Trade: Solution or Problem?

In December 2015, World Trade Organization (WTO) attracted attentions again. Though WTO had been seen getting less influential due to emergence of many regional trade treaties, it declared a “historic” agreement on abolition of subsidies for agriculture exports in the Ministerial conference in Nairobi, Kenya. The agreement is thought to lead fairer competition in the international and national markets. It will also work in favour of farmers in the developing countries, who have been compelled to compete with products subsidised by some governments from developed economies.

Meanwhile, earlier in the same month, the United Nations Food and Agriculture Organization (FAO) publicized a report on the State of Agricultural Commodity Markets 2015-16 (SOCO) featuring a long disputed issue, trade and food security. It shows that the impacts of trade on food security are mixed. The analysis reaffirms that i) trade itself is neither a threat nor panacea for food security, and ii) trade policies need to be well considered as trade does affect agrarian structure and food security. Nairobi exquisitely showed an example of the analysis.

How would it be like if we saw food issues in the context of development? “Trade, not Aid” and “Aid to Investment” are slogans we often hear in contexts of development, but it becomes always controversial when it comes to food. Investment in agriculture sector in the developing countries is often seen risky as it may infringe various rights of local people in the surrounding communities, including rights to food. However, trade simply takes place when the exchange of goods benefits both parties. Investment is undertaken to increase wealth in the future. If both trade and investment contribute to improvement of availability of goods and wealth, why should it be particularly controversial when we talk about food? Maybe it is because we mix up two different things. One is food and the other is agriculture.

What is Food?

Food is goods. You can produce it, exchange it, buy it, sell it, store it, and consume it. Food is fundamental goods in a sense that it is indispensable for people to live. However, in reality about 800 million people in the world are seen as food insecure.

According to FAO, food security would be achieved when all people at all times have physical and economic access to sufficient, safe, and nutritious food that meets their dietary needs and food preferences for an active and healthy life. It also says that food security comprises four dimensions: availability, access, utilization, and stability. Simply put, if there is enough food with good quality, and people have access to it anytime they need, food security can be achieved.

Trade can contribute to food security to great extent, for sure. Through food trade, people in a country can get access to food that cannot be produced in that country (availability, utilization). Appropriate prices that maximize consumers’ utility will be induced in more competitive markets (access). Food can be provided even when production in a country drops due to various reasons including poor weather (stability). It improves all the four dimensions of food security.

It is also true that dependence on imported food augments vulnerability, and some people argue that national food self sufficiency rate should be kept high, assuming the case of export restriction of major food exporting countries as well as the case of conflicts with exporting countries. But as long as you have money to buy food, this would not be the case. As long as food is a good, there should be ways to get it somehow. Considering that there are some countries that are not able to be food self sufficient due to natural resource constraints, food trade is apparently a tool for states to achieve food security.

What is Agriculture?

Agriculture is economic activity. It is a major source of incomes for 80% of rural population in developing countries. Growth in agriculture sector is expected to have more poverty reduction effects than other sectors. At the same time, as the economy of a country grows, the share of the agriculture sector decreases. This is applied at household level, too. The increase of income is brought by non-farming activities – the share of income from farming decreases. However, opportunities for a better job in a developing economy depend on human capital: education. Agriculture plays an important role in wealth accumulation to invest in human capital. In the long run, agriculture is a base for the poor to develop their capability to improve their livelihood. But generally speaking, productivity of farmers in developing countries is law. If farmers in such countries are exposed to competition with resource/asset rich farmers in developed countries, whether under fair or unfair conditions, they would be worse off due to enormous competitiveness gap.

Also, it is evident that eventually labour structure changes as economy grows, but it is also true that such structure change will take place over a long time, and that majority of the poor need to hinge on agriculture.

If food trade inhibits national agriculture development in less developed countries, it sounds prudent for the countries to protect the sector in terms of poverty reduction.

Ethics Behind

Food trade may benefit food security, but may do harm to agriculture and people who live on agricultural activities. Of course the impacts vary to a great extent according to the contexts of countries and time frames, but we can see a sort of a contradiction between the two.

Furthermore, some people see different aspects of agriculture. Agriculture is a way of life. It is asset, tradition, culture, and heritage. Producing your own food means something more than having access to food. It represents how people live. Some farmers’ organizations including La Via Campesina insist in concepts of food sovereignty and Agroecology, which put emphasis on the right of people and states to determine the food they eat and their food system, including environmental and cultural facets. While they are talking about food, their focus is more on production and producers of food, which we can refer to as agriculture.

There is an approach that gives us a hint on how we should understand these confusing discourses: ethics behind food and agriculture. If you think food should be supplied to anyone in order to achieve food security by any means, your ethic is based on the consequences of actions (Utilitarian approach). The action is ethnically justified if net profit is positive. If you think food should be supplied but at the same time people should have right to choose their way of living, your ethic is based on rights and duties of people (Right-based approach). The action can be justified unless you do not infringe affected people’s right to choose their life freely. Food security is a concept of Utilitarian approach, while food sovereignty is a concept of Rights-based approach. According to where you stand, the priority should be varied. Food related issues are always controversial, as food is not only mere goods, but also deeply related to people’s way of life.

Getting back to development, Sustainable Development Goals (SDGs), which include ending poverty and hunger by 2030, were agreed in 2015. It is a universal challenge based on shared values in the international community. Achieving the goals is important, so is the process. If we aim to realize development that is accepted by any stakeholders, Right-based approach as well as Utilitarian approach needs to be considered.

The protagonists of development are those who are the poor and the hungry, and the context differs from one place to another. Establishing a systematic participative and consultative process which make possible to reflect peoples’ will at local level is imperative to make decent processes.

For instance, it is suggested that theoretically trade could facilitate a country and its farmers to become more efficient on production in which they have comparative advantage. This is feasible in reality as well, since agrarian structure change can be done faster than industrial structure change. Empirically, farmers in developing countries would have comparative advantage in cash crops in most cases (Utilitarian approach). Still, in practice decision on cropping and trade policies should be made in accordance with involvement of farmers (Right-based approach).

How would they like to develop? Disputes over food and agriculture provide food for thought on this issue.

This article first appeared on Econ+.