i.    Pictorial to this feature

1.   Preamble
2.   Why Trade?
      Box 1. Division of Labour
3.   With Trade Comes Economies
      Box 2. What is an 'Economy' Anyway?
      Box 3. The Stock Market Problem
4.   Trade Between Countries and the Policies That Tag Along
5.   Free Trade to the Rescue?
      Box 4. The Thinking Behind International Trade
6.   Implications of Free Trade: Globalization
      Box 5. Economies of Scale and the Fight to the Finish
7.   The Actors on the Free Trade Stage
      Box 6. The Idea Behind Proposing Wild New Ideas
      CASE STUDY Making the Uncommon Common: The Multilateral Agreement on Investments
8.   The World Trade Organization
      Box 7. The Insidious TRIMs Agreement
9.   The International Influence on Domestic Policy
      CASE STUDY The Effect International Trade Bodies Have on Domestic Policy in Thailand
      CASE STUDY Asian Development Bank Forces Taxation of Irrigation Water in Thailand
10. Why Free Trade in Agricultural Products?
      CASE STUDY Putting it all Together I: Agriculture in the West and the AoA
11. The Agreement on Agriculture
12. Free Trade in Agriculture: The End of the Smallholder?
      CASE STUDY Putting it all Together II: A Look at the Sugar Industry in Thailand
13. In The End
 
 
 
 

This is a set of notes I have developed as a basis for talks held with Thai farmers on the issues of trade.  I had noticed that often the topic of ' international trade' itself is sufficiently abstract to the farmers that to talk about trade regulations and the way of thinking of trade negotiating bodies as well as trying to help them see the relevance of these fora on their everyday lives was very difficult.  These notes, then, were developed partly to help me think my way through the processes going on and finally to help me when talking to farmers about the hows and whys of international trade.

They are to serve only as an introduction.  It is a lengthy piece of writing and  so [no longer] give the whole thing as a lecture.  I had started trying to use it as a lecture but found that it was simply too long.  I have given this talk often enough now that I am beginning to get a feel for what level I can begin to talk at.  The ultimate goal of the talks staged by the NGO I work for is to address the Agreement on Agriculture (AoA) and what the AoA holds in store for the smallholder farmer.  When getting into the AoA in detail, I make use of the GUIDE TO THE AGREEMENT ON AGRICULTURE as available on this site.  These two documents, then, are used as a complementary set of notes for our talks.

I am hoping, by posting these notes, that your efforts in trying to popularize the issues and effects underlying the AoA will get some use from these notes.

Hope it helps!

JD Comtois
May, 1999
 

If there were no trade in the world, every person would have to do all the same tasks - everyone would have to grow food and make their own clothes.  If someone wanted to watch t.v. they would have to make their own t.v.s; they would have to make all the inner parts, would have to mine all the necessary metal, would have to design all those circuits.  Then, of course, they would have to develop their own electricity production system to power the t.v., finally they would have to make their own tv shows to watch...of course before taping the show, they would have built video cameras... it seems never-ending! Then once all that is done, they would still have to go to their plots of land, collect the food they planted themselves and cook it up for supper.

Now that is a hard day’s work just for dinner and a movie!

Trade, then, allows different people to achieve only a small set of tasks (build circuits or build inner t.v. parts or assemble parts into a t.v. or make hydro-electric power plants or plant food) and still be able to eat and otherwise maintain themselves by trading what they have produced for food or other things.

The term that economists have used for a very long time now that is used to refer to this allotment of tasks to different individuals is division of labour. Division of Labour necessitates trade and trade necessitates division of labour - you cannot have one without the other.  Whatever the force behind the evolution of this division of labour, its results are that now there are many different tasks done by many different people.  Trade makes our lives easier by reducing the number of tasks we have to do in a day.  But trade has its downsides too.
 

Box 1.  Division of Labour

It is argued that this division of labour - different people doing different tasks - has allowed for tremendous technological advances.  Those people who support this argument feel that division of labour makes people more ‘efficient’ because this way people do not waste time on things that they are not good at.  In other words it allows those people who are technological wizards but no good at planting vegetables to focus on developing techonological toys and tools AND then at the end of the day, sell those goods to one person and then turn around and use the profits from that sale to buy supper.  Other groups argue that ‘Industrialization’ played a key role in forcing a division of labour.  They say the politics and profits of industrialization over the years actually forced people to earn a living outside of the farms.  The profits of the factories were much higher than profits from farming.  This made the value of land increase in the areas close to the factories (because the factory owners were willing to pay more for land as they knew they could make more money converting farm land to factory land).  Having no land to produce food, farmers had no choice but to work for those factories so as to get the money needed to buy food.

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The thing with trade is it is motivated by profit.  People want to be able to sell things at a high cost and buy things at a low cost.  The higher the price the tv maker can get for a t.v., the less he has to work to feed himself and/or buy someone else’s video machine.

If there is only one t.v. producer then that producer can charge a very high price and the consumers, if they really want a t.v., have no choice but to pay that high price.  Such a production situation is called a monopoly.

How can the t.v. maker be forced to keep prices reasonable?  Well - we can introduce competition by encouraging several t.v. manufacturing companies to exist.  This way if one t.v. maker raises prices very high, then the farmer will go to the other makers to buy the t.v.  If the first company wants to continue making at least some money, then they will have to lower prices equal to the other companies to attrack the buyers.  BUT these companies could get together and negotiate an agreement that ALL t.v.’s will be sold at a high price - that is they could form a cartel.

Governments often have the role of creating policies that guard against monopolies and cartels.  Such policies might include low-interest loans to encourage the development of competitive industries in the market place.  A different policy approach could be to reserve the right for government to  intervene in corporate take-overs so that not all small-scale t.v. producers are bought up by larger companies.  Finally, the government may set price limits or special taxes that force or encourage prices to stay low.

On the other hand, government may actually set policies that harm the market (the consumers) but increase profits of various companies.

Either way, such policies are called domestic policies and they are concerned only with trade within a country.

So, with the development of increased trade inside a country, some governments saw a chance to increase their riches while in more democratic countries, governments were requested to control business and/or create jobs or support the economy in general.
 

Box 2. What is an ‘economy’ anyway?

An economy is simply the process of buying and selling goods and services - or more simply, it is trade.  It is people buying goods from producers; people buying a company’s stocks in the stock market and a company employing people.  This way companies can grow because they have made money from selling goods and stocks.  Once they grow they can sell yet more goods and employ even more people.  Those new employees now have money to buy goods from producers and buy stocks in companies.  Each time the cycle completes a circuit, it is hoped that the volume of money involved has increased (it is hoped that the economy has grown). Sometimes sales slow down and companies close so fewer people have money to buy goods and stocks which mean even more companies close and then yet more people have yet less money to spend.  This situation is referred to as a recession - the amount of money involved is reducing and the economy is receding.

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Box 3.  The Stock Market Problem

Today the stock market is a driving force in economic growth.  This is because when people buy stocks they are buying a portion of a company.  The stockholder hopes that the money they have traded for the stock will give the company the ability to grow and by growing be able to increase profits.  Since the stockholder owns part of the company, they also own part of the profits.  The more profits the company makes, the more money the stockholder makes.  Today stockholders put a lot of pressure on management teams to show at least 25% annual growth; anything less and and the owners of the company - the stockholders - threaten to fire the management team. The problem, of course, is that domestic markets provide only so much space to grow.  Eventually anyone who was ever interested in buying a product or service from that company have already bought it - the market is "saturated".  So companies begin to look to other countries to sell their goods.  This has made the West look to the East as a market to sell their goods.  The stock market’s demand for at least 25% annual growth has forced company management to look for ways to expand business into other countries. One way management looked was to lobby government to make international trade easier by negotiating special trade agreements with countries that looked like promising new markets for their products.

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Today a large portion of many countries’ economies comes from international trade.  This has developed because the domestic market for a given product or technology is too small to make sales revenues exceed production costs (no chance for profit) or sometimes the domestic market is simply already saturated so there is no potential for growth.

Also, in today’s marketplace, it often happens that a useful technology is very expensive because of the money invested for its development.

How can a government help its company to sell the expensive technology to poor nations, or simply to help its companies realize better profits?

Often the government in the exporting country will agree to give some money to that company so that it can lower the cost of the product for the buyer but still maintain the same profit.  This is called export support or export subsidies.

How can the government keep this up without going broke?  The answer is partly that national taxes collected by the government go to support these kinds of subsidies (public money often goes to support private companies).  Hopefully they do this in hope of helping domestic business but often it is a result of corrupt deals between government officials and business.

Another part of the answer is that the exporting country will find a way to gain revenues by imposing various taxes on imported goods.  Such taxes are called import tariffs or duties.  In this manner, a government hopes to support its own indsutries and business while making back some of those expenses by charging taxes on other countries exports coming into its country.

As trade between countries expanded and shipping of goods became easier and cheaper and technology began growing at faster and faster rates, small, poorer countries could not keep up.  Suddenly these countries found themselves unable to compete with larger, richer, more technologically advanced countries.  T.v.’s from the U.S., for example, might be cheaper and better than t.v.’s from, say Thailand.  So t.v. companies in Thailand could be going out of business fast.

To protect the whole country from going out of business, a government has several options other than just export supports:

¤ It can refuse to import goods from other countries - so that if a Thai wants to buy a t.v., he/she can only buy one from a Thai company.  This ensures that foreign companies do not crush local industry and is called import substitution.

¤ it can allow imports but give domestic companies various support such as reduced taxes or cheap land to build industries so as to help domestic companies stay competitive (domestic support);

¤ almost the same as the second point, it can make an exporting country pay higher taxes (duties or tarrifs) on goods being sent so as to make the ultimate cost of the good for the local consumer too high to be attractive (the local consumer will prefer to buy locally produced goods);

¤ a mix of any of the above measures to provide the best possible protection for its economy while allowing it to grow.

Such moves by a government are called trade restrictions - measures that reduce the amount of trade between countries.  Because these restrictions protect local companies from going out of business they are also called protectionist measures.

Trade restrictions or protectionist policies usually work very indirectly.  Such policies rarely directly say YOU CANNOT IMPORT BANANAS FROM INDONESIA but rather they put difficult to notice, indirect incentives in place to influence our decision making.  They may not directly support domestic business but rather indirectly discourage the support of foreign business.
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So up to this point in our short review of trade history, because of trade restrictions and other protectionist measures, countries are facing limited access to foreign markets ... what can countries do to gain access to these other countries’ markets?

Often richer countries have technology or goods that the poorer countries need - for example tools of war (planes, boats), electricity-generating technology or other infrastructure technology.  What happens now is that the richer exporting country says ‘We won’t sell you the planes or the electricity generators unless you let us sell our t.v.s and tulips as well.’

Even more tricky is the use of aid money as an incentive to open markets.  For example assume Japan has given Thailand millions of dollars for road building.  Now when Japan comes to Thailand looking to sell Japanese automobiles, the Thai govenrment cannot very well impose very high duties against those vehicles - that could be like biting the hand that feeds you.

These kinds of situations have resulted in thousands of agreements, measures and tricks by and between importing and exporting countries.

It got to be very confusing for companies of any one country to try to figure out what other countries they could most easily do business with. So businesses starting demanding that their governments make it easier to do business.  They proposed to their governments that all this messy and very confusing tangle of country-to-country (bi-lateral) agreements be replaced with a set of agreements common to all countries (multi-lateral agreements).

Many governments across the world agreed and this is what gave rise to the General Agreement on Tarrifs and Trade (GATT).  GATT is a collection of rules and regulations that state how much a country is allowed to tax imports and how much a country is allowed to subsidize exports (or as some prefer to say: GATT controls governments ability to impose trade restrictions).  It also contains various agreements to try to get countries to open up their borders to trade AND to try to get governments to even reduce the amount of subsidies and duties.  This latter feature of the GATT is what has earned the process the name free trade - there is reduced or eliminated cost to getting access to other countries’ markets.

Free trade is really trade free of duties/taxes price supports and other measures that a government can use to undersell other countries products.  The vision (although it has not reached this point yet) is to not have any barriers what-so-ever; anyone who wishes to sell something anywhere can do so without encountering any restriction from any government.  Not a single country in the world is prepared to have completely free trade.  In the end, all countries are afraid of it because no-one knows just where it is going to lead. So there is only ‘freer’ trade.

If we have equal trade agreements across the world, then suddenly the only way a government can protect its t.v. manufacturers from going out of business is to ensure that they have the most up-to-date skills and know-how.  This way, compared to t.v. manufacturers in other countries, they can produce t.v.’s relatively cheap OR produce t.v.’s that, compared to other t.v.’s are technologically superior and so hopefully attract enough buyers (and we this is termed as having a comparative advantage).

It could be argued that domestic supports and export supports generally help prices stay low because it keeps companies from going out of business and the more companies there are producing an item (or the more farmers there are producing rice), the more of that item (the more rice) there is in the market place.  This is the same idea of competition as was discussed above.

In this situation, those countries that cannot afford supports cannot compete in world markets (their asking price would be too high).  So what do supports and free trade mean, then?

Free trade enthusiasts argue that free trade, while it may cause some local companies or farmers to go bankrupt, will not reduce competition because the number of competing companies from many other countries entering the free trade circle (joining WTO) will maintain competition levels and keep prices low.  While this may or may not be exactly true, the fact remains that someone or some company or some country is going to be hit very hard.

Another question is just how many many companies could actually compete against those broadly diversified Western conglomerates who have the economies of scale working greatly in their favour?’   Of course no country wants to be the one whose industries goes bankrupt but no country can guarantee that its producers or its industries will not be hit hard by the competition of free trade.

The bottom line is no-one really knows what will happen.  Economic planning is a guessing game.  A very well known economist and author has said ‘Economic growth is about as well understood as the human mind.’ There are a lot of methods and systems to try to guess but in the end it is a guess and in the end, no-one knows how it will affect the country or the economy.  So no country is really for completely free trade.

Why, then, is free trade being pushed so heavily?  The initial argument promoted for pushing free trade was to show that expansionism (invading other countries) was not the means to avoiding economic stagnation (was not the means for economic expansion).  That purpose, however, has been forgotten (if indeed it ever was a genuine vision of the crafters of free trade).

A more likely explanation lies in the largely accepted observation that the West stands to gain the most from free trade.   The fact that it is largely the West that pushes for free trade certainly supports this observation.  The West is now in a position whereby it has free trade agreements giving it access to the East’s raw materials at a low price and then from those cheap inputs it does some processing and turns to sell those value-added (processed) goods back to the East or to other Western countries.  The East, meanwhile, looses out on the improved profit margins of those value-added goods.  The East (as a result of the wilely interpretation of the trade agreements), also lacks the advantage economies of scale offer those Western companies because it cannot as readily access the Western markets.

Such selfishness is not a means to the ending of wars.

The East, simply, is unlikely to be able to compete very much and so it is argued that the East has become but merely a source for inputs (raw materials) and a market for the final products.  I suspect it would be quite revealing indeed to calculate Thailand’s terms of trade (the gains or losses) from the sale of raw of materials versus the loss of Thai earnings to imported, value-added (processed) goods purchased by Thai consumers.

The present economic turmoil in Southeast Asia has been created exactly because of the existence of free investment (an aspect of ‘enhanced’ free trade).  Thailand and the Southeast Asian region has been on the brink of or largely in social unrest since the collapse caused by this free investment.  This evidence stands as a testament that free trade as a cure to political unrest is unfounded.

Thailand, however, is a Southern nation that is heavily pushing for free trade.  It is a suspicion of several NGOs that Thailand is negotiating for free trade while not knowing the full impacts such agreements will have on their country. This is supported by the fact that government data is often lacking or is collected in a questionable manner.  This is true of much government procured data across the region.  It is further suspected that this information is ‘corrected’ by data contributions from large exporters that stand to profit from free trade.

As a last point,  the confusion of all those various bilateral agreements that was supposed to have been cleared up by the GATT is not gone, it has just been rearranged and renamed.  This will become apparent when we look just a little bit closer at international trade under GATT.  The agreements are written in such a vague manner that there is a lot of room for individual interpretation.  This means that the powerful nations (those nations that may stop providing infrastructure technology and other aid if trade is restricted by poor nations) will do their best to interpret in their favour just how exactly the agreements will be implemented.

Such is the state of ‘free trade’ today.
 

Box 4.  The Thinking Behind International Trade

The idea of vastly ‘improving’ international trade was popularized largely after World War II by the then Bretton Woods Institutions which eventually begat the WTO.  Free trade was pushed as a means of global stability.  It was promoted that expansionist nations were expanding specifically to avoid economic stagnation - domestic markets were saturated and sources of inputs were drying up. Lee Kwan Yew, quoted on the subject of greatly enhanced international trade captured the thinking pretty good: "It is the only way you can keep the world peaceful, where people cooperate and compete with each other economically without going to war.  ... "That made possible a Germany where large numbers of Germans were cramped into a smaller area.  And large numbers of Japanese left the Asian mainland and were cramped into a few Japanese islands.  The Japanese and the Germans were told, you stay behind your lines and we will exchange goods and services.  You can invest in me; I can invest in you.  We will cooperate; we will compete. And the Japanese and the Germans were able to flourish and grow without causing wars in the world.* Unfortunately, other countries were quite able to cause wars even with greatly liberalized trade.  In fact - some argue that it causes wars.  These people say that rich Western nations feel threatened by other countries that refuse to abide by the liberalized trade rules.  It is felt that these Western nations, aggravated by the stubborness of non-compliant nations, will more readily engage in hostilities - using any excuse they can find to ‘encourage’ those non-compliant nations to play by the West’s rules. *from ASIA RISING by Jim Rohwer,  Butterworth-Heinemann Asia, Singapore, 1995.  p. 318.  Implications of Free Trade: Globalization

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In the opening page it was explained that trade has allowed people to pursue different types of interests- the division of labour.   Because of this, people left behind the jack-of-all-trades type of existence and now we have many masters of specific skills.

Today there is happening a similar revolution.  We call it globalization.  At the heart of globalization is greatly increased trade between countries fuelled by a reduction of the cost of access to other countries’ markets (free trade!).  As the boom of international trade provided new riches for many countries,  more and more goods were produced and as more and more people started buying these goods (i.e. as economies grew), more and more countries wanted a piece of the action and so started producing some of those goods themselves to sell (import substitution).

What had resulted is many countries producing many of the same goods to sell to other countries or to sell within their own borders.  This is somewhat similar to many persons doing all the same tasks except it is many countries doing the same tasks.  It is like there has been no division of labour between countries.  If all countries are producing the same goods, countries will not be able to sell to other countries (without division of labour, there can be no trade).

The recent economic boom from international trade has created an economic bottleneck - too many producers, too few consumers.  Free trade is hoping to ‘correct’ that.

Globalization is forcing an effect something like a division of labour but for countries instead of people.  With division of labour for people we have said that they will sell what they can produce and buy what they need.  The same is true for division of labour for a country.  Free trade rules and regulations have forced industries of all countries into a competition for the most efficient production to keep costs low - it is forcing countries to focus on those production methods or products they are best at and leaving the remaining production methods/products to be exploited by other countries.  Remember, as introduced in the previous section, this ability to produce a product better than a second country is termed comparative advantage - i.e. this country, compared to another country, has the advantage of being better at producing the product.

Comparative advantage has very important implications for countries: if you cannot produce cheaper than other countries then let them produce it and your country can just buy it from them.

It is now important to look at the effects of division of labour for people; there were many who were unable to find tasks that they could do in exchange for food and shelter.  So having no farmland to produce food, they went to the big urban centers looking for some means of getting money - many were forced to rummage through garbage looking for bottles and scrap paper that could be sold for the smallest sums of money.

But at a country level, what will a whole nation do it if cannot adequately compete under a free trade system of comparative advantage?  Will the whole nation move to some large urbanized (industrialized) nation and become that nation’s garbage rummagers?

This effect of comparative advantage has been to reduce the number of producers and increase the number of consumers.  More and more people across the world are buying the same products - coke, levis jeans, nike shoes, Pioneer seeds, Monsanto chemicals, "Bt cotton", etc...
 

Box 5.  Economies of Scale and the Fight to the Finish

There is a fight to the death going on in international trade.  The tremendous increase in the corporate struggle to survive under conditions of international competition and the stockholder’s demand of perpetual 25% annual growth has forced corporate management teams to do their best to force the competition out of business. The argument that free trade will decrease prices is based on this reaction.  Many companies have calculated that they can charge prices only barely above cost (a low profit margin) as long as they can sell very high quantities of the product; if they only make a profit of 0.0001US$ per item but sell one million items then they have made a profit of 100US$.  This small bit of mathematics is what is termed economies of scale;  very low per-unit profit margins are acceptable as long as huge sales can result in an acceptable level of net profit.  Before a company can start operations it must be able to sell cheaper than its competitors and this means a very low profit margin and a very large market. This is part of the reason today’s governments push for free trade - to ensure the markets of as many consumer nations as possible are accessible to its country’s start-up industries.    To make matters even worse for start-up companies, many large companies are able to begin production of a product to compete with the new company and sell it at a loss for many years because that large corporation’s profits from other activities can make up for the loss on the new product.  In this manner, many start-up companies are crushed before they even get off the ground.  That large company, however, needs access to a very large market for its old products so as to be able to profit adequately and so thereby be able to support new production ventures and squeeze out the competition.

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There are some very important groups that play a role in pushing Free Trade:

World Trade Organization (WTO):  This organisation sets the vision for global free trade.  They also construct the various free trade agreements and other devices that encourage free trade - it is the ‘GODFATHER’ of free trade and it will be looked more closely in the next section.

International Monetary Fund/World Bank/Asian Development Bank (IMF/WB/ADB): These (among others) are international financial institutions that provide governments loans for development projects.  They are arguably the ‘enforcers’ - the Godfather’s accomplices that ‘encourage’ countries to implement the free trade agreements.  They do this by arranging bail out loans for economically hard-hit countries with the conditions that they implement the WTO’s free trade vision or they don’t get the money.

The WTO, IMF and WB all grew from an initial grouping of organizations initially called the Bretton Woods Institutions.  Together they play the very important role of introducing new ideas and pushing new limits in free trade.

Asia-Pacific Economic Cooperation (APEC): A collection of countries that all have a coastline on the Pacific ocean.  This group, largely controlled by the US, is used to push the free trade VISION as well.

Association of Southeast Asian Nations (ASEAN):  This is a collection of Southeast Asian countries only.  They are hoping to build free trade in the area as well as build a stronger voice in global discussions.  If this group can more strongly coordinate their vision and efforts, it could prove to be the means by which the region strengthens its voice in free trade negotiations.  Each member country is relatively weak and if they try to oppose the visions of groups as strong as WTO, APEC or the WB, etc, they will fail.  But if ASEAN stands up and collectively says what they want, the world may well listen.  This grouping may be of increasing importance in the future.
 
 

Box 6.  The Idea Behind Proposing Wild New Ideas

The idea behind new ideas is to make commonplace that which is perceived as novel and shocking.  Once that has been achieved then plans can go forward.  Once the uncommon idea has successfully been made common, it will work itself into regular discussions in that topic.   Ideas once seen as heretic will eventually become acceptable talk and may even be incorporated into policy. As said by Penelope Fitzgerald (as quoted): "It's a very good idea for an idea to be commonplace.  The important thing is that a new idea should develop out of what is already there so that it soon becomes an old acquaintance."* This is the strategy of the WTO and other free trade institutions - they know the human psyche and play by its rules.  They introduce tremendously shocking ideas and let it sit around awhile.  Then other non-WTO groupings (but still WTO linked) present a similar but distinct idea and it is much more readily received. *from THE MOTLEY FOOL INVESTMENT GUIDE by David and Tom Gardner. Simon and Schuster, New York, 1996. p. 76

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CASE STUDY Making the Uncommon Common: the Multilateral Agreement on Investments

Some say the Multilateral Agreement on Investments (also known as the MAI - a free investment proposal that met with tremendous resistance) is dead but in fact it is very much alive and well in other forms - kept alive by the very countries who initially reacted with incredible resistance.  Today the talk of liberalizing investment is as common as talking about the weather.  This was not so even 5 years ago. Back then to ask a nation to allow foreign companies equal access to all financial, bureaucratic, human and natural resources as was allowed domestic firms was heresy.  Today, however, the Individual Action Plans (IAPs) of APEC members almost all talk about such freer investment across their borders. ASEAN itself is trying to take the idea even further amongst its own members (and Thailand is the trail-blazer).  As regards the MAI then (and contrary to the belief of some) the financial institutions along with the powerful trade organizations that pushed the MAI have succeeded in their endeavours; they have made the "unheard of " completely commonplace. This new idea of an ASEAN Free Investment Area developed out of 'what was already there' so ASEAN members were not shocked by its proposal - in fact it has become an old acquaintance - or, to look at it from a different perspective; the implementation of the original and very bold vision is taking care of itself through the fact that it had been made commonplace.

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Now it is time to take a closer look at free trade regulations.  The largest and most well-known is the GATT (the General Agreement on Tariffs and Trade as first described under the heading Free Trade to the Rescue?).  It is a collection of agreements and goals for reducing the number and size of trade restrictions and/or domestic support.   Many countries across the globe have agreed to work toward these goals (and so are referred to as Member Nations).  Earlier it was said that the messy tangle of agreements and arrangements that existed before GATT were not cleared up by GATT - they were just rearranged and renamed.

This is becase the actual text of the GATT is not exactly clear as to who must do what.  This has left room for many countries to try to twist the meanings of the agreements to once again maximize their profit.  So it was decided in 1994, as part of the Uruguay Round of free trade negotiations (the round that gave rise to the Agreement on Agriculture or "AoA") that a system of monitoring and enforcing compliance was very necessary if this body of agreements was to not fade away.

Instead of establishing an international organization removed from the games of profit these countries are addicted to, a number of committees were formed by drawing from people who were directly involved in these profit games in the first place.  This is like making a police force by selecting inmates from a prison to be the police.  These people are not going to find themselves guilty of any wrongdoings!

But that is what was done.  So the new name for this crazy police force is THE WORLD TRADE ORGANIZATION.  Their code of conduct is the GATT.  They have said to themselves that they are allowed to inspect, monitor and pass arbitration on Member Nations.  Combining this with the WTO’s very close relationship with the various financial institutions conditionally loaning huge sums of money to WTO member countries, the WTO has made itself a monitoring agency of domestic policy and given itself the power to penalize those countries whose various domestic and international policies rub the WTO the wrong way.

As far as agriculture is concerned, there are five key agreements of the WTO:

ü Agreement on Agriculture (AoA). The AoA concerns itself with reducing various policy tools such as duties and tariffs and export supports that are used to protect or strengthen domestic agribusiness.  It will be given closer consideration in a later section.
ü Sanitary and Phytosanitary Standards (SPS - a sub-section of the AoA).  The SPS sets various floors and ceilings on content and quality of produce.  The concern of the SPS is that many poorer nations do not have the means to meet these standards and so will be forced out of the processed-foods (value-added) markets.
ü Trade Related Investment Measures (TRIMs).  The TRIMs agreement is really insidious little inclusion in the WTO that mimics the effectively dead Multi-lateral Agreements on Investment and forces open the doors of WTO member nations to foreign nation’s unrestricted business activities inside its borders (see Box 7).
ü Trade Related Aspects of Intellectual Property Rights (TRIPs).  As regards agriculture, the TRIPs agreement gives the companies the legal right to patent life.  Furthermore, it also is home to the now infamous clause 27.3(b) (the SUI GENERIS clause) - a clause that might prove to be a way out for those nations which do not agree to patents on life.
ü Dumping.  This is a clause that talks to all traded products in general and so then relates to the dumping of agricultural products into other producer nations thereby affecting domestic markets.
 

Box 7.  The Insidious TRIMs Agreement

Of the WTO agreements most directly affecting agriculture in Southeast Asia, TRIMs is the least noticed but one of the most insidious.  The reason for this is that, especially in Southeast Asia, the focus of international trade bodies is on creating opportunities for small and medium enterprises.  This is pulling the focus of governments like Thailand away from the small farmer.  TRIMs is one tool in making it that much easier for small and medium enterprise (SMEs) to get a foot in the country by ensuring that foreign business has equal access to all trade opportunities as do domestic companies. In pushing for this feature in free trade, the WTO does not act alone.  APEC is heavily focussed on liberalized investment (as is ASEAN for that matter) and Thailand is without a doubt the Southeast Asian trailblazer on this trek!  TRIMs of WTO and partly the MAI were platforms from which the Individual Action Plans of APEC members (written following  the Manila Action Plan of APEC [MAPA]) were launched.  Together, these APEC and WTO efforts, all supported by the heavy hand of the financial institutions, are working to force open trans-national investment in agriculture (among other industries). "These measures focus essentially on facilitating trade and investment and on making the conduct of business in the region easier, cheaper, faster, more predictable and transparent.* As a result are whittling away any sovereignty Southeast Asia ever had over its food.  Once agriculture is given up to corporations and the force of the WTO, governments will have little authority to make moves to protect domestic agriculture without suffering some kind of ‘fine’ or trade sanction from the WTO. *from "Introduction to MAPA" as found in the APEC website

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Thailand is a Member Nation of the WTO, APEC and ASEAN.  It has received substantial loans from the International Monetary Fund (IMF), the World Bank (WB) and the Asian Development Bank (ADB) among others.  Any policy that Thailand now makes that may be seen as a trade restriction by the any of these organisations will be followed up for correction by these organizations.  This does not mean just policy for trade between countries - but even domestic social policies affecting the success of the vast majority of the farming citizenry of Thailand itself.

Assume milk is expensive. The government may be afraid that if prices rise too high then the citizens will be angry so it says to the farmers that it will pay 10% of the cost of cow feed transport and it will pay 10% of the cost of transportation of milk as it leaves the farm.  Now because the price of production and shipping is lower for the processor, prices of milk is lower for everyone too.  That means that it is a domestic support.  BUT since milk is also an ingredient in many many exported food products, it is also an export subsidy as it helps prices of exported Thai food products remain lower as well - just as it did for Thai consumers.

Under the AoA, this would be illegal and other member countries could lodge complaints to get the supports eliminated.

This way, domestic policy issues - such as making Thai consumers happy with low milk prices is now a more difficult policy to establish.  For many nations across the world domestic policy is now delimited by international trade regulations.  A country is now less free to do as it wishes inside its own borders.

It is important to understand that the development of GATT and the WTO did not follow democratic principles.  It was developed by a few powerful nations and then presented to other countries with the ultimatum ‘Sign and accept this or be left out of international trade circles’.  Many countries had little participation in drafting the ‘agreements’ and had but little choice in accepting that which was written.  This is particularly true regarding the Agreement on Agriculture and now policies within national borders must also abide by these non-participatory ‘agreements’.

Before a government can set its own domestic policies, then, it must make sure they do not have effects on international trade in line with the contents of WTO or else it may face fines and other actions from the WTO.  Because of this fact, some people are saying that free trade is taking away nations’ sovereignty.
 

CASE STUDY  The Effect International Trade Bodies Have on Domestic Policy in Thailand: Let Agriculture Service the Loans

Thailand's Ministry of Agriculture and Agricultural Cooperatives (MAAC), in the wake of all the aid loans accepted by Thailand, developed a set of economic policies for agriculture (that in itself might cause a few eyebrows to raise).  What the policy proposals contained was completely in line with improving the domestic return on investment in the agricultural sector.  Now, while such an effort is ok for cash-crop farmers, it is not appropriate for the many subsistence farmers who are labouring to produce food for home consumption and not for sale. This body of policy proposals tables the idea of taking land ill-suited to rice out of rice production and putting it under vegetable, flower or other high foreign-exchange earning commercial crops (to service all the loans, of course).  How government will institute this is by various incentives in loans and other supports for those farmers who plant the high income earners over such things as rice. What has to be understood is that those farmers who are owners of land ill-suited to rice are going to be trapped in a catch-22:  If one keeps in mind that rice is the very heart of the Thai diet, then those farmer who own land ill-suited to riziculuture are already hard-done by.  The fact that they own poor land already means they probably cannot afford to buy rice and can only barely produce it.  These farmers usually are non-commercial because they cannot afford the inputs. It will be these farmers that will suffer under the various dis-incentives that will be put in place to take their land out of rice production.  Gone may be the low interest loans, free inputs or whatever other support and services once available to them through government extension and outreach.  Those farmers' only alternatives will be to sell their land to those who want to plant flowers for sale or to plant flowers themselves and hopefully, if the market for flowers does not disappear, be able to buy food for their families. Furthermore, the body of economic policy proposals by the MAAC also talk of increasing loans available to the private sector (in line with ‘economic cooperation’ agreements under APEC) to increase opportunities for and enhance the existing environment of SMEs.  The trend then becomes very obvious. The loan stipulations drafted by the financial institutions are forcing the government to forsake their 'low-productivity' farmers for commercial interests.  This, of course, is all to the immediate goal of servicing the loans.  It is all to the ultimate goal of the financial institutions to create earnings opportunities for Western business and venture capital.

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CASE STUDY  Asian Development Bank forces taxation of Irrigation Water in Thailand

The past 5 months have been very exciting as regards water rights in Thailand.  The awareness of the effects of drought across the region was so acute that the Thai government began to talk of stopping rice export altogether to ensure maintaining adequate domestic supplies should the regional climatic situation persist. Then low rainfall started becoming a concern in Thailand itself.  The second rice crop (only possible in the central region of Thailand -  an area that ultimately receives the water from the northern and northeastern watersheds) was threatened by low rains.  Farmers were so concerned about their crops and the heavy investment made that they were pumping streams dry. Farmers downstream were up in arms.  Their crops had no water at all.  There was in fact so little water reaching downstream areas that natural limits of the saltwater reaches of the estuaries were creeping upstream - there was no flow downstream to oppose the inland flow of saltwater! Farmers demanded that the government do something to control upstream water consumption.  It was ultimately declared by the government that it could do nothing as the state never claimed ownership of the water in natural waterways.  The government's hands were tied. Then out of nowhere came a loan offering by the ADB for US$300 million for 'improvement' of the agricultural sector.  One of its key stipulations was the imposition of a water tax.  The thinking is that this way the government could get money back from the farming families - money that could go to paying off all the loans the government has come to accept for bailing out business.  If accepted, farmers would have to pay per unit volume of irrigation water consumed. Unheard of!  Heresy! Never in Thailand's history did anyone ever talk of such a tax. And how could such a tax be put upon farmers by a government that does not even 'own' the water in the rivers?  Does this mean that farmers along natural waterways could pump the streams dry before letting water reach the irrigation channels developed by the government? Could those farmers then sell the water to farmers downstream?  Could they sell it to the government irrigation systems? Now there is talk of inviting the private sector into the irrigation business.  Is that perceived as even worse by the farmers?  Are they being forced to accept the lesser of two evils?  Suddenly the idea of a water tax maybe is not so bad - not so foreign a concept - given the alternative idea of a private firm coming to knock on their doors once a month. The idea behind new ideas!

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Looking around Southeast Asia, it can be quite difficult to understand why it is necessary to include agriculture in free trade.  Almost everyone we know are farmers.  Thailand produces all the food it needs.  It imports very little of any foodstuff.   Why would it be interested in free trade?  Could it feel that the opportunities presented by free trade hold great potential for its farmers?  Probably not.

First of all, it must be understood that as a member of the WTO, Thailand did not have a choice in accepting the AoA.  The US and the EU wrote the agreement and then presented it to the WTO members saying this is an international agreement we have written.  IT will become a part of the WTO so lets review it together and then agree to abide by it.  But there was little negotiating to be done.  It was written by the US and EU for the US and the EU.
 
 

CASE STUDY  Putting it all Together  I: Agriculture in the West and the AoA

For the most part, agriculture in the US belongs to huge corporations. This is also largely true in the EU.  In the US there are very few farmers left in the country.  The few that exist own huge pieces of land but plant under contract.  Western farmers generally own pieces of land that are measured in square kms.  What does this mean with respect to needing free trade in agriculture?  To find the answer to this question we have to think about the economy and keep in mind economies of scale. Such large pieces of land mean that large machinery must be used.  Farmers in the West spend millions of dollars a year on farm equipment.  With such a low number of farmers, companies that sell farming equipment have access to only a relatively limited market. There also exist huge multinational companies like Monsanto and Pioneer that produce seeds and chemicals and employ 1000’s of people.  The farmers in the US and EU always buy their seed from these companies.  They have such large plots of land to plant that the effort of collecting and storing their own seed makes it preferable to buy seed rather than collect and store it themselves.  This is an expression of continued division of labour - farming has been divided into seed producers, seed collectors and storers and finally planters (farmers).  In Southeast Asia the farmer often does all of those tasks.   Finally, Western farmers also have to buy chemicals and fertilizers from these companies. Now, these farmers must borrow large amounts of money to be able to buy the machinery and buy the seeds and the chemicals.  Each year they borrow several hundred thousand dollars just to be able to plant the crops.  If the price drops horribly, the farmer is dead - there is no way the farmer would be able to pay back the loans.  So they all contract farm.  This way they are guaranteed a price by the company. The very important part of this whole cycle is that the companies that hold the contracts for the yeild are the same companies that sold the seed and chemicals to the farmer.  These companies have already made huge amounts of money from the sale of seeds and chemicals.  But the company makes contracts to buy the crop because this way they ensure a market for their seeds (the farmer feels secure in borrowing all that money to buy plant the crop). The tricky thing is that the seed and chemicals used are so engineered that they result in huge crop yields.  There is far more food produced in the US and EU than can ever be eaten by their populations.  Too much extra food in those nations means low prices charged to the consumers which means the company that owns the food by contract makes less profit. This is what led to the idea of free trade in ag goods.  They look at developing countries as huge markets.  They want to sell their produce here.  This way they can reduce the amount of food on the market in their own countries (get a better price) AND get food sale revenues from Southeast Asia too! The concern is that these companies have already made a sizeable profit from the sale of seeds and chemicals.  They have also made some profit from the sale of food in their country as well.  When they come to Southeast Asia to sell food they could actually give it away (remember the economies of scale).  This holds tremendous danger in driving farmers out of business in Southeast Asia. This is GLOBALIZATION of agriculture in Southeast Asia: fewer producers, more consumers and everybody eating the same stuff.

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Today’s economies are very complicated but their effects on the small farmer are quite predictable.  A look at the situation of agriculture in the West is enlightening.  Many farmers in the West are really nothing more than hired hands except that they usually own the land the produce is planted on.  Companies like AgroEvo and Monsanto sell the farmer the chemicals and the seed.  The farmer plants the produce and uses the inputs under contract with the large companies and so is guaranteed a price for the crop.  They must use the company’s seed and inputs and they get the loans for these things from banks.  The loans are largely approved because the yield is essentially going to get a good price pursuant to the contract and the various crop insurance the farmers have access to.

At this point, the company has already made a substantial profit from the sale of the various inputs.  Come harvest, they are going to make even more profit on the sale of food.  These companies could give away food and still make a profit.  Of course they won’t give away the food in North America or Europe.  They will sell at a reasonable profit.

Now, when these companies increase trade activities in countries of Southeast Asia, however, they may very well begin to almost give away the food.  The host nation’s government would very much benefit from reduced food prices as the millions of poor urban dwellers in the region’s various large cities would suddenly be millions of happy voters.

It would  also slowly force farmgate prices down proportionately and this spells disaster for many of Southeast Asia’s small-holder farmers.

It is through globalization and economies of scale that international trade in agriculture will spell the end for small-scale sustainable agriculture across the globe.  Many of the remaining small-scale farmers in the West are also complaining bitterly.  Unfortunately there are so few of them left that the government’s tiny ears are failing to hear the cries of distress.
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The Agreement on Agriculture (AoA) agreement was tabled as a trade ‘agreement’ during the infamous Uruguay Round of trade negotiations in 1994.  It is a body of measures to reduce domestic support, export subsidies and increase market access of/pertaining to agricultural products.  Not too long ago the US wanted to keep agriculture out of free trade agreements because it was one of the most supported producer nations on the planet.  Eventually, however, the EU also started heavily supporting agriculture.  It became a war of agriculture subsidies that was very costly for governments on both sides.  In an attempt to try to curb the escalating cost of supports, the US and EU developed the AoA.  No other nations were consulted during this process.  Once complete it was presented to GATT as the World Trade Agreement on Agriculture.  As it was written only by the US and EU it of course benefits the US and EU the most.

The AoA is 25 pages of regulations and mechanisms that force countries to lower supports as well as an inclusion on sanitary standards of food processing and production.  But there are also exemptions to these rules.  It is these exemptions that are the hardest to swallow.  Supports that are exempt from reduction are supports that most Eastern and Southern nations never had in the first place.  The implication of this is that the West is allowed to continue to support its farmers while the small supports that were afforded to Eastern farmers by their governments must be cut substantially.

An example of this is the support the US gives to its farmers irrelevant of the activity of the farmer.  The US argues that general and unconditional support cannot possibly interfere with the market place but the fact of the matter is that without those supports many farmers would not be support their families.  So in the end, these ‘non-protectionist’ support policies are really producer subsidy policies but use a different name and so are exempted from reductions.

The general points of the necessary reductions in supports and protectionist measures are as follows:

MARKET ACCESS
The WTO is promoting greater accessibility to each others markets (among members of the WTO).  This will be achieved by counting all the different types of taxes and tarrifs and other indirect impediments to imports, convert them all to a dollar value, and reduce that amount by 36% for Western nations, 24% for developing countries and 10% for ‘least developed and net food importing countries’ (LDNFIC).  Member nations must also open up their markets directly to imports at a low tarriff rate of 3% (increasing to 5% in the year 2000) of total domestic consumption for that commodity.

When dealt figures as a percent, one must always consider the absolute figures.  Here it seems that Western nations need to reduce support by quite a bit more than other nations.  However Western nations support their agriculture to the order of billions of dollars.  Eastern nations only barely reach the millions category.  In this light, even if the West reduces support by 36% that still leaves billions of dollars of support allowable while the East is barely able to hang on to the millions category.

++ For those farmers in thailand who produce for export this may help Thailand.  Also, prices of goods may come down as imports won’t be taxed as highly so it could benefit the consumers.

- -  No one is really sure what the impacts will be on the Thai market.  It is often feared that more exposure to cheap imports will force the cost of produce in Thailand down. But it is difficult for Thailand to predict just how much more imports will actually come once barriers are reduced.

We need to get reliable statistics from government or elsewhere.

DOMESTIC SUPPORT
Almost all government support given to farmers or the food handling processing/handling industries must be cut by 20% for Western nations and 13.3% for others.

++ again it may help thai companies become more competitive in other countries.

- -  the benefits will largely be gained by the exporting companies and probably not the farmers

EXPORT SUPPORT
Western nation members must reduce total support by 36% (24% by developing countries).  This includes supports of shipping costs, etc.

Thailand does not support (as far as I know) exports like this.  In indirect and corrupt ways maybe it does through various relationships between government offices and companies, etc.

SANITARY AND PHYTOSANITARY MEASURES
AoA also has a section on health and safety measures of food (fresh and processed) and considers the possible spreading of disease and pests.  The standards are set by various international bodies and these  standards will only be changed if there is sufficient scientific proof that it is necessary.  This concerns Thailand again because it has no research and development budget so it must be only a follower and not a leader in establishing necessary standards.

Some standards may be unnecessarily high and some may be dangerously low.  But Thailand must follow them and usually this means increasing standards in Thai factories.  This ultimately means higher production costs and so higher prices for consumers and also less competitive in exports.

But it may also mean safer food for Thailand’s consumers.

The big concern is that Thailand’s exports may be refused until Thai factories are able to meet standards.  This may directly and negatively affect farmers.

We must always be wary of the argument of competitive advantage when talking about international trade regulation and agreements.  It is believed that countries negotiate solely on their belief that they can compete - that they can produce better goods at a lower cost than other countries.  BUT sometimes final cost is not the most important thing.  Often stipulations like this SPS are only a tactic to make other countries’ production fall into an unfavourable category (‘unsafe food’) and therefore difficult to sell abroad.  In other words, these stipulations are possibly creations to simply further eliminate competition from those nations that do meet the imposed standards.
 

Unfortunately, agriculture has been dragged into the GATT and so dragged into the process of globalization.  The Agreement on Agriculture is forcing countries to improve the ‘efficiency’ of agriculture.  As explained regarding division of labour - improving efficiency means removing those people who are not too skilled at agriculture and allowing only those who are skilled in agriculture to continue.  What this really means is improving the ratio of money spent versus money earned - improve the financial efficiency.

The principal question still to be answered, of course, is ‘What are we supposed to do?’  That is a difficult question to answer.  It really depends on the particular situation of each nation.  For some countries, free trade may very well help the national economy prosper.  There will invariably be casualties but how many?  How severe?  These are important questions that can only be answered by careful consideration of the situation.  This necessarily must include extensive dialogue between NGOs, government, private industry and other countries.

This year is a year of review of the effects of implementation of the Uruguay Round agreements.  They have been implemented in small increments over the previous 5 years. The specific issue of the AoA is up for discussion in November of this year...still some time left... Unfortunately many member countries of the WTO are pushing to make this year not a review but a new round of negotiations to push for even more liberalized trade - before giving other nations the chance to asess just what is happening in their own backyards.

The very important difference between the gradual division of labour as talked about in the first page and the sudden division of global free trade (globalization), however,  is about 200 years and thousands of people at a time.  Globalization is taking place over a few years and since it is whole countries that are dividing the labour, whole sectors of their population are suddenly at risk of losing their livelihood.  Those farmers in non- and newly- industrialized countries as well as in some Western nations are being forced out of agriculture with no time and often no alternatives nor any safety net.

In times of economic contraction, those countries who export goods to earn money to buy food are in grave danger; there could be serious widespread hunger in those countries.  So agriculture does provide a great deal of stability - both social and political - in hard economic times.
 
 

CASE STUDY  Putting it all Together  II: A Look at the Sugar Industry in Thailand

Thailand’s sugar industry has really taken a beating over the past year.  As a result of the financial disaster, banks had tightened their grip on loans.  The sugar millers and refiners depended heavily - very heavily - on loans.  So suddenly, without loans, these big conglomerates were unable to fund operations which, of course means revenues fell which, of course meant they could not pay back their earlier loans.  A financial gridlock. So the sugar millers lined up at ‘financial soup kitchens’ looking for government hand-outs.  Things were that bad.  Then Brazil’s currency went down.  Things got suddenly worse. Brazil is one of Thailand’s strongest competitors in sugar exports.  With Brazil suddenly having very inexpensive currency, they could now sell sugar on the world markets far cheaper than Thailand ever hoped.  Thailand’s rich sugar families turned to the government for more handouts once again. Truthfully, Thailand’s competitiveness in sugar exports has been very low for a long time.  The government has been allowing domestic sugar prices to be kept artificially high.  This means extra profits for the millers and refiners who also, by chance, are exporters.  So high domestic prices increase revenues from domestic sales which then go to support the failing export industry.  Now the millers and refiners are calling for even higher domestic prices so as to be able to reduce export prices so as to be able to compete with Brazil. But doesn’tt the cry of the pro- free trade crowd go something like  ‘free trade means lower prices for consumers?’  It would appear that not only are prices increasing, but they are increasing only to directly support someone else’s profiteering.  If free trade regulations were put in place to ELIMINATE support to domestic industry, how come the Thai sugar industry is allowed to be supported by high domestic prices? The answers, of course, lies in the trickiness of the Agreement on Agriculture (AoA) and other Uruguay Round free trade agreements under the World Trade Organization (WTO). The AoA states that a government cannot give support to keep alive an industry that otherwise would fail under global market competition BUT it does NOT say that the population buying the goods from that domestic industry cannot give support.  So in the Thai sugar fiasco, the government is perfectly within its rights to allow the population at large to support those Thai industries. Central to this predicament, however, is the inclusion in the AoA that states that each signing member country must also open their domestic market to imported commodities at a low duty rate.  So for Thailand, which exports rice and sugar, among other commodities, it must also allow companies to freely import sugar and rice.  Clever, yes?  It gets better... There is also another agreement that was born under the same round of negotiations that produced the AoA.  This even more clever little inclusion is called the Trade Related Investment Measures (TRIMs).  This agreement has set the stage for companies of one country to freely set up shop in any other WTO member country’s borders and have all the same treatment that domestic companies enjoy.  Wow.  What does this mean? This means that with the Thai sugar price climbing higher and higher, Thailand may well see a non-Thai company setting up shop in Thailand to sell imported sugar (remember that imported sugar is cheaper than the artificially high-priced domestically produced sugar that makes up the entire sugar supply in Thailand).  The amazing thing is that it could be a Brazilian company coming in to sell its own imported sugar.  The Thai millers would be negatively hit and certainly, the farmers who slave away planting the sugar cane will be negatively hit. Because of the AoA and the TRIMs, the Thai government could do very little to stop its domestic producers from being attacked from within.  The Uruguay Round of free trade negotiations is sort of like the infamous Trojan Horse - it is promoted as being full of promise and potential for the WTO members who accept the deal but it is actually heavy with poison and pitfalls for the citizens and industries of that nation. Ultimately, free trade may well bring lower prices for the consumers but for the producers (the millers and farmers) the cost may be their livelihood.  That is quite a price for a ‘cheaper’ cup of sugar!  And what will the unemployed do?  Regional governments certainly do not have the money to set up any social safety nets! Hoping that was all?  Sorry - there is more.  The West, for some time now, has been pushing the idea that the way to succeed in the Global economy is to support small and medium enterprise because such enterprise will be more efficient than a number of farmers acting independently (so it is argued).  The argument is based on financial efficiency - nowhere is it considered how much more efficient a country with full employment and satisfaction with a livelihood is more efficient than a nation of unemployed people demonstrating to get their old lives back! Unfortunately, Asian governments are listening to the WTO because they have no choice.  They need the bail-out loans from the financial institutions like the IMF - loans that come with the conditions of strict adherence to implementing the vision of the WTO. The WTO has provided the vision and the tools for forcing open Southern nations’ agricultural markets.  The vision is global free trade where any nation can enter another nation’s backyard and set up business unhindered by special foreign taxes or other bureaucratic limitations against these foreign companies.  It also envisions a global market dominated by a greatly reduced number of producers in the form of small and medium enterprise (and of course large enterprise) and fuelled by the now greatly increased band of recently liberalized consumers (all those unemployed farmers!).  The tools are the various free trade agreements that have been strategically designed to systematically break the locks, force open the gates and then handcuff the residents.  The ‘enforcers’ are the assorted financial institutions like the International Monetary Fund, the Asian Development Bank and the World Bank who attack financially weakened nations and say ‘Need money?  We can help you IF...’

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Increased free trade means increased competition.  So Thai farmers will have to produce more at a lower cost to stay competitive.  This necessarily means lots of external inputs (off-farm inputs) - fertilizers, high yield varieties, pesticides, etc.  What does this then hold for sustainable agricultural efforts that have slowly been re-adopted by local farmers?

The larger global trend away from sustainable agricultural techniques into high yield systems is spelling the beginning of the end for sustainable agriculture.  There is no way sustainable agricultural techniques can compete with the high-input monoculture systems being implemented to for comparative advantage in international trade of agricultural commodities.

But smallholder farmers are not just a few voices in a huge crowd.  They are the overwhelming majority of the world’s farmers - they are from Asia, Africa, the Americas and Europe.  Throughout the world small holder farmers have been meeting and voicing their concerns. There have been meetings and rallies, conferences and demonstrations for some time now.  NGOs have been listening and some governments as well as parts of the general population have been influenced.

It is not impossible to continue to have high input and smallholder sustainable agriculture co-exist.  There is certainly room for both.  The real secret is to get member nations of the WTO to recognize that agriculture is not just a simple two factor system of nutrients and profits but that it is a way of life for the vast majority of the world’s farmers and to put trade ahead of the cultural aspects of farming is to leave millions of people without a livelihood or a culture.

The corporations pushing for the Free Trade rules are the tiny minority.  Unfortunately they are a powerful minority but this should not be accepted as an unquestionable nor as an in-correctable situation.

Around 1660, the brilliant mathematician and philosopher Blaise Pascal published a collection of ‘Reflections’ (his "Pensees").  In this rather lengthy document he made the statement:

Justice without strength is helpless;
strength without justice is tyrannical.
If we do not make strong that which is just,
we make just that which is strong.