Economists have long proclaimed the ingenuity and wealth-generating capacity of the free market. Dan Griswold, associate director of the Center for Trade Policy Studies at the Cato Institute, a Washington-based libertarian research organization, says as trade barriers come down, money and goods flow into once closed economies followed by wealth and economic development.
“I think globalization has yielded tremendous benefits in those countries that have decided to take advantage of it,” he says. “Those countries that have moved decisively towards freer markets, more engagement in the global markets, like China, like India, like Vietnam, like Chile have reaped the benefits of faster growth, declining poverty rates, rising imports and exports.”
But many governments and citizens in the developing world say they are not seeing the benefits of free trade and globalization.
The New York Times newspaper recently began an editorial series "Harvesting Poverty," which looks at the impact of globalization on the developing world. Dan Griswold is pleased to see The Times address this issue.
“It's a fat juicy target,” he says. “There's a lot to criticize. U.S. farm policy is really an abomination. It's bad for U.S. consumers. It's bad for some of the poorest subsistence farmers around the world. It's bad for U.S. foreign policy. We're keeping in poverty people in very critical, impoverished poor countries around the world, including some Muslim countries. We wonder why we have trouble making friends around the world, and I think our farm policy is one reason.”
The frustration of indigent farmers in Africa, Asia and Latin America is genuine, says Ann Tutwiler, president of the International Food and Agricultural Trade Policy Council, an organization that makes recommendations on politically feasible ways to open markets and increase trade.
“I lived in Kenya for a year a while ago, and you would see people just ripping out sugar cane fields because the price volatility was so terrible,” says Ms. Tutwiler. “Sugar cane takes several years to develop. So they would plant it when the prices were high, and then the prices would plummet because of policy moves in the U.S. and the EU. Then they would have to rip these cane fields out and start over with something else. So you certainly saw the frustration back in the early 1980's.”
In 1997, the International Food and Agricultural Trade Policy Council launched a four-year global study focusing on the links between agricultural trade and production in the developing world. Ms. Tutwiler says the results were surprising. Instead of more aid, developing world farmers and leaders wanted more trade: “It was just very strong sentiment that more foreign aid wasn't going to help, and that these countries wanted more open markets and access to markets and less competition from subsidized farmers in the U.S., Europe and Japan.”
“This notion that our farm supports are responsible for the plight of farmers in lesser-developed countries in the world is hard to substantiate,” says Bob Stallman, President of the American Farm Bureau Federation. “And I'll give you one example. Look at cotton. Our cotton production has roughly stayed the same. We import a lot of cotton into this country. All of that has roughly stayed the same, and yet the plight of these so-called cotton farmers in some of these other countries has been worsening. It's not a result of what we've done when you look at the conditions in those countries. You can't make a direct connection and say our policies are causing these farmers in these countries to have a very barren existence and not be able to survive.”
However, The New York Times says American cotton subsidies, worth three to four billion dollars a year, allow 25,000 cotton farmers to "dump so much product on the world market that it has driven down world prices. If the United States terminated its cotton subsidies, commodity prices would rebound to more realistic levels, allowing third-world cotton farmers to compete and earn a profit on their crops."
But what about internal factors that hinder the developing world's economies? asks Mr. Stallman: “You have to look at the infrastructure of the country. You have to look at the government. Do they have rule of law? How much corruption do they have? There are a ton of things that go into determining who is affecting or what is affecting a farmer in any given country. And I think there's been an attempt by some in this country and other parts of this world to make a very simplistic association that somehow our high supports are causing all these problems in the rest of the world. And I don't think you can substantiate that.”
Mr. Stallman has a point, says Ann Tutwiler. Although it's crucial to focus on what developed countries need to do in terms of leveling the playing field, she says it's also important to talk about what developing countries need to do for themselves.
“One thing you see in a lot of these countries,” she says, “is that they are discriminating against their farmers in their policies, either by directing all of the public investments towards the urban areas neglecting rural roads, neglecting rural infrastructure and communication because most of the voters and the people they have to worry about live in the cities. So a lot of these countries neglect their own farming sectors. They have economic policies which discourage farming in their own countries. So there's a lot that the developing countries themselves need to do to improve the lives of their farmers.”
“Nobody holds out farm policy as an example of free trade. To me it's an example of a deviation from it and all the problems that are caused by that,” says Dan Griswold from the Cato Institute.
“That's why the World Trade Organization must continue to work on the issue of farm trade,” he says. “I look at farm policy as a big piece of unfinished business. It's not an indictment of free trade that the rich countries engage in protectionism and subsidies. It's the antithesis of trade. The problem is not too much trade but not enough. We're not allowing markets to work. Trade barriers for agriculture remain stubbornly high in the 40 to 50% range. To me it's all the more reason for having a successful WTO round to lower these trade barriers, to get rid of these subsidies so that farmers in poor countries can realize the benefits of higher world prices for the commodities that are really the most important export product for these poor countries.”
Agriculture will top the agenda of the WTO's Fifth Ministerial Conference in Cancun, Mexico. The five-day meeting comes half way through the most recent round of WTO trade talks known as the Development Round because of promises to address many of the complaints of developing world countries.
The second part of this report will look ahead to the expectations for the September meeting. The recent announcement by the United States and the European Union of an agreed framework for reducing farm supports has added momentum to the proceedings, but will it be enough to keep the trade talks moving forward?