WTO forgets that free trade won't reduce poverty

Nurhidayat, Institute for Global Justice (IGJ), Jakarta, nur@globaljust.org

One of the many authorities on world trade and development, the World Trade Organization (WTO), always argues that trade liberalization, especially trade in agricultural commodities, under the Agreement on Agriculture (AoA) or the Uruguay Round Agreement on Agriculture (URAA), would improve income and food security.

It does not attempt to predict the direct impacts that liberalization of trade would have on the extent of hunger, malnutrition, poverty, and so on in least developed and/or developing countries. The WTO assumes that the latter would diminish as a result of more rapid economic growth.

History, however, suggests that rapid economic growth is almost always accompanied by accelerated marginalization of sizable groups in societies where access to productive resources, technology, and market is highly unequal.

In almost every WTO event including the recent WTO mini minsterial meeting in Sydney, the proponents of free trade reassert the importance of market access and trade barrier removal for both developed and developing countries.

However they did not seem to remember that this will not in itself improve access to food for the poor and diminish poverty.

Deforestation, land degradation, rural poverty, food insecurity, and debt crisis in Indonesia, for instance, remains serious. Growing protectionism by developed countries has made things worse, for example, the tax break given by the Australian government and other subsidies in the United States and the European Union.

In this society, economic growth and modernization result in the decay of traditional food systems, before alternative sources of livelihood become available for those displaced by labor- saving machinery and unequal competition for land, credit, markets, and jobs.

Modernization leads to accelerated degradation of the natural ecosystem through indiscriminate exploitation of forest, soil, and water resources in the pursuit of short-term economic gains.

Before the economic crisis hit in 1997, Indonesia was dubbed among the Asian "miracles", and Indonesia enjoyed increasing growth in real gross domestic product, from 6.3 per cent in 1992 to 7.3 per cent in 1994. With exports of US$36.8 billion in 1993, Indonesia continued to push economic growth to the limits right through 1995, before things came crashing down.

The slide in the rupiah caused severe direct and indirect impacts on food supply and on food producers. Soaring inflation and a negative 14 percent growth in GDP added to the people's woes.

The worst affected were the rural people (according to the 1993 Agricultural Census, there are over 23 million farming households in the country). The farming households were the most vulnerable to the impact of the crisis, though people in the urban areas also suffered as they were laid off from jobs in manufacturing and industry.

Even under normal economic conditions, farmers, as food producers, often received low returns compared to the final market price of their products. Now, as well as an economic crisis, the country faced other problems such as natural disasters, including a fall in the price of palm oil.

In a society where control of wealth, power, and income is highly unequal, such as in Indonesia, this almost inevitably results in greater polarization, growing rural landlessness, and poverty. The answer to these is not to weaken government intervention, remove trade barriers, and/or encourage outward oriented policy.

Instead, the answer is greater social and economic equality, especially in control of land, labor, and water, and broader access to development information, skills, and services.

If food security is a major priority, it is impossible not to talk about investment, trade policy, and productive national asset restructuring priorities. These policies are important in ensuring a national food strategy.

The state will have to play a leading role in this issue. Experience says that there is no country anywhere that has simultaneously industrialized, increased agricultural productivity, and reduced mass poverty without adopting protectionism and other forms of strong state intervention.

All governments have attempted to improve their countries' position since the 16th century, long before the World Trade Organization and Industrial Revolution came into force. Unfortunately, strong state intervention is almost impossible in an increasingly economically globalized world.

The impact on food security and economic growth of the ongoing Agreement on Agriculture (AoA) processes, in different social and economic contexts, emphasize both external and internal constrains on the implementation of effective policies to alleviate hunger and poverty.

This should help in assessing the relevance of the proposals, currently at issue in WTO negotiations, on the reduction of hunger and poverty. Proposals that must be considered are those designed to stimulate trade and economic growth of the world economy, while also reducing the negative effects of monetary and price instability, debt burden and unfavorable terms of trade for the developing and least developed countries.