Free Trade in Agriculture and Food Security

Introduction

Food insecurity has been threatened many countries in the world with an indication the high rate of hunger, 842 million people (UN, 2014). Countries that do not have a good food security system would be vulnerable to social problems. Conversely, countries with good food security system will create productive and prosperous citizens.

Some of the causes of food insecurity are limited access of food, the lack of food availability, and low of purchasing power. One solution to those problems is conducting trading activities of agricultural products. International institutions such as the WTO and FAO keep continue on encourage free trade toward developing countries. Free market means open competition. However, there is an imbalance of competition which is weak states are forced to compete against advanced states. The IMF has also imposed the Washington Consensus formula toward developing countries that was not always successful.

This paper tries to reveal some of the failures of free trade in agriculture, as well as some improvements that could be done. Government subsidies in developing countries for certain sectors (education and health care) must be maintained. In addition, the supporting agricultural infrastructure in developing countries must be prepared in advance until they really deserve to compete. Developing countries should be allowed to impose tariffs when their balance of payments extremely deficit.

Hunger and Food Security

MDGs (Millennium Development Goals) finish in 2015. The first goal of MDGs is eradication extreme poverty and hunger. Poverty and hunger have close relationship because major cause of hunger is poverty. In other words, to alleviate hunger must eradicate poverty as well. According to the data from United Nations, the number poor people in 2010 has halved than 1990 with definition of poor people is someone lived below US$1.25 per day.

However, nowadays there are still 1.2 billion people live in extreme poverty. Unfortunately, achievement in reduce of the poor people not accompanied by achievement in hunger alleviation. Roughly 842 million people are estimated undernourished and more than 99 million children under five years old are still underweight and undernourished.

Food security is prominent concept in hunger issue. World Food Summit 1996 provide concept of food security when “all people, at all time, 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” (FAO, 1996). There are many aspects which have correlation with hunger issue, such as economic and security.

Amartya Sen (1981, pp.1-8) said people starve because they do not have enough food entitlement. They are unable to produce foods, goods, or services which would enable them to access sufficient food. It means food security is not only about food availability, but also access in terms of household economic capacity and political condition in a particular country.

One of empirical examples country which has lack food security is South Sudan. Actually, South Sudan land has good soil which 70% is suitable for farming, but only 4% were utilized. Besides that, conflict with Sudan makes food distribution not smooth (Diao et al, 2012). On the other hand, countries like Singapore and Switzerland has good rank in Global Food Security Index (GFSI), fifth and sixth position respectively. Despite both countries do not rely on their national economic on agriculture sector, those countries have good infrastructure, trading system, and purchasing power (EIU, 2014).

Global Food Governance

In ancient era, most people consumed what they produced, but today more people are no longer directly involved in the production of their own food. Instead, they are connected through extensive and complex mechanism of food chain distribution (Smith, 1998, p.208).

Innovations in transportation, technology of food preservation, and logistics are supporting factors for the emergence of long-distance trade relations. Nowadays, international trades have been made interdependence relationship among food producers and consumer around the world. International trading, especially for agricultural products contain a series of laws, norms, customs, and contract which influence availability and security of food in many countries.

There are many efforts from multiple and intergovernmental to organize and coordinate the production and consumption of food in this era of globalization. Food and Agriculture Organization (FAO) is one of the United Nations bodies which aims to raise levels of nutrition and standards of living, increase production, processing, marketing and distribution of food and agricultural products, promoting rural development; and eradicate hunger.

World Trade Organization (WTO) is the international institution which regulates interstate commerce issues. WTO multilateral trading system is governed by an agreement which contain the basic rules of international trade as a result of negotiations among member states. The approval of a contract among countries member bind the government to obey the implementation of trade policies in their respective countries. Although signed by the government, its main purpose is to help producers of goods and services, exporters and importers in trading activities.

Institutions like the World Bank, International Monetary Fund, and UNDP (United Nations of Development Programme) also have contribution in terms of strengthen government capacity in food security programme. Besides them, there are International NGO, such as Centre for Food Safety (CFS) and One Acre Fund (OAF). Overall, states are important actor, how they manage their country and fulfil food needs for their citizens.

In competition there is usually a party who wins and loses. Conflicts between producer and consumer countries potentially threaten international organizations such as the WTO, bilateral and regional relations between countries as well. The relationship between food and agricultural trade gives an overview of the mechanisms of globalization. The food is also associated with many other sectors such as environment, biology, ecology, and human welfare and the globalization of world order any food could threaten these values (Cooke at al., 2008).

Can Free Trade Improve Food Security?

Trade among nations could bring good impact. According to WTO, trade gives wide range of benefits from promoting peace, reduce costs of living, until endorse practice of good governance. Like other Breton woods institutions who promote liberalization, privatization, or reduce any kind of government interference, WTO endorse free trade system.

In 1996 World Food Summit made declaration in Rome. Commitment number four state “we will strive to ensure that food, agricultural trade and overall trade policies are conducive to fostering food security for all through a fair and market-oriented world trade system” (FAO, 1996). That document explains that free trade market can help many countries which suffer hunger at that time.

The concept of free trade system has been existed since 18^th century when Adam Smith launched his book in 1776 “An Inquiry into the Nature and Causes of the Wealth of Nations”. One of concept on that book is ‘invisible hand’. Smith stated that giving people freedom to produce and exchange products (free trade) and opening markets to competition would bring opulence for nations. Following Smith theory, in 1817 David Ricardo introduced his theory named “comparative advantage”. If some particular countries do not have absolute advantage products, they still have opportunity to make trade transaction with specialized themselves in particular products.

At least there are five benefits of free trade: good quality products and prices, economic growth, efficiency and innovation, competitiveness, and fairness (Boudreaux, 2013). The logic thinking of free trade system assumes that competitive situation would bring many advantages especially availability of variant good quality products with affordable price. Each party (an individual, a company, or a nation) will compete to make competitive products. One way to make it happens, is create effective and efficient process of goods production. Besides that external factor like infrastructure and political stability also have influence.

Shortcomings of free trade in agriculture

Through World Food Summit in 1996 FAO endorse free trade. That declaration targeted the decreasing of the number of hunger people become half their present level before 2015. Unfortunately, based on global hunger index data from 1990 until 2014, only 26 countries reduced their score hunger index by 50% or more such as Kuwait, Thailand, and Vietnam. Some country like Sudan and Zambia were stagnant. Furthermore, four countries (Swaziland, Iraq, Comoros, and Burundi) even had worse condition than 1990 (IFRI, 2014).

One of countries has big score of hunger index is Gambia. Rice is the main food of Gambian people. Most farmers there are women, but they did not get much benefit from their agricultural activities. This is because the transportation, marketing systems, infrastructure and subsidies for them inadequate. Between 1966 and 1984, the government of Gambia receive aid from foreign governments and international aid agencies, but it made Gambia dependence from aid.

Starting in 1986, the government remove subsidies, price controls and import tariffs, and made several deregulation policy. This is a series of requirements which is imposed by the IMF for loans. As implication of lax regulation, frequency of import rice at low prices rose, consequences people prefer to buy the less expensive rice (Moseley et al., 2010).

Many countries involve in free trade agreements. These agreements can be bilateral type or multilateral free trade area such as NAFTA (North American Free Trade Agreement), AFTA (ASEAN Free Trade Area), and GAFTA (Greater Arab Free Trade Area). Mexico is member of NAFTA since 1994, after 20 years join in trilateral free trade agreement with USA and Canada, trade volume rose significant. However, many problems appear as well, such as environment issue, wages, and economic growth for Mexico

The increasing of Mexico GDP from 1960 to 1980 reached almost doubled. It is raising the living standards of Mexico people. In the early 1980s Mexico experienced a crisis, and handled by the neoliberal ways. Some ways were fiscal and monetary policy tight and provide a great space for the deregulation of international trade and investment fields. Unfortunately, that policy inhibits the growth and development of the Mexican economy.

Since 2000, countries in Latin America experienced a 1.9% increase in per capita per year. As a result, the poverty rate has declined from 43.9% in 2002 to 27.9% in 2013. However, economic growth in Mexico 1% below the average of the regional countries, so these results are not significant effect on the reduction of poverty, 52.3% in 2012 and 52.4% in 1994. Without economic growth, it would be difficult to reduce poverty in a developing country like Mexico (Weisbrot, 2014).

Imbalance in free trade liberalization

One of popular theories about liberalization is Washington Consensus. John Williamson (2000, p.255) reemphasized and clarified his concept about Washington Consensus. Washington Consensus focus on policy reforms that reduced the role of government, through several ways such subsidies restriction, privatization, deregulation, and liberalization of finance and trade. He said that Washington Consensus not the same with neoliberalism and market fundamentalism. It does not mean liberalize as much as you can or privatize as fast as you can.

For example, subsidies can still be given to push economic growth and has impact on poverty level reduction. Targeted food subsidies as well as the medical and educational program can reduce the number of poor people

Based on WTO Agreement in agriculture in 1994, member countries agree to ease market access and reduce or removing tariffs. Developing countries begin to open their market and removing tariff like many developed countries did. Nevertheless, developed countries had much higher subsidies to begin with. So they still have an advantage.

The industrialized countries of the OECD (Organization for Economic Cooperation and Development) have historically paid enormous levels of subsidies to their own farmers at levels that developing countries are unable to match for their own farmers (often because of obligations to liberalize their economies under programmes of structural adjustment) (Clapp, 2014, p.16).

In fact, industrial countries still maintain high protection in agriculture through an array of very high tariffs, tariffs more than 15%. On the other hand, industrialized countries market hard to access for small scale farmers from developing countries. Furthermore, they have to survive on lower or even without subsidies (IMF, 2001).

Conclusion

In conclusion, based on all the things mentioned above, it is necessary caution in liberalizing the agricultural product like rice products in Gambia. International organization and the government have to anticipate the bad impacts from its policy, and make sure that the life of local farmers is protected.

Common problems that occur in some developing countries are poor supporting infrastructure and political instability. Those basic problems have to be solved first before certain countries decided to join in the free market. Simultaneously, developing countries government could provide subsidies for basic sectors such as education, food, and health.

International organizations such as the IMF should be cautious in giving loans, so the prerequisite of loans does not deteriorate the economy of a recipient country. Furthermore, developing countries that have involved in free trade but experienced extreme balance of payments deficit as a result of too many imported goods, can perform the review to impose tariffs.

Bibliography

Smith, D. W. (1998). “Urban food systems and the poor in developing countries” Transactions of the Institute of British Geographers,Vol.23, No.2, pp. 207-219.

Sen, Amartya. (1981)Poverty and famines: an essay on entitlement and deprivation. Oxford: Oxford University Press.