The International Trade Framework and Recurring Food Crises: Challenges and Possibilities for the Global South

by Ranja Sengupta

The early stretch of the 21st century has been partly defined by recurring food crises, food price volatility, and uncertainty over agricultural production and distribution. Much of the world over the past two decades has seen acute agricultural crises, both in terms of food security and the certainty of farmers’ livelihoods. The age of hyper-globalisation was supposed to precisely address these issues. 

This would apparently be achieved through helping the Global South develop their domestic agriculture and food systems, and then helping the same regions reach global markets. In doing this, the logic went, the Global South would reach development objectives such as providing stable livelihoods and incomes, as well as access to food security tools which would eradicate hunger. Today, as we face rising hunger and ongoing food crises, the role and success of international trade regimes, including trade institutions and agreements, comes more and more under question.

Food Crises and International Trade

The US and European Union (EU) have tried to promote global trade as the dominant model since the 1940s. These efforts birthed the General Agreement on Tariffs and Trade (GATT) in the late 1940s, followed by the World Trade Organisation (WTO) in 1995. By the early 2000s, the WTO was widely regarded as being stuck in an impasse, and so the process of trade liberalisation was supplemented by a host of bilateral and regional Free Trade Agreements (FTAs). The interests of the developed countries, who were the main promoters of a globalised trading system, had not been getting sufficient support in the WTO. FTAs provided a quicker and simpler way of expanding the markets for the goods and services that the developed world so badly needed. In the meantime, recurring food crises, the most recent being the 2022 crisis brought on by the Russian invasion of Ukraine, have been felt much more acutely in developing countries, in particular Net Food Importing Developing Countries (NFIDCs) and Least Developed Countries (LDCs). Globally, in both developing and developed countries, those who fall below the poverty line, migrants, temporary workers, and other marginalised groups face an increasingly difficult set of barriers to access food.

The policies of trade liberalisation and harmonised rules were supposed to address the problems of supply imbalances, stabilise markets and provide a bulwark against crises. The system created by these policies would supposedly produce sufficient food for the world, which would reach those most in need efficiently. But how beneficial, equitable, stabilising and development-friendly has the process of trade liberalisation been in reality? 

Decades of the liberalisation of food markets has resulted in a high concentration in global food markets both at country level and by agribusiness companies. In 2020, just five countries contributed 63.8% of global wheat exports, and four countries accounted for about 72% of global maize exports. Similarly, the top five countries account for 72.62% of global rice exports, and three countries provide up to 58% of global soya oil exports. While natural resource endowment and the structures of production are certainly partial causes for this, global trade rules have also played a role in exacerbating this concentration of market power.

Acute price volatility in global food markets has been another major problem since 2020. Prices of agricultural products, by their very nature, are volatile. But when agricultural products are treated as financial assets that can be traded on commodity markets, they become vulnerable to shocks in related markets (such as the energy and metal markets), and to speculation. This contributes further to price volatility.

The pressures exerted through the global trade system, and exacerbated by the actions of governments in both developed and developing countries, have forced farmers in developing countries to switch from food production to cash crops just to survive. That is, farmers are driven to produce the likes of coffee, tobacco and cocoa instead of basic food crops. This has not only threatened food security across the Global South but it has also endangered farmers’ livelihoods, in that they are often forced to take on costly loans to meet the high cash needs of such crops. They take on this risk lured by the promise of eventual greater profit. Agribusiness’ control of natural resources and technology through FTAs has further aggravated this situation.

All these trends have made developing countries and LDCs more vulnerable to recurring food crises, and compromised their food sovereignty and food security. It has become clear over the past several decades that no developing country or LDC can depend on the global markets. Without augmenting domestic production and productivity while supporting farmers’ livelihoods, these countries will be unable to protect themselves against recurring food crises. This process is itself hampered by the trade rules. In order to challenge the current order, we first have to understand the power dynamics of the global trade system and the institutions that maintain it.

The World Trade Organisation, Then and Now

Under the WTO, the Agreement on Agriculture (AoA) established rules related to agricultural trade. The first of these was to help promote markets and international trade through the reduction in border taxes such as import duties. The second was the removal of export and domestic subsidies that distort trade. It should be noted that a major interest for developing countries and LDCs who wished to join the WTO was the supposed gain in agriculture. In general, developing countries and LDCs tend to be very dependent on their agricultural sectors. Part of the draw of WTO membership was a promise that the massive export and domestic subsidies given by developed countries (which significantly benefited western agribusiness and adversely affected developing country farmers’ access to global and even domestic markets) would be effectively reduced. The silent agenda of developed countries in encouraging mass-membership of the WTO was to break into the markets of developing countries.

While widening access to markets has not progressed much, the most contentious part of the AoA has been its rules on domestic subsidies. The AoA’s professed aim is to limit subsidies that distort trade (termed “Amber Box” subsidies) by incentivising farmers to produce more food, which is then dumped in global markets. At the same time, it allows subsidies that do not distort trade (termed “Green Box” subsidies) such as funding for research, environmental measures, disaster relief and public food programmes. In reality though, the AoA rules are highly unfair and inequitable and adversely impact the Global South. This is the product of a multi-pronged process: 

While the AoA theoretically allows a minimum level of Amber Box subsidies to all countries, countries including the US, the member states of the EU, Japan, Switzerland, and Canada have managed to extract additional trade-distorting subsidy allowances, referred to as extra AMS entitlements, for themselves. These same countries have also used Green Box subsidies to their advantage, for example by giving direct payments to their agribusinesses. As a result, they have continuously over-produced and dumped their subsidised agricultural exports on poor countries. This means they can maintain significant control over global agricultural markets, and can threaten agricultural livelihoods and food sovereignty in the Global South.

The AoA has limited the subsidies for developing countries and LDCs that could support their farmers and farming, for example through price support for procurement for running public food programmes. This has limited their policy options to address domestic agricultural development and challenges.

There have also been significant pressures on developing countries to limit and neutralise special and differential treatment (S&D). S&D is an underlying promise of the WTO to developing countries and LDCs that, in the field of agriculture, ensures certain policy flexibilities in order to support agriculture and farmers. These include, on paper, the ability to give higher subsidies under specific categories, and longer terms for implementation of AoA provisions on tariff and subsidy reductions. These are intended to shield developing countries and LDCs from the harsh competition unleashed by the AoA, and to help them catch up. However, developed countries have repeatedly blocked proposals that suggest better application and rational expansion of S&D provisions, not only in agriculture but across other WTO agreements.

Current Negotiations at the WTO

Since 1995, the divide between Global North and Global South on agriculture has only intensified at the WTO. Though agriculture was supposed to be an area in which Global South countries had more interest, countries in the Global North have vied for dominance of the sector. 

This is because certain developed countries – including the US, the EU and others – have entrenched commercial interests in agriculture. There is also a group of agricultural exporters that is dominated by developed countries such as Australia and New Zealand. Together, these countries have repeatedly advocated for their own interests, usually in direct opposition to developing countries’ interests. 

This conflict has been a particularly prominent feature of negotiations since 2017. At present in the WTO negotiations, there are several issues of interest to developing countries that remain unaddressed. These pertain to the abilities of these developing countries to meet their food security needs and fortify themselves against repeated food crises. The first of these unresolved issues is the demand to allow developing countries to subsidise farmers through administered price support, while purchasing food stocks for public stockholding programmes. In WTO parlance, this issue is referred to as Public Stockholding for food security purposes (PSH), on which a permanent decision has been outstanding since 2013.  The second is a Special Safeguard Mechanism that would allow developing countries and LDCs to raise import duties in order to protect against a sudden increase in agricultural imports. Finally, proposed cuts to western domestic subsidies have also been either left unaddressed, or at best distorted to benefit developed countries.

Alongside these stalled negotiations, the pandemic and the 2022 food crisis have been used strategically by developed countries to launch a parallel set of negotiations. Started in the name of food security, in reality these hinge solely on trade liberalisation. 

The keystone of this approach is a push to further open the markets of developing countries, and to prevent any restrictions on exports (even those that protect domestic food security). This approach also proposes that rather than first targeting the most unfair subsidies given by developed countries such as extra AMS entitlements, total domestic subsidies should be cut in a manner which places an equal, though obviously not equitable, responsibility on all countries. Analysis has shown that developing countries and LDCs will be forced to cut more subsidies than developed countries if such an approach is followed. This is because their minimum entitlements, including development-oriented subsidies (which were essential policy tools given to them as developing countries), will also have to be cut down.

In addition to the AoA rules, and the standards and technical barriers laid out through several WTO agreements, there are the Intellectual Property Rights (IPR) provisions of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) which promote the patenting of plant varieties. In addition, there are ongoing plurilateral initiatives on investment facilitation and on e-commerce. All these initiatives can constrain the access to technology, natural resources, markets and domestic policy space available to developing countries. In doing so, they hamper the abilities of these countries to augment their agricultural production and build up protections from crises. 

Free Trade Agreements and Investment Treaties: The Global North Agenda 

With the WTO in an ongoing impasse, bilateral FTAs began to proliferate. These trade agreements perpetuated an agenda that goes even beyond the WTO mandate. Currently, as registered by the WTO, there are 361 FTAs in force. Recently, there has been the emergence of ambitious mega FTAs, such as the Comprehensive and Progressive Trans-Pacific Partnership Agreement, the Regional Comprehensive Economic Partnership, and the US-led Indo-Pacific Economic Partnership for Prosperity. These FTAs attempt to both expand issues which are currently under discussion at the WTO, as well as bring in new issues. They have significant implications for agriculture and food security across the Global South.

Through FTAs, developed countries are asking developing countries to either reduce or entirely remove actual applied import duties. This is a more aggressive step than the WTO rules, which aim to reduce the maximum import duty rates that a country can impose. 

Through FTAs developed countries are also trying to push for the removal of export taxes, which are often imposed by developing countries to prevent exports and outflow of critical raw material.

Unhindered exports of agricultural raw material then ensures value addition in agro-processing sectors in developed countries. Further IPR provisions demanded in a typical North-South FTA go far beyond the TRIPS Agreement and propose measures that would increase the cost of agrochemicals and seeds. These IPR chapters also make it binding for developing countries to join the International Union for the Protection of New Varieties of Plants (UPOV) 1991. This treaty was designed and promoted by seed companies and a few states in the Global North, and it enshrines the control of these companies over seeds, while at the same time limiting farmers’ methods for saving, exchanging and replicating seeds. This has significant implications both for farmers’ access to seeds, and more broadly for biodiversity. Interestingly, FTAs do not allow subsidies to be addressed, on the grounds that subsidies are a multilateral issue. 

Developed countries are currently proposing rules within e-commerce trade agreements, which would result in all agricultural activities being termed as “services”. This is in effect an attempt at the disguised liberalisation of agricultural production, marketing and other related activities. Companies, including the German multinational pharmaceutical and biotechnology company Bayer, are now calling themselves “digital companies”, and controlling production processes through the marketing of both inputs and the crops produced. The US supermarket chain Walmart exerts power over even the dispersion of pesticides through its use of digitally controlled drone technology. 

Digital technology’s increasing inroads into agriculture are facilitated both within and outside the ambit of trade agreements, and the result is that farmers are losing control over agricultural production. In developing countries, where rules related to digital technology are not yet fully formed, such technologies can take a predatory shape with long-term implications for production structures, livelihoods and incomes in the food sector. 

There are also international investment agreements that cover investment chapters under the FTAs as well as stand-alone investment treaties, commonly known as Bilateral Investment Treaties (BITS). These ensure the opening of markets for Foreign Direct Investment (FDI) and the protection of foreign investors’ rights. Currently, there are 2,221 BITS in force, alongside 368 FTAs and other treaties that include investment provisions. Under investor protection clauses contained in these agreements, the rights of multinational companies involved in such FDI cannot be constrained, as they have recourse to the infamous Investor-State Dispute Settlement Mechanism (ISDS). 

The ISDS allows multinational companies to sue national governments under secret international arbitration cases for any expropriation of their investment rights. The ISDS mechanism reduces the scope for crafting national policies, and also reduces the sovereignty of Global South governments to regulate the predatory behaviour of multinational companies. The result of the protection that the ISDS framework grants to big business, is the ever-increasing loss of farming communities’ access to natural resources necessary for agricultural production, including land, water, and forests.

Finally, “sustainability” has become a new tool for multinational companies, backed by their governments, to gain commercial advantages through trade. Trade and investment agreements have multiple chapters and provisions that can create adverse impacts on environmental conservation and the rights of local communities. For example, there have been at least 13 ISDS cases since 2012 that have obstructed climate policies. Sustainability issues are now being brought by rich countries into the trade arena in the name of seeking solutions, but in general these have not addressed any substantive issues. These efforts include unilateral measures such as the EU’s Anti-Deforestation Law and the Carbon-Border Adjustment Mechanism, as well as FTA chapters under the guise of “sustainable food systems.” These measures seek to punish developing countries, and implement “sustainability standards” in a way that increases developed countries’ market control, creates barriers for exports from developing countries, and pushes out their farmers from production and trade pathways. Simultaneously, developed countries refuse to commit to finance and technology transfers (or even withdraw predatory technologies) that can support the efforts of developing countries to transition to sustainable practices, while ensuring there is space to bring in policies that benefit domestic agriculture. 

Resistance from the Global South

The resistance from the Global South to the trade hegemony imposed by the North has gone through many phases. There had been substantial opposition across countries in the past, on the ground especially, and the WTO had seen massive protests by farmers groups, NGOs, academics, and students. 

However, given the impasse at the WTO, and the massive proliferation of the more secretive FTAs and investment treaties, such mass opposition has proven weak, and been weakened further. The increasing complexity of trade negotiations has made it difficult for grassroots groups to engage with the machinations of the current trade agreements and draw links between trade policies and the impact these policies have on the ground.

At government level, there seems to be concern among many developing countries about both the content and the process of such negotiations, especially at the WTO. These include the impact the AoA rules have had on developing countries’ ability to expand and diversify production in order to meet recurring crises, as well as the implications for policy space to develop agriculture and ensure livelihoods. Countries including South Africa, India, Indonesia, Pakistan, and groupings such as the African Group, the African, Caribbean and the Pacific Group (ACP), and the G33 group of developing countries have considerably strengthened their opposition in negotiations, but a consolidated and consistent opposition is still needed. 

There are several reasons for this. Firstly, there is the perceived desirability of the WTO as the multilateral institution that will deliver uniform trade rules and development. Secondly, there is great dependence on, and interest in, developed country markets. Thirdly, developing countries still have dependence on finance, technical assistance or expertise from neoliberal institutions and developed countries to shape trade positions. 

Constructing alliances has proved a challenge for Global South governments both inside and outside the WTO. This is for manifold reasons, including a lack of common ground on critical issues, as well as political differences among developing countries who are often closely aligned with powerful developed countries. The politics of aid and developed country supportive programmes have also played their part in dictating decisions by economically vulnerable countries. For example, the US administration threatened not to renew the African Growth and Opportunities Act (AGOA), which provides duty-free access to US markets for Sub-Saharan African countries. This threat arose when African trade ministers were about to reject a proposed agreement in the WTO that was in the interest of and keenly pursued by developed countries. Soon the African countries were forced to support the agreement.

South-South cooperation and groupings such as MERCOSUR (the Southern Common Market) and BRICS (which comprises Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates) offer strategic opportunities. It must be stressed, though, that there are different interest groups even within these groupings. For instance, MERCOSUR countries like Brazil and Argentina are major agricultural exporters. 

As a result, they benefit from full trade liberalisation and are opposed to import duties and domestic subsidies for other countries. However, for many developing countries, in particular NFIDCs and LDCs, subsidies and import duties are key tools for supporting domestic production and livelihoods. Even in countries, which are agricultural exporters, such as South Africa, Pakistan, China, India and Indonesia, domestic food security concerns generally outweigh the export interests. 

In spite of some conflicts, cooperation-based approaches among Southern governments that are tolerant of mutual needs and have a broader vision, especially of domestic food security concerns, can and must be a more strategic path. This is especially when compared to relying on developed countries for either fair trade rules or for supply of agricultural products.   

An Alternative Model of South-South Cooperation

The lack of effective alternative models has been one of the key reasons why there is not a visible and substantial resistance in spite of repeated calls by various farmer’s organisations to “leave agriculture out of the WTO”, an alternative trade model has not been forthcoming. In particular, the specific principles that should underpin such an alternative framework is a key question and requires much deliberation. 

The experience of the WTO and FTA negotiations makes clear that safeguarding policy space for individual nations to design and implement agricultural policies is crucial. This is one step towards augmenting and stabilising production and productivity in the Global South. The agency and tools to deal with recurring crises, diversify production bases, ensure livelihoods, protect raw materials, and other objectives must be prioritised across the Global South. The current WTO rules, and the ongoing negotiations, are hostile to such objectives. FTAs too, are increasingly constraining policy space by including new issues that get deep into regulatory areas, such as TRIPS plus IPR rules, e-commerce, liberalisation of government procurement, and limits on state owned enterprises. 

Further, an agenda based on South-South cooperation must place small-scale food producers at its core. While the exact definition and scope of what a small-scale food producer is may vary from country to country, a framework such as the United Nations Declaration on the Rights of Peasants and Other People Working in Rural Areas (UNDROP) could form the basis for it. No trade rule must be allowed to supersede these rights which, for example, relate to incomes and livelihoods of small-scale food producers or agricultural workers. Similarly, such a framework could be based around the right to food, and would provide a set of clear, progressive guidelines that must not be allowed to be subverted by trade rules. Critical issues such as food standards and technical barriers, the operation of public food stocks and sustainability could be worked out on the basis of cooperation among Global South countries. Finally, the rules of any trade agreement, whether under the WTO or FTAs, must be equitable both between and within countries and must protect and expand special and differential treatment of developing countries.  

Strategic Considerations for Resistance

Given the complexity of agricultural trade, there are important things that organisations and grassroots movements should keep in mind. First, even if organising groups have adopted anti-WTO, or no-FTA positions, it’s still vital to engage with negotiations, at least to prevent damaging provisions from going through. Such engagement can be maintained even while fully opposing such agreements. This should include generating analyses of negotiations and impact studies, as well as engagement and advocacy with governments. 

This process of engagement will be aided by an alliance of organisations and movements. As with many successful movements, this will rely on the shared knowledge of groups and movements coming together who work inside and outside the system, and who have diverse expertise and interests. Farmers’ groups are naturally opposed to such trade agreements including the WTO and the FTAs. They are often outside the formal spaces, and tend to provide a strong voice of dissent. Such outside voices could be complemented by policy research and advocacy organisations that work within the official spaces and raise critical voices. 

Even on the research front, the somewhat technical analyses of policy research NGOs must be supplemented by the vast experience of grassroots organisations and movements. For this insider-outsider alliance to succeed, a relationship of trust and understanding is necessary. At the same time, there must be constructive efforts to develop an alternative trade agenda on agriculture, to ensure more equitable trade rules and greater policy space for the Global South both within and outside such institutions and agreements. 

 

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Ranja Sengupta

Ranja Sengupta works as Senior Researcher and Coordinator of the Trade Programme of Third World Network (TWN). Her work spans agricultural institutions, international trade and investment policymaking, globalisation, poverty and inequality. She currently works on global trade and investment policies including those framed by the World Trade Organisation and the Free Trade Agreements (FTAs) and their impact on development priorities in the South.

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