Trade and Food

By Craig Volland

The failure of the WTO's Cancun Ministerial Meeting in September of 2003 has been substantially attributed to the dispute over agricultural trade between many developing countries and the United States, the European Union and Japan. Over the past decade tensions between the US and the EU have also been ratcheted up over highly controversial food safety issues. For the Sierra Club, this means that trade and agricultural issues and our concern for the environment and human rights are becoming intricately intertwined. This analysis is intended to improve our understanding of the contradictions that exist in US food and trade policy by briefly reviewing both the history and the governing ideology behind that policy.

Free Trade Ideology . Free trade theory asserts that when every country exploits their "comparative advantage," total wealth increases and everyone is better off. In other words, "Free trade lifts all boats." Free trade ideology became ascendant in this country immediately before and during World War II. These principles were embedded in the World Bank and the International Monetary Fund at the Breton Woods meeting in 1944 and in the General Agreement on Tariffs and Trade, the GATT, in 1947. In 1995 the GATT was subsumed under the World Trade Organization, the WTO.

At the same time, the US government and agricultural leaders, including large farm organizations and large trading corporations like Cargill (Big Ag) concluded that we had a strong comparative trade advantage in food and agriculture. We could feed the world through exports. This idea was heavily reinforced by the oil crises of the 1970's. We desperately needed a large, competitive export industry to pay for oil imports. The USDA/Big Ag complex also figured we could make more money if we ran our grain crops through animals and exported the higher value meat products. As free trade created a growing middle class overseas, especially in Asia, people would eat more meat. We dreamed of becoming the world's low cost producer of grain and meat to feed a hungry and increasingly wealthy world consumer. It was an attractive idea.

Agripower. And we had the technical prowess to do it. Fresh from our victory over Japan and Germany we set out to vanquish nature in the production of food and fiber. An astonishingly rapid transformation of US agriculture was enabled by:

• the use of munitions technology to produce nitrogen fertilizer;
• the commercialization of chemical warfare research to produce synthetic pesticides;
• the development of antibiotics to speed growth of farm animals;
• subsidized irrigation projects in the arid west, and the draining of the Florida Everglades, which, along with pesticides, enabled a year-round supply of fruits and vegetables.

The post war era also saw the advent of monocropping, vast areas devoted to a single crop in fields swept clean by pesticides, and the replacement of diversified family farms with animal factories. In the late 1970's meat packing plants were deregulated by relaxing inspection standards, speeding up processing lines and substituting machines and chemical washes for more precise, manual operations. The latest in this line of techno-fixes is irradiation, which ensures that the fecal matter on your food is safe to eat, and genetic engineering which tampers with the very foundations of life. In short, over the last 50 years, we have witnessed the industrialization of agriculture, a process that continues.

The Rich Get Richer . Unfortunately our trade ideology has not panned out as the originators had expected. A defining characteristic of the post WWII world economy has been concentration of wealth, both among nations and within nations. Thus after some 50 years, instead of lifting all boats, global free trade has lifted mainly the yachts . Some of the reasons are:

• corporate mergers in rich countries and reduced competition in the world's major industries, particularly in food processing and marketing;
• deregulation, and tax policies in the United States that have favored corporations and rich investors;
• systematic substitution of cheap labor in poor countries, where labor rights are non-existent, for high paying manufacturing jobs in the rich countries, i.e. sweatshop economics;
• vast corruption and favoritism in poor countries that favors the governing elites and prevents much of the benefits of trade from reaching the poor, and
• vast subsidies to agriculture in rich countries that drive small farmers in poor countries off their lands and into urban squalor;

Accordingly, the lion's share of increased financial returns since WWII has accrued to holders of capital instead of to wage earners and ordinary farmers. What we have achieved so far is not so much globalization, but glob-u-li-zation. Globulization is where globules of fat float about in a sea of misery.

False Promises and Human Rights . At the heart of the growing trade dispute with developing countries are the serious social and human rights consequences of US trade policy. Rich people can eat only so much. The inability of the current international trade regime to significantly benefit the teeming billions of the world's poor has seriously limited the markets for our agricultural products. In addition the agricultural policies of the US and Europe have artificially driven down the price of agricultural commodities, so small farmers in developing countries, who have practiced sustainable agriculture for centuries, cannot compete.

For example, here's what happens when farm families in Mexico are driven from their land by unfairly subsidized US grain. The family heads north to the US border where the young women get jobs in the Maquilladoras at a dollar an hour. Most factories will hire only young women from ages 18 to 30. Some of the naive young women are raped, murdered and dumped in the desert. The men try to cross the US border, some dying in the desert, or drowning in the river or suffocating in enclosed, locked vehicles. Immigration pressure on the US has increased since the passage of NAFTA, not decreased as promised.

In this country farm policy has led to a consolidation of production into yet larger "farms" in search of false economies of scale that generate large social and environmental costs. The ensuing surplus of production has resulted in chronically low crop prices and the loss of many skilled family farmers.

According to the US Department of Commerce, prices received by farmers in 2002 are about the same as in 1979. Net farm income in the past few years is at roughly the same level as the late 1980's, including government subsidies that comprise about 45% of the total. Exports of food, feeds and beverages in 2002 are up 58% over the level of 21 years ago. However as a percentage of total exports, food has declined from 14.5% in 1981 to only 7% in 2002. In 2002 imports of food into the United States exceeded exports, so now the rest of the world is feeding us. Meanwhile the inability of Big Ag to export the chronic surplus of food production led to inexorable pressure on US consumers to eat more. More on that later.

Consequences of Industrial Ag. The industrialization of agriculture has not gone all that well either. It's impossible to tell whether we succeeded in becoming the world's low cost producer since our agriculture is so dependent on massive government subsidies and artificially cheap petroleum.

We did, however, succeed in producing cheap food , whose price fails to account for:

• massive loss of topsoil;
• pesticides in our water and on our food;
• loss of wildlife
• a vast "dead zone" in the Gulf of Mexico from fertilizer runoff;
• huge animal factories that pollute our streams and stink up the countryside;
• seepage of fertilizer and manure into groundwater;
• heartbreaking farm animal cruelty;
• decline of rural communities
• contaminated food that makes millions of people sick each year;
• antibiotic resistant bacteria
• depletion of groundwater aquifers.

Perhaps worst of all, much of our food doesn't taste like what we remember from Grandma's farm.

Consumer Revolt. These problems have not gone unnoticed by American consumers. According to Newsweek the US market for organic foods has grown 15 to 20% every year over the past decade. Nearly 40% of consumers at least occasionally buy products labeled organic. Large companies like Heinz and General Mills are launching organic product lines in mainstream supermarkets. Kroger is adding 120 natural food departments in its supermarket chain. Tyson is even test marketing a line of organic chicken

To most people organic means food that is produced without the use of chemical fertilizers and synthetic pesticides. But it means much more. Organic agriculture is a production management system, based on minimal use of off- farm inputs, that enhances biodiversity and focuses on natural cycles and building healthy soil. Certified organic means the methods used on a farm are verified by a certifying organization approved by the USDA. During the rule-making process the USDA tried to allow irradiation, genetically engineered crops and sewage sludge fertilizers into the organic system. However, they were soundly rebuffed when outraged consumers sent in an astounding 280,000 comments to the agency.

Organic meat comes from farm animals raised from birth without the use of growth hormones and antibiotics. They are fed organically grown grass or grain that is free of domestic animal byproducts. They also enjoy regular access to the out-of-doors. Another, unofficial term is free range. Free range meats are generally the same as organic meats except the chicks, calves and piglets may have been obtained off farm and the feed may not be certified organic. Another term, "natural" is applied to beef that is produced without the use of synthetic hormones and antibiotics to speed growth.

In pursuing its mission of becoming the world's low cost producer of staple foods, the USDA/Big Ag complex reversed the logic of free enterprise, which holds that market signals must come from the customer. Instead Big Ag has been modifying the consumer and selling them what they want to produce...essentially an unnatural, mass-produced commodity in a box, take it or leave it. When the world could not or would not absorb our huge surplus, the USDA/Big Ag complex got together with purveyors of fast food to seduce American consumers into eating more sweet, salty and fatty foods plied with artificial fragrances and flavors manufactured in New Jersey. Now we have an obesity epidemic.

Instead of cutting back production when prices plummeted Big Ag begged for massive, continuous taxpayer bailouts....a decidedly un-free market solution to the problem. Farm income stabilization payments over the past four years have averaged $24 billion per year. In the 1980's such payments averaged $20 billion per year. The USDA budget also includes another $4 billion per year for research and services which is another non-market advantage our farmers have over those in developing countries. Adam Smith is turning over in his grave.

Aided by university extension specialists, Big Ag applied tried and true industrial engineering concepts to what, in essence, is an exceedingly complex and subtle natural process...managing diverse life forms in the production of food. It was high technology without common sense. A high school biology student could tell you what would happen when you cram tens of thousands of animals into confined spaces...disease, suffering, death and high rates of contamination that can be only partly obviated by the heavy use of antibiotics. The typical egg factory is now designed to hold one quarter of a million hens in a building about the size of a Walmart. The birds are stacked on top of one another with fecal matter flying around in the air.

Food Fight . Having met considerable resistance to its "feed the world factory food" scheme, the United States is now engaged in a running battle with Europe and Russia over the food trade. The most familiar dispute is Europe's ban on the import of US beef raised with synthetic hormones. A few years ago the WTO ruled that the European Union's ban was a barrier to trade . Strong public sentiment forced the EU to maintain the ban. They pay the fine every year, in the form of countervailing tariffs.

The concept of non-tariff barriers to trade requires further explanation. From the inception of GATT in 1947 until the Tokyo round of negotiations in the late 1980's, trade negotiators were preoccupied with lowering tariffs on goods. While some agricultural tariffs remain at significant levels, the average tariff on manufactured goods is less than 4%. So with the Tokyo Round trade officials began to focus on what they call non-tariff barriers, which are the sovereign laws of nations that address non- commercial values such as health & safety, environment and labor. In 1991 & 1994 GATT/WTO tribunals ruled that our Marine Mammal Protection Act, which banned the import of tuna caught in a way that killed dolphins, was a barrier to trade. In 1998 another panel overruled our Endangered Species Act, which prevented the import of shrimp caught in a way that kills sea turtles.

These rulings were based on a fundamental WTO principle that like products cannot be discriminated against based on how they are manufactured or harvested. This means that we have to accept the import of products no matter how much pollution, how much child labor or how much cruelty to animals are associated with their manufacture or harvest. Rulings are made by dispute resolution panels that operate in secret and are staffed by trade officials rather than real judges.

If a country refuses to abide by a WTO ruling they are hit with perpetual damages in the form of trade sanctions. On top of that the WTO has an insidious enforcement hammer called cross retaliation . Cross retaliation allows the winning country to retaliate not just against the industry involved in the dispute, like beef, but any industry it so chooses. That allowed the US to enforce its favorable verdict on hormone beef by slapping $116 million in tariffs on important and highly symbolic European manufactured products like English wool garments and French truffles and Roquefort cheese.

WTO rules do contain language providing exceptions to protect public health and the environment. But then one must pass a gauntlet of caveats that have allowed only one favorable ruling over the past decade which was about France's ban on asbestos. For example, to pass muster a country's regulation must be:

• "necessary"
• "least trade restrictive"
• "non discriminatory in fact and effect"
• "scientifically justified" (the precautionary principle does not apply)
• "cannot apply beyond one's territory"

Worse, the verdict rests on the bias of the tribunal members who are, of course, free trade advocates.

Precautionary Principle . The EU based their hormone beef ban on the precautionary principle. They applied it also to their own beef producers so it was non-discriminatory. In other words they had reason to believe but could not yet prove to the WTO's satisfaction that hormone residues in beef could be a threat to human health. With respect to toxins it is almost impossible to achieve certainty in environmental and health science. This is why many US environmental laws are based on the precautionary principle. Moreover it takes decades to wring the effects of money and politics out of our scientific establishment, by which time, the laws of physics prevail and impacts become evident to all.

The battle over genetically modified foods, often referred to as GMO's, is a good case in point, and it has a strong trade policy component. From the beginning biotech was hailed as an industry in which the US could become world leader and could help compensate, through exports and license fees, for the massive trade deficits we have been running the past two decades. The Bush-I administration wanted to make the new biotech industry a model for deregulation. The Clinton Administration's admired the way Japan's government and industry worked together. In the early 1990's Japan's industrial model was widely admired and feared. Clinton believed the US had to emulate this system to back "our team" of corporations in the struggle to compete in international trade.

In the case of biotech, several former Monsanto executives served in key positions in both the Bush-I and Clinton Administrations. Not surprisingly the bureaucratic decision was made that genetic engineering of foods is not an "additive" in the legal sense, and these foods were ruled to be "substantially equivalent" to their conventional counterparts. This opened the way for rapid approval for genetically engineered foods on the basis of a few studies submitted by Monsanto.

However, in recent years more and more questions have arisen about the safety of GMO's. Monsanto may have made a serious error in relying on political influence rather than waiting for the results of intensive food safety and ecological studies. Likewise, in prosecuting the beef hormone case against Europe, we essentially shot ourselves in the foot.

Food is a matter of national pride with Europeans. The first thing they did after the ruling was to commission 17 new scientific studies on synthetic hormones. As a practical matter what we know in science is what somebody has an incentive to pay to find out. So the Europeans are going to keep looking until they find something to hang their hat on. In fact they already have. They declared one hormone (of 6) commonly used in U. S. feedlots to be a carcinogen. The others are still being studied.

Ironically, cattle feedlot operators gain a cost advantage of only a few percent with hormone implants. The Argentines are starting to ship their grass fed natural beef into the US because a growing number of Americans don't want our beef either. A recent study indicated that consumers can tell the difference between hormone and natural beef. Why not satisfy consumer demand and just ship natural beef to Europe?

Now the US is proceeding to take the European Union to WTO court over the approval and labeling of genetically engineered foods. The food biotech industry was created by giant chemical corporations primarily to sell more pesticides. Therefore Europeans are understandably wondering what's really in it for consumers. And there's a deep credibility problem.

Experimenting on us. Our government has a habit of allowing large corporations to conduct uncontrolled experiments on the population with new technology. It took about 40 years for us to find out how dangerous asbestos was. The old movie musical called "42 nd Street," made in the 1930's, which is great fun, unwittingly documents this point. At the very end of this movie, the stage curtain comes down and there written very large on the curtain is the word " asbestos " an early example of Hollywood product placement. It was intended to show the movie public how the fire resistant properties of asbestos fibers in curtains prevent fires in theaters. So, at that time, asbestos was the greatest thing since sliced bread. Now it is banned.

The chemical industry contaminated the entire earth with their commercially successful organo-chlorine compounds like DDT and PCB's before Rachel Carson blew the whistle on the dangers to wildlife and human health in the 1960's. Only in the past ten years have scientists discovered that such compounds can disrupt the body's endocrine (hormone signaling) system where exposure is in parts per trillion concentrations. In fact it is extremely difficult to conduct a ideal scientific study on the health effects of these chemicals because an uncontaminated human control group cannot be found.

When nuclear power plants were first built, electricity was going to be too cheap to meter. Forty years later we found out that nuclear power was much more expensive than other common sources of electricity. We also found from numerous applications of nuclear energy that exposure to low levels of radiation is more dangerous than originally believed.

And now big corporations are claiming that genetically engineered crops will revolutionize agriculture and will solve the world's hunger problem. They are outraged because the European Union and many other nations refuse to approve the planting of GMO crops, and the EU requires labels on foods notifying consumers of GMO content. We already know that pollen from GMO corn and the illicit planting of GMO corn in Mexico have contaminated wide swaths of North America. We know that GMO rapeseed (canola) pollen has contaminated the entire crop in Canada and has created a rapeseed super weed .variety Renowned biologist Dr. Barry Commoner and other scientists have recently refuted some of the basic claims of corporate funded GMO science. Thus more unforeseen consequences from the premature commercialization of genetically engineered crops are likely.

The US attack on the European Union over GMOs is a bellwether case. If the secret dispute resolution panel rules for the US, they will, in effect, overrule the Cartegena Protocol on Bio-safety which specifically allows the use of the precautionary principle in the regulation of GMOs. This treaty went into effect in 2003. The WTO would thereby assert its authority over international treaties in health and environment, a scary prospect indeed.

Farm Animal Cruelty . Then there's the growing issue of farm animal welfare. The US has been building huge animal factories in order to become the world's low cost producer of meat. Pigs, chickens and now dairy cows are plied with antibiotics and growth hormones and crammed into enclosed buildings. Hogs must stand over waste pits and endure noxious gases. Massive amounts of manure are periodically sluiced to huge lagoons which emit air pollution and contaminate groundwater. These facilities differ from human concentration camps only in the amount of food that is offered.

The European Union, though, reacting to public demand, is reducing pollution and eliminating some of the cruelest features of their facilities. They are seeking a new framework within the WTO that can address animal welfare, so their farms are not wiped out by meat imports produced to a lower standard. Under the WTO their proposal can be easily blocked by the US. As it stands now rural residents near animal factories in the prairie states and the Midwest exist in what can be described as a sacrifice zone for US meat exports with little prospect for relief.

Scary chickens . Last year Russia blocked the import of frozen chickens from the US because of concerns about product contamination. The US retorted that it was a move by Russia to protect its domestic chicken producers. The fact is, if you go to any supermarket in the US and buy a chicken, there's a good chance it will be contaminated with Salmonella or Camplybacter bacteria that can kill you if you have a compromised immune system. These bacteria may also be resistant to commonly used human antibiotics. Currently the US government is masking its failure to clean up the meat industry by nuking everything. Irradiation was an idea proposed by the U.S. military several decades ago as a means to utilize radioactive wastes.

In the final analysis, the US food supply lacks credibility and is a threat to European culture and sensibilities. The US will likely win more WTO rulings, but this will only further alienate Europe. Instead US producers should relearn the age old principle of free enterprise which is to give your customer what they want and need. Then they can sell food to Europe. It's time to get MBA's, accountants and engineers out of our food supply. Farmers know how to grow good food. And they know how to treat farm animals humanely. People here in the US and worldwide have a basic right to clean, wholesome food to eat, clean air to breathe and clean water to drink.

Tainted Produce . More and more of the fruits and vegetables we eat are imported from developing countries with inadequate sanitation programs. Predictably this has led to a number of serious outbreaks of food borne illness. The FDA inspects less than 2% of imported produce. Fearing claims of unfair trade practices, Congress has waffled on giving the FDA the resources and authority to require higher standards in exporting countries.

Flowers that Fly. The whole agricultural trade enterprise is dependent upon massive subsidies for the continued use of petroleum...so, for example, we can continue to airfreight fresh flowers from the tropics to US shops every day. Many fruits are flown in as well. The biggest subsidy, of course is US military power focused on protecting oil supplies. Even more important in the long run is the intensification of global warming and all the costs, both big and small, this will entail as we go along.

Near Term Solutions . Here are some ideas on how to fix this mess. The authority of WTO trade tribunals to punish countries for their environmental & animal welfare laws should be revoked, and countries should be allowed to apply the precautionary principle in their environmental decision making. Agricultural subsidies in the rich countries that artificially spur production and depress prices should be eliminated in favor of programs that:

• reward farmers for removing marginal land from production, like CRP;
• reward farmers for ecologically sound farming practices;
• reward farmers for helping restore wildlife habitat;
• in the US, restore competition and farmers' access to agricultural markets;
• help maintain the infrastructure of rural communities and
• facilitate supplemental forms of economic development such as wind power, hunting & fishing and tourism.

Chronically low crop prices are the result of too much production capacity combined with slow growth in food demand from developing countries. This latter problem reflects the failure of globalization to unleash demand for food in poor countries by broadly raising incomes. The near term solution would seem to be measures that spread around the benefits of trade and that effectively reduce worldwide capacity by internalizing all the costs of producing food.

We must take care in how food production subsidies are eliminated in order to prevent major agricultural producers like China, Argentina and Brazil from rushing in (with Cargill's help) to fill the gap. It would make no sense to suppress US soybean production, for example, so that Brazil can increase their planting of soybeans in the Amazonian rain forest or Argentina can increase their production of GMO soy.

One element of an overall strategy could be a system of US import quotas. Quotas would be set annually according to market conditions and the progress other countries are making toward eliminating subsidies and establishing their own ecologically sustainable agricultural practices. This would still require negotiations at the international level to control overall supply. Since supply controls are anathema to the WTO these negotiations would need to be conducted in some other venue such as the UN.

In parallel, we should support international policies that enable the world's poor to grow and/or buy more food. This involves both technical assistance to help make third world farmers more self sufficient and sustainable, and it also involves enforcing the right of third world workers to form independent labor unions to improve their income above subsistence levels.

Another approach may be to promote the use of biomass for energy. This may involve the use of agricultural waste or fast growing crops like switch grass for dry fuel or for the production of ethanol. However, these must be carefully analyzed to ensure that profits are real, i.e., there is a net gain in energy from a process that is environmentally sound.

Do as we say, not as we do. The hypocrisy of the United States, as the most vocal proponent of free markets, is astounding. The three most important material inputs to the US economy, energy, water and agricultural crops, are all massively subsidized by taxpayers. Indeed the collapse of the WTO meeting in Cancun sets up the strong possibility of an internecine struggle between US financial interests, who badly want favorable investment and service agreements in the FTAA and WTO, and US Agribusiness who wants to keep riding the production subsidy gravy train. While one would expect the "big money boys" to prevail, Big AG controls two US Senators in each of the "red" rural states. In any event the Sierra Club needs to participate in this debate in a manner that best protects the world's environment.

The Long Term Fix . Nonetheless, the long term goal of international public policy should be to encourage local self reliance, particularly in food & fiber production. Trade should be focused on goods that cannot be produced or harvested in a particular country at a reasonable, fully recognized cost. Progress to this end can be achieved by eliminating hidden subsidies for the use of petroleum and requiring that all social costs, i.e. environmental, safety, etc., be incorporated into the cost of food products. Programs should focus on helping consumers obtain organic or sustainably grown, high quality food from local farmers insofar as possible.

Craig Volland is a member of the Sierra Club's national Human Rights and Environment/ Responsible Trade Committee. However, the views expressed in this article are strictly his own.