Free trade could harm agriculture in developing nations

By Prapti Widinugraheni

BALI (JP): A senior agricultural economist warned yesterday that global free trade in the agricultural sector may bring about new inequalities between developed and developing countries and between farm regions with different resources.

Kim Dong-Hi, the president of the Asian Society of Agricultural Economists (ASAE), said that for this reason, Asian agricultural economists have the responsibility not only to refine economic theories but to design strategies for agricultural development in Asia that are "balanced and practical in economic reality".

Speaking at the opening of the ASAE's second conference, Kim said here that liberalized trade is generally more favorable to economic growth in the open market economies of developed nations.

The production of grains, the staple foodstuff of the world population, tends to be controlled by exporting countries. At the same time, he said, food-importing countries are deprived of their cereal-production capabilities.

"On the one hand, increased grain production in some exporting regions... may result in environmental degradation and a cost push. On the other hand, scarce farming resources -- such as cultivated land -- in food-importing countries are forced to refrain from producing due to lower (import) prices," he said.

Kim said that the effect could ultimately upset the global food market, particularly if there is unfavorable weather and if major exporters retain their grain stocks.

"In recent years, two giant cereal exporters -- the United States and the European Union -- have reduced their grain reserve stocks since the end of the trade war over grains, thanks to the Uruguay Round," he said.

The Uruguay Round was the eighth multilateral round of trade negotiations since the birth of the General Agreement on Tariffs and Trade (GATT) in 1947.

Kim said giant food exporters such as the United States, Canada and Australia "were most delighted" with the outcome of the Uruguay Round negotiations, which established a globalized food market by eliminating the trade barriers imposed by the governments of importer countries.

"The GATT's goal is to promote free trade. But, as a matter of fact, individual governments... have been guided by mercantilistic motives in the practice of trade policies," he said.

"Our primary concern after the conclusion of the Uruguay Round in 1994 is as to what extent the paradoxical behaviors of these governments will improve," he said.

Coordinating Minister of Economic and Financial Affairs Saleh Afiff, who attended the conference's opening ceremony, acknowledged that during the 1969-1974 period, the Indonesian government played a major role in the country's agricultural sector.

The government, he said, invested greatly in infrastructure while policies were designed to protect Indonesian farmers from foreign supplies of "sensitive" foodstuffs such as flour, sugar, soybean and maize.

"For virtually all significant food commodities, traders usually have had to keep a close eye on what the government was doing in order to succeed in business," Saleh said.

But over the last 15 years, the government started deregulating the economy, removing barriers and controls "which were once considered necessary and important but which we now recognize as impeding growth".

Indonesia's agricultural development, he said, will become more market oriented as international trade in food and agricultural commodities increases.

Meanwhile, the chairman of the conference's organizing committee, Beddu Amang, noted in his opening remarks that in several Asian countries, trade liberalization may complicate the management of programs to stabilize food prices.

"Poor consumers may end up less secure than they are now, unless there are innovative policy approaches," said Beddu, who is also the head of the State Logistics Agency.

The issue of free trade in the agricultural sector is among the topics being discussed in the four-day conference being attended by 200 participants, of which 120 come from foreign countries.

The conference, called "Asian agriculture facing the 21st century", will also include discussions on the sustainability and commercialization of agriculture.