Free Trade and Agriculture in Developing Economies

Trade is one of the few things upon which most economists have generally agreed: more is better. Globalization, the most recent and expansive manifestation of the concept, possesses undeniable appeal. And yet, globalization often falls short of its promises and proves counterproductive, especially in the agricultural industry, on which much of the developing world is dependent. Mattias Lundberg of the World Bank explains that the world’s poorest 40 percent have seen overall declines in their income and welfare as a result of trade openness in agriculture. Understanding why agricultural globalization fails to work for the world’s developing countries and their poor is of paramount importance, as many countries and their citizens continue to debate the merits of engaging in international trade agreements such as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).

According to the World Hunger Project, 75 percent of the world’s global poor work in agriculture. Free agricultural trade initially seemed poised to eradicate this poverty, supported by the classical concept of comparative advantage: that the world’s developing nations hold a relative advantage in agricultural production over the developed. This assumption fed the global craze for liberalization and opened the markets of many developing countries. But as the global marketplace expanded, smallholder farmers quickly lost all food and market sovereignty in their domestic and local markets and struggled for entry into international ones. The domestic food chain, through a series of aggressive trade negotiation rounds aimed at poking holes in the barriers of poorer developing countries, has been handed over to large industrial farmers. Local markets are flooded with cheap foreign foodstuffs priced at criminally low prices that induce the demise of the farmers’ livelihoods. What once promised to improve their lives now threatens to destroy them.

There are two parts to this ongoing issue: one part internal and one part external.

Internally, Chika Aniekwe of the University of Bradford finds that there are three restrictive constraints that limit the potential for small farmers to compete globally. First, the lack of coordination and functionality on the part of small farmers in the global market that prevents global exportation. Second, deficient rural infrastructure prevents produce from being sold effectively at market. Third, there is a lack of access to technology and credit facilities that restricts competitive development. Correcting for globalization’s insidious effect requires development initiatives targeted not just at opening up markets, but also strengthening them before they are exposed to global competition. Without preparation, small farmers exposed to the global market simply cannot compete due to local systemic disadvantages.

Externally, a corrupt international trade system works to undermine the potential of small farmers. M. Ataman Aksoy of the World Bank explains that through subsidies, rich countries suppress the developing countries’ smallholder farmers and incapacitate their development. OECD farmers sell their products on the world market far below the cost of production, depressing world prices and forcing competitors to struggle for survival or exit the market. Overall, the International Food Policy Research Institute estimates that subsidies by industrialized nations cost developing countries about $24 billion annually in lost agricultural and agro-industrial income. Subsidies which are only legal in certain developed nations, unequal trade negotiations that create relationships of dependency between nations, and relentless requests for increased liberalization are all part of the external disadvantage that developing countries face when entering the global market. Joseph Stiglitz of Columbia University points to the Uruguay Round of trade negotiations to paint a grim picture of this asymmetry. Stiglitz found that this series of negotiations, although wildly successful in the developed world, caused an overall decline by 2 percent in Sub-Saharan Africa, the poorest region in the world.

Globalization’s potential inequity has remained hidden for too long behind the powerful rhetoric of free trade. The accepted story of global integration and the spread of wealth stifles the narrative of the global poor who have been ignored by those who presume they come bearing gifts of economic opportunity. To accept globalization’s flaws is to improve it and it is only through challenging this status quo of asymmetry and injustice that we can begin to rectify it.

Abhinav is a freshman in the School of Foreign Service from San Jose, California. He spends an unwarranted amount of time researching obscure philosophy, while shirking his actual, relevant work.