-liberal policies: if people can’t afford the prices these monopolistic companies charge, they don’t get food.

The world has not always been this way

Prior to the advent of neo-liberalism in the late 1970s, most governments assisted small-scale farmers within their borders, providing them with various forms of subsidies.

For example, in Africa, Asia, and Latin America, various state-run entities were created to offer small-scale farmers assistance in the forms of research, cheap credit, marketing services, transport, and processing services. Many states even subsidised the seeds, compost and equipment that small-scale farmers needed.

Third World states also applied high import tariffs on staple foods such as maize, potatoes, rice, beans, grain, and poultry, to protect small- and medium-sized farmers from dumping and cheap imports. A number of states also played an active role during this period in helping small-scale farmers establish cooperatives.

The result was that between 1950 and 1980, small-and medium-sized farmers met most of the food needs of their own countries. To help consumers, most governments also regulated the prices of agricultural goods and subsidised certain food products so that the poor would be able to afford them. With the advent of neo-liberal capitalism and free trade, however, this situation was turned on its head.

Hello neo-liberalism; goodbye food sovereignty

In the early 1980s, the US, International Monetary Fund (IMF), and the World Bank (WB) used the debt stranglehold that they had over many Third World countries to force them to adopt neo-liberal economic policies through Structural Adjustment Programs (SAP).

This period saw most Third World governments being forced to sell off their public assets to multinational companies; allow foreign companies to move money in and out of their borders; end food subsidies; create export-processing zones; smash workers’ rights; dismantle environmental laws; and implement wage freezes.

Under SAPs, almost all governments in Asia, Africa, and Latin America were also forced to reduce their import tariffs on agricultural goods, thereby creating new export markets for multinational companies.

Linked to this, Third World states were required to dramatically reduce the subsidies that they offered to small-scale farmers, who were producing for domestic needs. Of course, the US and European countries continued to subsidize their own farmers, mostly agribusiness corporations, and also maintained high tariffs on selected agricultural products — those that their farmers were producing.

The result was that by the mid-1980s small-scale farmers in the South were being forced to compete with subsidised agricultural products flooding into their countries from the US and Europe.

Although the IMF, the US, and the WB demanded that the Third World states end any form of assistance to small-scale farmers, they encouraged these same states to continue assisting agricultural corporations and large-scale farmers that were exporters.

Third World states were pushed to grow export crops that were needed or desired in Europe and the US.

For instance, Kenya was instructed to focus on growing flowers for export to Europe while Brazil was told to focus on soy beans for export to the US. Thus these states — along with the IMF, the WB, and agricultural multinationals — prioritised such export crops over food for domestic consumption.

As if the SAPs were not bad enough, almost all the states in the South became members of the World Trade Organization (WTO) when it was formed in 1995. In order to become members of the WTO, countries were required to become full signatories to the WTO’s Agreement on Agriculture (AoA).

The AoA was written by an ex-employee of one of the largest agricultural multinationals in the world, Cargill, and is highly beneficial to the US and the EU and their corporations.

Specifically, the AoA stipulates that WTO members cannot impose quotas on agricultural imports, states that agricultural imports can be only controlled by tariffs, and requires all member states to reduce their import tariffs on agricultural goods.

The idea behind this was to create more export opportunities for multinational companies, such as Cargill.

Up until a few years ago, free trade had led to low food prices internationally. More recently, subsidised agricultural products from the US and EU have flooded into the countries of the South.

The dire consequences of neo-liberalism

Farmers involved in producing staple foods in the South, such as maize, beans, and grains, were especially hard hit. For example, maize farmers in the US have traditionally received massive subsidies, often to the tune of US$10 billion a year, which allowed them to export their produce to countries in the South at exceptionally low prices. Most small-scale farmers in the South, who no longer received subsidies under the SAPs, could not compete with the price of this imported maize.

The outcome was that millions of small-scale maize farmers around the world have gone bankrupt. In Mexico alone, it has been estimated that as many as 5 million small-scale farmers and farm workers have been forced to leave their farms and move to the urban areas due to cheap imports flooding in from the US.10 As a result, millions upon millions of hectares of farm land has been abandoned in the South.

The result has been that most countries in the South are no longer able to meet their own food needs; they have to import food from the US and the EU — which of course benefits multinational companies.

The advent of neo-liberalism and free trade has helped a small number of multinational companies gain a virtual monopoly over global food production, distribution, and sales.

Six corporations control 85 per cent of the world trade in grain; three companies account for 83 per cent of the trade in cocoa, and three corporations control 80 per cent of the global trade in bananas.

Through this monopolization, multinationals are now able to control the prices of food products. This system has seen companies in the agricultural and food industries making massive profits.

The performance of a number of corporations in 2007 highlights this point: last year Nestle posted a profit of $9.7 billion; Archer Daniels Midland (ADM) recorded a profit of $3.1 billion; while Cargill raked in $2.3 billion in profits. This all took place in a world where 850 million people are suffering from chronic malnutrition because they can’t afford food.

These two companies also used Uruguay and South Africa as bases to export regionally into Mercosur and SADC (Southern African Development Community). In doing so, they gained complete dominance over these markets.

The biggest multinational companies have also been buying massive tracts of land in Brazil, Argentina, Paraguay, and Bolivia as small-scale farmers leave their land due to neo-liberalism. These countries have been at the heart of the massive, and ever expanding, soy industry.

In Brazil alone, soy plantations — mostly owned by multinationals — expanded from only 705 hectares in 1940 to 18 million hectares in 2003. Most of the soy from these plantations does not go towards meeting the food needs of the people in these countries; it is rather exported to the US and the EU as animal feed for cattle.

Indeed, the reality is that there is not a shortage of food. Rather, food is literally being taken away from the poor to feed cattle and wealthier consumers.

Another factor that has been driving up food prices has been the emergence of the biofuel industry, which neo-liberal policies and policy-makers have promoted. Recently, huge maize, soy, and palm oil plantations in Africa, Asia, and Latin America have shifted away from producing these products for animal feed to producing them for biofuel for the US and the EU.

Even in the US it has been estimated that as much as 25% of maize produced in 2007 was being used to produce biofuels. Many of the maize, palm oil, and soy biofuel plantations in the South are on land that used to be owned by small-scale farmers who were producing food for local needs.

Added to this, vast forest areas have been cleared in countries such as Brazil and Paraguay to raise new plantations. Essentially, the environment in the South is being destroyed and millions of people are going hungry because of the demand for biofuels in the US and the EU.

With the advent of neo-liberalism, the global food market has been completely deregulated. Before the 1980s, countries around the world controlled the price of food to ensure that it was more or less stable.

To do so, countries built up massive food reserves. When prices were high, countries sold off some of their food reserves to bring prices down. When prices were low, countries bought food for their reserves in order to stabilise prices.

Since the 1980s, this system has been dismantled. Countries have run down their reserves and have let the price of food products float according to supply and demand in the global market.

Internationally, the food commodity prices are determined by companies and speculators through trade. Recently, due to the sub-prime crisis, speculators and investors have shifted their money into these commodity exchange markets, seeing a chance to make massive profits out of speculating on food commodities.

Sensing this, and knowing that countries’ food reserves were depleted, large corporate traders started withholding supply over the last few months in the hopes of higher prices in the future, whilst playing off currency differentials.

In response, investors started buying grain futures in the hope of making profits, which drove prices even higher. The consequence has been that the price of maize tripled in the last two years. Of course, corporations and speculators are profiteering from the higher prices; while people around the world stare starvation in the face.

The elite’s solution

The WTO, the IMF, the WB, the US, and the EU have proposed several solutions to the current food crisis. The main solution that they have offered is further trade liberalization.

Thus, they have proposed that the remaining protective barriers that countries have, in the form of tariffs, be completely dismantled.

This, we are told, will drive down food prices. Such a drive for further liberalization reveals the callousness of the neo-liberal ideologues in charge of the US, the EU, and the international institutions they control. Seeking to tout further trade liberalisation as a cure to the current crisis is simply malicious considering that free trade is actually the cause of the problem.

The growth of the GM sector will simply increase the already substantial power of multinational corporations at the expense of the peoples of the world.

The people’s solution

In Latin America, a number of states with progressive governments, such as Venezuela, Bolivia, and Nicaragua, have tried to address the food crisis through breaking with the dictates of neo-liberalism.

These countries, along with Cuba, have attempted to establish a viable regional alternative to free trade in the form of the Bolivarian Alternatives for the America’s (ALBA). Through ALBA, these states have created five major agricultural projects that are producing soy beans, rice, poultry, and dairy products.

The goal of these projects is to guarantee food security in the ALBA member states. In fact, Venezuela has used these projects to provide free or subsidized food to millions of people.

It has also redistributed two million hectares of land to small-scale farmers. Linked to this, the Venezuelan state has increased its spending on agricultural production by 728 per cent over the last three years.

More recently, the ALBA states launched a $100-million fund for staple foods such as maize and rice to ease the impact of the recent food price hikes on the poor in these countries. To avoid private speculators, these states agreed to establish a public food distribution network and to regulate the price of food.

Unfortunately, the vast majority of other states in the South, which do not have progressive governments, have largely failed to take similar steps for the benefit of their populations. In these countries, it seems that people themselves are going to have to take action on a massive scale if they are going to avoid chronic food shortages and malnutrition.

The recent protests that have erupted across the world are a sign that people have indeed started to take action to change their own lives and gain access to food. The poor of the world, as consumers, are rising up and demanding their right to food and the dignity that accompanies it.

This struggle, however, is not new. Movements for the right to food have existed for decades. The latest bout of protests, however, point towards the fact that the struggle for food may become more widespread and intense.

The aforementioned movements’ struggles have also been a fight to create alternative economies, outside of capitalism. Indeed, these struggles have clearly articulated that the right to food for everyone cannot be achieved through capitalism.

Such an understanding has seen movements such as the Zapatistas and MST invading the land in the Chiapas and areas of Brazil. On this land, these movements have established cooperatives and collectives to meet people’s food needs.

Through this, they have created their own economies based on democracy, solidarity, and equality. They have also established alternative trade networks to improve the lives of the people. In the urban areas of Argentina, movements such as the Piqueteros have also invaded land and established urban farms.

Along with this, they have created their own neighborhood kitchens to ensure that all the people in these areas are fed. The idea behind these actions has been to prioritise local production to meet needs locally outside of the global, corporate-controlled economy.

If hundreds of millions of people are to avoid starvation in the coming months, it seems that the actions of these movements will need to be adopted and adapted by people across the world.

The power of corporations to control the food chain needs to be broken, and only the people can do that. Indeed, only the people through their own actions can create a world of freedom, democracy, dignity, and equality - a world where people don’t starve if they don’t have money.

- Third World Network Features

(The writer is a research and education officer at the International Labour Research and Information Group (ILRIG) in Cape Town, South Africa.)