Toward a new foreign policy.

Key Recommendations

* The AoA must be reformed to allow developing countries flexibility to use a range of trade and domestic support programs.

* All export dumping must cease, and the prosecution of antitrust cases against transnational agribusiness firms must be allowed.

* The AoA must be reoriented toward governing agricultural trade in a way that enhances food security and sustainable rural livelihoods.

The renegotiation of the AoA beginning in June 2002 offers a new opportunity to reorient global trade rules in a manner that promotes food security, resilient ecosystems, genetic diversity, and vibrant economies. Such a transformation would require rules that recognize how agricultural production and trade differ from the production and trade of other goods and services. It would also require rules that outlaw dumping and increase transparency in world commodities markets. Finally, it would require a move away from "one size fits all" policies to rules that enable a diversity of agricultural trade policies to consider each country's level of development, degree of trade dependence, and agricultural production profile. The starting point has to be devising multilateral rules for agriculture that reflect the ecological and economic realities of agricultural production and markets; low elasticity of supply and demand, production levels that are not closely linked to demand, political sensitivities related to ensuring an adequate food supply for each country's citizens, and production that is not dependent on ever increasing quantities of agrochemicals.

Developing countries in particular are dependent on agriculture as a major source of employment and foreign exchange, and AoA rules should be changed to allow these countries to nurture their domestic agricultural production and markets. Exemptions from tariff and domestic support reductions should be revised to take into account relative economic dependence and poverty rather than relying solely on the static and somewhat arbitrary country categories of developed, developing, and least developed. The differences among developing countries is widening by most indicators, and though such country categories still provide a useful basis for differential treatment, a more dynamic distinction would be more useful.

For example, Guyana relies on rice exports for 40% of its foreign exchange revenue. Its contribution to the world market, however, is marginal--if Guyana were to disappear from the world market, prices would hardly reflect the change. Thus Guyana is heavily dependent on a market in which it exercises almost no influence. Were Guyana to receive preferential status as an exporter, to ensure its foreign exchange earnings, the volumes involved would not significantly affect larger exporters. Guyana could "graduate" out of this category of dependent countries as and when its dependence on rice evolved. Similarly, countries with a high dependence on agriculture as a source of employment, coupled with a low overall GDP, could be eligible for exemptions from government support limits and could be given more flexibility to use border protection to support their producers.

One clear goal for the AoA negotiations should be to outlaw all forms of agricultural dumping. For certain grains, prices both in the U.S. and overseas are below the cost of production. This distorts the market for food exporters who seek to access the U.S. market or who compete in other markets where U.S. grain is sold. It also distorts the market for domestic producers in countries that import U.S. grains, creating artificially low prices that deprive local farmers of their livelihoods.

A first step in ending dumping would be the publication of accurate and complete cost-of-production figures for all crops that each country wants to export, including the dollar value of domestic support measures. The prospective exporting country would then be required to impose an export tax--or a tariff could be levied by the importer--to ensure that the final sale price reflected both the cost of production and a reasonable profit. There could be a minimum threshold level exempting a country from this provision if it had a very small share of the world market--for example, 5% or less. In addition, the transparency measures required of state trading enterprises would need to be extended to include private companies with a similar or greater degree of market power.

These reforms would constitute the first step in efforts to shift agricultural policy from a narrow neoliberal framework toward embracing broader developmental policies and concerns. Under this new framework, agricultural trade would promote objectives such as full employment and sustainable development and would not be touted as an end in itself.

Sophia Murphy <[e-mail]> writes for Foreign Policy In Focus <www.fpif.org> and is the director of the Institute for Agriculture and Trade Policy's trade program. Her work includes advocacy, research, and writing related to the World Trade Organization and the UN.