Asia, Asian farmers, and the WTO

by Walden Bello*

The opposition of the US to the bid of Deputy Prime Minister Supachai Panitchpakdi to become director general of the World Trade Organization to succeed Renato Ruggiero hardly came as a surprise to many Asians. Thailand and Japan, Supachai's strongest backers, have long been the key targets in Asia of US trade policy. Indeed, the Thai's stalemated candidacy is seen as yet another sign of the unwillingness of the US and other traditional trading powers to seriously accommodate the interests of East Asia in the international trading system.

There is a good historical basis for this apprehension. For if one looks at why the loose General Agreement on Tariffs and Trade (GATT) was transformed into the powerful World Trade Organization (WTO) during the Uruguay Round of 1986-94, a major part of the explanation was containing the Asian economic challenge and preventing the diffusion of what was regarded as the state-interventionist and mercantilist Asian development model.

The banning of quotas and so-called Trade-related Investment Measures (TRIMs) such as local content requirements was aimed at radically restricting the use of trade policy as a means of industrialization by countries such as Korea and Malaysia, which had already used it successfully in products such as cars, petrochemicals, and pharmaceuticals.

Similarly, the draconian Trade Related Intellectual Property Rights (TRIPs) regime was intended to prolong monopoly rights for US high-tech industries and eliminate "industrialization via imitation" that is, development based on a loose regime of technological diffusion. Again, it was the East Asian economies, which based their rapid drive to industrial status as much on ingenious computer assembly operations as on textiles and garments, that had excelled at this strategy.

US trade negotiators did not hide the fact that the WTO's Agreement on Services was aimed at opening up what was seen as potentially massive markets for financial services, like retail banking and insurance, in the prosperous Asian economies (pre-crisis, that is).

As for the Agreement on Agriculture, a major consideration for its coming into being was US agribusiness' search for markets on which to dump subsidized US grain and meat products. The emerging middle class markets of the Pacific Rim were critical in the plans of the US Department of Agriculture, which sought to increase East Asia's share of US agricultural exports from 40 per cent in the mid-1990s to 60 per cent by the year 2000. After years of frustrating bilateral negotiations with Asian countries on opening up their markets, the GATT-WTO Agriculture Agreement, with its banning of agricultural quotas and imposition of "minimum access" volumes for foreign grain and meat imports was a tremendous victory for the US farm lobby.

Agriculture will most likely be the focus of global trade negotiations over the next few years. For whether or not agreement will be forged on launching a "Millenium Round" of comprehensive, multi-sectoral negotiations, the Marrakesh Accord that established GATT-WTO in 1994 mandated the opening of new negotiations in agriculture at the end of 1999.

On the eve of the agricultural negotiations, the countries of East Asia are divided on whether or not to move to support further liberalization of agricultural markets. Northeast Asia, particularly Japan and South Korea, are opposed to more liberalization, for that would mean the extinction of their small rice farmers. Indeed, it is said that Japan's rationale in supporting the European Union's position for a new round of comprehensive negotiations is to give it flexibility in defending agriculture: a comprehensive, multi-sectoral round would enable it to trade concessions in, say, industrial tariffs in exchange for yielding few or no concessions in agriculture.

The Southeast Asian countries, on the other hand, find themselves on the other side of the fence. They are part of the "Cairns Group," an informal bloc of big and medium-sized developed and developing country agricultural exporters that includes, among others, Argentina and New Zealand. The Cairns Group position is broader and faster liberalization of agricultural markets via increased market access, an end to export subsidies, and a decrease in production subsidies in the North. Interestingly, the Southeast Asian governments find themselves on the same side as the United States, which has formed a de facto alliance with the Cairns Group to put the pressure for market opening in Japan and South Korea and the ending of direct income subsidies for European Union farmers. In a classic instance of double standards, the US Department of Agriculture has stoutly defended its own forms of direct income subsidies for its farmers, but the Cairns Group countries seem unwilling to challenge Washington.

On closer look, however, the Southeast Asian governments' position in favor of more liberalization of agricultural markets in the North serves mainly the interests of organized lobbies of cash crop exporters and processors, like Malaysian palm oil plantations, Philippine coconut oil exporters, and Bangkok-based Thai rice middlemen. The vast majority of unorganized small farmers in these countries, who do not have political clout, are harmed by this position, for the quid pro quo of greater market openings for products like palm oil and coconut oil in the North is even greater liberalization of sectors like rice and corn in Asia, where small farmers are concentrated. The ASEAN governments, warn some agricultural experts, are allowing themselves to be dragged by hardline Cairns Group countries such as New Zealand and Argentina to positions that will ultimately bring great harm to their small producers.

As it is now, rice farmers in Malaysia and rice and corn farmers in the Philippines are already bearing the brunt of the displacement effects of the Uruguay Round. Thai farmers are hardly benefiting, since it is the Bangkok-based middlemen that are reaping the gains from increased Thai rice exports. Even before the Marrakesh Accord, an OECD study had noted that Indonesian agriculture would be one of the losers in the Uruguay Round. To follow the Uruguay Round with another round of agricultural liberalization that serves mainly the interests of the US agricultural dumping lobby and a small elite of Asian agro-exporters will drive the region's small farmers over the edge.

This is why it is important for ASEAN governments, small farmers, and consumer groups to study closely the arguments being advanced by the Japan and South Korean governments-under pressure from their small farmers-- to oppose another round of liberalization: that small farm agriculture in Asia, though it may seem inefficient in terms of unit cost, actually produces net gains because agriculture is "multifunctional": that is, it protects biodiversity, guarantees food security against the volatility of world trade, promotes rural social development, is part of the national cultural heritage, and enhances the regional landscape.

Agriculture is more than just a sector of production. It is, for millions in both Northeast and Southeast Asia, a way of life. The greatest threat to smallholder communities in Asia and throughout the world is even more WTO-decreed liberalization of agricultural markets. Free marketeers say that this will bring about more efficiency, though they fail to show how this squares with the fact that the main beneficiaries will be subsidized US and European farm interests. In any event, the likely outcome is the bankruptcy of small farmers and their transmogrification into marginalised masses pouring into Asia's big cities.

Like Asia as a whole in the WTO process, Asia's small farmers have been big losers in the global trade liberalization game. It is time to stop the bleeding.

* Walden Bello is professor of sociology and public administration at the University of the Philippines and co-director of Focus on the Global South, a program of the Chulalongkorn University Social Research Institute.