Arab Trade Deals Benefit Investors, but Hurt Farmers
Author: alhayat Posted February 8, 2013
Economic and social issues should be — and were at one point — given a high priority by the post-revolutionary Arab leadership. The current governments reached power following uprisings organized by the youth, laborers and the public at large in protest of deteriorating living conditions and rising rates of poverty and unemployment. Among the many economic and social issues lies that of rural development. This should be high on government agendas, especially since the uprisings erupted in remote and neglected rural areas before they reached cities and expanded nationwide.
Developing the agricultural sector is essential for economic development in general and rural development in particular. The economic and social survey conducted by the Economic and Social Comission for Western Asia in the beginning of 2012 highlighted the importance of production sectors, including the agricultural sector, and urged governments to give it more attention in crafting future policies.
The traditional outlook on agriculture as merely a part of the economic sector is a limited one, since it does not consider the social dimensions of the agricultural sector. In other words, the importance of this sector should not only be determined solely on its financial return and its size in the economy. The aforementioned issues are indeed important; however, the social aspect and its role in rural development should be considered key concerns. Most Arab countries continue to neglect the agricultural sector and when they grasp its importance they act by increasing the spending on the sector. They do this without setting national strategies or creating policies to advance this sector since it affects both the economy and the society. For example, the National Plan for Social Development, which was prepared in 2011 by the Lebanese Ministry of Social Affairs, completely neglected the agriculture sector and, in consequence, rural development. The Agriculture Ministry is currently developing a national plan to support the agriculture sector without the efforts of the Social Affairs Ministry.
The international crises that erupted in 2007, which can generally be considered a financial crisis accompanied by a sharp increase and manipulation of international food prices, highlighted two matters worthy of our attention:
The first matter is related to the developmental models that had been adopted in past decades. These centered on achieving economic growth for the purpose of creating job opportunities that would alleviate poverty and reduce social marginalization. These models ignored the importance of sustaining the quality and nature of this growth and the sectors that contribute to it. The production sectors, particularly agriculture, were not given much notice. This was due to the difficulty of providing the sector with water for irrigation — a scare commodity across much of the Arab world — and its mismanagement in a number of countries. In addition, the absence of policies ensuring the distribution of revenue from this growth into all the components of society led to the accumulation of wealth in the hands of a few elites. It is worth noting that distributing revenue from growth can be accomplished by means of fair tax policies and through a service system that guarantees that everyone receives a share of the proceeds. The experiment proved that focusing on the growth of financial, real-estate and leasing markets does it guarantee sustainability and continuity.
The second issue is the importance of shifting effort from achieving food security to ensuring food sovereignty. This requires a deep transformation in approach, policy and commitment. Food security is based on providing citizens with basic food needs from any source. The international crisis, which led to the rise and manipulation of food prices, confirmed that this approach is fragile and unsustainable. Food sovereignty is based on policies that not only ensure food supplies to citizens, but also guarantee the domestic production of a large percentage of them. Of course, suitable food products and the quality needed for the local market are also identified and targeted for production. Hence, policies promoting food sovereignty would also contribute to developing the agriculture sector and providing job opportunities for citizens. Furthermore the policies would eventually lead to developing the rural areas and easing the pressure on the cities due to booming populations.
We will focus here on a main issue that is obscuring the advancement of the agriculture sector and delaying the achievement of developmental goals and food sovereignty. The problem is the effects that trade liberalization has had on agriculture and food security. It is a debate that emerged during the establishment of the International Trade Organization in the mid 1990s, and was heightened with the rise in bilateral and regional free-trade agreements. On an international level, there are two schools of thought in this field. The first believes that the agricultural sector is a system that relies on and evolves due to the market mechanisms, and that its role contributes to profitability. Liberalization of trade and direct investments will certainly lead to the promotion of the agricultural sector and the generation of income. The second school of thought contends that promoting agriculture as a production sector contributes to human rights, as it is a sector which encompasses social and cultural dimensions as much as economic ones. Hence, it is part of the human-rights system that guarantees access to food and food sovereignty. According to the second school of thought, agriculture is not just a means or a method to increase profit, but it is also a human right that should be guaranteed.
In order to explain both approaches, it is necessary to refer to the debate at the end of 2011 that took place via messages and statements between UN Special Rapporteur on the Right to Food Olivier De Schutter and WTO Director General Pascal Lamy. De Shutter issued a report on the right to food at the WTO’s 8th ministerial conference in December 2011. The report states that the current trade system does not secure the right to food, but rather leads to violations of this right by enforcing foreign investments without giving priority to national interests and their vitality in achieving food security. The concerned governments are then forced to safeguard investments rather than the national interest of their people. Thus, based on this concept, it is important to restore the role of the trade system into one that operates for the benefit of development and safeguards national interests. In other words, De Shutter’s report concludes by stating the necessity of a just trade system that supports development based on considerations of human rights.
In order for trade to benefit development, and so that governments can issue policies that promote food sovereignty, it is important to consider human and national rights before defending the rights of foreign investors. The trade ties are required to respect three pivotal governmental abilities:
- to pass laws and work to protect the interests of the nation and the citizens according to what is known as the "policy space"
- to encourage local investors and small farmers, and protecting them from foreign investments and unfair competition
- to reassess the investments that contribute to the deterioration of an important sector, such as the agriculture sector (These investments are deemed the "distorting" investments.)
Large-scale agricultural land is currently privatized in most Arab countries, including the less developed countries like Sudan and Yemen, in addition to Egypt and others. The land was either sold or leased for many years under contracts signed by the governments. The decision to privatize agricultural land was made without adopting transparent mechanisms that would safeguard the national interest and the interests of small farmers and local investors. Instead, the contracts were signed under the rule of corrupt and nepotistic regimes. This is what is referred to as land grabbing.
Even worse, these countries have signed free-trade agreements, with some agreements signed by multiple parties such as the International Trade Organization or as part of a Euro-Mediterranean partnership, and including bilateral agreements as well. These agreements protect the rights of the investors even at the expense of the national interests and rights, and even if they harm the interest of small farmers or oppose the principal of food sovereignty. For example, Sudan has signed 28 bilateral free-trade agreements, including 12 with Arab countries, while the government owns 95% of cultivated land.
The positions of the Egyptian minister of international cooperation and planning, Fayza Aboulnaga, and the minister of finance is an obvious example of the consequences of the government losing essential political space. Both ministers continuously confirmed that the Egyptian government is not capable of annulling the privatization agreements — a decision made by the administrative court — that took place during the rule of Mubarak. These agreements do not consider transparency or prices, and violate the rights of the citizens. Aboulnaga had said that 200 investment companies have benefited from privatization. Four of them used to the WTO’s International Arbitration Commission to file a law suit against the Egyptian government, demanding compensation worth $1 billion. The Egyptian government is not able to pay this amount in such circumstances, even though privatization had led to the displacement of thousands of Egyptian families who were benefiting from the land that was either transferred to major real-estate companies or was seized by agriculture companies that turned the farmers into agricultural workers.
In this regard, these important questions arise:
- The free-trade agreements raise questions about methods to protect the rights of small investors and citizens, and to ensure food security and food sovereignty. This is especially important in a time without transparency, and when those directly concerned were not present during negotiations or the signing of the agreements.
- In the field of agriculture and investment, trade-liberalization agreements raise many inquiries regarding the implementation of local laws and policies that safeguard the rights of citizens. This includes farmers and local investors who were benefiting from now-privatized land, which was either leased or sold to foreign investors. It is worth noting that most of the aforementioned land was either not legally registered or was common land that was sold at very low prices.
- The mechanism of international arbitration and dispute resolution, which mainly addresses the rights of foreign investors, tend to pay no attention to the rights of local citizens affected by the trade-liberalization policies, economic practices and the spread of corruption associated with privatization amid the absence of transparency and accountability.
The aforementioned questions and the recent events that took place in Lebanon — namely the spoiled food supplies that were distributed throughout the Lebanese markets — necessitate rebuilding international trade relations to restore importance to the rights of the citizens and to enable the governments to protect their rights instead of protecting those of the investors. This will in turn lead to food security and food sovereignty, especially after most Arab peoples voiced their rejection of corrupt and suppressive regimes, and carried out revolutions to achieve justice, freedom and dignity.
Read More: http://www.al-monitor.com/pulse/business/2012/04/agricultural-market-liberalizati.html