Agreement on Agriculture

Posted: 14 December 2007

The Agreement on Agriculture (AoA) is one of four agreements to emerge from the Uruguay Round of trade talks (1986 to 1993) which set up the WTO. The stated objective of the AoA is "to provide for substantive and progressive reductions in agricultural support and protection", in order to reduce distortions in world agricultural markets. The agreement is basically a pact between the US and the EU and serves their interests; developing countries had minimal input. It covers market access, export subsidies, and domestic support for agriculture; non-trade concerns, including food security, are mentioned in the preamble.

Under the agreement, member countries of the WTO can provide investment subsidies, input subsidies to low-income or resource-poor producers, and give support to encourage diversification from illegal narcotic crop cultivation, as long as they do not exceed the level of support they gave in 1993.

Member countries of the WTO are obliged to reduce tariffs on imported food by 36 per cent over 6 years (beginning in 1995) and also to convert non-tariff barriers, like quota restrictions, into tariffs - so-called "tariffication". For developing countries the required reduction was 24 per cent, which could be spread over ten years. Countries also had to cut export subsidies to their farmers by 36 per cent over six years. Again for developing countries the required reduction was 24 per cent, spread over ten years. Government subsidies to farmers had to be reduced by 20 per cent, 13.33 per cent in the case of developing countries. These reduction commitments did not apply to the least developed countries.

Industrialised countries who were already affording high levels of protection before 1993 can continue with those levels, but developing countries cannot step up their support. WTO members are also obliged to provide "minimum access" for agricultural produce they do not export in significant quantities - they had to import a minimum 4 per cent of their food requirements by 2000.

The AoA has already had a considerable bearing on poverty. Proponents of the agreement said it would strengthen food security by removing distortions in agricultural trade. But the evidence suggests that implementation of the agreement has been detrimental to the poor.

A 1999 FAO study of 16 countries found that the agreement has led to a surge of food imports but not to an increase in exports; this is forcing local farmers out of business and into the urban areas, and leading to a concentration of farm holdings. Other studies confirm this.

A study of the impact of the AoA on food security, by Hezron Nyangito of the Institute of Policy Analysis and Research in Nairobi, finds that liberalised trade has led to increased imports of foodstuffs, mainly wheat, rice, maize sugar and dairy products. Local farmers could not compete with the prices of the imports and this resulted in disincentives for increased domestic production. "Liberalised trade, including WTO trade agreements, benefit only the rich while the majority of the poor do not benefit but are instead made more vulnerable to food insecurity", it concludes.

A Friends of the Earth study of Uruguay says that until recently the country's small producers provided milk for the domestic and export market through the National Cooperative of Milk Producers; 80 per cent of the cooperative's 6,500 milk producers were small, family-run farms. The milk market in the Mercosur trade grouping has proved very attractive for food TNCs, including Parmalat, Nestlé and Unilever. Milk powder is now being imported in large quantities, causing the bankruptcy of many small milk producers.

Other microeconomic studies, showing the impact on communities, are consistent with this evidence. A number show that women have suffered disproportionately from the surge of food imports as a result of trade liberalisation, finding it harder to put food on the family table. For both women and men, two decades of intensive trade liberalisation have failed to reduce hunger. While consumers may appear to gain from cheap food imports, they only do so if they have the money to buy, which many of the poor do not have.

Studies tend to show that inequality has increased under liberalisation but a number suggest that the process can be positive. A WTO Secretariat study "Trade, Income Disparity and Poverty" claims, for example, that liberalisation "is generally a strongly positive contributor to poverty alleviation - it allows people to exploit their productive potential, assists economic growth, curtails arbitrary policy interventions and helps to insulate against shocks". But it acknowledges that some people lose in the short run and adds: "it is far from obvious that the impact of trade liberal-isation found on incomes in the middle and high-income countries could also be found in the poorest countries".