Getting the Goods

Subsidizing unsustainable production and consumption: Sustainability still a distant objective at WTO

by Veena Ramani

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In September 2003, the WTO convened in Cancun, Mexico to continue the discussion from the last session in Doha (2002). Trade, among other sales and marketing functions, plays a major role in shaping production and consumption patterns. Therefore, the ongoing negotiations in international trade rules play an important part in either encouraging or undermining the sustainability of the flow of products and their impacts.

Sustainable production and consumption deals not only with the problem of overconsumption and the lavish lifestyles of Wthe west, but also underconsumption and poverty. The 300 billion (U.S.) dollars granted as agricultural subsidies by developed countries has unsustainable effects on the production and consumption of food worldwide—particularly in developing countries. A coalition of affected countries—led by Brazil and India—refused to continue with negotiations at Cancun until the United States and the European Union (the worst offenders in the subsidies issue) significantly reduced the amount of subsidies granted. This was a big factor leading to the collapse of the talks on 14^th September 2003.

Subsidies are important public investment tools that can be used by governments to bolster production and consumption in a particular industry. In fact, in the United States, agricultural subsidies were originally implemented in order to promote the rural middle class that worked in the farming sector¹. However, they currently have the opposite effect. As they are typically tied to the amount of land under cultivation or the volume of the commodity produced, agricultural subsidies have had the perverse effect of favoring the largest producers and driving the smaller farmers out of business—both in the United States and Europe². The subsidies also place emphasis on intensive and extractive agricultural practices that focus on overproduction and ignore hidden costs. Thus, there is concern that "in coming decades, industrial farming will rival climate change as a source of massive irreversible environmental impacts"³.

On account of the liberalization of international trade, agricultural subsidies granted
by developed countries directly affect food production and consumption patterns in developing countries. The farming sector, which is one of the mainstays of the developing country economy, and the single largest source of employment for its poor, is suffering in the face of cheap agricultural products dumped by developed countries. This, in turn, has led to a decrease in food security—or underconsumption of food. Some commentators predict a "collapse of agriculture in the developing world"⁴. There is also concern that the agro-businesses will eventually turn their attention to developing countries and export their unsustainable food production patterns—characterized by "machinery instead of human labor, along with huge quantities of fossil fuels, artificial fertilizers, and pesticides"⁵.

As can be seen, trade and subsidies are a part of a larger production and consumption cycle—which also includes dimensions from investment and marketing. This is best represented through the CIPM schema⁶, which considers production and consumption as a part of a cycle. The cycle moves from Consumption to Investment to Production to Marketing—and back to consumption again. Each stage can be analyzed both in terms of their impact on sustainability and the quality of life.

The preamble to the agreement establishing the World Trade Organization⁷ calls for "expanding the production of and trade in goods and services", and immediately adds the caveat "while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development". Thus, the anticipated expansion in production (and consumption) caused by globalized trade is supposed to be sustainable in nature. The decisions arrived at the Ministerial conference in Doha called for incorporating a development dimension in international trade. However, in spite of these commitments, the WTO has proved to be singularly ineffective in addressing these concerns. The primary reason for this is because of the WTO's mandate that focuses on trade to the exclusion of other concerns. When trade is considered a part of sustainable production and consumption paradigm, which by itself is one of the "overarching objectives" of sustainable development, this
gives certain indications as to which policies and practices should be chosen and how they should be applied.

Martin Khor of Third World Network suggests, "The objective of development should become the overriding principle guiding the work of the WTO, whose rules and operations should be designed to produce development as the outcome. Since developing countries form the majority of WTO membership, the development of these countries should be the first and foremost concern of the WTO."⁸

The Commission on Sustainable Development, which is holding its 12^th Session in New York between April 19^th and 30^th 2004, should take the opportunity to overrule the subordination of sustainable development to trade—which characterizes the Johannesburg Plan of Implementation. —By Veena Ramani, Integrative Strategies Forum

Footnotes

¹ Michael Lind, The Cancun Delusion, New York Times, 12 September 2003.

² Brian Halweil, Why no one wins in the global food fight. Washington Post, 22 September 2003. The author quotes an EWG survey that found that the largest 10% of the American farmers raked in 65% of the subsidies.

³ State of the World 2002, page 55, A Worldwatch Institute report on progress towards a sustainable society.

⁴ Devinder Sharma, Towards Cancun WTO ministerial: Bring the subsidy issue back in focus, Business Line, 29 July 2003.

⁵ Brian Halweil, Why no one wins in the global food fight. Washington Post, 22 September 2003.

⁶ The CIPM cycle, http://www.icspac.net/CIPMSchema.aspx

⁷ Signed in 1994

⁸ Martin Khor, The WTO, the post-Doha agenda and the future of the trade system: A development perspective, 45 (2002).