No. 42, December 2006
Wheat Imports – A Tool for Re-shaping India’s Agriculture
The fate of Philippines under the WTO’s Agreement on Agriculture (AoA), and the fate of Mexico under the North American Free Trade Agreement (NAFTA), are instructive for India.
Nearly half of the workforce of the Philippines was employed in agriculture when the WTO came into existence.41 The rulers planned to limit land under rice and corn to 1.9 million hectares, freeing some 3.1 million hectares (then planted to rice and corn) for raising cattle and cultivating “high value-added” commodities such as broccoli and cut flowers. They claimed that this would create more jobs, increase exports and increase the value added in agriculture.
Although the AoA allowed some tariffs and restrictions on specified agricultural imports, the country’s rulers actually imported amounts far beyond the levels required under the treaty. The rulers cited “supply crises” as their excuse. Rice production in the country, already in crisis for various reasons including the lack of effective official support programmes, stagnated.The massive volumes of cheap imports of rice and corn depressed prices for Philippines rice and corn growers. Such imports became a permanent fixture of the agrarian economy. Thus corn imports rose from zero in 1995 to 446,000 tonnes in 2000; domestic corn production, concentrated in Mindanao, declined, and land under corn fell by over 20 per cent between 1993 and 2000. Other sectors of agriculture too were devastated by imports: By 2000, the price of chicken imported from the US was 50 per cent lower than the domestic price.
Thus the Philippines’ agricultural exports stagnated, its agricultural imports doubled, and employment in agriculture actually fell between 1995 and 2001. The “high value-added” agricultural activities (that the Government claimed would replace the employment lost to imports) could not do so; for they required large capital investments beyond the means of the peasants who were being displaced. A section of prosperous producers alone could enter these areas.
Mexico is the ancestral home of corn (maize), where it has been grown for over 5,000 years.42 So central is it to Mexican life that the Aztecs worshipped a corn god, Centeotl, and in Mayan mythology man’s flesh was made from corn dough.
Mexico possesses a unique and irreplaceable genetic diversity of corn varieties, and most of its production comes from traditional varieties cultivated by peasants from seeds that they preserve from their own crops and from exchange of seeds with neighbours in their communities. This practice protects the genetic resources of corn, and serves as the basis for crop breeding – as it were, protecting corn over the long term for the whole world. “US producers are actually the indirect beneficiaries of Mexican farmers’ stewardship, since their high-yield hybrids are derived from the varieties that originated in Mexico’s fields”.43
Corn, in the form of “tortilla” (cooked corn dough) also provides about 59 per cent of human energy intake and 39 per cent of protein intake in Mexico. Corn cultivation covers half the total area under crops in Mexico, accounts for over two-thirds the gross value of agricultural production, and employs three million people – more than 40 per cent of the agricultural workforce or eight per cent of Mexico’s total labour force. This activity supports some 18 million people.
Unsurprisingly, the Mexican government faced stiff resistance to liberalising trade in corn and beans (the other staple crop of Mexico) under the North American Free Trade Agreement (NAFTA) of 1994. (The Zapatista indigenous people’s organisation of the southern Mexico state of Chiapas timed their revolt with the coming into force of NAFTA.)
The US is the largest corn producer in the world, exporting 18 per cent of its crop. Even more significantly, US corn is the single largest recipient of US government subsidies -- $10.1 billion, or 10 times the Mexican agricultural budget in 2000.44 Following the US’s 1996 Freedom to Farm Act, subsidies soared, and accounted for some 46 per cent of farm income in the corn sector.
At the time NAFTA was passed US corn sold for roughly half the price of Mexican corn. However, it was experiencing a decline in export markets since Europe and South Korea had imposed restrictions on genetically modified (GM) food imports. These losses were partly made up for by a post-NAFTA tripling of corn exports to Mexico.
No doubt the Mexican government could, under NAFTA, place restrictions on the import of corn under “tariff rate quotas” (TRQs), the same instrument the Philippines could use to protect its rice market under the WTO. However, like the Philippines, the Mexican government decided to abstain from enforcing any of the TRQs it had negotiated for agricultural products, on the plea of production shortfalls and price rise. Corn imports from the US now make up one-third of the domestic Mexican market. As a result of these imports, prices paid to Mexican corn growers have plummeted 70 per cent.
Mexican government policies systematically helped undermine domestic production. The government removed price supports for corn; dismantled and finally shut down CONASUPO, the state trading agency (similar to India’s FCI) that had managed all aspects of support for small corn producers; eliminated the official programme of subsidised credit to agriculture (total commercial credit for agriculture has fallen since 1994 to about one-quarter its previous level); reduced overall official support programmes for agriculture by 30 per cent by 2002; and removed constitutional constraints on private sale of collectively held agricultural lands (held by indigenous peoples). Agricultural investment, which had fallen steeply after the 1981 balance of payments crisis, fell further, to just two per cent of agricultural GDP. The annual expansion of irrigation fell by over 82 per cent since the early 1990s.
The poorer Mexican peasants, concentrated in the southern part of the country, have also been for centuries the stewards of the greatest number of corn varieties in the country. “This diversity is of importance not just in Mexico but for the world’s crop breeders, who rely on this genetic pool in the development of new varieties that can adapt to changing conditions.”45 Although the cultivation of GM crops is still banned in Mexico, there is evidence of GM contamination of Mexico’s corn varieties, presumably through peasants experimenting with the US corn received through the government food programme.
As their incomes fall with the fall in producer prices for corn, members of the poor peasant families migrate from the region, perhaps first to the north of the country and later to the US. As members of households farming the most diverse varieties of maize migrate, the transmission of local knowledge, and with it agricultural diversity itself, is threatened. According to one writer, “Since the passage of NAFTA, an estimated two million Mexican family farmers have been displaced from the land.”46 In 1997 47 per cent of the Mexican population was engaged in agriculture, according to the U.N.’s Food and Agricultural Organisation (FAO). By 2010, the FAO estimates that number will have dropped to 18 per cent.
The ramifications of this are several. The bankrupting of the peasantry has vastly increased the pool of unemployed willing to work at any wage, and wage levels have dropped, much to the satisfaction of the owners of maquiladoras, the sweatshops producing goods for export. Many try to cross the border for sweated, illegal jobs in the US, and face US state terror as they make the attempt. In 2005, an estimated 400 Mexicans died trying to cross the border with the US.47
The drop of producer prices has not benefited the Mexican consumer: tortilla prices are now about one-third to one-half higher than they were at NAFTA’s passage, thanks to the fact that just two firms control 97 per cent of the commercial corn flour market.
These developments have stoked rural anger, as reflected in a number of peasant movements during the last decade, as well as the 2006 presidential elections. Andres Manuel Lopez Obrador campaigned on the promise that he would renegotiate NAFTA to protect the country’s corn and bean farmers. There is no doubt that he polled more votes than his well-funded opponent, Felipe Calderon, a staunch supporter of NAFTA. However, with the help of outrageous rigging and the support of the courts, Obrador was defeated by 0.6 of a percentage point. At any rate, had Obrador won office and tried to re-negotiate NAFTA, he would have faced a variety of retaliatory actions by the US; only political forces prepared to put up drawn-out resistance can afford to take such steps.
42. This section draws on Alejandro Nadal and Timothy A. Wise, “The Environmental Costs of Agricultural Trade Liberalization: Mexico-US Maize Trade under NAFTA”, Working Group on Development and Environment in the Americas, June 2004. (back)
43. Ibid. (back)
44. Anuradha Mittal, “Want to stem the tide of desperate immigrants? Repeal NAFTA”, The Free Lance-Star, 1/8/06. (back)
45. Alejandro Nadal and Timothy A. Wise, op cit. These poor peasant families growing traditional varieties have survived by bringing marginal land under cultivation; however, the production of the more traditional sectors of Mexico’s corn economy has stagnated or declined, and the share of production of Sinaloa, a small enclave in the north relying on high chemical use and unsustainable water use, has risen. (back)
46. Mittal, op cit. (back)
47. Ibid. (back)
All material © copyright 2006 by Research Unit for Political Economy