Trade & Agribusiness are destroying Family Farming

AEFJN

© United Nations
© United Nations

The World Bank (WB), the International Monetary Fund (IMF) and the World Trade Organization (WTO) present liberalization as the recipe for developing countries to escape poverty. According to them, foreign direct investment and trade liberalization would bring great benefits to developing countries: jobs, access to international markets and economic growth driven by exports to name but a few. However, such liberalization policies have been bad for family farmers in developing countries and their food sovereignty.

Trade Preferences suit the Agribusiness

Currently, the EU accords preferential treatment to exporters from certain developing countries by allowing them to pay lower duties to enter the EU-market via the Generalized Scheme of Preferences (GSP). Economic operators from the least developed countries (LDCs) get the most favorable treatment under the “Everything but Arms” (EBA) agreements. Under the EBA all products (except arms and ammunition) coming from LDCs can be exported duty-free to the EU. However, the developing countries’ exporters are not the only beneficiaries of this preferential treatment; the foreign agribusiness companies operating in that country benefit, too.Both the EU’s trade preferences and its subsidized bio-fuel are extra incentives to the agribusiness to acquire land in developing countries. On top of that, foreign agribusiness can often count on other incentives such as tax sweeteners from host governments, supportive services from investment promotion agencies and investment protection due to Bilateral Investment Treaties.

However, there is increasing proof of negative human rights impacts surrounding these investments by foreign agribusiness in developing countries. Agribusiness companies from around the world acquire land in Africa and once their plantations and facilities become fully operational they can export raw materials, food and biofuels on a duty-free basis to the European markets. For example, in both Liberia and Sierra Leone, the Investment promotion agency uses the preferential EU market access as an argument to attract foreign companies[1]. At the same time civil society in both countries have reported human rights violations and increasing poverty and hunger in the regions where palm oil is currently being produced by foreign companies. The risk of increased instability and conflict is present, because both countries are recovering from decades of civil war.[2]

Neglect of family farming

Some traders, producers and farmers from LDCs and developing countries benefit from better export conditions for their products to Europe under the EBA or the GSP, but many of them need support to overcome the obstacles to access the European markets. However, in contrast to all the support the agribusiness gets from policymakers worldwide, there is little support for family farmers. Until the 80s and 90s farmers received support through government-led agriculture marketing boards that gave farmers stable prices, credit extension services, information and technology. The Structural Adjustment Programs promoted by IMF and WB led to the disappearance or weakening of these boards during the 80s and 90s leaving farmers with little support even to this day.[3]

Family farmers are often left to themselves to overcome the obstacles to marketing their products. In Africa, farmers are very often physically far away from export markets and there is a lack of transport infrastructure to bring their produce to markets (roads, rail). Another issue is that farmers have limited access to market information and finance, which means they cannot negotiate a good price for their products or plan investment. Then, as a condition for entering the EU-market, farmers have to ensure that their products respect the phytosanitary measures applied at EU-borders. The EU claims that these measures are established to ensure food safety, but they act as a trade barrier for many exporters from developing countries as the standards are often very restrictive and technical for African family farmers.[4] African farmers would have to spend 10 times more to meet these high standards and they do not receive sufficient support to do this. Within the WTO, developed countries push for stricter regulatory standards and these complicated barriers to trade could completely rule out exports from exporters from developing countries.[5] So support for family farmers should focus on eliminating these obstacles.

Conclusion

When it comes to taking advantage of the EU’s trade preferences, large agribusiness companies investing in land in Africa are better equipped and have more market information than African traders and farmers. These companies do not face the same obstacles as local producers and exporters, but benefit from a number of incentives which puts them in an advantageous position. In this way the competition for farmland between large, supported agribusiness companies and neglected family farmers will grow. Unless family farmers are supported, this competition carries the danger that family farming will be destroyed completely, further increasing the dependence of African countries on food imports. The result of these trade agreements is that Africa will continue to supply, via foreign companies or domestic exporters, commodities and agricultural raw materials (such as inputs for the food and biofuel industry) to EU markets to which value is added, through processing, in the EU.[6] This maintains Africa in the economic position where it has been since colonial times: a supplier of raw materials for the western consumer society.

Gino Brunswijck

Policy Officer

[1] Sierra Leone Investment Agency: http://www.investsierraleone.biz/download/SL_OilPalm_Investment_Opp.pdf

Liberia Investment Agency: http://www.nic.gov.lr/public/download/Liberia_Investors_Guide_2011.pdf

[2] Green Scenery Overview of studies Sierra Leone: http://www.greenscenery.org/index.php?option=com_content&view=article&id=15&itemid=53

International Land Coalition, “Is Palm oil a Kernel of Development for African Countries like Liberia?”, 2011, http://www.commercialpressuresonland.org/press/palm-oil-kernel-development-african-countries-liberia

[3] United Nations, Africa Renewal, “Boosting African Farm Yields”, 2006, http://www.un.org/africarenewal/magazine/july-2006/boosting-african-farm-yields

[4] The standards do not only concern the quality of the food, but also the labeling and packaging. It is especially these last issues that family farmers find difficult to overcome.

[5] United Nations, Africa Renewal, “New Barriers hinder African trade, 2006, http://www.un.org/africarenewal/magazine/january-2006/new-barriers-hinder-african-trade

[6] European Commission,  EU Agricultural Trade with ACP-Countries, 2013, http://ec.europa.eu/agriculture/bilateral-relations/pdf/acp_en.pdf