Free trade can mean the poor stay hungry

Go to Original
By Felicity Lawrence

It is not lack of food but lack of money to buy food that, as often as not, causes hunger in developing countries, as any aid agency will tell you. About 850 million people around the world are malnourished, but then about 1 billion of the global population are trying to survive on less than $1 (50p) a day. A further 2.5 billion people have less than $2 (£1) a day to live on. They have been hit hardest by rising food prices.

More than half the world's population also still depends for some of its income on agriculture. Rising food commodity prices ought to have helped them but they haven't. The fact is that much of the money made in the food chain is captured by transnational corporations based in richer nations.

The policy of the international financial institutions over the past two decades has been to encourage poor countries to open up their agricultural markets and pursue export-led growth, with food exports the engine of development. But the effect time and again has been to increase inequalities and deepen poverty for those at the bottom of the chain.

A hearing of the US Congress's Ways and Means committee in 2006 unintentionally provided one of the most succinct accounts of the problem I have come across. The Peruvian asparagus industry was up before the house to reassure representatives that any growth in imports to the US from Peru would be in US interests.

For every dollar spent by a US consumer on imported asparagus from Peru, 70 cents stayed in the US, the industry explained. The money goes not to Peruvian farmers but to US supermarkets and wholesalers, and to US shippers, distributors, importers, and storage owners. Just 30 cents stays in Peru. (The UK too imports most of its out-of-season asparagus from Peru.)

But Peru doesn't even get the full benefit of that 30 cents, because a large portion of the 30 cents Peru makes comes back to the US anyway: it is spent by Peruvians on US seed, US materials for processing, US fertiliser and US pesticides. US-based vegetable corporations, Del Monte and General Mills Green Giant, have been able to enjoy lower land values, cheap labour and low environmental costs by moving some of their production to Peru. The handful of corporations that dominate the global markets in seed, fertiliser, pesticides, trading, distribution and retailing take care of the rest.

Increased agricultural exports have indeed contributed to a growth in Peru's GDP, but the benefit to the poor of its population is hard to see.

This is a story repeated around the world, where free trade has so often meant a one-way ticket - poorer countries forced to open up their markets while western ones continue to subsidise their agriculture to the benefit of their traders and manufacturers. Until the system is radically restructured, people will still go hungry.