Agricultural trade and global justice

Ricardo Parellada
Universidad Complutense

Resumen
Se ofrecen primero datos sencillos sobre reglas e impuestos comerciales que tratan a distintos pases de forma muy desigual, en particular en el terreno agrcola. A continuacin se muestra que, a pesar de la sencillez de algunos de esos ejemplos, es preciso un conocimiento tcnico y emprico slido para orientarse en la complejidad de estos fenmenos. Y se concluye que la perspectiva de la justicia global es relevante para las consideraciones de economa y poltica internacional, siempre y cuando las aportaciones filosficas cuenten con suficiente informacin inter-disciplinar. Palabras clave: comercio agrcola, justicia global, Poltica Agrcola Comn, subvenciones.

Abstract
First, I offer simple data about commercial rules and tariffs that are very unequal for different countries, particularly in agriculture. Next, I argue that, despite the eloquence of these examples, deep technical expertise and empirical knowledge are necessary for a fuller understanding of these issues. Finally, I argue that the perspective of global justice is indeed relevant for international economics and politics, but only if it takes into account relevant inter-disciplinary data. Keywords: agricultural trade, global justice, Common Agricultural Policy, subsidies.

398 On May 16, 2007, a British farmer, Mr. Nigel Johnson-Hill, from Liphook, Hampshire, addressed an extraordinary letter to Mr. David Miliband, Secretary of State of the British Department of Environment, Food and Rural Affairs (DEFRA).
Dear Secretary of State, My friend, who is in farming at the moment, recently received a cheque for 3,000 from the Rural Payments Agency for not rearing pigs. I would like to join the not rearing pigs business. In your opinion, what is the best kind of farm not to rear pigs on, and which is the best breed of pigs not to rear? I want to be sure I approach this endeavor in keeping with all government policies, as dictated by the EU under the Common Agricultural Policy. I would prefer not to rear bacon pigs, but if this is not the type you want not rearing, I will just as gladly not rear porkers. Are there any advantages in not rearing rare breeds such as Saddlebacks or Goucester Old Spots, or are there too many people already not rearing these? As I see it, the hardest part of this programme will be keeping an accurate record of how many pigs I havent reared. Are there any Government or Local Authority courses on this? My friend is very satisfied with this business. He has been rearing pigs for forty years or so, and the best he ever made on them was 1,422 in 1968. That is until this year, when he received a cheque for not rearing any. If I get 3,000 for not rearing 50 pigs, will I get 6,000 for not rearing 100?

Agricultural trade and global justice and effective consideration of complex empirical data and information.

1. Agricultural subsidies
A. Import tariffs. The guiding principle seems to be: The poorer you are, the more you pay. Tariffs imposed by rich countries on poor countries are, on average, four times higher than those rich countries lay on one another (UNDP, 2005). That is a striking upside down tax progressivity. For example, why does delicious chocolate come from Switzerland and Germany? Is it because cocoa beans grow in the Alps or the Black Forest? No, sir. It is because tariffs imposed on cocoa beans range between 0% and 9%, whereas tariffs enforced on elaborate chocolate amount to 30%. Silly countries grow cocoa beans, and clever countries manufacture it. B. Subsidies. The guiding principle seems to read: The richer you are, the more you get paid. As it is well known, almost half of the EU budget goes to the CAP (Common Agricultural Policy). But worse still, distribution of subsidies is more unequal than distribution of income in the most unequal countries on earth, such as Brazil (UNDP, 2005). This can be clearly shown with the Gini indexes. In Europe, 75% of resources goes to 10% of farmers, most of which happen to be the richest. In the US, only 40% of farmers are subsidized, and 5% of them get 50% of the money. In Spain, subsidies independent of production benefit greatly the richest landowners, such as the duchess of Alba. Do you know why in Spanish cafeterias and restaurants there are saltcellars, but no sugar bowls? Why does sugar come in individual tiny envelopes so that we can throw away what we do not want? Well, because this way a lot more sugar is consumed. Well, yes, because the EU has paid European producers until recently four times the world prize, and has imposed on foreign sugar an entry prize that is higher than the European guaranteed prize. You say this is changing? We shall see. In order these changes not to be too dramatical, the next change in regulation is planned for 2050.

Mr. Johnson-Hill went on with a few more technical questions about not rearing pigs, and also expressed his interest in the not growing crops and not milking cows businesses. I believe this sort of irony or even sarcasm not to be inappropriate. I believe it presents crudely a difficult issue with deep implications for human development and global justice: the legitimacy or outrageousness of rich countries agricultural subsidies and protectionism. In this paper, I want to do three things. First, I present some examples of rich countries protectionist measures. Second, I refer to the view of international institutions, such as the UNDP or the World Bank, which argue these rules to be deeply unjust. Finally, I mention contrary opinions and argue that it is essential to take an ethical perspective on these issues, but also that the viewpoint of ethics and global justice can not offer much political guidance without a technical

Ricardo Parellada C. Dumping. The very evangelical principle is: Whoever has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him (Mt 13:12). Subsidies for cultivating and exporting cotton in the US, for instance, amount to its market value, and outnumber the aid of this country to the whole Sub-Saharan Africa (World Bank, 2006). Of course, these payments generate enormous overproduction for exportation, which dramatically lower the prize of cotton in world markets and ruin local African producers. Some calculations translate this dumping practice into a fall of several points in some African countries GDP, when it is highly dependent on cotton. This GDP fall amounts to the difference between life and death for a lot of people.

399 contrary. Now, let me quote subversive institutions such as the UN and the World Bank. The problem at the heart of the Doha Round negotiations can be summarized in three words: rich country subsidies. Having promised to cut agricultural support in the last round of world trade negotiationsthe Uruguay Roundthe worlds richest countries have increased the overall level of producer subsidies. Led by the worlds farm subsidy superpowers, the European Union and the United States, developed country support to agricultural production amounts to $350 billion a year. Direct support to producers can be calculated on different measures. The Organization for Economic Co-operation and Developments (OECD) producer support estimate measures the cost of all policies and transfers that maintain domestic prices above world levels at about $279 billion, or one-third of the value of production and rising to more than one-half for Japan (figure 4.11). This support comes in different forms, most of which have the effect of raising prices, increasing output and boosting exports. Import tariffs, rising to more than 100% for several productsincluding rice, sugar, and fruit and nutskeep domestic prices above world market levels, while budget transfers inflate incomes. Most developed country governments would take a dim view of any developing country contemplating tariffs and subsidies on this scale, but when it comes to agriculture, developed countries are able to set their own standards. Some political leaders in developed countries seek to justify agricultural support by reference to rural development objectives and the interests of vulnerable communities. There is little evidence to support this justification. In the real world the winners in the annual cycle of multibillion dollar subsidies are large-scale farmers, corporate agribusiness interests and landowners. Research carried out for this Report estimates that subsidy distribution in rich countries is more unequal than income distribution in Brazil (box 4.5). It would be hard to design a more regressiveor less efficientsystem of financial transfer than currently provided through agricultural subsidies. The financial commitment to a small group of largely high-income beneficiaries in developed countries puts the financing requirements for the MDGs in perspective. Rich countries spend just over $1 billion a year on aid to developing country agriculture and just under $1 billion a day supporting their own agricultural systems. For a fraction of what rich countries spend subsidizing the overproduction of crops like rice and sugar, it would be possible to meet the

2. Policy
In June 2008, the UN Food and Agriculture Organization (FAO) held an important meeting. Although it had been long scheduled, it attracted more attention than usual because of the food crisis, which was shortly after sent to oblivion by the financial crisis. The Rome summit gathered an unusual number of prime ministers and heads of state from around the world. They agreed publicly that the world does not lack resources to surmount the food crisis and even make poverty history. But they could not agree at all as to the means and the economic and commercial policies best suited for this acclaimed goal. The summit was intended to diagnose problems and offer solutions. Important elements that influenced the rise of food prizes were analyzed, such as the cost of oil, the growth of demand, the weather, speculative movements and bio-fuels. However, the final document offered general remarks, but no true compromise on specific policies. A few voices (some Northern European governments, NGOs) argued that rich countries agricultural protectionism has pernicious effects on agriculture and trade of poor countries. But given the conflicting interests involved, an agreement on this point was not possible either. When it comes to agricultural policy, actors disagree. Nobody says that to harm the poor is right. Some say that rich country subsidies harm the poorest of the poor, and benefit mainly rich farmers and agribusinesses in rich countries. Others maintain the

400 financing requirements for achieving the MDGs in areas such as education, health and water. Adding insult to injury, the subsidies in rich countries not only divert resources but also reinforce rural poverty in poor countries. Industrial countries are locked into a system that wastes money at home and destroys livelihoods abroad. When it comes to world agricultural trade, market success is determined not by comparative advantage, but by comparative access to subsidiesan area in which producers in poor countries are unable to compete (UNDP, 2005, 129 s.). To quote another revolutionary institution: Inequities in the trade arena are well known: rich countries protect their markets with tariff and nontariff barriers on the goods that poor countries produce more advantageously (such as agricultural produce and textiles). They provide handsome subsidies to their farmers, subsidize their exports, and discourage value-added processing in developing countries. Reducing such protection and subsidies would have a beneficial impact on world trade, growth, and poverty reduction (World Bank, 2006, 210). Some politicians and government officials (mainly from countries which benefit greatly from abundant PAC cash, such as France or Spain) still defend the PAC openly. They talk of solidarity, good management and transparency. But curiously enough, when they go into any details, they usually refer to the good direction of recent reforms, such as suppressing subsidies that distort markets and export subsidies that lead directly to dumping. These officials probably forget that these shy reforms (that they consider positive) are usually introduced with great difficulties and despite heavy opposition of their own countries, and only thanks to hard work by some Northern European countries. But even these reforms still call for comment. The EU classifies products that are eligible for subsidies in three categories: orange box, blue box and green box. Products in the green box are supposed not to distort markets. But who says they do not? International agencies? The WTO? No, sir, the EU itself (UNDP, 2005, p. 133). Needless to say, the green box gradually grows thicker and thicker at the expense of the other boxes. As for export subsidies, most international institutions called for their complete suppression in 2007, but rich countries have only agreed to put a slow end to them by 2013.

Agricultural trade and global justice

3. The viewpoint of global justice

Following the lead of John Rawls, contemporary theories of justice usually apply to the political and economic structure of a state. These are theories of domestic justice. If we consider that the basic rules and structure of a state are just or unjust because of their effects not only on citizens of that state, but also on foreigners and other states, we step form domestic to global justice (Follesdal and Pogge, 2005, 8). Among the favorite examples of unfair regulations from an international point of view are, precisely, rich country agricultural subsidies, which are intended to benefit farmers of these countries, regardless of their devastating effects on farmers in very poor countries. If we believe that our idea of justice should be somehow broader than our countries borders, then we will have to take into account the lot of these people, despite the difficulty of dealing with very powerful agricultural lobbies in our own countries. And yet, the fact that rich country agricultural subsidies have pernicious effects is not undisputed among experts. Matthew Lockwood, for instance, is an independent expert who has worked both in academia and NGOs. In his The State Theyre In: An Agenda for International Action on Poverty in Africa, he argues that internal factors to African states are much more decisive for development than external ones. He stresses that, in particular, the removal of trade barriers imposed by rich countries on agricultural goods would not make a big difference (Lockwood, 2006, chapters 1 and 3). After having quoted extensively the UNDP and World Bank on agricultural trade, I wanted to bring up this instance of a contrary view in order to raise a worry about the viewpoints of philosophy and global justice. What could the discourse of global justice possibly add to expert discussions about the effects of different policies in the lot of the poor? As a person trained in philosophy, and interested in justice in general and global justice in particular, I personally find it frustrating, when philosophy relies just on philosophy for these matters. I believe it to be absolutely necessary to take into account technical information and expert knowledge on issues about which, without this knowledge, the discourse of justice alone does not seem to me to take us very far. Development experts offer few certainties. I just want to mention two. First, there is no single road to development and prosperity for all peoples on earth. Policies intended to protect weak and underdeveloped economies should be respected. These policies

Ricardo Parellada sometimes prevent exports of basic goods, such as food, and other times impose tariffs on imports of basic products, in order to protect the local economy. Early imposed liberalization has ruined small economies, whereas changing and wise protection has made possible for some countries to strengthen their economies before opening them to world markets, particularly in Asia (Stiglitz, 2002). Second, despite some controversy, it seems that rich country agricultural protectionism heavily harms farmers and the economy in general of many poor countries. Of course, there are many more important factors into trade and development. But, if rich countries want to be serious about world hunger, they cannot continue to dissociate aid and agricultural policies.

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References
Follesdal, A. & Thomas Pogge (2005), Introduccin, en A. F. and T. P. eds., Real world justice: grounds, principles, human rights, and social institutions, Springer, Dordrecht. Lockwood, M. (2006), The State Theyre In: An Agenda for International Action on Poverty in Africa, Intermediate Technology Publications, Warwick, UK. Stiglitz, J. (2002), Globalization and its Discontents, Norton, New York and London. UNDP, Human Development Reports, since 1990. World Bank, World Development Reports, since 1978.