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Subsidized Hunger

"The US and the EU cause a brilliant world market distortion through their inner state or inter-continetal export subsidies and assistance. The export subsidies of the EU are almost twice as great as the subsidies of the US. Through the subsidies and the stimulated over-production, the production surpluses can be sold at world market prices up to 75 percent below the cost of manufacture. This export-dumping is a power
Subsidized Hunger

By Anja Laabs

[This article originally published in: Utopie kreativ, 155 (September 2003) is translated from the German on the World Wide Web. Anja Laabs, b. 1977, is a veterinarian and author of "Schlachten oder Schlachten-eine pseudoethische Kontroverse", Utopie kreativ, 140 (June 2002).]

Every day more than 24,000 persons on earth die of starvation. Three quarters of them are children under five. They starve to death in a world where surplus food is destroyed because it cannot find any profitable sales market, where a quarter of the annual worldwide grain harvest is fed to cattle and people suffer in malnutrition as a civilization disease. "Both - the starving and undernourished and the over-nourished - could live well and healthy if food were distributed more justly in this world." (1)

The present distribution injustice is based on the industrial orientation (profit maximization) of constant intensification of production, operational specialization, rationalization and segmentation of the flow of work. The "world social" phenomenon described as globalization stimulates this process and subjects it to the logic of the world market. This world market creates standards for economic competitors (2) that undermine the development of distribution justice in and between societies. The emphasis here is on nations as positional rivals who submit to the international rules of the World Trade organization (WTO). The WTO pursues a boundless international freedom of trade. (3) Promotion and creation of structural inequalities in trade, production and - supported by the World Bank - awarding credits (4) are its consequences.

Under the control of the International Monetary Fund (IMF), the World Bank and the WTO, states obligate themselves to structural adjustment programs and restrict the sovereignty of their governments. The three international organizations use sanctions as levers enforced according to international law. Corresponding to the rules of the WTO, the structural adjustments make possible a deregulation of trade that affects social areas once under national control. Alongside the dismantling of the welfare state, the results are losses in nation-state regulation in the service economy and in agriculture.

Through regionalism and adaptation to geographical realities, agriculture is the prerequisite for the development and preservation of rural space. Agriculture has an important social role under the aspect of a sustainable use of ecological resources and worldwide food security. 1.3 billion people live from agriculture. (5) They represent 4-7 percent of the population in industrial states and 56-80 percent in developing countries. (6)

The economic potential of agriculture counts more than its social significance. The philosophy of free trade was enforced in international agricu9ltural trade with the World Trade Organization founded in 1995 (Uruguay round). This area was previously largely exempted from the free trade rules of the general Agreement on Trade and Tariffs (GATT). The WTO agreement on agriculture (AoA) prescribes rules that disagree with the GATT agreement. The AoA seeks "a global framework for the instruments of agricultural policy (7) allowed every WTO member state." (8) All government-supported measures for agriculture and all nation-state trade instruments are subject to international control mechanisms and ultimately also put in question. The goal of the AoA should be removal of distortions in international agricultural trade by abolishing tariffs and non-tariff trade barriers, ending payment of export subsidies and liberalized market access. In the meantime, the industrial states reform the incentive system of their agriculture with (marginal) set aside programs and new subsidy programs. The latter are regarded as WTO-consistent or "trade-neutral" for reasons of social, ecological or rural development. The EU (European Union) subsidies have even increased since the WTO agricultural agreement from $92.4 billion in 1994 to $96.6 billion in 1997. For the agricultural sector, the subsidies in all industrial countries (OECD) amount to over $300 billion annually or even $350 billion according to World Hunger Relief.

While developing countries are clearly disadvantaged, the industrial countries have considerable possibilities by intensively lowering tariffs on a few important products while hardly changing the high tariffs for decisive agricultural commodities. Moreover the tariffs for finished products are higher than for the raw materials that in large part are exported by the developing countries. The US and the EU cause a brilliant world market distortion through their inner state or inter-continental export subsidies and assistance. The export subsidies of the EU are almost twice as great as the subsidies of the US. (10) Through the subsidies and the stimulated overproduction, the production surpluses can be sold at world market prices up to 75 percent below the cost of manufacture. This export dumping represents a form of power over international trading conditions. (11)

Dismantling tariffs to guarantee the freest possible markets strikes developing countries very hard for two reasons. Firstly, their only protective instrument for their own agricultural production (marginal political influence) is lost through this measure. Unlike the leading industrial states, developing countries cannot subsidize their agriculture with direct payments or secure their markets with price-stabilizing measures. Therefore price fluctuations on the world market always have a direct influence on their national markets. Secondly, competitive products from industrial countries endanger agriculture's share in the gross domestic product (GDP) in developing countries, which is much higher than in industrial countries. In the ten poorest developing countries, the share of agriculture in the GDP is between 24 and 58 percent. In comparison, the agricultural sector contributes 2-3 percent to the GDP in industrial countries. (13)

Although the EU only has a share of 6 percent in the world population (379 million persons with eastern expansion), the EU is the largest trading power and the largest domestic market. Together with the US, the EU exported 35 percent of all world agricultural commodities in 1999. This amounted to $57 billion for the EU. The EU mainly exports grains, milk and meat. Altogether the EU imports far more agricultural commodities from developing- and threshold countries than it exports. With the trading nations US and Japan, the EU imports around 53 percent of all agricultural goods worldwide. That the main imported agricultural products either don't compete or compete only negligibly with EU products is important (Mediterranean fruits and vegetables, coffee, tea, cocoa). On the other hand, the exported agricultural products of the US and the UE represent an existence-threatening competition to indigenous products in developing countries. 10 percent of all the agricultural land in developing countries is used for the production of export agricultural goods. This trading potential plays an important role for the WTO.

The countries defining the world market - apart from several countries of the Cairns group (14) - are not among the developing countries. This principle of monopolistic market position brings developing countries into existential pressure. On account of deficient influence on the world market, they must produce agricultural goods that can be exported although they cannot jointly determine their prices. (15)

On the other hand, developing countries are forced to import goods without harmonizing this with their actual national needs and production conditions. The milk- and grain markets are exemplary. The EU exports its milk products at a price independent of the actual production costs by strongly subsidizing milk production and forcing down the world market price. Milk production in the importing countries is endangered by reduction of trade tariffs and conditions guaranteeing market access in the WTO-member countries. Imported milk powder in Jamaica (more than 60 percent comes from the EU) (16) is much cheaper than the milk produced in the country. For that reason, the agriculture producing milk is destroyed more and more. In the 80s, grain dumping in Kenya led to the country becoming a grain importer since grain production collapsed instead of a country self-sufficient in grain

The mechanism of this process has intensified with the implementation of the agricultural agreement. "In many developing countries, the key agricultural branches that were vital for the national economy and food supply were destroyed because they could not compete with the cheap imports." (17) Developing countries are brought into export bondage at the expense of indigenous food production. In connection with increasing proliferation of transnational corporations, these countries control a large part of the product5ion, transportation, processing and sale of important agricultural products. This forces developing countries to cultivate and export raw materials (not processed agricultural products) as their most important export revenues.

In Benin and Burkina Faso, 74 percent of export revenues and in Mali 50 percent of export revenues come from cotton exports. (18) The currency revenues of export-dependent countries decline through the lower world market prices of raw materials forced by the leading trade nations. To compensate for deficits, these countries often boost export production encouraging the further decline of market prices. Export production competes directly with production for the indigenous market and endangers the food supply (which has already collapsed in many regions) with increasing dependence on the industrial states. In Kenya, cut flowers, coffee and tea are grown on vast areas instead of grains and indigenous field crops. The population loses these areas as sources for their own food. While the arable acreage for cut flowers was increased in the Philippines, it was reduced in the last years for rice- and corn production. "Thus the ACP countries (Africa, Caribbean, Pacific) are 40 percent dependent on the European market. However the inter-regional trade remains weak.." (19) The importance of a product for the domestic market declines the more important it becomes for the agricultural export market.

Agriculture as a multi-functional network plays a vital role in society. Its significance can be very different according to the country, region and production organization. Nevertheless its function providing food is essential for the survival of humanity and cannot be replaced by anything. Besides the economic dimension, the social dimension of a way of life oriented to production should be emphasized on account of the great number of people in agriculture in developing countries. The interferences in international agricultural trade by the WTO didn't consider this aspect or ignored it to safeguard the trading interests of the industrial states (or transnational corporations).

The principle of food sovereignty cannot be guaranteed under the present conditions of a progressively liberalized agricultural market. Domestic market developments and national control mechanisms cannot be replaced by international regulations that long promoted and continued unequal production and trading conditions. Present conditions make impossible a food-secure agriculture without subsidies in the industrial states because consumers don't pay producers life-supporting prices. Market-oriented competition is crucial for productivity and agricultural organization (agricultural production is oriented to world-political trade interests, not national needs).

Agriculture in the industrial states hardly has significance as an institution influencing the gross domestic product. Today only 10 percent of worldwide agricultural production is handled on the world market. However this small share determines the price development on the national markets. The international wheat price is an example. This price corresponds to the US price even though the US produces 5.1 percent of the worldwide production. (20)

Agriculture as a central institution of food security cannot be abandoned uncritically to international trade organizations that - apart from the ethical aspects in producing agricultural working animals and useful plants - are equal with institutions like the textile- and clothing industry and service sectors as defined by the General Agreement on Trade in Services, GATS). Under the aspect of food security, basic foods or staples must be factored out of the WTO regulations. A first step to a sovereign national agricultural policy is abolishing export-dumping and guaranteeing equalizing payments of the industrial states to developing states disadvantaged by the agricultural agreement so they can reestablish the damaged lines of production. Finally, a fundamental reform of the WTO must be tackled on this plane. The WTO should be abolished if it cannot make allowances for the vital economic interests and infrastructures of nations.

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