Free trade against hunger | Globalization | DW | 14.11.2011
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Free trade against hunger

Can free trade in the agricultural industry play a role in fighting hunger on a global scale, or does it simply make the problem worse?

Container ships

Food trade has a different set of rules

International trade has brought the world economy immense growth. Since 1990, the value of all goods and services worldwide has more than doubled. This has prompted some to ask whether liberalizing trade can help in tackling world hunger.

One of the most prominent advocates of free trade is the Indian economist Jagdish Bhagwati, a professor at New York's Columbia University who has lent his expertise to institutions such as the United Nations and the World Trade Organization. But even Bhagwati warns that eliminating subsidies and removing trade barriers won't be a catch-all solution.

"It might surprise you, because I'm an advocate of free trade," Bhagwati told Deutsche Welle, "but it is generally not a good idea to assume that every instance of deregulation helps everyone."

Jagdish Bhagwati

Bhagwati advocates free trade - with an eye on compensating the losers

Bhagwati says that individual cases must be carefully reviewed to see who benefits and who loses out.

One French NGO tried to do exactly that. Momagri was founded by French agriculture cooperatives, including the seed manufacturer Limagrain and the Credit Agricole bank.

"We are for free trade," said Jacques Carles, Momagri's vice president. "But free trade needs rules, otherwise there's just the law of the jungle."

Unreliable models

The special circumstances of agriculture also play a role. "Food production cannot be compared with manufacturing t-shirts, shoes, or cars," Carles said.

Carles says that the economic models used by the World Bank, for example, don't factor in the finer points of agriculture. For one, there are extreme price fluctuations in the agricultural industry. Also, the supply of food never completely meets the demand, especially due to the fact that weather and harvests are not entirely foreseeable.

As part of a Momagri project, a team of researchers led by French economist Bertrand Munier created an economic model specially developed for agriculture. After correctly predicting price fluctuations in food since 2008, the researchers are now trying to predict how free trade - with no subsidies or trade restrictions - would affect the revenue of manufacturers.

Who wins, who loses?

"The only countries that would profit from maximal liberalization of the food trade are the countries of Latin America, especially Brazil and Argentina," said Carles. Those countries have huge amounts of land that could be used for industrial agriculture.

Jacques Carles

Carles sees Africa suffering the most from deregulation

Most South American countries are members of the Cairns Group, an interest group of large agriculture exporters. It's no wonder that this group advocates a wide-reaching reduction of subsidies and trade barriers, says Jagdish Bhagwati.

"As large exporters, they stand to gain a lot," he said.

In Europe and the US, however, a complete liberalization of trade would reduce farmers' profits by 20 percent, according to Momagri's calculations. Small farmers in Asia and Africa would be especially hard hit, with income losses of 30 to 40 percent in China and India.

"In Africa, the effects would be drastic," said Carles. "Farmers' incomes would drop by half - and they are poor enough to begin with."

Starving farmers

More than half of those who have too little to eat worldwide are small farmers in Africa and Asia, according to the UN's Food and Agriculture Organization (FAO).

"It's a total paradox," said Marita Wiggerthale, a consultant for global trade and global sustenance at Oxfam. "Those who are producing the food are the same ones suffering from hunger. The harvests are often so poor that there isn't enough to feed themselves and their families."

There are many reasons for this phenomenon. The plots are often too small, money too short for seed and fertilizer, or access to markets too limited. Wiggerthale says the farmers need help - and more than simply investments to improve conditions.

"Fair trade also means that a government can protect certain products," Wiggerthale said, adding that she doesn't think that would threaten world trade. "Around 90 percent of what small farmers produce is for their home markets. Only ten percent is exported."

Pressure from world bankers

However, in the last few years, many countries have reduced these protections, often under pressure from the World Bank and the World Trade Organization. The International Monetary Fund (IMF) leans on countries that have borrowed money to reduce their trade barriers, according to a study conducted by the Swiss NGO Ecumenical Advocacy Alliance, which is associated with the Christian churches.

Logos of the World Bank and the IMF on a map of Africa

African nations feel the pressure of the IMF and World Bank

Their researchers investigated the effects of trade liberalization on rice farmers in Indonesia, Ghana and Honduras. All three countries liberalized their trade because of international pressure, and according to the study, this had a negative impact on the local rice farmers.

The farmers found themselves unprotected against international competitors, and many had to give up farming without any other job opportunities in sight. "Through the liberalization of trade, the small farmers' right to food was abused," the study concluded.

Momagri's Jacques Carles believes that behind the pressure for wide-ranging trade liberalization are interested parties from the finance and agriculture industry.

"In the last five to 10 years, the number of investment funds that buy large amounts of land from poorer people - in Africa, especially - has increased," he said. "We're talking millions of hectares. Their goal is to produce food for export."

A world security council for food

Jagdish Bhagwati is still convinced, however, that free trade has more benefits than consequences.

"Of course, the losers of trade liberalization must be compensated and helped," he said, "but no one does that."

Rice paddies in Bali

Indonesia liberalized its rice trade in 1995

Jacques Carles, on the other hand, considers the question of food security so important that he thinks it should be top priority.

"We need a world security council for food," he said, "along the same lines as the Security Council of the United Nations."

The task of the world security council would be to foster an international dialog, anticipate crises, and intervene, if necessary. Not with soldiers, but with strategic food reserves that would influence prices on the world market.

But with none of the major lobbies concretely promoting the idea it remains simply a pious wish.

"They're always saying at these summits that the poorest people have to be helped," said Carles, "but nothing ever happens."

Author: Andreas Becker / mz
Editor: Nancy Isenson

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