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Dying for Free Trade

By Project Syndicate
Created 20/02/2007 - 07:58

Malcolm CookMalcolm Cook is program director for Asia and the Pacific at the Lowy Institute for International Policy. His previous piece on Webdiary was The Philippines' sanctuaries of terror. [0]

by Malcolm Cook

 Last year was a bad one for free trade. The Doha Round was supposed to make agriculture the centerpiece of negotiations to assuage the deep frustrations of developing countries. But, instead of breathing life into free trade in food, rural protectionism in rich countries seems to have killed the Doha Round – and, with it, potentially the whole multilateral trading regime.

Agriculture has always presented the greatest challenge to free-trade doctrine and its promise of empowering the poor, for it is one of the most distorted areas of global trade. In 2004, OECD countries spent more than four times their official development aid budgets on support for domestic farmers. In 2000, the World Bank estimated that OECD agricultural protectionism cost the developing world $20 billion in welfare losses annually. Most galling, agriculture is a small and declining part of these “rich club” economies, and the richer and larger they are, the less significant agriculture is and the more resources are wasted on rural welfare.

The practical challenge comes from agriculture’s two advantages that insulate the rural sector from global market forces and turn even the most urbane, liberal politicians into its defenders. First, farming is geographically concentrated and farmers vote on agricultural policy above everything else, greatly enhancing the power of their votes – something that few, if any, urban consumers do.

Second, protectionists have developed populist but logically questionable arguments that agricultural staples cannot be treated as tradable commodities subject to competition. Domestic farmers are portrayed as irreplaceable defenders of the social fabric and traditional values. On top of this, farming is presented as analogous to the military. Just as no government should outsource national security to untrustworthy foreigners, nor should any government permit the national food supply to rely on the supposed vagaries of foreign production.

We accept paying a high and inefficient cost for national defense against what are often unknown enemies. Agricultural protectionists, through the language of food security and food self-sufficiency, claim that the same holds true for food.

Japan has long been the paragon of rich-country agricultural protectionism. Its electoral system heavily favors rural voters. Farmers are well organized politically, and the Ministry of Agriculture, Forestry, and Fisheries (MAFF) has been a fierce defender of agricultural protectionism. Food security arguments resonate well in Japan, owing to memories of shortages during World War II and its aftermath.

Ironically, Japan now offers a seed of hope for agricultural liberalization. The country’s declining number of voters are lining up in favor of cheaper, imported food. Japan’s demographic crisis is particularly acute in rural areas, where the average age of farmers is surpassing the retirement age. One enterprising village recently sold itself entirely to a waste disposal firm after it could no longer find any young people willing to return to bucolic bliss.

Despite decades of immense government support, Japan’s rural sector cannot even aspire to feed its declining population. Food self-sufficiency in staple cereals now stands at 28% on a calorie supply basis, with no signs of growth. Farming, fishing, and forestry now account for less that 2% of the total economy and less than 4% of the workforce.

The rapid aging and decline of Japan’s rural population is fundamentally shifting Japan’s approach to food. The MAFF is wistfully abandoning the cherished goal of food autarky. Its latest strategic plan calls for a self-sufficiency ratio of 45% by 2015 and focuses instead on “securing the stability of food imports” through diversification and free-trade agreements. For decades, the MAFF’s power meant that Japan’s trading partners would not even contemplate free-trade discussions. Now the Japanese government, supporting the reformers at the MAFF, is using free-trade deals and negotiations with competitive exporters like Thailand and Australia to pursue agricultural consolidation.

Even more galling for the MAFF’s traditionalists, their food security argument is being turned on its head. Leveraging Japan’s inability to feed itself, trade negotiators now argue that Japan needs to open up to imports or face being shut out of global food markets by fast-growing giants like China. Deepening these fears, China’s free-trade deals in Southeast Asia give agriculture priority. While the logic of this argument is shaky, it taps into deep Japanese concerns about China’s rise.

The rich countries face a similar demographic challenge, while the rest of the world waits to see how their responses will reshape the global economy. Japan, due to its advanced demographic decline, is the bellwether, yet other traditional rural protectionists like France and South Korea are not far behind. France now has half the number of farmers it had 20 years ago.

That is good news for farmers and consumers around the world. Rich and aging countries may finally become promoters, rather than opponents, of free trade in food.

Copyright: Project Syndicate, 2007.

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