Of all globally traded commodities, agriculture is most subject to rigged rules and double standards.
In the early 1990s there was some optimism that agricultural trade would become fairer: for the first time agriculture was included in the Uruguay round of the Global Agreement on Trade and Tariffs (Gatt). Through Gatt it was hoped that the disarray that characterised global trade in agriculture would be reformed to make way for a “fair and market-oriented agricultural trading system … through substantial and progressive reductions in agricultural support and protection”.
For developing country producers the hope was for greater access to Northern markets and higher and more stable world commodity prices.
The impact of the Uruguay round has been extremely disappointing. While developing countries have liberalised their agricultural markets and support systems for farmers, often as part of a structural adjustment programme, the subsidies and support to farmers in the United States and the European Union have, in fact, increased since the late 1980s. The US and the EU now subsidise farmers by between $9-billion and $10-billion more than they did a decade ago.
Instead of supporting the agricultural sector during tough times, they have become a normal and expected part of farmers’ income. The impact of the subsidies on prices has been enormous for international competition and on developing country producers.
Agricultural commodities exported from the EU and the US are priced on average between 34% and 46% of actual production costs. Subsidies for commodities such as maize and sugar are so high that they can be sold at between 20% and 25% of what it costs to produce them.
In the 1990s the nature of the rigged rules and double standards changed in significant ways. Prior to the Uruguay round subsidies in the US and the EU were often indirect or in the form of market-price supports. Since then the subsidies have become direct to support measures for limiting production and improving the environment.
In the EU direct payments have also been made on the basis of preserving rural culture. Despite changes in the focus of subsidies their impact on world trade remains the same.
Tariff protection has also changed since the early 1990s. Non-tariff barriers and quotas have given way to quantitative tariffs, which increase the costs of imports. These quantitative tariffs have not, however, changed significantly and many remain very high for processed products and key developing country exports including coffee, cocoa, vegetables and fruits.
Developed countries are also using a range of regulations to restrict imports. The use of these barriers has in turn reshaped the nature of trade wars in agriculture, which are increasingly fought over genetically modified organisms, hormone-injected beef and mad cow disease.
South Africa has first-hand experience of this “new” trading environment. The world’s largest citrus exporter, Spain, is now pushing for South African fruit exports to be banned from the EU because of black spot. But the problem is not associated with Spain’s concern about importing a potentially damaging fruit disease. It is about international competition.
South African citrus exported to the EU is considered to be counter-seasonal, which means that we do not compete with EU producers who produce citrus at a different time of the year. The tariffs for citrus exports are, as a result, lower during our production season but very high during the Northern hemisphere season. In recent years there have been significant “overlaps” in the season due to overproduction and the planting of early and late season varieties of citrus.
These overlaps have proved to be damaging to the returns of citrus producers in Spain and South Africa. Rather than attempting to compete on what is already a highly unfair advantage, Spanish producers are attempting to restrict South African fruit altogether.
Since we export 70% of our citrus to the EU the impact of a ban on the South African citrus industry would be devastating.
We also experience aspects of this trading environment in the bilateral trade and development agreement between the EU and ourselves. What sticks in the mind about the agreement were the huge debates about the names we use for wines and spirits. In the end we were forced to give up names like port, sherry, ouzo and grappa on export and local markets in return for some money to help us develop new names and for a quota of duty-free wine.
It is not immediately clear why the EU was so insistent on our dropping these names: South Africa produces about 39-million bottles of port and sherry, but only 13% of it is exported.
The EU negotiators claim that these names are “geographical indications”, which is a form of intellectual property protected to varying degree by EU laws and under the World Trade Organisation’s (WTO) intellectual property rights agreement called Trips.
To have a name protected as a geographic indication, producers must demonstrate the quality or reputation of the product derives from its place of origin.
Why was the EU insistent on protecting these names when our production levels are so small? The reason has to do with its failure to increase protection for geographical indications through Trips. This agreement does not protect geographical indications but it provides for certain exceptions. Names that are considered to be customary or common language like, for example, cheddar cheese and feta cannot be protected.
It is also not possible to protect names that have been in general use more than 10 years before the Gatt agreement. These restrictions have hamstrung the EU’s attempt to increase protection of names like sherry and port, both of which would meet the exception clauses.
Unable to protect geographic indications like port and sherry through the WTO, the EU has instead resorted to bilateral trade deals where, thanks to its bargaining strength, it can force developing country producers to give up names that have been used for decades.
We aren’t the first wine-producing country to become a victim to this process. In 1994 Australia signed a wine and spirits agreement with the EU and was not only forced to give up port and sherry, but also claret, Beaujolais and Chianti.
Even where the WTO rules were against the major economic powers, they are able to use other methods of forcing less powerful countries into complying with protectionist policies.
There are two ways forward to remedy the rigged rules and double standards that are characteristic of agricultural trade in the new millennium. An immediate priority involves increasing the capacity of developing countries in dealing with the rigged rules and unfair standards detailed in an Oxfam report.
In South Africa’s case our experience with the EU has been important in exposing us to the uncompromising nature of agricultural trade.
A longer-term strategy involves reforming the WTO so that it represents different trading interests more equitably. There is a fine line here: if the WTO became more representative of developing country interests it would almost certainly become ineffectual or even cease to exist.
In the South African context there is a third issue. Conditions for most farm workers remain extremely poor and they are the lowest-paid workers by some margin. Gains that are made in agricultural trade must be passed down the chain so that those at the end of the chain also benefit from better and fairer access to global markets.
Charles Mather is a lecturer at the school of geography, archaeology and environmental studies, University of the Witwatersrand. This paper was presented at the Oxfam International’s campaign to canvass for fairer and equitable global trade terms. For the full text visit www.sarpn.org.za