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Africa: Crops and Trade, 2
Africa: Crops and Trade, 2
Date distributed (ymd): 021002
Document reposted by Africa Action
Africa Policy Electronic Distribution List: an information
service provided by AFRICA ACTION (incorporating the Africa
Policy Information Center, The Africa Fund, and the American
Committee on Africa). Find more information for action for
Africa at http://www.africaaction.org
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+
SUMMARY CONTENTS:
Today's series of two postings contains several recent documents
(from the Mozambique News Agency, the UN's Integrated Regional
Information Network, Oxfam International, and Food First)
highlighting the negative impact on Africa of international
policies on key African export crops, including cashews, cotton,
and coffee. While Oxfam International and Food First (in reports
earlier this year available on their web sites) have taken
different positions of the potential for increased export trade to
benefit developing countries, these documents show convergence in
exposing the damage done by rich country protectionism combined
with imposing free trade on the poor.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
Oxfam International
http://www.oxfaminternational.org
Press Release
18 September 2002
Coffee companies under fire as millions face ruin
The full report: MUGGED: Poverty in your coffee cup, is available
at:
http://www.maketradefair.com/stylesheet.asp?file=16092002163229
Please contact Matthew Grainger, Oxfam International Media
Officer, for any press inquiry: +44-(0)1865- 313705;
matt.grainger@oxfaminternational.org
Millions of people in 45 coffee-growing countries are facing
economic ruin - and many are going hungry - due to collapsing
world prices. Oxfam today launches a global campaign to tackle
the coffee crisis and force the corporate giants who dominate the
$60-billion industry to pay farmers a decent price.
The "Big Four" roasters - Sara Lee, Kraft, Procter & Gamble and
Nestle - buy nearly half the world's coffee crop and make huge
profits. They know there is terrible human suffering at the very
heart of their business and yet they do virtually nothing to
help. It's time to shame and change them, says Oxfam
International Executive Director Jeremy Hobbs.
With coffee prices at a 30-year low, new Oxfam research warns of
economic breakdown and worsening misery for 25 million producers.
The International Coffee Organisation - which meets in London
next week (Sept 24-27)- could begin to solve the crisis but only
if it gets enough high-level support.
The agency says that rich country governments have neglected to
help. "It's inconceivable that our political leaders are unaware
of a humanitarian crisis that is affecting so many people. It's a
scandal that there is no real debate, no help and no answers," Mr
Hobbs says
The campaign comes at a time when people are getting angrier that
the rich are getting most of the benefits of globalisation at the
expense of the poor. "How governments and companies react to this
crisis is the acid test of whether globalisation can be made to
work for poor people," Mr Hobbs says.
Oxfam's "Coffee Rescue Plan" includes destroying surplus stocks,
trading only in quality coffee and paying farmers a decent price.
Governments, companies and producers should manage the market to
ensure supply doesn't overshoot demand and support producers to
process their crops so they can get more money. Aid should also
be spent helping farmers find alternative livelihoods.
"We were told to be patient and that the free market would
eventually work. We're still waiting as the rich get richer and
better at making excuses. Enough is enough. 25 million coffee
farmers need rescue now," Mr Hobbs says.
The new Oxfam report says:
- The global market is oversupplied by 540m kilograms of coffee
each year; 8% more coffee is being produced than consumed.
- Roasting companies are using more poorer quality coffee beans
than ever before thanks to new technologies such as steam
cleaning.
- Ten years ago, poor countries' export sales were worth a third
of the total coffee market. Today, it is just 10%.
- Coffee farmers are getting, on average, 24 cents a pound while
consumers in rich countries are paying roughly $3.60 a pound - a
mark-up of 1500%. Coffee now costs more to grow and pick than it
does to sell.
- Millions of families in four continents who are dependent on
coffee are going hungry. They can't afford school fees for their
children or pay for medicines. The first to suffer are women and
children. Some farmers are turning to growing coca instead.
- Disaffection and public disorder are growing. Joblessness and
economic migration is worsening.
- The benefit of aid and debt relief is being severely undermined
as entire country economies are decimated (in some Central
American countries coffee income has fallen by 40%; Ethiopia's
coffee income dropped by $110m compared to the $58m it is set to
save in debt relief this year). The value of coffee exports to
producer countries has fallen by $4 billion in five years.
The "Big Four Roasters" are extremely profitable, with margins
estimated at between 17% to 26% on billion-dollar coffee sales.
However, Oxfam says their business strategy is increasingly
risky. Coffee quality is falling because farmers don't have the
money to take care of their crops. The companies have made
savings but have done next to nothing to help the poor farmers
who find themselves at the wrong end of the corporate supply
chain.
"Our campaign aims to give the companies a sharp reminder that
people who drink their coffee care about the well-being of those
who actually grow the crop," said Mr Hobbs.
Oxfam also criticises the World Bank and the International
Monetary Fund for a "stunning policy failure" in encouraging
countries into export-led growth without warning them about the
potential of catastrophic price falls. Poor countries are stuck
with selling cheap raw materials which others turn into highly
profitable processed goods.
Anuradha Mittal, Co-Director, Food First
Giving Away the Farm
Backgrounder, Summer 2002, Volume 8, no. 3
[excerpts only]
Food First/Institute for Food and Development Policy 398 60th
Street, Oakland, CA 94618 USA Tel: 510-654-4400 Fax: 510-654-4551
Email: foodfirst@foodfirst.org Web: http://www.foodfirst.org
After about 14 months of hearings, conferences, and deliberations,
President Bush signed the Farm Security and Rural Investment Act of
2002 on May 13. The $248.6 billion bill increases taxpayer spending
on agriculture by more than 80 percent over the 1996 farm bill, the
Freedom to Farm Act, which made a tentative attempt to wean farmers
from the system of price supports and commodity payments, as the
U.S. was bound to do under its World Trade Organization (WTO)
obligations. While the theme six years ago was freedom, the new
farm bill will force American taxpayers to cough up at least $190
billion over the next 10 years, about $83 billion more than under
current programs. The bill proposes a complex program. And the bill
focuses mainly on eight "program" crops (cotton, wheat, corn,
soybeans, rice, barley, oats, and sorghum), and thus will largely
benefit bread-basket states - which also happen to be swing states
in the midterm elections. Representative Larry Combest, the House
Agriculture Committee Chairman, hailed American farmers as the
bill's winners.
The new farm bill does have some potentially good provisions,
including the Farmers' Market Nutrition Program, help for beginning
farmers and ranchers, mandatory country-of-origin labeling for all
meats and produce, the creation of an Under-Secretary for Civil
Rights at the USDA, and a doubling of the annual funding for the
Community Food Projects (from $2.5 million to $5 million). The bill
covers food stamps, and it reinstates some benefits for adult legal
immigrants who have lived in the U.S. for at least five years, with
no residency requirement for their children and the disabled. ...
But the bill's potential for good pales in comparison to the damage
it will do. Overall, the new bill fails the nation's family
farmers, consumers, taxpayers, and environment. It robs the poor to
pay the rich. It further destabilizes family farmers and rural
communities around the world. And it fails to strengthen food
security. This backgrounder explores these faults. ...
Down on the Farm
While the farm bill is a big bonanza for large producers of favored
crops such as corn, soybeans, and cotton, small family farms are
shortchanged. It is no exaggeration to say the new farm bill gives
away the farm. ...
The new bill only compounds the existing inequities. The top 10
percent of farm-subsidy recipients collect two-thirds of the money,
and the bottom 80 percent get just one-sixth.(6) Forty-seven
percent of commodity payments will go to large farms with average
household incomes of $135,000. Moreover, most crops are not
eligible for subsidy payments. For example, in California, only 9
percent of California's 74,000 farms actually received subsidy
payments since 1996; $1.8 billion have gone to fewer than 3,500
farms. ...
Of the top 20 recipients in California, 7 are big cotton growers
and 11 are big rice growers who take in an average of $596,000 in
crop subsidies a year.(7) It costs $700 to $800 to produce an acre
of California rice that fetches just $650 in the world market! ...
New World Markets for American Corporations
... With American markets already saturated, the U.S. is
aggressively pushing to open up foreign markets-with great success.
Already, one out of three acres planted in the United States
produces food or fiber destined for export, and one quarter of
American farm sales are now exports.(11) Under the 2002 Farm Bill
Market Access Program, a total of $100 million has already been
distributed to 67 U.S. trade groups for the purpose of promoting
U.S. agricultural products in overseas markets. ... The entire
farm bill is based on the myth that trade will save the American
farmer. Yet evidence from the last two decades shows that exports
have not delivered on that promise.(13) Low farm commodity prices
have only increased the profits of processors, exporters, and seed
and chemical companies while destroying the livelihoods of family
farmers.
Robin Hood in Reverse
Not only does the 2002 farm bill act as a welfare program for
agribusiness, with U.S. taxpayers footing the bill, it also robs
the world's poor. Wielding the World Bank, the International
Monetary Fund (IMF), and international trade agreements, the U.S.
is opening up foreign markets for exports by forcing poor countries
to remove subsidies and lower tariffs. However, the U.S. shields
itself from foreign competition by increasing its subsidies and
maintaining tariffs. These measures have allowed the U.S. to dump
its farm surplus on world markets. For example, the U.S. exports
corn at prices 20 percent below the cost of production, and wheat
at 46 percent below cost.(14) This has resulted in Mexican corn
farmers being put out of business. ...
A dramatic increase in U.S. agricultural subsidies will further
jeopardize the livelihoods of Third World farmers. The new bill
will stimulate an even greater domestic farm surplus, which the
U.S. will then dump at prices even farther below the cost on world
markets, depressing the global commodity prices of crops that
developing countries count on while wiping out even more poor
farmers. The result is a reverse Robin Hood effect-robbing the
world's poor to enrich American agribusiness.
An example of this effect is trade in cotton, a principle commodity
crop. New subsidies mean that many U.S. cotton growers-whose
average net worth is $800,000-will receive half of their income
from the government this year, though only a relatively small share
of the farm population, just 25,000 of America's 2 million farmers,
actually raise cotton.(15)
While subsidies will protect cotton growers in America from falling
world prices, they will further depress prices by encouraging
continued production, and thus cripple growers in Third World
countries with no subsidies. U.S. farmers last year harvested a
record crop of 9.74 billion pounds of cotton, aggravating a U.S.
glut and pushing prices far below the breakeven price of most
growers around the world. This costs African countries $250 million
each year, according to a World Bank study published last February.
The report estimates that the removal of U.S. subsidies would
produce a drop in U.S. production that would lead to a shortterm
rise in the world price of cotton and in turn would increase
revenue to west and central African countries by about $250
million.(16)
These skewed economics are evident in the gap between cotton
growers in the U.S.'s Mississippi Delta and in Africa's Niger
Delta. America is the world's largest exporter of cotton-even
though it is an inefficient and high-cost producer-and West Africa
is the third largest, with both subject to market forces that have
slashed prices by 66 percent since 1995, to 35 to 40 cents a pound.
Armed with roughly $3.4 billion in subsidy checks that make up for
any shortfall in the market, U.S. farmers reap about 70 to 75 cents
a pound for cotton. The new farm bill will increase the amount of
money a U.S. cotton farmer can count on making this year by at
least 16 percent. At the same time, in Mali, where cotton makes up
nearly half the nation's export revenue, the government is telling
cotton farmers they will be getting about 10 percent less this
year.
Even the World Bank President, James Wolfensohn, acknowledges that
"these subsidies are crippling Africa's chance to export its way
out of poverty."(17) Mark Malloch Brown, the head of the United
Nations Development Program, estimates that U.S. farm subsidies
cost poor countries about $50 billion a year in lost agricultural
exports. By coincidence, that's about the same as the total of rich
countries' aid to poor countries.
Free Trade Takes a Pounding
For decades, the United States has been the champion of free trade,
pushing others to open their markets for manufactured goods and to
stop subsidizing their farmers. Back in the 1990s, the U.S. pushed
hard for reduced agricultural subsidies in the Uruguay Round of the
World Trade Agreement. ... At the WTO ministerial in the Qatari
capital of Doha in November 2001, the U.S. renewed its antisubsidy
commitment. Only six months later, the U.S. has lavished an 80
percent aid increase on its own farm sector, making even the
Europeans blush. ...
These double standards in the administration that professes
allegiance to market economics and fiscal probity have unleashed a
wave of indignation among countries whose development prospects
largely depend on farm exports. These countries are appealing to
the WTO for sanctions, threatening retaliation, and charging the
U.S. with hypocrisy in taking a protectionist turn even as it urges
other nations to open up further. The U.S. Trade Representative,
Robert Zoellick, has acknowledged that "we deserve the criticism we
have received."(19)
With the passage of the U.S. bill, the European Union, which spends
more of its budget on its farm programs than on any other single
program, is no longer the stand-out sinner. The Japanese, too, have
reason to feel relieved. (Forty percent of European farm income
comes from subsidies, as does 63 percent of Japanese farm
income.)(20) However, the bill has infuriated America's trading
partners [such as Canada] ...
The Europeans are not alone in their criticism. Developing
countries are up in arms as well. President Museveni of Uganda,
speaking at the U.S. Chamber of Commerce in Washington, charged
that government subsidies of farmers in rich countries contradict
the Bush administration's own policy of "trade, not aid" by
shutting out the products of poorer nations. South Africa, which
has routinely obeyed the liberalizing edicts of the World Bank and
the IMF and has removed state support for agriculture, is likely to
join the European Union and other countries in objecting to the
U.S. action. ...
But Free Trade Is Not the Answer
One of the great myths perpetuated by the U.S. and E.U. governments
for the past few decades is that free trade helps farmers and the
poor. It does not! Attempts to leave farmers at the mercy of the
free market only hasten their demise.
The focus on export crops for trade has meant increasing yields,
with farmers pouring on pesticides, herbicides, and fertilizers.
Many have stopped rotating their crops, instead devoting every acre
to corn, wheat, or some other commodity crop and creating vast
monocultures that require still more chemicals to be sustained.
This has destroyed our biodiversity. Vast industrial farms require
costly equipment for planting and harvesting, increasing the
capital intensity of agriculture. As costs rise, prices fall in
markets flush with surplus. As prices fall, farmers need subsidies,
which are available to big growers and agribusiness only. Land
values and cash rents increase. This encourages heavy borrowing.
Rich landowners get richer and young farmers cannot afford to get
started. An agricultural bubble economy is created. Inevitably it
crashes as subsidies fail to keep pace with falling crop prices.
Farms go bankrupt. Free trade in agriculture starves our farmers.
Who will pay the farm bill when it comes due? American taxpayers
have some surprises coming. But the ultimate cost of the bill will
be the tragic demise of small family farms around the world.
An Opportunity for Change
The 2002 bill provides international civil society with a new
opportunity to demolish the hypocritical "development agenda" myth
of free trade. The bill should galvanize civil society to take up
the call of Via Campesina, an international farmers movement that
has denounced the liberalization of farm products promoted by the
WTO as well as the dumping policies of the large export countries
on Third World countries. Instead of trade, the small farmers
movement prioritizes healthy, good quality, and culturally
appropriate subsistence production for the domestic market and for
the subregional or regional markets. These farmers' priority is to
produce for their families and communities, then to seek access to
the domestic market before seeking to export.(24)
Agriculture and food are fundamental to the well-being of all
people, both in terms of access to safe and nutritious food and as
foundations of healthy communities, cultures, and environment. All
of these have been undermined by dependence on the vagaries of the
free market promoted by the World Bank, the IMF, and the WTO.
Instead of ensuring the right to food for all, these institutions
have created a system that prioritizes exportoriented production
and has increased global hunger and poverty while alienating
millions from productive assets and resources such as land, water,
and seeds. ...
The farm bill may be a done deal, but we should use it to challenge
the free trade regime and to renew our call for the WTO to get out
of agriculture. Governments have to uphold the rights of all people
to food sovereignty. ...
This material is being reposted for wider distribution by
Africa Action (incorporating the Africa Policy Information
Center, The Africa Fund, and the American Committee on Africa).
Africa Action's information services provide accessible
information and analysis in order to promote U.S. and
international policies toward Africa that advance economic,
political and social justice and the full spectrum of human rights.
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