WTO Impact on Small Farmers of Asian Economies   

• Asif Maqbool
• Muhammad Rasheed
• Naeem Qasim

The 20th century was a terrible blight on small farmers everywhere. In both wealthy capitalist economies and in socialist countries, farmers paid a heavy price for industrialization. In advanced capitalist countries like the United States, a deadly combination of economies of scale, capital-intensive technology, and the market led to large corporations cornering agricultural production and processing. Small and medium farms were relegated to a marginal role in production and a minuscule portion of the work force.

Today, perhaps the greatest threat to small farmers is free(WTO) trade. And the farmers are fighting back. They have helped, for instance, to stalemate the Doha round of negotiations of the World Trade Organization (WTO). This tug of war between farmers and free trade is nowhere more visible than in Asia.

Asian governments placed the burden of industrialization on the peasantry during the phase of so-called developmentalist, industry-first policies. In Taiwan and South Korea, land reform first triggered prosperity in the countryside in the 1950s, stimulating industrialization. But with the shift to export-led industrialization in 1965, there was demand for low-wage industrial labor, so government policies deliberately depressed prices of agricultural goods. In this way, peasants subsidized the emergence of Newly Industrializing Economies. Peasant incomes declined relative to urban incomes, and the resulting stagnation of a once-vibrant countryside led to massive migration to the cities and a steady supply of cheap labor for factories. The farmers left in the countryside were primarily poor and aging, and they formed an increasingly small part of the national work force.

In Thailand, for instance, a tax on rice exports insulated the domestic market from price movements in the international market, depressing the price of rice and reducing the wage costs of non-agricultural employers. A transfer of real wealth from the countryside to the city took place every year between 1962 and 1981, except for 1970. Not surprisingly, despite the image of Thailand as an agricultural superpower, a large percentage of the rural population remains poor.

In China, millions of peasants died of starvation during the Great Leap Forward as the government requisitioned grain surplus to finance Mao Zedong’s super-industrialization drive. The chaos of the Cultural Revolution allowed peasants to regain a degree of control over production because the government was in crisis. Following the death of Mao in 1976, Deng Xiaoping dealt with the crisis by introducing the “household contract responsibility system.” Each family was given a piece of land to farm, along with the right to sell what was left over after a fixed proportion of the produce was sold to the government at a state-determined price. This led to peasant prosperity that, as in Taiwan, stimulated industrial production to fulfill rural demand.

But, as in Taiwan, this golden age of the peasantry came to an end, and the cause was identical: the adoption of urban-centered, export-oriented industrialization. Primitive capital accumulation for industry took the form of requisitioning peasant surpluses via heavy taxation. Currently, the various tiers of the Chinese government foist a total of 269 different taxes on farmers, along with often-arbitrary administrative charges. Not surprisingly, in many places, taxes now eat up 15% of farmers’ income, three times the official national limit of 5%. Not surprisingly, too, while the economy has been growing at 8-10% a year, peasant income has stagnated, so that urban dwellers now have, on average, six times the income of peasants. True indeed is the observation of the rural advocates Chen Guidi and Wu Chuntao that the urban industrial economy has been built “on the shoulders of peasants.”

The forcing of peasants to subsidize industrialization was indeed harsh. But at least trade policies at the time helped to mitigate the pain by barring agricultural imports that were even cheaper than local commodities. Practically all Asian countries with agricultural sectors tightly controlled imports via quotas and high tariffs. This protective shield, however, was severely eroded when countries signed the Agreement on Agriculture (AOA) and began joining the World Trade Organization (WTO) starting in 1995.

The AOA forced open agricultural markets by banning quotas, which were converted to tariffs, and required governments to import a minimum volume of each agricultural commodity at a low tariff. At the same time, under the pretext of controlling the heavy subsidization of agriculture in developed countries, the AOA institutionalized the various channels through which subsidies flowed, such as export subsidies and direct cash payments to farming interests in the northern hemisphere.

As a result, the level of subsidization of agriculture actually increased in developed countries in the first decade of the WTO. The total amount of agricultural subsidies provided by the OECD’s member governments rose from $182 billion in 1995 to $280 billion in 1997, $315 billion in 2001, $318 billion in 2002, and almost $300 billion in 2005. The United States and the European Union (EU) were spending $9-10 billion more on subsidies in the early 2000s than they were a decade earlier. For every $100 of agro-exports from the United States, government subsidies accounted for $20-30. In the case of the EU, the figure was $40-50. While unsubsidized smallholders in the developing world had to survive on less than $400 a year, American and European farmers were receiving, respectively, an average of $21,000 and $16,000 a year in subsidies.

With massive American and European subsidies distorting global prices in a downward direction, developing country agriculture became “non-competitive” under the conditions of WTO-mandated trade liberalization. As the Food and Agricultural Organization (FAO) notes, instantaneous import surges following the adoption of the AOA in a number of developing countries led to “consequential difficulties” for “import-competing industries.” The report continued, “Without adequate market protection, accompanied by development programs, many more domestic products would be displaced, or undermined sharply, leading to a transformation of domestic diets and to increased dependence on imported foods”. This historic shift to dependence on food imports was, needless to say, accompanied by the displacement of millions of peasants.

Even before the AOA took effect, the World Bank was predicting that Indonesian farmers would lose out under the new regime. Indeed, since 1995, farmers in rice and other basic commodities have been marginalized. Meanwhile, competitive pressures induced by trade liberalization led to the expansion of commercial plantations at the expense of smallholders.

In the Philippines, corn farmers, chicken farmers, cattle raisers, and vegetable growers were driven to bankruptcy in huge numbers. In Mindanao, where corn is a staple crop, many farmers were wiped out. As analyst Aileen Kwa has described, “It is not an uncommon sight to see farmers there leaving their corn to rot in the fields as the domestic corn prices have dropped to levels [at which] they have not been able to compete.” With production stagnant, land devoted to corn across the country contracted sharply from 3,149,300 hectares in 1995 to 2,150,300 hectares in 2000.

In China, tens of thousands of farmers, including those growing soybeans and cotton, have been marginalized with China’s entry into the WTO. Indeed, to maintain and increase access for its manufacturers to developed countries, the government has chosen to sacrifice its farmers. According to the Institute of International Economics: “The challenge of managing the farm sector has grown with China’s WTO commitments in agriculture, which are more far reaching than those of other developing countries and in certain respects exceed those of high-income countries. The Chinese government agreed to reduce tariffs and institute other policies that meaningfully increase market access; accepted tight restrictions on the use of agricultural subsidies; and pledged to eliminate all agricultural export subsidies. These commitments went far beyond those made by other participants in the Uruguay Round negotiations that led to the WTO’s creation.”

In Sri Lanka, thousands of small farmers staged street demonstrations to protest the import of chicken parts and eggs, claiming they were being driven out of business. The FAO concurred, noting that import surges on major food items like chilies, onions, and potatoes made local production “precarious, as reflected in the significant drop in areas of production.”

In India, tariff liberalization, even in advance of WTO commitments, has translated into a profound crisis in the countryside. Indian economist Utsa Patnaik has described the calamity as “a collapse in rural livelihoods and incomes” owing to the steep fall in the prices of farm products. Along with this has come a rapid decline in consumption of food grains, with the average Indian family of four consuming 76 kg less in 2003 compared to 1998 and 88 kg less than a decade earlier. The state of Andra Pradesh, which has become a byword for agrarian distress owing to trade liberalization, saw a catastrophic rise in farmers’ suicides from 233 in 1998 to over 2,600 in 2002. One estimate is that some 100,000 farmers in India have taken their lives owing to collapsing prices stemming from rising imports.

It is generally feared that WTO would impact adversely the economies of developing countries like Pakistan. Developing countries are concerned with the difficulties of non-implementation of the existing WTO Agreements and objectives and timetable of the current negotiations on agriculture, services and market access. It appears that the developing countries4 would be facing more international uncertainties and additional hardships in integrating their economies with the global economy. However, countries which accept these challenges and make necessary changes will benefit from the WTO agreements. Unfortunately Pakistan has not been able to raise awareness and understanding about WTO among the general public, industrialists especially the small and medium enterprises and amongst the farmers especially the small farmers. In a recent study conducted by PIDE5, it was found out that only 4 percent of general public, 46 percent of exporters and 38 percent of the members of the business community were aware of the WTO issues and even those who were aware had only rudimentary knowledge of the issues involved.

The resistance to the new regime so opposed to the interests of small farmers has come from several sectors. At the international level, trade liberalization and other anti-agriculture policies led to the formation of two blocs of developing countries: the Group of 20 and the Group of 33. The G-20 put the developed countries on notice that, unless they significantly reduced unfair domestic support for agriculture, there would be no more concessions on market access. The G-33 demanded exemptions from tariff liberalization for certain products considered vital to agricultural production and employment (special products or SPs). They also wanted the right to raise tariffs and resort to other measures — special safeguard mechanisms (SSMs) — to protect their products from surges of agricultural imports. When the EU and the United States refused to compromise on these issues, the WTO’s Fifth Ministerial Meeting in Cancun in 2003 collapsed.

The Ministerial Declaration of the Sixth Ministerial Meeting of the WTO in Hong Kong in December 2005 recognized the right of developing countries to designate SPs and institute SSMs. However, the U.S. backtracking on this commitment as well as its refusal to significantly reduce its domestic subsidies led to the collapse of the Doha Round of negotiations in July 2006. Developing countries simply could not provoke more discontent among their peasant populations by opening their markets even more in exchange for cosmetic reductions in the massive EU and U.S. agricultural subsidies.

The opposition to GE-based agriculture has created a powerful link between farmers and consumers who are angry at corporations for marketing genetically modified commodities without proper labeling, thus denying consumers a choice. In the European Union, a solid alliance of farmers, consumers, and environmentalists prevented the import of GE-modified products from the United States for several years. Although the EU has cautiously allowed in a few GE imports since 2004, 54% of European consumers continue to think GE food is ”dangerous.” Opposition to other harmful processes such as food irradiation has also contributed to the tightening of ties between farmers and consumers, large numbers of whom now think that public health and environmental impact should be more important determinants of consumer behavior than price.

More and more people are beginning to realize that local production and culinary traditions are intimately related, and that this relationship is threatened by corporate control of food production, processing, marketing, and consumption. This is why Jose Bove’s justification for dismantling a MacDonald’s resonated widely in Asia: “When we said we would protest by dismantling the half-built McDonald’s in our town, everybody understood why — the symbolism was so strong. It was for proper food against malbouffe [awful standardized food], agricultural workers against multinationals. The extreme right and other nationalists tried to make out it was anti-Americanism, but the vast majority knew it was no such thing. It was a protest against a form of production that wants to dominate the world.”

Many economists, technocrats, policymakers, and urban intellectuals have long viewed small farmers as a doomed class. Once regarded as passive objects to be manipulated by elites, they are now resisting the capitalist, socialist, and developmentalist paradigms that would consign them to ruin. They have become what Karl Marx described as a politically conscious “class-for-itself.” And even as peasants refuse to “go gently into that good night,” to borrow a line from Dylan Thomas, developments in the 21st century are revealing traditional pro-development visions to be deeply flawed. The escalating protests of peasant groups such as Via Campesina, are not a return to the past. As environmental crises multiply and the social dysfunctions of urban-industrial life pile up, the farmers’ movement has relevance not only to peasants but to everyone who is threatened by the catastrophic consequences of obsolete modernist paradigms for organizing production, community, and life.