‘The [European Union] has taken a deliberate decision to keep its farmers on the land, whether or not they are internationally competitive … If we are fully competitive, employment in the farm sector will drop from seven million farmers to just one million. This is politically unacceptable. The question is whether market rules should apply to everything. Important to EU decision-makers is rural life, landscape, environment; and these justify the continuation of its costly and inefficient farming strategy.”
This is the blunt message from EU trade commissioner Pascal Lamy. EU politicians are not about to lose six million votes by putting farmers out of work. EU farming is perfectly competitive regionally, but to make it internationally competitive would undermine Europe’s whole way of life, including its environment. Market rules should not apply to agriculture.
The United States and other developed countries use essentially the same argument as they apply tariffs to protect their “sunset” industries like steel and textiles, which can be made cheaper elsewhere. In doing so they break World Trade Organisation (WTO) rules that they themselves have made. And they insist that developing countries like South Africa should, in accordance with WTO rules, abolish their subsidies and tariffs, so that our markets become available to their products.
How should we respond? So far, we have simply railed against that hypocrisy — in common with most international development lobbies. But is this right, and can it work? I would say “no” to both.
It is a waste of energy to try pushing a tank up a sand-dune — the equivalent of expecting powerful political leaders to jeopardise their own people’s prosperity and way of life for others. Hopes that the EU subsidies policy is about to change are constantly dashed. Today these subsidies stand at $50-billion a year. Suppose, by some miracle, they were reduced to $40-billion — the effect on us would be negligible.
Nor can we truthfully claim that the EU policy — on agriculture in particular — is irrational or unsustainable. The variety of food, the cuisine, the countryside, the village life, the national habitat in countries that apply Lamy’s stated prescription are precisely the reason why most people see them as humane, civilised and attractive places to live.
There are many reasons why agriculture should be subsidised. It crucially depends on climatic events that cannot be controlled by the farmer. “If the Reserve Bank raises interest rates,” says Absa economist Chris Hart, “it’s not going to bring more rain down.” In other words, macroeconomic instruments have virtually no effect on production.
Farmers worldwide, however efficient, are crippled by debt because market rules are inappropriately applied to them. Last year’s unusual grain bonanza reduced our farmers’ debt by R4-billion, leaving it standing at R28-billion and expected to rise this year. Why? Because grain prices are expected to fall in response to expected harvests in Asia — and the possible effects of speculation in the rand. Left to themselves market rules are too fickle, too responsive to too many factors, to apply to agriculture.
Most importantly, agriculture is the source of food and food security. It is a government’s first duty to ensure food security: people cannot do without food, as they can a fridge or new shoes.
Government policy must stabilise prices for sustainable food access. Last year’s food inflation had nothing to do with local harvests, everything to do with the rand price and international pricing based on harvests elsewhere. Profiteering follows, because there is no control.
The argument that unfettered markets ensure the cheapest sourcing of food worldwide holds no water, as we have seen to our cost. The government must develop an agricultural policy that ensures stability and sustainability over time. As well as allowing farmers to plan investment, subsidising food production will put small farmers back on the land. Small farmers are the reason for food security in the EU — the only part of the world where farmers are not going out of business in droves.
Small farmers — not as commonly assumed, agribusiness — reduce a nation’s hunger. Small farmers substitute for imports; agribusiness relies on unpredictable export markets. Small farmers require diversity for survival and use fewer toxic chemicals than agribusiness, which is based on monoculture. Small farming would reduce our unemployment: agri- business replaces people with technology. Small farming feeds and expands the local market.
It is said agriculture is the litmus test of the WTO’s Doha round. If we value a rules-based trade regime we can help it by protecting our agriculture instead of complaining fruitlessly about others’ behaviour.
We should start by subsidising food production, activating a new culture of small farming for local consumption, thus hoisting the EU with its own petard.
From that position we can negotiate entry into each other’s markets for selected export crops, connecting with the global market from the stronger position of food security.
Margaret Legum runs the South African New Economics Network.